Business Environment Analysis and Impact on Iceland Supermarket

This report provides a comprehensive analysis of the business environment surrounding Iceland Supermarket. It begins with an introduction to the business environment and identifies the purpose of various organizations, including Iceland Supermarket, KFC, Transport for London, and Cancer Research. The report examines how Iceland Supermarket meets the objectives of its stakeholders, including owners, workers, consumers, and the government. It then outlines Iceland Supermarket's responsibilities, such as social, environmental, and legal, and the strategies employed to fulfill them. The report further explores different types of economic systems, including command, market, mixed, and transitional economies, and assesses the impact of fiscal and monetary policies on Iceland Supermarket's activities. The effects of competition policy, market structure, and the business and cultural environment are also analyzed. Finally, the report considers the significance of international trade, global factors, and EU policies on Iceland Supermarket's operations.

BUSINESS
ENVIRONMENT
1

TABLE OF CONTENTS
Introduction .....................................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Identifying the purpose of various organization. ..................................................................3
1.2 The extent to which Iceland Supermarket meets the objectives of its different stakeholders
.....................................................................................................................................................4
1.3 Iceland Supermarket's various responsibilities as an organization and the strategies it
employs to meet them..................................................................................................................5
TASK 2............................................................................................................................................6
2.1 Various types of economic systems ......................................................................................6
2.2 Impact of fiscal and monetary policy on activities of Iceland Supermarket ........................7
2.3 Affect of competition policy on the functions of Iceland Supermarket................................8
TASK 3............................................................................................................................................9
3.1 Explaining the impact of market structure on the pricing decisions of Iceland Supermarket
.....................................................................................................................................................9
3.3 Impact of business and cultural environment on the behavior of Iceland supermarket......10
TASK 4..........................................................................................................................................11
4.1 Significance of international trade to Iceland Supermarket.................................................11
4.2 Impact of global factors on Iceland Supermarket ...............................................................12
4.3 Impact of EU policy on the operations of Ice land Supermarket.........................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
Business environment is a combination of all extrinsic and intrinsic factors that can
impact the business. extrinsic factors includes , political, legal, social, economic and
environment factor that are beyond the control of the company (Gao, 2011). However, the
intrinsic factor are related to, customers, competitors, suppliers etc. which tcan affect the
functioning of business entity. The main objective of studying business environment is that, it
help the company in identifying various opportunities and overcoming different threats with
prior planning. In the present report, different aspects of business environment has been studied.
The report is based on Iceland supermarket which is a subsidiary of Associated British foods
group. The organization is known for providing effective retail services to wide range of
customers through more than 100 stores across Britain and Ireland. Further, it is a growing
company which is expanding its operations across the UK, Ireland and Europe. In this report,
various economic system that assist in distribution of resources are explained. In addition to this,
impact of fiscal and monetary policy on the activities of Iceland supermarket will be explained.
Thereafter, the effects of global factors on the operations of company will be detailed out.
TASK 1
1.1 Identifying the purpose of various organization.
Presently, there are different types of company that are functioning in dynamic business
environment for various purpose. The description of which is provided through examples:
 Iceland supermarket: It is a subsidiary organisation of Associated British foods. The
organization is best known for providing frozen eatables, retail products and groceries. It
is a private company whose objective is to increase its profitability by maximizing the
sales of products and services (Purpose of business organization, 2015). Further, the
shares of company cannot be listed on stock exchange. The vision of the company is to
expand its business in every possible location.
 KFC: It is type of subsidiary company which is operating its business in restaurant
industry. Its parent company Yum brands have own more than 50% of its shares and have
the right to control the operations of KFC. Further, it is a type of the public company
listed on stock exchange. The main aim of public company is to maximize the wealth of
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its shareholders. Thereafter, its objective is to fulfill its duties towards society by
emphasizing on conducting CSR (corporate social responsibility) activities.
 Transport for London: It is that government body which is operational at local level
whose aim is to provide transport services to the general public. It is a type of statutory
corporation which is formed by statute. The main objective of such type of company is to
provide superior services to customers and enhance their revenue. Further, it is crucial for
Transport for London to follow the rules and regulations laid down by statute (Types of
business. 2015).
 Cancer Research: It is a type of non profit organization whose main objective is to
arrange finance for cancer research. The main objective of non profit organization is to
enhance and work for the welfare of society by furnishing free of cost benevolent
services. The cancer research organization is doing research to determine the cause,
treatment and medicine for preventing or curing cancer.
1.2 The extent to which Iceland Supermarket meets the objectives of its different stakeholders
Stakeholders are the persons who are interested in the organizations to see how the
businesses are performing in the market. Stakeholders can be the owners, employees, customers,
management, communities and shareholders etc. which can influence the management by taking
decisions (Spitzeck and Hansen, 2010). There are different stakeholders and they have various
objectives in the organization and that are classified as: Owners: They invest their working capital in the organization and generate profits from
the business and in return they get profits as well as increasing of market share in the
business. By getting more profits they will receive security from that earnings (Rios,
McConnell and Brue, 2013). In context to this, Iceland Supermarkets' owners also invest
their capital to gain more profitability. Workers: They work for the non-executive and executive level and helps in operating the
business effectively and efficiently. Employees work for to gain job security and job
satisfaction from their job. They also want satisfactory level of income for their efforts
which they are giving in their jobs while Iceland Supermarkets is also paying good
salary and wages to their workforce (Warner,2012).
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 Consumers: These are important part of the management because consumers are those
who buy the goods and services of the organization (Bitzenis and Nito, 2005).
Consumer's main aim is to buy any products and services which are safe and authentic in
nature. Iceland Supermarkets are giving their customers good products which will be
equivalent to their value of money. The organization is also giving proper after sales
service to their customers in time of any convenience.
 Government: It also plays a crucial role in managing the economy as well as government
also charges tax from the company and further controls the environment of the business.
Government is focusing on prosperous businesses, more employments should be created
in the organization (Pagano, 2009). Government emphasize on Iceland Supermarkets to
give more taxes and should follow their rules and regulations.
1.3 Iceland Supermarket's various responsibilities as an organization and the strategies it
employs to meet them
The organization has various responsibilities and the strategies which are employed to
meet the desired objectives of the organization (Gao, 2011). Some of the various responsibilities
and strategies includes: Social responsibility: Iceland Supermarkets is committed to activities that provide great
support to social development such as practicing of environmental standards, etc. The
organization believe in giving back the society by operating and regenerating high streets,
creating jobs, providing excellent after customer service and giving support to the “Good
Causes” which will help the sick and socially disadvantaged people. Iceland
Supermarkets are communicating with their customers to know their feedback and to
improve its product and services to gain positive outcomes. The company is organizing
CSR activities to rise ethical consumerism movement which responds in consumer
demands and also contributes in sustainable development goals (Urip, 2010). Environment responsibility: The company is operating its activities in environment very
effectively by ensuring about various responsibilities. They are focusing on the renewable
and recycling resources which is beneficial for the company as well as for the society.
By utilizing resources more effectively, the business firm is accomplishing responsibility
towards environmental aspects. Iceland Supermarkets are responsible retailer who
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focuses on eliminating artificial colors and flavors from their products. It ensures that
working environment should be clean and safe and the organisation should work with
positive vibes.
 Legal responsibility: Iceland Supermarkets is following its legal responsibility very
effectively by fulfilling its legal policies of the country. Legal policy includes
employment policy, in which company provides salaries and wages to their employees
on time. In discrimination policy and equality policy, the company provides equal
remuneration to their employees on the basis of age, gender, race etc. In health and safety
policy, the company provides security to their employees and also maintain good
environment in the organisation (Urip, 2010).
TASK 2
2.1 Various types of economic systems
Economic system is body responsible for producing and distributing products and
services. It further help in allocation of resources to various activities in society. The main aim of
economic system is to monitor and control the key elements responsible for production; human
resources, capital, technology, physical assets and businesspersons. Broadly, there are four types
of economic system which are explained as follows,
 Command economic system: In this type of economic system, the control over economy
is in the hands of government bodies. Thereafter, the allocation and distribution of
resources is done by centralized body (Sushko, 2013). Therefore, the vital decisions like
utilization of factors of production are taken by government. For instance, the economy
of Cuba is a type of command economy.
 Market economy: In this type of economy, the individuals or corporations decide
themselves about how to use the factors of production for their own benefit. Thereafter,
the decision about production and distribution of goods and services are based on the
market forces. For instance, the US economy is a type of market economy.
 Mixed economy: This type of economy involve different attributes of various economies
like, command, transitional and market (Spitzeck and Hansen, 2010). Therefore, both
public and private sectors regulates the economy and take decisions regarding use of
factors of production. For example, mixed economy is prevalent in UK.
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 Transitional economy: It is a kind of economy that is changing from command to
market economy. Therefore, to meet the present needs, it has become important for
centrally planned economy to go through functional modifications significant to develop
market based establishments. Therefore, many nations of Soviet Union like, Poland,
Bulgaria etc. are changing into transitional economy (Rios, McConnell and Brue, 2013).
2.2 Impact of fiscal and monetary policy on activities of Iceland Supermarket
The activities of Iceland supermarket are directly affected by the fiscal and monetary
policy framed by UK government. The monetary policy is a procedure through which central
bank of the country monitors and regulate the supply of money in economy. Therefore, the
monetary authority of nation makes changes in interest rates to avoid inflationary situation. In
addition to this aspect, monetary policy help in maintaining stability in the prices of goods and
services and assure maximum growth of economy. Presently, the interest rate of UK are held
stable at 0.5% by Bank of England which states that corporations can borrow funds at lower
interest rate (Pagano, 2009). Therefore, Iceland Supermarket can obtain loans from leading bank
and utilize the same for growth and development projects. In addition to this, interest rate of UK
is less than many other countries which states that it is more profitable for company to expand its
business in home country.
Furthermore, the fiscal policy refers to changes made by government in its expenditure
level and tax rates to impact the economy of country. The government of UK, make change in
taxation policy which directly influence the productivity of Iceland Supermarket.
For example, government of UK can increase the tax rate which means company will have to
pay more funds this in turn will further reduce its profitability. Thereafter, the overall operating
cost of organization will be raised. Therefore, to recover this cost the burden of taxation will be
directly shifted upon customers in terms of offering goods and services at high prices. Currently,
the corporate tax rate of country is reduced to 20% from that of 22 % in year 2008. Therefore,
company can provide good quality products and fair prices. This will also help company in
increasing the sales (Krugman, 2008). Therefore, due to favorable economic policies the
opportunities for Iceland supermarket are increased in UK. In addition to this, inflation of
country is declined to 0% which indicates that customers purchasing power is also increased.
Therefore, company can offer more products and services to meet the growing demand.
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2.3 Affect of competition policy on the functions of Iceland Supermarket
Competition law is a regulation framed by government of UK and European Union to
encourage and maintain healthy market competition. The main aim of this policy is to prevent
anti competitive practices. The main goal of this policy is to limit the unfair trade practices like,
price fixing where prices are set at a particular point to discourage free market trade. It further
involve reducing unhealthy market practices like, dumping where products are sold at loss to
reduce the sales of rivals. Thereafter, there are many anti competitive practices like, limit pricing,
resale price maintenance etc that aim at reducing the competition in market. Therefore,
competition policy assures that such activities are discouraged (Pagano, 2009). The main aim of
this policy is to protect the interest of customers. The competition policy help in minimizing the
misuse of monopoly power. Thereafter, the evolution of competition law has increased the level
of competition in UK market. Therefore, the major competitor of Iceland supermarket are,
Tesco, Sainsbury, Next Plc etc.
Further, to avoid legal consequences and penalties it has become important for the
company to adhere with competition policy strictly. Thereafter, to uphold its business in long run
it has become viable for cited company to make constant innovations in its offerings. Further, it
has become crucial for company to consider the strategies framed by rival business enterprises
while operating. Further, Iceland Supermarket have to assure it is not indulged in any unhealthy
market practices. Due to application of competition policy, competition for cited company has
increased leading to slower the growth rate and falling sales (Klapper and Parker, 2011). In
addition to this, there are various regulatory mechanisms like, office for fair trading, regional
policy etc that should also be followed by Iceland Supermarket. The main aim of regulation of
office for fair trading, is to assure the overall goodness of market for both customers and
companies. Thereafter, regional policy is aimed at reducing the regional differences and assuring
the overall growth of all the regions under the European union.
TASK 3
3.1 Explaining the impact of market structure on the pricing decisions of Iceland Supermarket
There are various types of market that are functioning in the present economy. The
explanation of which is as follows:
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 Perfect Competition: In this market, easy entry and exist can be made and this applies
on the buyer to.(Pagano, 2009). There are unlimited number of producers and consumers
are available and the market offers homogeneous product and generate normal profit and
can't influence the prices.
 Monopoly Competition: In this market, the producer is single manufacturer whereas the
customers are many to sell and buy the products and services. If the firm is strong then it
dominates the market and generate supernormal profits for the company. There are
barriers for the sellers to enter in the market but the firm has eminent control over supply
and prices of the products and services (Hakansson and Snehota, 2006).
 Monopolistic Competition: It is an imperfect competition where products and services
are heterogeneous by brands and quality. The seller and buyer are more in numbers and
can enter through free entry and exist barriers. This market can generate normal profits
for a long run but they are not the better substitutes for the consumers (Gao, 2011).
 Oligopoly Competition: There are few number of sellers with small number of firms
which are controlling the majority of the market share as well as prices. It has its own
market structure which reduces competition and it leads to higher prices for its
customers. Here, only small number of firms dominate the market and sellers has free
entry and exist whereas buyer has limited entry and exist barriers (Sushko, 2013).
Furthermore, Iceland Supermarket operates in oligopoly market structure where prices
are high as compared to their competitors.
3.2 Impact of market forces on the functional ability of Iceland Supermarket
The market forces refers to the range of economic factors impacting the prices, supply
and demand of product and services (Hajkova and et. al., 2006). They play an important role in
deciding the quantity and level of production and distribution. Further, the market forces have
directly affects on the sales and profitability of Iceland Supermarket. Therefore, they must be
considered by the company while operating. To survive in competitive and ever changing
market, it is significant for organization to consider the impact of market forces. This will also
help the company in overcoming the situations of excessive production or low-level production.
With the consideration on market forces, company can adjust its production process with the
current demand. Thereafter, to identify the demand, Iceland Supermarket can take help of sales
9

forecasting based on past sale, market scrutiny, customer survey to identify the demand etc. On
the basis of these factors, company can make changes in its production system. This aspect will
also assist company in determining the interest, needs and requirement of potential customers
and making changes in its products and services (Gambardella and McGahan, 2010). By
studying demand and supply factors, Iceland Supermarket can provide proper products in an
appropriate quantity to customers. This will enhance the satisfaction level of customers as there
needs will be fulfilled in best possible manner. Considering, the market forces, the proper
availability of demanded product in the retail stores of brand can be ensured. This aspect will
also assist company in staying competitive as per the industry trends. In addition to this, the sales
can be increased by providing offerings as per the prevailing demand and trends. Thereafter,
market forces will help Iceland Supermarket in having focused production. For instance,
company can increase the production of product which are highly demanded and also attain the
benefit of economies of scale (Fullbrook, 2008). Therefore, study of market forces will help
business entity in making best use of marketing opportunities. For instance, the increase in
demand of healthy food will induce company to offer the organic products and increase its sales.
3.3 Impact of business and cultural environment on the behavior of Iceland supermarket
Iceland Supermarket is carrying its business activities in various part of Britain, Ireland,
UK and Europe. Therefore, to function smoothly in different market, it is important for the
company to consider the affets of business and socio-cultural constituents on the functioning of
organization. Further, the organization provides its retail products and services to diversified
range of customers from various cultural background, religion, ethnicity. Therefore, while
offering the services company should consider these factors (Frey, 2008). Therefore,
organization can make changes in its products as per the culture. This will help company in
meeting varied cultural needs of its customers. Further, the business enterprise assures cultural
diversity by appointing candidates from different background and culture. This will also help the
company in complying in regulations of Anti discrimination policy. According to this policy, it
is important for company to give equal employment chance to individuals of different culture,
gender, ethnicity, religion etc. Further, enterprise maintain positive work culture by providing
safe, healthy work environment to it employees. In addition to this, it assure, there is proper
communication between management and employees. This will also help in identifying the needs
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and problem of employees (Chi and et. al., 2009). Further, for retaining the competent, talented
and honest employees it is crucial for company to maintain positive work culture. Thereafter,
employees participate in decision making process also supports in building positive work
culture. Therefore, strong business and cultural environment will help Iceland Supermarket in
enhancing its market reputation and attracting candidates of different cultural background to
apply for the job.
TASK 4
4.1 Significance of international trade to Iceland Supermarket
There are large number significance of international trade in UK based organizations.
However, with globalization, it has become a necessity for companies to expand in foreign
market (Chandler, Hikino and Chandler, 2009 ). It also help organization in staying competitive
and facilitating change. However, to assure effective operation in foreign market, it is important
for company to follow the guidelines generated by World trade organization for regulating
international business. The various advantages of international trade are as follows:
 Best use of resources: The foreign trade will help the business enterprise in assuring the
optimum utilization of its resources. Therefore, it can produce only those products which
are highly demanded in international economy (Impact of international trade, 2015).
 Increase customer base: The international trade will help company in increasing and
targeting large number of customers. Therefore, organization can enhance its market
share and increase its proficiency.
 Increase in efficiency: The international business will increase the level of competition
for Iceland Supermarket (Boldrin and Levine, 2008). Therefore, company will have to
face cut throat competition with domestic and foreign companies. Moreover, Iceland
Supermarket is required to provide superior quality services, innovative products at
affordable cost to its customers. Therefore, company will do intense research to find new
technology which will minimize production cost and enhance efficiency.
4.2 Impact of global factors on Iceland Supermarket
Following factors can impact the function of company at international level:
 Political factors: The rules and regulations laid down by domestic and government of
the host country can effect the operations of the company. Therefore, they must be
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followed strictly. Further, it is important for company to pay tax and duties on time
(Abelson, 2009).
 Economic factors: The economic policies of UK, Britain and Ireland can impact the
functioning of Iceland Supermarket in target market. Therefore, they must be considered.
For instance, GDP of UK is increased with 0.5% which means there are more selling
opportunities for company.
 Social factors: The socio-cultural needs of individual, market trends, lifestyle can affect
the sales of the organization. Due to increasing, health concern company took effective
steps to remove unreal flavors and color (Urip, 2010).
 Technological factors: The constant improvement in technology will assist Ice land
Supermarket in competing at international level. Therefore, company can attract national
as well as international customers.
4.3 Impact of EU policy on the operations of Ice land Supermarket
 More job in UK: Due to formulation of employment policy, business entities working in
UK made it mandatory to create more job opportunities for citizens of UK. It will assist
in reducing the unemployment level (Bitzenis and Nito, 2005).
 Free trade without tariff: As per the foreign relation policy, the 28 members countries
of European Union can trade freely without much restrictions and tax barriers. This
policy provides a great support to the companies indulging in trade within EU regions.
 Improved working conditions: Considering, the employment policy it has become
significant for companies to assure health and safety of its workforce. Therefore, Iceland
Supermarket assures that healthy working environment to its employees (Impact of
international trade. 2015).
CONCLUSION
Summing up the entire report, it has been identified that study of business environment is
very important aspect for the success of operations in Iceland Supermarket. Due to the
competition policy, company is required to assure healthy competition with its rivals. Further,
various external and internal factors can impact the performance of company should be
considered. It can also be concluded that Iceland Supermarket is a private company functioning
in mixed economy of UK.
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