Market Structure and Economic Factors in the UK

This report analyzes the market structure and economic factors in the United Kingdom that will impact the business operations of Penny market, a European grocery company.

MAKETING ESSENTIALS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
1. Explaining the market structure in the United Kingdom.........................................................4
2. Economic factors of United Kingdom that will impinge the business of the company..........5
3. Impacts of Brexit on business operations................................................................................7
4. Analysing the impact of Covid-19 is appropriately to have on the business of the company.8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Market analysis is an extensive matter of research and strategic analysis for the
organizations which are thinking to expand their business in new regions. This analysis delivers
details of market variables, competitors, customers and environment of industry. It is very vital
for any company to analyse markets effectively to begin a new journey over the latest market. In
this report, analysis of market and business environment of UK is done for Penny market, a
European grocery company looking forward to start its operation in United Kingdom. This report
analyses market structure and gives knowledge of impact of economic factors, Brexit and Covid-
19 that will affect its business operations.
MAIN BODY
1. Explaining the market structure in the United Kingdom
Supermarket industry in the United Kingdom is outlined as oligopolistic, means the market
structure is of oligopoly. It refers to the market that is flawlessly competitive and influenced by
some suppliers. Oligopoly has three major aspects. First, the few organizations must be the prime
suppliers in the persistence. Second, the oligopolistic companies must be interconnected. Third,
other new organizations should not be capable of entering in the industry. Some of the
oligopolistic supermarkets such as Tesco, Sainsbury, Morrison and Asda hold more than 75% of
market shares in the UK. Customers in this country as appreciably influenced by these
supermarkets as they deliver lowest costs, outstanding quality of service, the unethical
conspiracy and the shortage of rivals. These dominating organizations have capability of setting
prices constantly to make topmost profits in the distant future. These companies always take care
of prices because if they set up heavy unaffordable costs of products then they will face a risk
from another new entered companies will scramble their customers. There are many barriers for
new entrants in this oligopolistic structure of supermarket industry in UK. Furthermore, when the
scale improvement of supermarket scale leads to the maximizing of supply, the amount of the
products minimizes as cost reduces from the wholesalers. All-inclusive, in the United Kingdom,
the customers not at all distress about the products prices in the oligopolistic supermarkets.
These supermarkets make their services systems progressive which involves attitudes, operating
system of management and after sale services. Those supermarkets offer sufficient parking
spaces for customers, exhibit the same type of product simultaneously, consumer’s service unit
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for supporting customers to solve their queries related to products and services. The system of
service is unusual necessary because it manifests the image of supermarket. Consumers of UK
prefer to shop in the supermarket which has outstanding service system. The impressive image
retains expensive expenditure of advertising as well as fascinates more customers and makes
them feel delighted at the time of shopping. This kind of oligopolistic structure countenance a
descending slant demand curve yet the elasticity is hanged on the result of rivals to modifications
in the outputs and prices. Organizations are preserving high level of market shares and
profitability. Rivals does not chases prices which are increased by on firm because demand in
consequence will be fairly elastic and maximization in cost leads to fall in the total capital of the
organization. the awareness of oligopoly is unfit and the cost has no compete; therefore, those
dominant supermarkets are capable to collude to authorize the supply or price to grow the profits.
No matter what occurs, the supermarkets that are conspiring will safeguard themselves to possess
supreme profits. The complicity among those oligopolistic supermarkets and shortage of
competition is solemnly disadvantageous to the buyers in the United Kingdom. These
oligopolistic supermarkets focus to stay in same place rather than making many improvements. It
is said that, if those dominant oligopolistic supermarkets will have rivals they will promote latest
techniques, services and prices more advantageous to customers.
2. Economic factors of United Kingdom that will impinge the business of the company
Economic factors of UK that will affect the business of Penny market are defined below:
Low economic widening and specific static actual wage development. Substandard
productivity growth will affect prospects of long-term growth. Unpredictability from Brexit is
also the effective factor that can impinge the business. Probable costs to commerce from new
tradition of arrangements will bring harsh times for Penny market retail store. Manufacturing
sectors can also affect business by their demands. Conditions of the housing market refer to their
expensive cost and rents are putting up to intergenerational inequality for renting the spaces for
huge supermarkets. Cost-push inflation that is granting a fall in income will decrease consumer
volume of Penny market. Presently UK is facing weaker economic growth as per the ratio of
required trend so this can also impact negatively on the business of Penny market.
Unemployment refers to persons who are energetically seeking employment yet not unable to
search work. It means that prudence is not making full utilization of the workers who are
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currently accessible. The economy is not developing as quickly as it needs to be and it may begin
to slow down. So, these downturns in the activities will directly impacts on businesses. Drop in
real wages were the effects of low economic growth which was also lowering living standards of
people of UK. Escalate ratio of government charges / GDP and weak economic
developments in GDP flatter much more hard for the council to decrease the burden of
government charges to GDP. In spite of frugality measures, the debt to GDP proportion is
predicted to keep rebel. Taxes by government on persons, customers and also businesses can
affect Penny’s market. The UK has a collection of various kind of taxes that are: Income tax,
National Insurance Contributions (NICs), value-added tax (VAT), and corporation tax. Most
estimation is for economy considering pretty flat for the future or so, yet that possibly will just be
a central route that components in the probability of numerous options of Brexit. Business
confidence gaze put to endure short for the anticipated future together with self-respecting
financial expert will Penny market to self-fulfilling prophecy and delivers knowledge to retail
company about their sustainability in a flat economy. Inflation regarding UK Customer cost
Index is presently 1.8%, along Retail Price Index somewhat inflated at 2.4%. Nevertheless
midpoint wage hike perch at 3.5%, so, Penny market might find itself below pressure to escalate
salaries beyond the inflation rate. Wages will endeavor an ascending pressure on inflation, even
so which will be counterbalance by the slipping pressure of subordinate of business and customer
confidence. Government spending was not growing much because the Chancellor announce end
to abstention/ continence now appear a compact untimely and copious will rely on what kind of
Brexit it can end up with. It is aspiring wise to presume that there is no chance of a big
enlargement in the spending’s of government. It will not be called austerity currently; however it
deems likely to resume Interest rates will rise heavily and might popup in a assortment of unalike
places, foist by a incompatible people. It is obvious that state of affairs for rates of interest might
additionally affect companies whose plans depend on captivating out big loans. Exchange rates
include the currency of UK that is pound. It antiquated low occasionally and even though it has
recuperated a bit past the New Year. It is still capable of rising significantly. It is not
comprehensible to what scale the markets are taking account to resolve Brexit. Yet, it does not
look true that the worth of sterling leap up at any clue of lucidity about the future, If Penny
market trade internationally and trade in contrasting currencies, the company has to look at its
hedging strategy and assure the strategy is not exposed. Exchange rates are very complicated
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factor but it is clear that it has to be applied on those who trade with export or import companies.
Modifying exchange rates will effect on company because it has to pay extra cost to its
international supplier and satisfy. Therefore, this can put impact on margins of profit as well as
clasp a lot of assets to hang on top. Labor market wage inflation at 3.5% is ably exceeding either
evaluate of inflation that will usually be expected to lay pressure on organizations that are not
deficient to augment their wage bill over their costs. Employment currently nestles at 76.1%, the
shared towering on record but the kind of employment is extensively reported to own
deteriorated with further people on contracts for short term. Unemployment is falling since last
five years and presently reported at minor than 4%. And may build issues for Penny market
hanging on the kind of employees it requires to hire. Economic recession has the prospective to
modify the buying attitude of buyers that may force penny market to drop its prices or explicit
smaller volumes. The rise in global growth and increase in GDP around the world means that
their market of target is moderately growing. On the other hand, developments globally might
maximize costs of labor and material (Simionescu, Strielkowski and Kalyugina, 2017). The UK
has repeatedly increasing sum of Foreign Direct Investment and still inkling the effects of
economic recession of 2008 and 2009 as well as economic setback of the Brexit. Modifying
customer’s level of income will support businesses to expand, decrease unemployment and
revamp the economy. However, if buyer incomes drop squander credible to decrease and
businesses will not perform well. Unemployment will rebel and the economy would be slightly
steady.
3. Impacts of Brexit on business operations
Brexit impacted a lot on all the functions and operations of business like it began with a
keen jump in uncertainty succeeding the UK voted to quit European Union. That uncertainty
encounter continued which was the greatest depression occurred with the crash of stock market
and continued beyond (Giudici, Milne and Vinogradov, 2020). The availability of product
regulation and migrant labours implies for the likelihoods of businesses. Volatility of stock
market was little increased and demanded new approaches to fulfil their requirements. Brexit
also affected investments, employees, sales and prices. It reduced 6% of investment in the
foremost two years behind the referendum (Ilin and et.al, 2017). It will also affect and reduce
growth of productivity around 1/2% through batting outputs average effect. It is also anticipated
that Brexit will eventually decrease sales and maximize costs. it will highly impact on growth of
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investment and employment (Kee and Nicita, 2017). Negotiations will become very difficult and
high effect on potential deals of trade. Costs of import will get high rather than expected and
giant supermarkets will look forward to other economically developed countries to relocate and
start operations over there to obtain relaxations from these impacts. The workers of European
countries have to apply for the settle schemes of EU. Brexit will naturally disrupt the circulation
of products and services from United Kingdom to Europe. Many businesses possess a respond to
Brexit by stockpiling products while the trade was tariff-free between these two countries was
still going on. Withdrawal will severely impact the business of both regions. Brexit will cause a
heavy loss in GDP growth and affects the consumer’s base of supermarkets by implementing
unlikable charges, taxes and many more negative impacts. It will shrink workforces of
organizations because UK seen over a 70% reductions in the net of European country’s migrants
(Joll and et.al, 2018).
4. Analysing the impact of Covid-19 is appropriately to have on the business of the company
The Covid-19 pandemic has already caused unprecedented disruption politically, socially
and economically (Mayhew and Anand, 2020). It is already considered as the largest threat for
global economy (Choi and et.al, 2020). This direct disruption will remain for more considerable
period of time. Although the consequences in the terms of problems like customer confidences,
resilience of supply chain, economic prosperity and social unity will be perceive for countless
years (Chavaz and Elliott, 2020). Numerous governments viewed this pandemic as threat for
national security, demonstrating a readiness to utilize legislation to vigorously impose
conformity. It also impacted on corporate management and planning approaches of contingency
and has been mitigated the heavy effects. Covid-19 also impacted heavily on accessing
infrastructure and staff because the government restricted to gather because the outbreak was
very dangerous for everyone (Heald and Hodges, 2020). It is transmitting from human to other
so, everyone has to maintain a gap between each other. It has heavily affected corporate
companies and leads to run different scenarios (Kassem and Succar, 2017). It also decreased UK
discretionary spending and forced other organizations to make adjustments and offer services
that are out of their business strategies and scenarios.
.
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CONCLUSION
The above report concludes that before making a plan of relocating in such a country an
organization have to take proper consultation or suggestion from the known people or personally
analyse the business environment and market situations in their desired regions. It is concluded
that the UK is suffering from many factors including economic which will effectively make
disruptions in the business operations and can lead to loss. The report has concluded that Penny
market has to keep courage and be capable of taking risk to relocate and begin operations in the
united Kingdom because all the situations are already defined in this following report.
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REFERENCES
Books and Journals
Chavaz, M. and Elliott, D., 2020. Separating retail and investment banking: evidence from the
UK.
Choi, B., and et.al., 2020. The impact of the COVID-19 pandemic on final year medical students
in the United Kingdom: a national survey. BMC medical education. 20(1). pp.1-11.
Giudici, G., Milne, A. and Vinogradov, D., 2020. Cryptocurrencies: market analysis and
perspectives. Journal of Industrial and Business Economics. 47(1). pp.1-18.
Heald, D. and Hodges, R., 2020. The accounting, budgeting and fiscal impact of COVID-19 on
the United Kingdom. Journal of Public Budgeting, Accounting & Financial
Management.
Ilin, I.V., and et.al., 2017, May. Method of decision making support for it market analysis.
In 2017 XX IEEE International Conference on Soft Computing and Measurements
(SCM) (pp. 812-814). IEEE.
Joll, C., and et.al., 2018. Developments in labour market analysis (Vol. 11). Routledge.
Kassem, M. and Succar, B., 2017. Macro BIM adoption: Comparative market
analysis. Automation in Construction, 81, pp.286-299.
Kee, H.L. and Nicita, A., 2017. Short-term impact of Brexit on the United Kingdom's export of
goods. The World Bank.
Mayhew, K. and Anand, P., 2020. COVID-19 and the UK Labour Market. Oxford Review of
Economic Policy, 36(Supplement_1), pp.S215-S224.
Simionescu, M., Strielkowski, W. and Kalyugina, S., 2017. The impact of Brexit on labour
migration and labour markets in the United Kingdom and the EU. Terra
Economicus. 15(1).
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