Business Environment Report: Iceland Supermarket Performance Analysis

This report provides a comprehensive analysis of the business environment affecting Iceland Supermarket, a retail chain specializing in frozen foods. The report begins with an introduction to the concept of the business environment and its impact on organizational strategies. It then delves into an examination of different types of organizations, including Iceland Supermarket, KFC, Transport of London, and Cancer Research, highlighting their diverse objectives. The report further explores the stakeholders of Iceland Supermarket, such as customers, employees, and shareholders, and their respective objectives. It also outlines the company's responsibilities towards the government, environment, and customers, emphasizing compliance with regulations and commitment to quality. The report analyzes the economic systems, including command, capitalistic, mixed, and transitional economies, and their effects on the supermarket. It also assesses the impact of fiscal and monetary policies, as well as competitive and regulatory mechanisms, on Iceland Supermarket's operations and expansion decisions. The conclusion summarizes the key findings and implications of the analysis.

BUSINESS ENVIRONMET

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1................................................................................................................................................3
1.2................................................................................................................................................4
1.3................................................................................................................................................5
TASK 2............................................................................................................................................6
2.1................................................................................................................................................6
2.2................................................................................................................................................7
2.3................................................................................................................................................7
TASK 3............................................................................................................................................8
3.1................................................................................................................................................8
3.2................................................................................................................................................9
3.3..............................................................................................................................................10
TASK 4..........................................................................................................................................11
4.1..............................................................................................................................................11
4.2..............................................................................................................................................11
4.3..............................................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Business environment includes various factors which affect the operations and working
of the organization. There are various aspects which impact the policies and the strategies made
by the organization. Besides this, the major factor which is considered by the organizations is the
rules and regulatory policies which are made by the government (Business and environment,
2013). This report is made on the Iceland supermarket which is a retail store and sells frozen
products to the customers. Further, it is known for the strategies and tactics which are formulated
by them to attract public and create competitive advantage among its competitors. The report
will focus on the internal and external factor which will affect the activities of the firm. Further,
it emphasizes on fiscal and monetary policy which highly impact on the expansion decision of
the company. Besides this, it stress on the importance of the international trade which is
beneficial for the Iceland supermarket in expanding its target customers. Lastly, emphasizes is
provided on the global factors and the policies of European Union which affect the performance
of the company.
TASK 1
1.1
There are different types of organization working in UK with diverse motives and
objective. Before serving the customer in the market, first the company decides the aim which
they want to accomplish. Basically, different types of firms can be categorized in four areas
which are as follows:
 Iceland supermarket- It is a private organization working in a retailing sector. The
organization serves its customer with frozen food and also provides ready meals. The
main aim of the business is to expand its market and earn huge profit as it is operating its
business highly competitive market (Dickinson, 2013). Besides this, another aim of the
Iceland supermarket is to restricting their plans and strategies from the competitors. This
will help in raising more revenue and attaining competitive advantage. KFC- It is basically the subsidy and its aim and objectives are different from other
organizations. It is the fast food chain and is operating in many countries. The main aim
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of the KFC is to increase its customer market and expand its services in different parts of
the country. It is the subsidy of Yum Brand so its major aim is to capture the large market
share (Freeman, 2010). Transport of London- It is the government body whose main aim is to provide transport
facility to the citizens of the UK. All its functions are regulated by the government so
their main objective is to render convenience to the public. So they do not face difficulty
in travelling. Besides this, the services regarding transport are provided by subsidy as
well as private organization. The major aim is welfare of the public. Cancer research- It is different from all the organization working in the industry. It is
considered under the non-profit organization. They are not majorly concerned about the
profit. In case of the cancer research, its motive is to treat the patients who are suffering
from cancer. Further, they are always trying to evaluate different ways through which the
person can overcome cancer (Cancer Research, 2016).
1.2
There are different stakeholders of the company and their purposes are also diverse. To
successfully operate the business in the market, it is important for the Iceland supermarket to
fulfill the needs of them. Stakeholders have significant role in the company for making it
profitable. The stakeholders are as follows- Customers- They are one of the significant shareholders for the Iceland supermarket. The
company is providing frozen foods which are the recent demand of the public. Further,
this retail chain provides prepared foods which are need of the hour. So this way it is
meeting objectives of the customers (Yu and Ramanathan, 2012). The objectives of the
users are to get quality products from the organization. So for this, all the products are
tested before serving the customers. Employees- Without them, Iceland supermarket cannot serve its customers. The basic
objectives of the employees are to get salary on time. Besides this, they require good
working conditions and proper facility to serve their customers. As it is the supermarket,
the company provides proper atmosphere which helps them to work effectively in the
organization (Chen and Mohamed, 2008). Further, all the employee acts and regulations
are followed by the Iceland supermarket for protecting the interest of employees.
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 Shareholders- Their main objective is the profit which is earned by the company. They
are the one who invests in the organization. For meeting their objectives, the firm
provides report regarding the profitability and different financial documents which are
required by them for taking decisions (Parker and et.al., 2014). For providing this
information, the firms make annual report which includes data regarding all the potential
aspects of the firm.
1.3
There are various responsibilities of the organization towards different individuals. If the
company is working in market, its responsibility is towards its customers, environment,
government etc. the major responsibility of the Iceland supermarket is for the government.
There are various rules and regulations which are made by the authority for safeguarding the
interest of the public and society (Ahmed and W. M, 2012). Besides this, the company is
responsible to give proper tax to the government so that they can make proper use in developing
the nation. Further, the authority has made certain guidelines for the employees working in the
organization. So by complying with all the regulations the company is meeting the responsibility
towards the authority as well as employees. Every company is required to fulfill its responsibility
towards the environment. As with the increasing global warming, the firm has made strategies to
reduce the pollution which generate from the activities of people. For this, they have made
tactics to reduce the waste and recycle it. Further, Iceland supermarket suppliers are all registered
under FTSE food index (McGuire, By and Hutchings, 2007). This helps the retail store to get all
the authentic food products. By serving this food to their customers they are fulfilling the
responsibility of serving quality foods. Besides this, the company is responsible for making
people aware about the pros and cons of the food. For this, proper packaging strategy is made in
which the entire ingredient as well as its technique regarding preserving is mentioned. The recent
strategy which they have made regarding preserving the perishable items which are spoiled
easily. They have made different section for it so that it can be preserved effectively. This will
ensure good health of their customers. These are the responsibilities of the organization and
Iceland supermarket has made appropriate strategy to fulfill it (Eagle and Brennan, 2007).
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TASK 2
2.1
Economic system is the system which determines the distribution of resources and
trading of goods in the economy. There are basically four types of economic system and each
one has different way to allocate the resources. The role of government varies according to the
economic system which the country follows. The 4 economic systems are as follows:
 Command economy- In this system all the rules and regulations are in the hands of the
government. It is also known as the centrally planned system. The resources allocation is
in the hands of the authority. By analyzing every sector and the area, the resources are
distributed in the country. Besides this resource allocation, the goods to products,
occupation of the workers are decided by the authority. The organizations have no power
regarding the resources or the decisions which related to the economy. Examples of
command economy are: Cuba, Russia etc (Pride, 2013).
 Capitalistic economy- This economy system is purely governed by the private sector. All
the power is in the hands of private ownership. It has full freedom to what to produce and
how much to produce. The resources are allocated by the private sectors. The major
players in this economy are large companies which are actually given huge profit to the
economy. There is no intervention of the government in this economic system. Further,
this is also known as the market and free economy (Services, 2009). Further, the public
are free to sell and buy their properties without the interference of the government.
United States is the one which is categorized in this economic system.
 Mixed economy- In this economy system, private and government both takes decisions
regarding allocating the resources. Most of the countries follow this system because it
helps in equally distrusting the natural resources. The decisions regarding education,
water supplies etc are taken by the government as they directly affect the society of the
nation. Besides this, producing the commodities and all the goods related decisions are
taken by the private organization. This helps in safeguarding the interest of the society
without hampering the profit of large size organization (Moon, 2010).
 Transitional economy- It is the economy which changes from the planned to the
command economy. In this the prices are set by the market forces and the resources are
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allocated by the private sector. Further, the power is shifted from the government in the
hands of the private sector. The whole and sole functions are regulated by the private
organizations. For example: China, soviet Union are the countries which are following
this economic system.
2.2
Fiscal policy and monetary policy have huge impact on the Iceland supermarket. Fiscal
policy is basically associated with the tax rate as it is changed because the government has to
control the spending levels of the public. If the taxes are increased then the consumer purchasing
power will be reduced. This will affect the purchasing of the Iceland supermarket. The user will
purchase only those foods which are essential and not the luxury items because they do not have
much money to spend (Hurn, 2011). This will lower down the profit margin of the Iceland
supermarket. Besides this, if the government decreases the tax rate then purchasing power will
be more. Further, it will result in more sales and profit for the Iceland supermarket. Fiscal policy
has major impact on the supermarket because the costs of the luxury products are more which
raises the profit of the company (The Impact of the Tax System on Business Environment, 2008).
On the other hand, monetary policy is made to create stability in the price. The monetary
policy is related with the interest rates. This helps in controlling the supply of money in the
economy. If the government increases the interest rates then the major part of the customer will
not purchase the item (Iqbal and Strong, 2010). Less money will flow in the economy then the
expansion chances of Iceland supermarket will reduce. On the contrary, if the government lowers
down the interest rates then the users will purchase more food items which will help in
expanding the business of Iceland supermarket. So it can be said that, the operation of the
activity are highly linked with the monetary and fiscal policy (Stackelberg and et.al., 2010).
2.3
There is huge impact of competitive policy and other regulatory mechanism on the
operations of the Iceland supermarket. There is high competition among the retail chains so this
policy is made to enhance the competition and serve quality products to the customers. Due to
this, the companies are giving quality services and effectively working for rendering products
according to the taste and preference of the customers. Due to this policy, they are safeguarding
the interest of customers (Jones, Hillier and Comfort, 2007). Further, the ice land supermarket
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has been dealing in frozen foods because the competitors are doing so. With the help of this, the
consumer gets choice to select between the products. This policy gives rise to innovation as the
retail chain wants to do better in compare to their competitors. So ice land supermarket has
introduced different services to attract the customers towards it. Further, there are certain
regulatory mechanisms like tax, duties levied on import export etc. the company has to comply
with different laws as this increases the goodwill of the organization and build trust among the
consumers (Lihitkar, 2013).
TASK 3
3.1
Different types of market structures are present in which a business operates. Majorly, the
market structures are monopoly, perfect competition, oligopoly and monopolistic. For taking
decisions on the basis of setting prices or gaining output in Iceland Supermarket, these market
structures play a significant role. In oligopoly market structure under which cited firm if
operating, there are many buyers but, only a few sellers are present. Here, demand gets
fluctuated by the number of buyers present in the target market (Lusardiand Mitchelli, 2007).
This is the reason; any action of a firm put a direct impact on the working of other competitors.
Supply of products and services of Iceland Supermarket depends on their demand and
accordingly, production is done, that is, output decision is made. In this market structure,
because of the presence of only few sellers, issue of shortage of labour does not exist. Under
oligopoly market, firms like Iceland Supermarket are having the advantage of this as well as they
are using latest and advanced technologies (Wiley, 2013). Apart from that, economies of large
scale production are also one of the benefits that Iceland Supermarket is gaining being in
oligopoly market structure.
In perfect competition, products and services of firms are highly demanded as well as
competition with other organizations is also intense. This is the reason; price of products of
company is generally kept moderate so that customers would not switch over to other firms and
will stay for longer duration with loyalty. However, in monopoly market structure, firms have
complete control over the pricing and output decision as there is only one seller of particular
commodity or service and the demand is high. Also, there is the advantage that under monopoly,
owner can change the price of product or service offered by him as per the fluctuation in demand
6

and supply (Shaikh, 2010). It says that buyer is needed to pay higher price as the availability of
product or service is limited in this market structure.
Apart from that, monopolistic market structure is one in which the level of competition if
moderate. Here, management of firm makes decisions with respect to the price of product or
services well as on the basis of output that company needs to attain. Thus, it can be said that
Iceland Supermarket has to make judgments related to the price and output in accordance with
the market structure to which it belongs and policies and norms of the same. Being in oligopoly,
firm is not having the right to charge very high price even not in case when other competitor
firms are charging high (Baldwinand Scott, 2013). It is because of the reason that this action may
lead to loss that Iceland Supermarket may have to face. Thus, the firm is adopting various
promotional strategies in order to make the target market aware that products and services
offered by organization are available at affordable prices with high quality. In this way, decision
based on output can be taken by assessing the expectations of customers (Al-Najjar, 2012).
3.2
Many market forces are there which have a direct impact which shape the response of
Iceland Supermarket and in accordance with the same, management takes decision. These forces
are like supply and demand, elasticity of demand and supply, customer perceptions and actions,
research and development, core competencies, etc. As per the changing scenario, Iceland
Supermarket needs to take care of all these forces so as to stay in the competition in the long run.
Demand and supply are the major market forces with which company gets affected as in case if
the demand of products and services of Iceland Supermarket is high, then its supply will
automatically get increased and vice-versa. On the basis of same, cost, pricing and output
decisions are taken (Viswanathanand Dickson, 2007).Cited organisation adopts effective
strategies by which sales and profits of the firm can be increased. The first and foremost strategy
of company is to revise the price of perishable products after every particular interval of time.
Apart from that, Iceland Supermarket is doing in-depth research of the market so as to
assess current needs and trends of customers and satisfy the same accordingly. Company has
made developments in its services according to which it started doing home delivery of products
as per the demand of customers. By assessing the strategies of competitors, Iceland Supermarket
is making efforts to gain competitive advantage over others in the market to stay for a long
period of time with success (Stackelbergand et.al., 2010). In order to achieve its short and long
7

term goals, company is using the latest and advanced technologies which are helping in
increasing its sales and reducing the cost of production. Along with that, analyzing the
perception of customers towards products and services of company, that is, taking their feedback
and resolving the issues if they have any, is one of the successful response of Iceland
Supermarket towards market forces (Lihitkar, 2013).
3.3
Business and cultural environments play a significant role in shaping the behavior of
firms and that is Iceland Supermarket. Business environment includes factors like political,
economic, social, technological, legal and ethical. These factors if not taken into consideration
put and adverse impact on the functioning of firm. Similarly, cultural environment consists of
factors like language, religion, culture as well as beliefs and values of people. Both the
environments have their own importance in shaping the behaviour of Iceland Supermarket. In
order to assess the business environment of firm, tool of PESTLE analysis can be used. Political
factor put a huge emphasis on the functioning of firm as every organization needs to operate in
accordance with the rules and regulations imposed by government of country (Jones, Hillier and
Comfort, 2007). For example, a little change in the tax rates leads to alteration in the prices of
products which decreases the sales as well as profitability of the firm.
As per the economic condition of nation, Iceland Supermarket needs to set the prices of
products by seeing the purchasing power of customers. Also, at the time of recession, entire
operations of Iceland Supermarket get affected. In terms of social factors, company is needed to
fulfill the needs and demands of customers as per their tastes and preferences. In addition to this,
technological developments play a crucial role in increasing the productivity and profitability of
organization (Iqbal and Strong, 2010). Legal changes in the nation in which the firm operates are
also needed to be emphasized so as to get protected from any kind of legal obligations imposed
by legal authorities. For example, in case of any alteration in the laws and norms imposed by
legal authorities, Iceland Supermarket is needed to make respective changes in its existing plans
and actions. Ethical factors say that company should ethically run their business with making fair
practices to remain in the competition (Hurn, 2011).
With respect to cultural environment, company is required to take care of the social
beliefs, values, culture, religion, language and attitude of employees as well as of customers to
make the efforts successful and gain sustainability. For this purpose, Iceland Supermarket needs
8

to ensure that all employees working in it are treated equally and not getting discriminated on the
basis of their religion, gender, caste or language. Apart from that, it is important for the firm to
respect the diversity of employees as in Iceland Supermarket, there are people working who
belong to different nations, culture and background (Moon, 2010). With respect to customers,
cultural environment needs to be taken into consideration as products and services are needed to
be offered as per the beliefs, values and attitude of target customers so as to make them
successful. Sometimes, it happens that a product if successful in one nation but get failed in
another. For this reason, cultural environment is important to be emphasized.
TASK 4
4.1
As to day’s scenario is of globalization where every organization is running its business
internationally, it has become important for Iceland Supermarket to trade with other nations. It is
a well-known fact that to increase the scope of business, getting globalised is the best option. For
this purpose, WTO (World Trade Organisation) has been established which is giving emerging
economies the chance to get developed by globalization like Brazil, Russia, India and China.
Company can gain a lot of advantages by doing international trade with these nations.
Globalization is allowing firms to increase their profits with the help of trading in these nations
which have cheap labour and raw material (Services, 2009).With the help of this, Iceland
Supermarket can grab the attention of large number of customers and thus, profits of company
will automatically get enhanced. Through trading across national boundaries, customer base as
well as the revenue of firm raises by which market position of firm gets stronger than that of
competitors. Thus, it can be said that there are many advantages which Iceland Supermarket can
gain by running its business on international level and survive in the intense competition with
sustainability.
4.2
Global factors are having their direct impact on the performance of any business and
thus, on Iceland Supermarket. These factors like growth, employment, education, economics and
finance, labour movement, etc. With the help of globalization, rate of employment in developed
as well as in developing countries increases to a high extent by which living standard of people is
also enhancing. Ultimately, when nation’s economic condition is rising, education level is also
9

getting improved (Eagleand Brennan, 2007). Thus, companies like Iceland Supermarket are
having skilled and knowledgeable workforce that work with efficiency and leading to increased
productivity and profits. Apart from that, because of international trade, labour movement is
increasing by which people are getting opportunities to grow and therefore, firms like Iceland
Supermarket are getting advantage of the same, that is, issue of labour shortage has been reduced
with globalization. Apart from that, exchange rates are also one of the benefits that international
trade is providing to Iceland Supermarket (Pride, 2013). By dealing with other nations in terms
of import and export, company can gain higher profits. This is the reason; it can be said that
global factors put a huge impact on the functioning of Iceland Supermarket.
4.3
European Union has imposed many policies and regulations which every firm of nations
that come under EU have to follow. With respect to Iceland Supermarket, EU plays a significant
role as it is helping the firm in getting flourished and growing in the market. For example, EU
imposed the Consumer Protection Act according to which firms need to keep transparency in the
information to give to customers and it is essential for them to provide high quality products that
are safe to consume (McGuire, Byand Hutchings, 2007). EU has formulated and imposed many
policies according to which firms have to operate so that they can perform their operations
smoothly as non-compliance with rules and regulations imposed by EU may lead to face serious
consequences by organizations. It can be said that European Union has helped Iceland
Supermarket to do free trade with other nations which is assisting in gaining higher profits
through increased sales. According to food policy imposed by EU on all the firms that come
under food and beverage industry, it is essential for Iceland Supermarket to offer high quality
products with keeping in mind the well-being of customers (Ahmed, 2012). Also, according to
health and safety policy imposed by EU on firms offering food products, Iceland Supermarket
cannot use any ingredient in the item that can prove to be harmful for the health of target
customers. Last but not the least; with respect to employee’s health and safety, Iceland
Supermarket is liable to provide flexible and suitable working hours to its employees along with
healthy working conditions in the organization.
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CONCLUSION
From the above report, it can be articulated that business environment plays a vital role in
performance of a firm. This is the reason; it is important for all firms like Iceland Supermarket to
keep the factors into consideration that come under business environment so as to remain in
competition with sustainability in the long run. Also, report has shown that to make the products
and services successful in market, it is essential to give due emphasis on the cultural environment
as well. Apart from that, it can be seen that EU has imposed many policies and regulations on the
firms; non-compliance of which may lead to serious issues like legal actions taken by EU
authorities. In addition to this, market forces highly shape the response of Iceland Supermarket
that is the reason; to become successful, running operations in accordance with the same is
important. Last but not the least; report has evaluated that economic system, monetary, fiscal and
competition policies as well as market structure; all have a great contribution in making the firm
able to survive in the long run with growth and success.
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