Business Environment Analysis

This assignment delves into the complexities of the business environment. It examines various aspects, including fiscal and monetary policies, international business dynamics, taxation, and the impact of business reforms on firm formation. Students are expected to analyze these factors and their influence on businesses operating within different contexts.

BUSINESS
ENVIRONMENT

Table of Contents
Introduction......................................................................................................................................1
Task 1...............................................................................................................................................1
1.1 Purpose of various organization.......................................................................................1
1.2 Extent to which Iceland Supermarket meets the objectives of its different stakeholders 2
1.3 Responsibilities of the Iceland Supermarket and the strategies it employee to meet them3
Task 2...............................................................................................................................................4
2.1 How economic system attempt to allocate the resources properly...................................4
2.2 Impact of fiscal and monetary policy on Iceland Supermarket........................................5
2.3 Impact of competition policy and other regulatory mechanisms on Iceland Supermarket5
Task 3...............................................................................................................................................6
3.1 Types of market structure.................................................................................................6
3.2 Ways in which market forces shape Iceland Supermarket...............................................7
3.3 How business and culture environment shapes the behavior of Iceland Supermarket.....7
Task 4...............................................................................................................................................8
4.1 Significance of international trade....................................................................................8
4.2 Impact of Global factor on Iceland Supermarket.............................................................9
4.3 Impact of policies on European Union on Iceland Supermarket....................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

Introduction
Business environment is the combination of all internal and external factors that refer to
the environment. Business environment affects the working and functions of organization in
other world, it can also be said that business operations are affected by the micro and macro
environment. In this report, case study of Iceland supermarket has been undertaken. Iceland
supermarket is a subsidiary company of Associated British Foods group headquartered in
Deeside, Wakes, UK. The company was launched in 1969 in Ireland trading as Penny's. By the
end of year 2012, Iceland supermarket had 238 branches across the UK, Ireland and Europe. The
company is focused on the sale of frozen foods including meals and vegetables. The following
report depicts about the purpose of different organization. In this, requirements of different
stakeholders are also discussed. In addition to this, what necessary steps undertaken by company
in order to satisfy its stakeholders are also interpreted. Along with this, impact of fiscal,
monetary and competition policy on company is also mentioned. In this report, an attempt is
made to understand the behavior of organization in the respect of market environment. At last,
importance of the global factors that shape national and international business activities will also
be discussed.
Task 1
1.1 Purpose of various organization
Iceland Supermarket: It is a company which deals with the sale of frozen and non-frozen
food items. The main purpose of this company is to provide all types of foods items from Pizza's
to fish and vegetables to desserts. In addition to this, it also aims to provide high quality products
and services to the customers at an affordable price (Aruoba and Chugh, 2010). Along with this,
company also aims to become the number one leading company not just in UK but in the whole
world.
KFC: KFC is a fast food restaurant which is specialized in fried chicken. The main purpose
of KFC is to bring joy and happiness in the world and made a place available where all
individuals can come together and be happy as one family and friends (Aswathappa, 2009). They
also aim to provide healthy food products with different varieties to the customers.

Transport for London: It is a government body which is responsible for the various aspects
of the transport system in Greater London in England. Main purpose of this company is to keep
London working and growing at the fastest speed. It also aims to provide safe and secure journey
to each and every individual present in London. In addition to this, it also aims to make London a
better place to live by providing safe, sustainable and reliable transport.
Cancer Research: Cancer research is a charitable institution which was formed on 4
February 2002 by the merger of Cancer Research Campaign and Imperial Cancer Research
funds. Main purpose of this institution is to reduce the number of deaths from the cancer. In
order to reduce the number of death rate, they have conducted research for the prevention,
diagnosis and treatment of disease for finding out the best solutions in order to cure diseases.
1.2 Extent to which Iceland Supermarket meets the objectives of its different stakeholders
Stakeholders are the persons who are interested in various activities and operations of the
organization. These stakeholders are affected by day to day operation of the organization. Some
of the stakeholders of the Iceland Supermarket are as follows:-
 Employees: Employees are the individuals who work for the betterment of
organization. Employees want security for their livelihood. They want continuous
increase in their salaries (Björklund, 2011). They also want that there should be fair
communication between all. Thus, Iceland Supermarket has taken into consideration all
necessary measures to satisfy its employees.
 Customers: Customers simply want the value for the money invested by them. They
want high quantity product at reasonable rate. In addition to this, they also aim that
company should conduct all its operations in an ethical manner. Thus, Iceland
Supermarket has taken into consideration all necessary steps to satisfy customers. Main
aim of the Supermarket is to
manufacture better quality products at an affordable rate.
 Supplier: Suppliers are the persons who supply raw material to the company. Suppliers
want that company should make timely payment to them for the raw material supplied by
them (Cherunilam, 2010). These suppliers are also concerned about the credit worthiness
of business. Thus, in order to satisfy suppliers, Iceland Supermarket normally prefers to
purchase raw material by making advance payment.
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 Government: Government wants that every business unit should grow at the steady
speed but on a fair basis. They want that company should generate more employee
opportunities in order to reduce the rate of unemployment. Thus, Iceland Supermarket is
continuously trying to expand its business; this in turn will create more and more
employment opportunities.
Thus, in order to meet the objective of different stakeholders, Iceland Supermarket
is undertaking all necessary measures into consideration.
1.3 Responsibilities of the Iceland Supermarket and the strategies it employee to meet them
There are some of the basic responsibilities that Iceland Supermarket can undertake in
order to satisfy its customers that are as follows:-
 Deliver value products: Basic responsibility of the company is to deliver value product
to its stakeholders. Thus, in order to provide them valuable product, company should
focus more on its research and development programs.
 Place customer health first and profit generation: Management of Iceland
Supermarket should make its products by keeping in mind the health of customer's first.
Then, afterward they should focus on profit maximization (Chi, Kilduff and Gargeya,
2009). It is their responsibility to provide better quality product to the customers at the
affordable price.
 Increase the profit margin: Iceland Supermarket should make an attempt to increase its
profit margin but not compromising with the value of customers. It is their responsibility
to manage all its operations in order to satisfy all its stakeholders. They should focus on
increasing its sale by simply beating its competitors.
 Employment law: It is the responsibility of Iceland Supermarket to follow employment
law in order to treat its employees on the fair basis. This in turn will aid company to
satisfy its employees.
Thus, these are some of the responsibilities which Iceland Supermarket should follow in
order to satisfy its stakeholders. Moreover, in order to meet up these responsibilities properly,
Iceland Supermarket should follow demonstrative strategies. Demonstrative strategies are the
strategies which aid organization to manage inappropriate behavior of the stakeholders and at the
same time satisfy them (Correia, Nicolini and Teles, 2008). This can done by following various
policies and procedures. These strategies will be used to discuss the behavior of each and every
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individual who is affected by the functioning of organization. These strategies are also used to
set out consequences and offering in order to support employees if necessary.
Task 2
2.1 How economic system attempt to allocate the resources properly
There is different type of economic system available across the world which makes an
attempt to allocate the resources properly. Thus, some of the common economic system that is
followed is as follows:-
Command economy: - Command economy is also known as planned economy. In this
type of economy all the functions and activities of the organization are controlled and managed
by the government and government bodies only (Craig and Campbell, 2012). The government
only decides the quality and quantity of the raw material an organization is going to use in order
to manufacture its products. Some of the main factors that are controlled by the government are
labor, capital and oil. In this government allocate the resources keeping in mind the welfare of
the society.
Free enterprise economy: - It is the type of economy in which the entire all the function
and operations are controlled and manage by the organization only. In this type of economy no
decisions are taken by the government. Seller and customer only decide the demand and supply
of the products. In addition to this it can also be said that company is complete to plan all its
activities without the government interference. In this type of economy stock and market price
are also decided by the company only. In this type of economy allocation of resources is done
keeping in mind the profit maximization.
Mixed and transitional economy: - It is the type of economy in which some functions are
operated and controlled by the government and some by the organization itself (Dungey and Fry,
2009). Normally internal functions are controlled by the organization itself and external factors
are controlled by the government. In this type of economy allocation of resources are done
keeping in cognition the safety and welfare of the society along with profit maximization.
There example of India has been taken. India is a country which operates all its
operations under the mixed and transitional economy. Allocation of all resources and
management of activities are controlled and managed by the government and shareholders of the
company. The company that are working in India need to enclose all this operations in front of
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the government (Hajkova and et.al, 2006). These companies are also required to pay taxes on
time. These organization works for the betterment of the society and then think of earning profit.
Iceland Supermarket is the company that works under the mixed economy. Therefore, the
company should prepare various strategies in order to overcome the various problems that could
be faced by them due to change in business environment.
2.2 Impact of fiscal and monetary policy on Iceland Supermarket
Fiscal policy was introduced by the government in order to control the inflow and
outflow of the cash from the country (Hill, 2008). Introduction of this policy has badly affected
the profitability of the company. Enforcement of the high tax rates has affected the sales and
demand of the products. Due to high tax Rate Company has started charging high price for the
products. In lieu of which customers have started switching to the substitute products. Shifting
over other products reduces the profit margin of the company.
Monetary policy was introduced by the Federal Reserve Board in order to combat the
monetary dis-equilibrium in the economy (Johnson, Lenartowicz and Apud, 2006). The main
aim of this policy was to stabilize the economy and to increase the currency value of the
country. Introduction of this policy has not only affected the working of the organization, it has
also affected the financial decisions of both the company and the customers. In addition to this
introduction of this policy has also affected the research and development strategies of the
company. This policy has forced the banks to reduce its interest rates. This change proves to be
beneficial for the company. Company was now able to get the bank loan at low interest rate in
order to fulfill its various requirements.
2.3 Impact of competition policy and other regulatory mechanisms on Iceland Supermarket
Competition policy was introduced by the government in order to introduce new and
innovate products in market at an affordable price (Kelliher and Bernadette Henderson, 2006).
The main aim of this policy was to increase the level of competition in the market which in turn
will provide various benefits to the customers. In addition to this it also aims to the efficiency of
the individual market. Introduction of this policy has affected the Iceland Supermarket in the
following ways:-
Introduction of this policy has badly affected the demand and supply of various products.
Due to availability of the variety of similar products customer have started moving to the
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company product provides them better quality products at low price. Decrease in demand
resulted in decrease in price. This in turn reduces the profit margin of the Iceland Supermarket.
Introduction of this policy has also affected the strategy formation of the Iceland
Supermarket. Thus, in order to increase its sales they should focus more on strategy formation in
order to beat its competitors.
Regulatory mechanisms were introduced in order to supply the quality products to the
customers at the affordable price (Klapper and Love, 2010). In addition to this also aims to
reduce the rate of unemployment in the country by generating more and more employment
opportunities. Moreover, introduction of this policy has also affected the profitability of the
Iceland Supermarket. Iceland Company was forced to sell its product at high rate. This in turn
reduces the profit margin of the company due to the availability of various substitute products.
Task 3
3.1 Types of market structure
Perfect Competition: - In case prefect market competition there are large number of firms
present which are producing the similar products (Klapper, Lewin and Delgado, 2009). The level
of competition is high. Size of the firms present is small. Therefore, it can be aforesaid that there
are large number of buyers and sellers available in the market.
Monopoly Market: - In monopoly market there is only one firm present with no close
substitute products. Entry of new firm is highly restricted. In this type of market structure there
are number of buyers with no only one seller. Therefore, the level of competition is zero in this
case.
Oligopoly Market: - In oligopoly market, there are firms available producing the
homogeneous products. There is large number of buyers present with limited sellers. Level of
competition is high. Size of the firms operating under this type of market structure is of medium
size.
Monopolistic Market: - In monopolistic market competition there large number of firms
present which are manufacturing the substitute products (Morrison, 2006). Level of competition
is relatively high as compared to that of any other market. The substitute products are
differentiated on the basis of its branding. Market share of the firm operating under this type of
structure is relatively small.
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After studying about the various market structures it can be summarized that Iceland
Supermarket is operating its business unit under the oligopoly market structure. Organizations
operating under this type of market structure are known as price maker. Thus, in this type of
market structure all the pricing and output decisions are controlled and managed by the Iceland
Supermarket itself.
3.2 Ways in which market forces shape Iceland Supermarket
Demand and Supply: - Demand and supply of the product assist the company to decide the
price of the product. Demand and price both have the inverse relation. If price increase than
demand decrease and similarly if price decreases the demand increase (Osterwalder, Pigneur and
Tucci, 2005). Therefore, increase in demand of the product will prove to be beneficial for the
company. Company will be able to increase its sales and at the same time will also be able to
increase its profitability ratios.
Thus, in order to increase its sales Iceland Supermarket should tries to manufacture its
product at the low prices. This in turn will assist the company to generate more profit.
Customer's Perception: - Customer's perception can be defined as the level of awareness
in the mind of the customers about the products and services offered by Iceland Supermarket.
Awareness about the company product can be increased through social media and
advertisement (Palmer and Hartley, 2008). Demand and supply of the company's product can be
affected by customer's perception. Because large variety of products are present in the market at
affordable price. If products and services offered by the Iceland Supermarket are known to the
customers than how they will purchase it.
In order to increase its sales Iceland Supermarket should focus on creating the awareness
in the mind of the customer. This can be done by using various sales promotion methods.
Merger and Acquisition: - Merger and acquisition is the process in which one firm takes
over another firm (Persson, Persson and Svensson, 2006). Merger and acquisition normally take
place between sick and healthy firms. Merger and acquisition many a times proves to be
beneficial for the organization in order to increase its sales and generate profit.
In order to expand its business in different countries Iceland Supermarket can follow the
concept of mergers and acquisition.
3.3 How business and culture environment shapes the behavior of Iceland Supermarket
PESTLE analysis
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Factors Affects
Political
Accumulated level of globalization and competition has created many
opportunities and challenges for the company.
Economic
Increased number of competition in supermarket has badly affected the
demand and supply of the product (Ruff, 2006). In addition to this it has also
affected the profit margin of the Iceland Supermarket.
Social
Introduction of new policies by the government has created the great
opportunities for the Iceland Supermarket. The policy says that company
should focus more on the manufacture of the healthy product due to increase
number of obesity problem.
Technological
By using the new and latest technology Iceland Supermarket can be able to
manufacture the new and innovative products which will attract more
customers towards the company’s product.
Legal
Due to the imposition of various policies and regulation by the government
in context of the packaging and labeling of the products can increase the
financial burden of the Iceland Supermarket.
Environmental
High emphasis of Western companies in order to reduce the emission of the
carbon has forced the Iceland Supermarket to focus more the green issues
(Sen, 2011).This in turn increases the cost of the Iceland Supermarket.
Task 4
4.1 Significance of international trade
In general, international trade can be defined as the exchange of goods and services
between two or more countries. Herein, Iceland Supermarket is operating in Britain, Ireland and
Europe thus has to employ various international trade policies so as to carry out operations
effectively (Aruoba and Chugh, 2010). The main purpose of international trade is to give rise to
world economy which consists of prices, supply or demand that affect or affected by the global
events. The main purpose of Iceland Supermarket to trade internationally is to enhance the
market share as well as attract more number of audiences for the higher revenues. There are
several benefits for the cited supermarket firm to trade internationally that it helps it to grow,
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diversify the risks, enhance the margins of profitability etc. Furthermore, looking at current
competitiveness in the supermarket industry it is essential for the Iceland chain of supermarket to
grow business globally and for which international trade is one of the most significant tool. In
this regard there are several advantages and disadvantages of international trade for Iceland
Supermarket that is as follows:
Advantages Disadvantages
Encourage Iceland Supermarket to make
optimum utilization of natural resources.
It has adverse effect on the development of
home industry for Iceland Supermarket.
Stabilize in prices
Iceland Supermarket has to depend upon the
economic conditions of Europe.
Leads Iceland Supermarket to large level
enterprise
At time leads to mis-utilisation of natural
resources.
Enhances the efficiency of business
functioning (Björklund, 2011).
It leads to develop rivalries amongst the
international supermarkets.
4.2 Impact of Global factor on Iceland Supermarket
Operating in such a competitive market of retail industry, there are several internal and
external factors that affects the course of functioning for the Iceland Supermarket. However, it is
the duty of senior authority cited firm to make sure that they focuses on each aspect effectively
and accordingly make decisions for the future functioning.
Political environment is one of the major factors that can affect the course of companies.
However, considering UK and Europe its political environment is quite that assist Iceland
Supermarket in establishing its business in effective and efficient manner (Craig and Campbell,
2012). Along with this, economic conditions of both the economy are improving at a significant
that creates several growing opportunity for the cited firm in different global markets. In this
regard, international trade becomes easy as the spending power of people becomes strong which
is feasible for the cited organization to generate higher revenues.
Along with this, cultural difference is one of the major concerns that affect the
functioning of business enterprise in international market. Herein, expanding business to
European market, Iceland Supermarket’s top level management has to concentrate on the cultural
aspects of the target market as it is different from the UK market (Johnson, Lenartowicz and
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Apud, 2006). However, taste and preferences of people is different due to which supermarket has
to offer products and services accordingly so that demand can be generated and cited firm can
establish its business within the international market. Henceforth, there are several global factors
that affect the functioning of Iceland Supermarket that management has to focus on and
accordingly develop strategies and tactics to carry out operations in effective and efficient
manner.
4.3 Impact of policies on European Union on Iceland Supermarket
There are various policies of European Union that affects the course of companies.
However, the main aim behind EU policies is to encourage or promote high level of employment
as well as reduce the percentage of employed people and along with this, motivates business
follow good and effective practices of trade or commerce. Following are the European policies
that affect the working environment of Iceland Supermarket.
Cultural policy: Iceland Supermarket promotes the working environment that encourages
as well as engages the interest of employees (Osterwalder, Pigneur and Tucci, 2005).
Furthermore, through the means of cultural policy, cited firm develops teams from diverse
departments with the aim of identifying talents and promoting flexible thinking for carrying out
business operations. However, this strategy helps in identifying the needs of customers and
meeting them effectively.
Competition Policy: Retail industry is considered as the most competitive industry around
the globe. There are several rivals from whom Iceland Supermarket has to face competition
while executing their operations (Klapper, Lewin and Delgado, 2009). However, intensity of
competition changes depending on the nature and number of competitors. Furthermore,
competition policy of European Union ensures that Iceland Supermarket market and promotes its
products fairly as well as does not make any strategy that affects the brand image of other firm.
Conclusion
In conclusion to the above report it has been evaluated that, there are several forces
external or internal that affects the course of business functioning. Iceland Supermarket
operating in such a competitive market it becomes more crucial for the senior authority to make
sure that they undertake suitable and reliable steps to maintain the position within the target
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market as well as generate desired results and outcomes. Lastly, Iceland Supermarket has to
follow certain policies of EU in order to establish its market at global level.
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References
Books and journals
Aruoba, S.B. and Chugh, S.K., 2010. Optimal fiscal and monetary policy when money is
essential. Journal of Economic Theory, 145(5), pp.1618-1647.
Aswathappa, K., 2009. Essentials of business environment. Himalaya Publishing House.
Björklund, M., 2011. Influence from the business environment on environmental purchasing—
Drivers and hinders of purchasing green transportation services. Journal of Purchasing and
Supply Management. 17(1). pp.11-22.
Cherunilam, F., 2010. Business environment. Himalaya Publishing House.
Chi, T., Kilduff, P.P. and Gargeya, V.B., 2009. Alignment between business environment
characteristics, competitive priorities, supply chain structures, and firm business
performance. International Journal of productivity and performance management, 58(7),
pp.645-669.
Correia, I., Nicolini, J.P. and Teles, P., 2008. Optimal fiscal and monetary policy: Equivalence
results. Journal of Political Economy, 116(1), pp.141-170.
Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.
Dungey, M. and Fry, R., 2009. The identification of fiscal and monetary policy in a structural
VAR. Economic Modelling, 26(6), pp.1147-1160.
Hajkova, D., Nicoletti, G., Vartia, L. and Yoo, K.Y., 2006. Taxation, business environment and
FDI location in OECD countries.
Hill, C., 2008. International business: Competing in the global market place. Strategic Direction,
24(9).
Johnson, J.P., Lenartowicz, T. and Apud, S., 2006. Cross-cultural competence in international
business: Toward a definition and a model. Journal of International Business Studies.
37(4). pp.525-543.
Kelliher, F. and Bernadette Henderson, J., 2006. A learning framework for the small business
environment. Journal of European Industrial Training, 30(7), pp.512-528.
Klapper, L.F. and Love, I., 2010. The impact of business environment reforms on new firm
registration. World Bank Policy Research Working Paper, (5493).
Klapper, L.F., Lewin, A. and Delgado, J.M.Q., 2009. The impact of the business environment on
the business creation process. World Bank Policy Research Working Paper, (4937).
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