Market Structure and Economic Factors in the UK: A Case Study of Penny Market

This report examines the market structure and economic factors in the UK that will impact the business operations of Penny Market, a discount supermarket chain. It discusses the market structure in the UK, economic factors such as unemployment, demand and supply, competition, labor cost, threats of substitutes, innovation, and inflation. It also analyzes the likely impacts of Brexit and COVID-19 on the company's business operations.

Penny Market

Contents
INTRODUCTION...........................................................................................................................1
1.Explain the market structure in the UK within which the company will be operating............1
2. What are the economic factors within the UK that will affect the business of the company? 2
3. What are the likely impacts of Brexit on the business operations of the company?...............4
4. Analyse the impact COVID-19 is likely to have on the business of the company..................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Market is an area and place where organisation offer their goods and services to sell, trade
and fulfil need of target audiences so that they provide satisfaction to their wants and desires.
When organising performing the activity of the process of buying and selling commodities which
known as business. Market structure indicates to the number of companies in the market, their
market shares and other characteristics that influence the level of rivalry in the market
(Amaravathi and et. al., 2020). Market structure is decides majorly through the level of
competition which exists among the companies running the market. This written report is based
in Penny Market which is a discount supermarket chain based in Germany. Thus venture was
incorporated in 1973 and is headquartered in Cologne, Germany. It operates globally with its
estimate 3550 outlets as a retail sector business establishment. This document will consider
information about market structure of the UK in which the respective firm operate and economic
factors within in UK which will influence the business of this firm. Further, the document will
explain about impact of Brexit on the business operation of firm and impact of COVID19 on its
business.
1.Explain the market structure in the UK within which the company will be operating.
Market structure is considered as a state of market with regards to competition. The
various market structures that exists are monopoly, oligopoly, perfect competition and
monopolistic competition (Fang, Nie and Penny, 2020). All these four market structure are for
organizational intent. In respect of grocery retail industry, in UK it is considered as one of the
most fiercely competitive areas. The Penny market is a firm that operates in groceries retail
industry. The United Kingdom UK groceries marketing are worth is approx 193.6 billion in year
2019 and enhancement in comparison to previous year. Also, there are about 87,141 groceries
stores within UK. These are categorized into four such as traditional retail, convenience stores,
hypermarkets or supermarket and online channels. Also, the UK’s four largest multiple retailers
are ASDA, Morrison’s, Sainsbury and TESCO. All these have huge control over grocery market.
In addition to this, as Penny Company is a groceries retail company which operates in
Germany and planning to operate in UK. Also, Oligopoly is considered as market that is
imperfectly competitive as well as dominated through some suppliers. Moreover, respective
market structure have three key characteristics. Initially the some entity should be main suppliers
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into sector. Other one is it should be interdependent and last one this is not able to entry sector.
Additionally, there are some super markets that has covered about 75% of market share. Also,
customers within UK are essentially influenced through these market structures due to its low
price, effective service quality, unprincipled collusion and the competition storage.
Within United Kingdom, the Oligopolistic supermarkets are benefits as the clients receive
low and rigid cost. Because there are only some firms which are dominating the supermarkets
sector, they are not essential to accomplish with another supermarket upon price. In other words,
non-price as well as price competition would be relative stable. Therefore, they has capability to
set price in rigid way for developing maximum profitability into longer period. However, when
supermarket scale development drives towards enhancing supply, the product price would
minimize or provide a discount due to decreasing of cost from wholesalers. Whole into United
Kingdom, the audiences never focus upon product price into Oligopolistic supermarkets. As
respective firm going to operate in UK groceries supermarket so this would be beneficial for
them as oligopolistic supermarket provides low and rigid cost. Also, the customers still may
enjoy effective service quality and as per the kinked demand curve, product price would be low.
2. What are the economic factors within the UK that will affect the business of the company?
Economic factors are related with product, services and money. Despite directly impacting
enterprises, these variable consider to monetary state of economy upon huge level- wither it is be
local and international (Gilchrist, Knight and Emery, 2020). The reason for it is that, state of
economy may decide various essential details which come up into an operating firm such as
demand, taxes and others. Therefore, some of the economic factors are discussed below which
have impacts upon Penny Market are:
 Higher rate of Unemployment: The Penny market would get impacted through economical
factors as this impact their goods cost as well as profitability. Unemployment is considered
to be one of the essential economic factors which are accountable for impacting entities
profit. Moreover, it could not be controllable due to this it is a key concern for firm. Also,
this hinders the Penny market whole performance into both local as well as global
marketplace.
 Demand and supply: This is considered as another economical factor which would impact
Penny market. The key reason is they could face various challenges for their good’s demand
as well as supply. Along with this, the demands for their product have dropped due to their
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competitors. As an outcomes, respective firm would have to negotiate now fair cost that
other firms could not able to meet.
Competition: One of the most essential economical factors that would impact Penny market is,
they could faces competition from competitors. Along with this, over previous some year,
groceries retailer is facing an huge competitions level from its close competitors (Globan, and
Škrinjarić, 2020). So, as respective firm desires to operate into UK market then they would also
have to face this. As an outcome, this is currently witness lower profitability margin for
supermarket chains and suppliers.
 Labour cost: This is other economical factors that have several affect in minimizing the
revenue of groceries business. Along with this, the firm has to concentrates upon labor
costing at present for having sound monetary situations.
 Threats of substitutes: Threats of substitutes is other huge economical factor that develops
various kind of negativity for groceries business. As some groceries stores are the growing
over last some years as well as their products were second to no one. Moreover, they have to
deal with board range of goods currently. But presently their rivals are facilitating their
substitute’s items within marketplace. Along with this, customers often switch to other
brands because of several reasons in addition to their fair as well as convenient cost. In
respect of Penny market, which is desires to operate within United Kingdom marketplace.
So, they have to concentrates upon this aspect in order to operate their business in effective
and efficient manner.
 Innovation: Within United Kingdom, the various groceries market share has been
minimized due to innovation as well as advance technologies (Guggenmo, 2020). Some of
them are consider to be market leader within respective business but at present various small
retailers came up as well as re-concentrates upon utilizing technology for adjusting their
product prices.
 Inflation: Inflation is considered as general as well as sustained enhancement into price over
time. Moreover, this is measured utilizing an index such as customer price index, that trace
how cost of typical items basket changes over time. Moreover, the inflation is generally
described as a percentage. In addition to this, inflation also impact international businesses
which trade overseas. In case inflation is high within United Kingdom than this elsewhere,
then it’s goods become comparatively much costly. It also drives towards fall into demand
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for the product of UK. Therefore, in respect of Penny market which deal in groceries market
and desires to operate their business in UK. So, respective country inflation rate may impact
their business in positive and negative manner.
Apart from the above economic factors, there are another factors as well as that can impact
Penny market directly or indirectly as they wants to operate into UK marketplace. Some of them
are higher interest rates, inflation rates, higher rate of tax, customer can spend less upon premium
goods and many others.
3. What are the likely impacts of Brexit on the business operations of the company?
Britain set to leave EU on March 29, 2019. The Britain decision for leaving EU is one of the
most seismic political aspect. This has impact upon whole United Kingdom, specifically into
grocery retail sector. It is an industry that based upon favorable trade agreement, stabilized
commodity prices, sustained economical development and healthy customers spending. Brexit
undoubtedly has an impact upon whole grocery industry, from main supermarkets as well as
news agents, to global brands as well as rural farmers (Jantyik and Török, 2020). Along with
this, Supermarket get affected from devalued currency as well as higher import tariffs, while
farmers stand to lose its substantial subsidies as well as access to EU’s free market. Moreover,
the Britain have opportunities for renegotiating trade deals with whole world while aspects of
deregulations as well minimized immigration may benefits small enterprises business owners
and low salary staff. In respect of Penny market which is a groceries retailer firm so Brexit may
have impact upon their business operations. Some of the impacts that Brexit have upon UK
groceries market are: Rise in Tariffs and Fall in pound value: As British pound is at a whole time low against US
dollar an Euro. After Brexit, the pound value would fall and outcomes into high product
costs. Moreover, the enhancement into import tariffs could further worst respective
circumstances. So, this affects the Penny market business operations negatively.
 Brexit and access to labor: Within United Kingdom, 1/3 rd of personnel all the industry is
developed of EU migrants. After Brexit , accessing to this personnel can be restricted. Also,
the required to recruit more workforce of United Kingdom may drive up labor costs; that in
turn would have affected upon items prices. Therefore, this impact Penney market business
operation as they are operating into UK.
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 Fall into Standards: Retailers as well as suppliers are already compromising upon its quality
needs. Also, they are no longer reject generates based upon sizes as well as shapes.
Moreover, they are also seeking at buying long lasting vegetables and fruits varieties. Along
with this, retailers are utilizing artificial Intelligence and other higher technology methods
for understanding behaviors of consumers within the situations of food shortage for
predicting what they required to stock for meeting desires of consumers.
4. Analyse the impact COVID-19 is likely to have on the business of the company.
As COVID-19 crisis is considered as the one of the most essential impacts upon UK
groceries retail as well as life under lockdown have been the sudden change in which meal
consumptions undertakes. Moreover, the virus outbreak is unprecedented as well as their affect
upon retail industry have been profound. As the circumstances enhances as well as person are
being forced for spending longer indoors, the concentration is moving towards categories of
fresh and health. They are beginning to observe similar patter, and it would be a main pressure as
circumstances within United Kingdom develops. In respect of Penny Market, they plan to
operate into UK market. So, the present affects have been indiscriminate and impact huge chain
as well as local enterprise in equal manner, with whole struggling for accomplishing the huge
demand. However, for small retailers, the affects of rapid development in demand is much
greater for various supply, network are not as growth as well as deliveries of new stock are not
much frequent (Percheski and Gibson-Davis, 2020). Along with this, it has been further
magnified through customers whether through by preferences or within advice, staying closer to
home as well as shopping more in local manner.
Along with this, this enhances the online grocery shopping due to COVID-19. It has been
determined that, online has observed a demand spike because of some customers who do not
want to go in stores. In context of respect entity, COVID-19 caused a dramatic as well as
unprecedented 21% of drop within the GDP of United Kingdom. With individuals confined to its
homes, restaurants and takeaways closed. Also, grocery industry is one which is actually get
advantage from pandemic. As above 28% of UK adults’ quarter spends much upon online
groceries as well as third 32% are also intent to utilise more online shopping and delivery. So,
respective company can operate their groceries firm in effectively and efficiently (How COVID-
19 is impacting grocery retail, 2020).
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CONCLUSION
This has been summarised from the above mentioned information that a business market is
an area where organisations operate their business in effective manner. Along with the market
structure of the nation vary to operate the firm in adequate form. Economic factor is one of the
key aspects which influence the business of organisation in diverse manner like positive and
negative form. Britain have opportunities for renegotiating trade deals with whole world while
aspects of deregulations as well minimized immigration may benefits small enterprises business
owners and low salary staff. Brexit and COVID19 are those components which affect the
business operations of respective company in negative manner and affect the business of venture.
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REFERENCES
Books and Journal
Amaravathi, T. and et. al., 2020. Traditional value added products from Indian penny wort
(Centella asiatica) and water hyssop (Bacopa monnieri) to alleviate ADHD.
Fang, Y., Nie, Y. and Penny, M., 2020. Transmission dynamics of the COVID‐19 outbreak and
effectiveness of government interventions: A data‐driven analysis. Journal of medical
virology, 92(6), pp.645-659.
Gilchrist, D.J., Knight, P. and Emery, T., 2020. Human Services Data Assets Project: An Initial
Review of the 2018 ACNC Dataset & Other Data Sources. Available at SSRN 3678496.
Globan, T. and Škrinjarić, T., 2020. Penny wise and pound foolish: capital gains tax and trading
volume on the Zagreb Stock Exchange. Public Sector Economics, 44(3), pp.299-329.
Guggenmos, E.M., 2020. Religion in Taiwan and China: Locality and Transmission, edited by
Benjamin Penny and Hsun Chang. Numen, 67(4), pp.417-421.
Jantyik, L. and Török, Á., 2020. Estimating the Market Share and Price Premium of GI Foods—
The Case of the Hungarian Food Discounters. Sustainability, 12(3), p.1094.
Percheski, C. and Gibson-Davis, C., 2020. A Penny on the Dollar: Racial Inequalities in Wealth
among Households with Children. Socius, 6, p.2378023120916616.
Tebaldi, A. and D'Hondt, C., 2020. Penny stocks attractiveness for retail investors.
Online
How COVID-19 is impacting grocery retail. 2020. [Online]. Available
through<https://yougov.co.uk/topics/consumer/articles-reports/2020/06/15/how-covid-19-
impacting-grocery-retail>
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