Business Environment Analysis

This assignment requires a comprehensive analysis of the business environment surrounding the fast-food chain KFC. Students must identify key stakeholders, apply Porter's Five Forces model to assess competitive forces, and examine the impact of different economic systems on KFC's operations. The analysis draws upon academic literature and real-world examples to demonstrate an understanding of how internal and external factors shape a company's success.

BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASK 1 ...........................................................................................................................................2
1.1 Assessing the purpose of different organizations ............................................................2
1.2 Extent to which Iceland Supermarket meets its stakeholder objectives ..........................4
1.3 Responsibilities of Iceland Supermarket and strategies employed by it in order to meet the
same .......................................................................................................................................5
TASK 2 ...........................................................................................................................................6
2.1 How economic system allocates its resources..................................................................6
2.2 Impact of fiscal and monetary policy upon Iceland Supermarket....................................7
2.3 Impact of competition policies on the activities of Iceland Supermarket........................7
TASK 3............................................................................................................................................1
AC 3.1 Impact of market structure in pricing and output decisions.......................................1
AC 3.2 Impact of market forces on Iceland Supermarket......................................................2
AC 3.3 Impact of business and cultural environment on Iceland Supermarket.....................2
TASK 4............................................................................................................................................3
AC 4.1 Significance of international trade for Iceland Supermarket.....................................3
AC 4.2 Impact of global factors on Iceland Supermarket organization.................................4
AC 4.3 Impact of EU policies on Iceland Supermarket.........................................................5
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

Illustration Index
Illustration 1: Stakeholders..............................................................................................................4
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INTRODUCTION
Business environment is the sum totals both internal and external factors which lead to
cause the necessary impact upon the operation of company (Business environment meaning,
2016). Thus, it can be said that for the corporation it is very necessary that it must conduct
thorough environmental analysis while making any kind of decision. It is due to the fact that,
here through such types of activity only the tactical goals and objectives can be met by the firm
in an effective way. The present report is based on the case of Iceland Supermarket. It is the
subsidiary company of Associated British Foods and it is launched in the year 1969. The present
report will showcase the purpose of different type of companies. In addition to this, it will also
give detail information about the varied factors which lead to influence the operation of cited
firm in both positive and negative manner.
TASK 1
1.1 Assessing the purpose of different organizations
The purpose of different type of firms is assessed and it is being depicted in the below
given table:
FIRMS PURPOSE
Iceland Supermarket It is the public limited company which runs
supermarket chain in the country such as
Ireland, Europe and United Kingdom. The firm
has specialization in selling frozen foods but it
also offers varied non frozen food varieties to
its respective buyers. In UK, it has around 1.8
% market share. The main objective of Iceland
Supermarket is to enhance the satisfaction of
its buyers by giving them high quality of
services (Davig and Leeper, 2011).
KFC (Kentucky fried chicken) It is the famous privately owned fast food
chain which has its operation present in
worldwide (KFC, 2016). The organization
offers huge variety of non-vegetarian dishes
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wherein their main ingredient is chicken. In
this regard, it can be said that KFC can be
consider as heaven for those individuals who
love non-vegetarian dishes or fast food. Being
the private firm, its objective is to enhance the
profits by maintaining the satisfaction of its
buyers. Here, with an aim to achieve the same
cited firm makes measures with regard to
enhance the quality of its services in an
effective way.
Transport of London It is the transportation firm which is owned and
controlled by government of London. The
main aim of this firm is to manage and handle
the transportation facilitates in London in an
effective way (Guleva and Dukhanov, 2015).
This is the public firm and thus it works for the
benefits of members of society. In order to
achieve the same, it makes efforts in terms of
charging or setting such prices for its
transportation services which can be afford by
each and every customer irrespective of their
income.
Cancer Research It is an NGO (Not for profit) firm which gives
services to the cancer patients. The firm works
for the public interest. Thus, it put its whole
focus upon diagnosing and preventing the
cancer diseases from the society. The firm
works for the welfare of society and thus it
does not give any importance to the profit
maximization related approach. However, with
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an aim to raise the funds they take charity and
donation from the established firms and
famous people (Hutchison, Noy and Wang,
2010).
1.2 Extent to which Iceland Supermarket meets its stakeholder objectives
Stakeholders possess very crucial position in firm and hence for the manager it is
essential that it should gather the proper information regarding the major objectives of its
stakeholders (Stakeholders, 2016). Thus, it should direct its work accordingly. In accordance
with the given context, main stakeholders of Iceland Supermarket are identified. It consists of
customers, employees, government and suppliers etc. These all given people expect something
from the cited firm. The detailed explanation about the same is depicted in below:
 Customers: They are the individuals which purchase the products and services of
enterprise and in return of this they give payment to the firm. Here, buyers of Iceland
Supermarket expect that they must receive high quality of products and services and
maintains their satisfaction. The given objective is being met by the corporation
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Illustration 1: Stakeholders
(Source: Stakeholders, 2016)

effectively (Jordan, 2012). Here, with an aim to give high quality of services to the
buyers, firm give training to its employees who enable them to carry out the production
of the best quality of goods and services. Employees: They are the people who perform practical implementation of all the plans
which is being framed by the enterprise. Iceland Supermarket workers have an objective
that firm must take measures in terms of improving their employability skills. This
objective is being met by Iceland Supermarket by conducting regular training and
development programs for its workers. Thus, it is through this way only cited firm
maintains the satisfaction of its employees (Pulaj and Kume, 2013). Government: The government of UK expects that the firms which are operating in its
nation must pay its taxes within specified time limit. The given objective is also being
effectively fulfilled by cited corporation.
 Suppliers: The given individual has its importance for the firm like Iceland Supermarket.
This is because, it is with the help of these people only cited firm will be able to carry out
its efforts in terms of fulfilling then needs and demands of its buyers within specified
time period. In this context, suppler expect that they should receive their due payment
with interest within limited period of time. The given thing is also being fulfilled by
Iceland Supermarket.
1.3 Responsibilities of Iceland Supermarket and strategies employed by it in order to meet the
same
The Iceland Supermarket has number of responsibilities and thus with an aim to meet the
same the organization uses different type of tactics or strategies. The firm has the responsibility
towards its employees. In this context, it has the duty that it must maintain the satisfaction and
motivation of its buyers. Thus, in order to fulfill the same firm take help from the different
performance management approach. Here, with the help of given method manager of Iceland
Supermarket review the performance of its respective employees (Tolstrup, 2013). Thus, on the
basis of obtained result firm organizes training and development activity and thereby enhances
their satisfaction. In addition to this, Iceland Supermarket has the responsibility that it must
give high quality of product and services to its buyers. Here, in order to achieve the same cited
firm has set different quality standards with respect to both frozen and non frozen food and thus
through this way only it enhances the quality of food which is being offered by it to the
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respective buyers. Here, firm has the responsibility that it must behave ethically. In order to
behave ethically, firm has set different ethical policy with respect to the goods and services
which is being offered by it (Wetherly and Otter, 2014).
TASK 2
2.1 How economic system allocates its resources
There is different type of economic system identified which uses varied measures with an
aim to allocate its resources effectively. The detailed explanation about the same is depicted in
below: Command economy: It is the type of economy in which all the decisions regarding the
allocation of nation's scare resources is being taken by the government (Meaning of
command economy, 2016). In the given economy, government prepares the central plans
with an aim to allocate its resources in an effective way. For example, South Korea
follows the given economic system and thus here government prepares central plans with
regard to allocate the resources of country in an effective manner. Free-enterprise economy: It is the economy in which the resources of country such as
men, machine and material are allocated on the basis of different market forces.
Furthermore, here price mechanism is used for the purpose to allocate the resources of
country (McGuigan and et.al, 2010). Here, manager employ more resources in the
process of carrying out the production of product if demand of the respective good
increases. Thus, in the given circumstances firms enjoy the liberty of selling the product
at high prices.
 Mixed economy: This economy is the combination of both command and free enterprise
economy. Thus, here some decision of allocating the resources of country is taken by
government (Richardson and Mazey, 2015). Likewise, some decision is taken by
manager of firm on the basis of market forces which consists of demand and supply. For
example, the country such as United Kingdom follows the given type of economy. Here,
government controls all the operation which is associated with the interest of public. In
the similar way, decision relating to the type of products to be produced is being taken by
the varied private firm managers like Iceland Supermarket.
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2.2 Impact of fiscal and monetary policy upon Iceland Supermarket
The activities of the Iceland Supermarket are impacted through the different fiscal and
monetary policies. The detailed explanation about the respective policies is depicted in below: Fiscal policy: It is the type of policy which government uses with an aim to maintain
stability within economy. Thus, in order to does the same government perform necessary
adjustments in its taxation and spending policy? The given thing will lead to cause direct
impact upon Iceland Supermarket strategy. For example, manager of Iceland
Supermarket has decided to sale its product at low prices with an aim to lure large
number of buyers towards the firm (Hamilton and Webster, 2015). The given objective
cannot be met by the corporation if government raises the rate of taxes upon the firms
which sales both frozen and non frozen food. This is because; in the given circumstance
cited firm will have to charge high prices upon its product. Thus, it due to this Iceland
Supermarket objective to attract large number of buyers towards the firm cannot be met.
 Monetary policy: Central bank uses the given policy with an aim to stabilize or control
the supply of money within nation. Here, in order to control the supply of money within
nation central bank performs changes in the rate of interest. For example, if it wants to
increase the supply of money then in this situation it will reduce the rate of interest. The
given thing will provide opportunity to the Iceland Supermarket with regard to take loan
from the bank at low interest rates (Kryzanowski, 2006). Thus, the money which firm has
obtained can be used by it’s for its operation and thereby it can gain the benefit in the
form of increased profits and sales.
2.3 Impact of competition policies on the activities of Iceland Supermarket
The operation of Iceland Supermarket is also influenced through different type of
competition policies. In accordance with the given context the competition policy of UK is
analyzed. Here, the United Kingdom competition policy 1998 prevents the firm with regard to
make the dominant position within market (Goyal and Goyal, 2013). Here, the policy is used to
monitor the activities of those firms which comply with ineffective or illegal practices with an
aim to carry out their operation. The given policy will force the firm like Iceland Supermarket
with regard to perform all its operation in an effective and ethical manner. However, if cited firm
will not comply with the same at that time government takes necessary action against the
company in an effectual way.
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Furthermore, varied regulatory mechanisms tend to influence the operation of cited
company. For example, regulatory mechanism such employment law influences the existing
employment policies of the company and thus it force the firm with regard to perform significant
changes in its employment policies. But, if firm will not follow the given action at that time
employees of Iceland Supermarket have full authority with regard to file the case against the
company in an effective way (Hooper and Greenall, 2005).
TASK 3
AC 3.1 Impact of market structure in pricing and output decisions
Market structure: It refers to the number of firms which are operating in the market and
provide similar products to the consumers. There is different type of market structure that impact
pricing and output decisions of the business described here as under:
Perfect competition: This market structure comprises large number of buyers and sellers.
The buyers are well informed about the products and prices of different companies. All of the
firms offer homogeneous products to the customers. Any company can enter into the market at
any point of time. Therefore, the pricing decisions are very much impacted by the competitors’
prices and market demands (Sena Ferreira and et. al., 2012). In this market structure, prices are
decided at the point where total demand is equivalent to the supply.
Monopoly market structure: Under this type of market, only a single producer provides
the services to the customers. Competitor firms are not existed therefore, both the industry and
firms are taken in a same context. Moreover, new entries barriers are existed in this market.
Therefore, monopolist has full rights to decide their product prices in order to get maximum
amount of profitability. Moreover, he can control the prices by changing the product supply.
Monopolistic competition: Large number of firms is operating in this market structure.
Moreover, entry and exit are very easy due to the absence of entry barriers. The products are
differentiated by branding it. Therefore, it can be said that all the firms produces similar kind of
products but they are not identical. Therefore, organization set their prices according to their
product demand and maximizes profits.
Oligopoly: In this market, very little number of firms provides services to the consumers.
The firms are interdependent to each other and provide standardized product. Non price
competition is existed in this market (Anandarajan, Anandarajan and Srinivasan, eds., 2012).
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Iceland supermarket firm operates in an oligopoly market structure. Therefore, it decide the
prices taken into consideration the competitors products. The reason behind that is if competitors
set lower the prices than the demand for Iceland product get decline and impact sales in an
adverse manner. However, if Iceland reduces its product prices in order to occupy larger the
market share than it will reduce the profit margin. Therefore, it becomes important that prices
must be decided at an appropriate level for the better survival of the Iceland Supermarket.
Further, by satisfying larger the number of consumers, Iceland business can increase its
profitability and market position.
AC 3.2 Impact of market forces on Iceland Supermarket
Market forces refer to the demand and supply forces that impact the organization's
pricing decisions. It major includes demand, supply and marketing elements to the product. As
per the scenario, the impact of market forces on Iceland Supermarket is described here as
follows:
Demand: It is the number of products and services that have been desired by the
consumers. It impacts Iceland Supermarket pricing decisions in both the directions. Increasing
the product demand of Iceland business tends to increase the product prices. This in turn, Iceland
Supermarket can generate larger the sales revenue and can maximize its profitability to a great
extent. However, if the food product demands get decline than it will decrease business sales and
impact business profits in an adverse manner. Thus, it can be said that demand and business sales
are positively related to each other.
Supply: It is the quantity of goods and services that are available in the market for sales.
In context to Iceland Supermarket, rises in the supply of food products tends to decline the
prices. This in turn, both the business sales and profitability margin get decline (Craig and
Campbell, 2012). However, in case when the supply of food product get falls results in
increasing the product prices. This in turn, Iceland supermarket will be able to generate larger the
revenues and enhance its profit margin.
Marketing: It is the market force that impacts the product demands for Iceland
Supermarket. It can increase or decrease the food product demands results in changing the
product prices. For instance, effective advertisement strategy and market planning helps to
increase the product demand. Therefore, sales and profitability of Iceland Supermarket will
greatly increased and impact the business in a positive manner.
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AC 3.3 Impact of business and cultural environment on Iceland Supermarket
External environmental analysis can be done by PESTLE analysis that has been done as
under:
Political factors: Iceland Supermarket business operates at wider place. Therefore,
business has to abide by all the political situation of the country. Political stability plays a crucial
role in the success. Unstable political situations such as terrorism bring higher the risk to Iceland
Supermarket and impact it in a negative direction.
Economic factors: Iceland supermarket business purchases many of the components from
outside UK. Therefore, economic factors play such as interest rates, tax rates and inflation rates
plays a significant role in the organization. Increasing the inflation rate, tax rates and exchange
rate influenced Iceland business negatively as the business has to pay higher the amount to other
countries.
Social factors: Food market demand greatly depends upon the customers’ tastes and
preferences. Iceland business has to manufacture product through considering the changes in
customer tastes, choices, their life style, their culture, values and beliefs (Stuart and Gregory,
2013). It will help to satisfy large number of consumers and maximize business yield.
Technological factors: In the present age of competition, Iceland business has to
introduce upgraded and innovative technology in the business. It helps to provide qualitative
food products at affordable prices and get competitive advantageous.
Environmental factors: Iceland Supermarket Plc has to abide by the UK environmental
laws and regulations. Business has to ensure environmental safety for the consumers. Reducing
the waste through recycling is the best way of reducing environmental protection for the
consumers.
Legal factors: Iceland supermarket business has to strictly follow the government
legislation. Moreover, company needs to follow country's pricing and quality standards for the
offered food products.
TASK 4
AC 4.1 Significance of international trade for Iceland Supermarket
The exchange of goods and services between distinct countries of the world is known as
international trade. It involves cross boarder transaction by the means of export and import
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functioning. It brings number of advantageous for the Iceland supermarket Plc that is explained
below:
Maximum utilization of resources: Through selling the food products at international
level, Iceland Supermarket will be able to ensure maximum utilization of available resources.
Moreover, through increasing the production level, business will be able to take benefits of
economies of scale. This in turn, per unit production cost gets decline results in enhancing the
profit margin.
Decreasing the product cost: Importing the raw material at lower the prices tends to
decline the cost of food products. Thus, it can be said that international trade helps Iceland
business to reduce cost of production.
Increasing business sales: Exporting the food products at distinct lands, Iceland
supermarket can maximize its sales. This in turn, business revenues and profitability both tends
to increase.
Large customer base: International trade operations help to enhance the customer base for
Iceland Supermarket. Export the food products to various countries, Iceland business can satisfy
larger the number of customers and increase their customer base and enhance customer loyalty
(Schultz and Hatch, 2008). This in turn, Iceland supermarket business can grab larger the market
share and get competitive advantageous.
Business expansion: International trade refers to expanding the business operations in
different countries. Thus, Iceland Supermarket can achieve higher the success and make business
growth and development.
Good corporate image: Larger the customer base, increased sales, increased profitability
and business expansion create good corporate image of Iceland supermarket. This in turn,
business can compete effectively at the market place.
AC 4.2 Impact of global factors on Iceland Supermarket organization
Global factors impact every organization in a great manner. Under the economic factors,
Gross Domestic product (GDP), Gross national product (GNP), standard of living, purchasing
power and rate of unemployment impacts Iceland supermarket business. For example, higher the
GDP, population growth rate and consumers purchasing power will increase the product demand.
Therefore, Iceland Supermarket can maximize its sales revenue and also the profitability
(Harrison, 2013). Moreover, cultural difference also tends to vary from country to country.
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Therefore, it become necessary for Iceland supermarket to analyses the cultural difference and
meet the customer demand in an effective way. Furthermore, trade barriers, governmental laws
and policies are also included in global factors. Lower the trade barriers and favorable laws and
regulations impact business in a positive manner and vice versa. Another, technological factors
require Iceland Supermarket to improve their technology on a regular basis. Technological
improvement helps the organization to improve their product quality and reduce its cost.
AC 4.3 Impact of EU policies on Iceland Supermarket
The European Union Policies directly impacts the operations of Iceland Supermarket
business. Competition law and other regulatory policies influenced the operating functions of all
the business corporations. Competition policy aims at prohibiting unfair business practices and
ensures fair competition between the business organizations. The policy helps to eliminate
manipulative the government laws, rules and regulations to get unfair business advantageous
(Nataraja and Al-Aali, 2011). Another fiscal policy influenced the business through changing the
level of government spending. Increasing the tax rates will impose higher the tax liability to
Iceland business and vice versa. Furthermore, under the monetary policy, increasing the interest
rates, CRR and SLR will impact business in a negative direction as it decreases the business
profits. In addition to it, free trade policy and liberalization policy is beneficial for Iceland
Supermarket Plc. The reason behind that is the policy allows all the organizations to start their
operations in other countries and provide service to the customers. However, entry barriers
impact the organization in a negative way as business will not be able to operate their functions
at distinct lands.
CONCLUSION
Attributing all the facts and figures from the present report, it can be concluded that the
organization must use different tools with an aim to gather the information about the factors
which are prevailing in the external environment of the company. Here, by complying with the
given type of activity only an appropriate decision can be taken by cited company and thus it can
gain the benefits in the form of increased profits and sales in an effectual way.
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