Business Environment Analysis Report: Iceland Supermarket, Semester 1

This report provides a comprehensive analysis of the business environment impacting Iceland Supermarket. It begins with an overview of various organizational purposes, including partnerships, private firms, public companies, and NGOs, and examines how these organizations meet stakeholder objectives. The report then delves into the strategies Iceland Supermarket employs to fulfill its responsibilities to customers, local communities, employees, and legal and ethical standards. Furthermore, it explores different economic systems and their impact on the supermarket, considering fiscal and monetary policies, competition, and regulatory mechanisms. The analysis extends to market structures, pricing decisions, and the influence of market forces on Iceland's responses. The report also assesses the impact of business and cultural environments on organizational behavior, along with the significance of international trade, global factors, and the policies of the European Union on Iceland Supermarket's operations and strategic planning.

Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 The purpose of various organizations....................................................................................1
1.2 The extent of meeting the objectives of Stakeholders...........................................................2
1.3 Strategies to meet the responsibilities as an organization.....................................................3
TASK 2............................................................................................................................................4
2.1 Different economic system....................................................................................................4
2.2 The impact of fiscal and monetary policy on Iceland Supermarket......................................5
2.3 The impact of competition policy and other regulatory mechanism on the activities of
Iceland supermarket.....................................................................................................................6
TASK 3............................................................................................................................................7
3.1 Impact of market structures on pricing and output decision..................................................7
3.2 Market forces shaping Iceland supermarket responses.......................................................10
3.3 Impact of business and cultural environment in shaping organization's behaviour............12
TASK 4..........................................................................................................................................13
4.1 Significance of international trade.......................................................................................13
4.2 Impact of global factors.......................................................................................................14
4.3 Impact of policies of European Union.................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
The environment of business consist of various internal and external elements that
directly links with the business functioning and activities. The set of environmental factors
includes different macro-economic and micro environmental factors. They generally deal with
the impacts of political policies, economic conditions, governmental intervention, socio-cultural
situations and national as well as international market environment. Along with this, they have to
face the effects or behaviour of micro economic factors like competitors, customers, suppliers,
financial bodies. An organization needs to consider all the factors that are responsible to
determine their business environment (Melville, 2010). It is helpful in increasing the level of
employee’s participation and involvement in all the business activities.
The report is covering information about the factors that impact the working and market
condition of Iceland which is a supermarket chain. It offers various local as well as international
products thus; it needs to consider the macro and micro environment factors that have high
impact on the improvement and survival of Iceland Supermarket. The management of the giant
supermarket industry has to defeat all those challenges in order to mark success and continue its
business in their targeted market. For this, Iceland supermarket has to define a good set of
strategies for reducing the impacts of these factors.
TASK 1
1.1 Purpose of various organizations
It is examined that all the organizations have different mission, vision, objectives and
competency level which is determined as per their business motive, functioning and targeted
market. The following are the organizations and their purpose are: Partnership firms - They are termed as the business enterprise which are mostly
operated and functioned by more than two individuals. In this, roles, duties, liabilities and
responsibilities are equally divided among all the partners (Griffin, 2013). For example:
◦ Iceland Foods Ltd – It is a British originated supermarket chain which deals with all
types of frozen vegetables, fruits and other foods like precooked meals. Iceland
supermarket group has reported £190 million revenue in 2015 and has expanded its
chain with 750 retail stores. All of their stores offer foods which are fresh and frozen
foods by the name of Iceland and other related brands. Company is facing high
competition from other similar chains of supermarket in UK like Asda and Tesco
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(Kennerley and Neely, 2014). However, Iceland has marked a new position for itself
in food sector which facilitates them to attract high level of customers in the UK
market. The main purpose of the cited firm is to increase the overall productivity for
gaining more sources of attaining revenue. Private firm – This is a form of partnership firm which is owned by private bodies. In
these types of firm, the intervention of government is impossible. A private company is
similar to:
◦ Kentucky Fried Chicken (KFC) – This is a chain of fast food restaurants that are
specialized in making and serving various types of fried chicken. KFC has 19,000+
restaurants in about 200+ countries from where it earns £25 billion every year. KFC
was originated from Kentucky where Harland Sanders, the founder, started selling
various types of fried chickens in his restaurant. KFC mostly adopts the franchising
method for expanding its business in its targeted market. KFC is popular for chicken
food items in the fast food industry (Ferrell and Fraedrich, 2014). The primary aim of
the cited buisness is to increase the market value of the company in the food sector
and generate more profits. Public company – It is a type of company which is wholly owned and maintained by
government or regulatory authorities. Their aim is to work for the public and gives
services in a particular sector. For example:
◦ Transport for London (TFL) – TFL is a local government body that operates its
business in tertiary sector and liable for addressing all the activities that are defined
under the transport system of London, England. TFL is highly concerned for
developing effective network of main road routes and for improving all the public
transportation networks including the underground train system of London,
Docklands Light Railway system and TFL Railways, local buses and taxis. The
organization was established in the year 2000 under the London Council which is
public welfare society (Morton and Hu, 2008). Its aim is to develop an effective
transport network for managing and controlling all the transportation services in
London.
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 NGO – A mixed structure of all the other types of firm whose aim is to function and
operate business functions in accordance to society welfare and betterment (Klapper,
Lewin and Delgado, 2015). They are like:
◦ Cancer Research (CR): It is one of the largest independent cancer research charities
at global level which conducts research for cancer prevention, identifying causes and
curing the disease. The mission is to reduce the rate of cancer deaths by implementing
various activities and campaigns. It is a charitable organization which functions in
multiple sectors (Conner, 2013).
1.2 Extent of meeting the objectives of stakeholders
It is ascertained that a stakeholder is a person who can impact the functioning of an
organization, business and market by its activities. They are present in internal as well as
external environment of an organization, thus has the ability to influence the business process
and projects in various aspects. In that case, Iceland supermarket has to consider all the
stakeholders related to the company (Pryor, 2005). The management team needs to implement
various strategies to increase the participation and engagement level of their stakeholders which
are determined under two perspectives or levels:
Internal stakeholders Employees – They are termed as the lower level management for Iceland and their scope
of improvement links with a good salary, job security, retention over the job, healthy
working environment, timely retirement, better pension plans and a settled career.
However, Iceland supermarket employees and their related groups are interested in
making stability in job whereas the company's aim is increase the level of productivity
among the individuals (Shaikh, 2010).
 Managers - The focus of managers of Iceland supermarket is to maintain their employees
interest level over their jobs, involvement in the business activities and their salary as
well as incentive system. They are liable to do this by their effective set of managing,
making decisions and controlling their processes.
External factors Customers – The process of maintaining the level of customers or their sovereignty is a
highly challenging activity for the organization. For this, the company has to determine
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the areas of useful resources in order to attain attention from their customers which
defines the survival or continuation of Iceland supermarket's business. Central government – It is addressed that the intervention made by the government are
highly impacting the working, functioning and market of Iceland supermarket. The
impacts include the political and economic condition, taxation policy, legal framework as
per the business of Iceland Supermarket (Mitra, 2003). Government parties and their
administrative bodies are generally concerned on maintaining the level of natural
resources.
 Suppliers – The suppliers of Iceland Supermarket mainly seeks for a good merchandising
price over their supply and a fast payment of inventories in order to mark a good deal.
Their aim is to maintain the statement of Law of supply which states that higher the price
would generate high quantity sale of the products.
1.3 Strategies to meet the responsibilities as an organization
It is evident that an organization needs to implement a perfect set of strategies and
accordingly follow the specified action plan. This process would help them to meet up all the
objectives and sustain a high competency level. In that case, it is necessary for the company like
Iceland supermarkets to develop an effective set of strategies for achieving all the targets
determined as per their business. For this, the company needs to consider each and every aspect
of business activities and processes that leads to success. Accordingly, it has to define a set of
action plan which is beneficial for the management as well as the society and other related
authorities (Faul, 2008). In addition to this, it has to consider various elements in respect to their
business and market which are:
Stakeholder responsibilities Customers –Company has to focus on their customers’ needs and wants which is
generally based on a budgeted price product and high quality product. In that respect,
Iceland supermarket has to manage both of these objectives and accordingly develop a
strategy in order to be competitive in providing high value and better quality. The
management of an organization has to protect their customer’s health and safety, for
which Iceland Supermarket is pledged to their customer's principles for sustaining in the
market. Company has destroyed all their products which have flavours and artificial
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colours in the ingredients (Fernando, 2011). Along with this, the company's brand
products commence as per the animal welfare policies and regulations. Local community – It is determined that Iceland supermarket have to protect the interest
of local community and the surrounding environment which are termed under the group
of external stakeholder. It is assessed that Iceland has the participation of approx 24,000
employees. In addition, Iceland supermarket is extremely focused on developing the
business environment and always seeks to give back the communities where the company
operate. They retain the resources in form of creating new jobs, developing new
opportunities, catering superior customer services and providing generous support to all
the factors present in the local communities (Zsambok and Klein, 2014). Employees - Iceland management has invested a lot of money on their employees present
in their UK market. However, an organization is mostly aimed on generating sources of
getting a large form of profit and revenue. For this, it buys product from providers at a
cut-price and deal them with the highest level of profit.
Legal responsibilities
The cited organisation is forced to follow the entire set of legal as well as ethical
responsibilities that are to be maintained by them. They are directed to conduct their business
functions and operations as per the defined norms and standards of functioning in the policies
and regulations specified by the government and related legal bodies.
Practical responsibilities
As per the stated set of responsibilities, the management is bound to maintain the level of
morale values and support towards their employees and targeted customers. This would help
them in placing a strong position in the market and attain greater aspects of business.
Ethical responsibilities
It is ascertained that an organisation should focus its attention and efforts on maintaining
their hold on the entire forms of commitments and promises made by them. This would help
their management in acquiring greater market share and generate ways of attaining more
revenues.
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TASK 2
2.1 Different economic systems
The information has been specified for all the economic markets and resources are forced
to offer a high level of community's goods which is termed as factors of production. Those
elements of resources are determined as minerals, sources of fresh water, areas of oil producing,
the climactic conditions, etc. (Halbert and Ungulli, 2011). It is evident that different states have
assorted kind of resources. In that respect, human resource has a vital role in defining developing
the market as it is the ability of labour or humans to use their skills in order to convert and attain
better profits in producing a finished product. Accordingly, the economy system is the most
significant area or perspective for defining the ways of dealing the situation production in
scarcity. The condition of scarcity is an inefficiency of humans to produce as per the wants and
needs of the society due the unavailability of resources. There are different kinds of economic
system which are effective in allocating and utilising the resources for the benefit of society, they
are: Free economy – It is a free market of defining the prices and determining the competition
as per the actions of demands and supply of the products. However, the central bodies
have the power to control the market intervention and stating the rules. As the
government has no participation in the free market but still the members faces a strong
and positive competition because of their regulations and policies that are flexible for
operating the business processes and activities (Savitz, 2012). Examples of market are
UK, France and Germany. Command economy system – The market or economy system where the government
intervention is high and most of the control and decision are taken by the political parties.
They define the production criteria and the level of production for all the members that
are engaged in the market. In addition, government also interacts with the process of
price fixing. For example, China has a command economy system. Mixed economy – In this kind of economy, the decisions over the prices and other factors
are determined as per the interactions of their buyers and sellers or demand and supply in
markets but in which the government interference in the benefit of resources (Kews and
Stredwick, 2005). United States of America is one of the best examples of mixed
economy.
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 Transitional economy – It is defined as the kind of economy which has modified itself
from centrally planned economy to market economy. This form of economy has a
specific structure of working and placing the operations specified in the system. China is
one the most common example of transitional economy.
2.2 Impact of fiscal and monetary policy on Iceland Supermarket
Impact of Monetary policy
The motive of is to control and maintain the level of macro-economic environment which
determines their impact through the interest rates, exchange rate and money supply. It is analysed
that monetary policy influences the market of Iceland Supermarket and also the whole economy. Exchange rates – It is examined that variation in exchange rates has the capacity to
impact the price. This mostly affects the variableness on the production and the
distribution level of Iceland Supermarket. Consider that if pound realize more than the
Iceland Supermarket business would suffer losses from the other countries as they faces
problems in buying the products while sales in home country would increase higher value
for the company (Prasad, 2010). Interest rate – It is termed under the government intervention when it determines to
modify the interest rate by directing the monetary policy, then it will affect the market of
Iceland Supermarket. Thus, a change in interest rates results to a reduction of profits,
which further leads to low level of expanding the new outlet of Iceland in UK market. On
the other side, if interest rate is decreased then it is beneficial for Iceland company as
they can easily get funding at lower cost.
Impact of Fiscal policy
They are the policies that mostly attempt to impact the level and process of economic
activities by implementing changes in government spending and taxation, that are: Taxations – It is marked that if taxation rates increases, payment would decrease as the
prices of frozen food products of Iceland Company would be also increase. As per the
results, it leads to a lower profit because Iceland Supermarket will pay more money in
taxes (Ahmed, 2012).
 Government borrowing – The situation which results in no lending of money, Iceland
Supermarket has to pay fewer taxes and can attain benefits to increase revenue. This
generally leads to high wages, generating more than profit and high production.
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However, the nature of lending the money influence Iceland Supermarket which is
responsible for taxes system and this could forbid their business to develop. Thus,
everything is relatively depended on the government intervention and economic politics
(Benedictis and Salvatici, 2011).
2.3 The impact of competition policy and other regulatory mechanism on the activities of Iceland
supermarket
It is ascertained that UK government has developed different economic policies and
regulations that have a direct link or impact with the business activities of Iceland Supermarket.
These set of impacts has both negative and positive aspects, depending on the types of their
working and company's mechanism. Any kind of changes in the policies and regulation in the
government perspective would results influence on the acts of Iceland Supermarket. In UK
market Iceland Supermarket has to overcome all their competitors that are Tesco, Asda, Aldi,
etc. who have similar food market as that of Iceland (Kew and Stredwick, 2005).
All these competitors have different stores with various capital, working and organization
policies. In that respect, it is specified that government must change policies as per the existing
market to make out with the competition. It is termed so because as the organization modifies
their policies in order to increase the competitive spirit and organization, like Iceland, must
follow all such changes. However, alteration in the policies of the competitors (like reduction in
the pricing policies) would lead to change in the actions and policies of Iceland Supermarket. It
is examined that the competitive policy specified by Iceland Supermarket gives better form of
determining the market and motivates their activities for leading different organizations
(Camacho, 2012). It assures broad customer choice between Iceland and their competitors, along
with this; it also breaks the non-competitive market and implements an easy entry on new
competitors.
TASK 3
3.1 Impact of market structures on pricing and output decision
On the basis of certain characteristics such as seller entry barriers, seller number, buyer
entry barriers and buyer number, there are many market structures. Few of the prominent ones
are perfect competition, monopoly, monopolistic and oligopolistic competition.
Perfect Competition
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In this type of market structure there is no barrier while entering into the market and
hence has large number of sellers and buyers (Czinkota and et.al, 2009). Companies operating in
this market structure face fierce competition and cannot choose the prices for their products.
Prices and outputs are determined by the equilibrium attained by the demand and supply of
products and services. There are homogeneous products sold in the market to the large number of
sellers. In any industry such as in retail no organization like Asda and Tesco are empowered to
decide prices and strategy related to it due to goods which are in market are similar in
appearance and quality like eggs. With 1.8% share in UK foods, Iceland Supermarket has
decided its own prices (Bitzenis and Nito, 2015).
Monopolistic competition
It is the type of market structure in which there is large number of sellers but is selling
distinguished product and service range to the buyers. The products offered by the sellers are
differentiated from each others in terms of quality and the methods adopted for branding by
them. The firms operating in this structure are entitled to determine their own pricing and
outputs. While operating in this market structure Iceland supermarket caters to provide optimum
level of products and services to have a competitive edge over rivals.
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Illustration 1: Perfect Competition
Market
(Source: Czinkota, Knight and Liesch,
2004)

Oligopolistic competition
In this type of market structure there is the dominance of few firms and organization over
the market share (Beck and Demirguc-Kunt, 2016). Pricing and output decisions taken by this
organization depends on that of taken by the rivals. The market structure is very productive and
concentrated in nature due to limited number of sellers. The satisfaction level of the customers is
very high in this aspect.
Monopoly
There exists only one seller in the market with the absence of competition. The seller
serves the entire market with the high degree control over the pricing and output making
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Illustration 2: Monopolistic
Competition
(Source: Teece, 2010)
Illustration 3: Oligopolistic
Competition
(Source: Welford, 2013)