Comprehensive Analysis of Business Environment for Iceland Supermarket

This report provides a comprehensive analysis of the business environment impacting Iceland Supermarket. It begins with an introduction to the concept of the business environment and its influence on organizations, focusing on Iceland Supermarket as a case study. The report examines the purposes of various organizations, including Iceland Supermarket, KFC, Transport for London, and Cancer Research, and evaluates the extent to which Iceland Supermarket meets the objectives of its diverse stakeholders, including employees, government, customers, and suppliers. It explores Iceland's responsibilities and strategies employed to meet stakeholder needs. The report further delves into economic systems, including traditional, command, and mixed economies, and their impact on resource allocation, specifically within the context of Iceland Supermarket. It analyzes the effects of fiscal and monetary policies, competition policies, and regulatory mechanisms on the supermarket chain. The report also examines how market structures determine pricing and output decisions, market forces shaping Iceland's responses, and the influence of the business and cultural environment on Iceland's behavior. Finally, it assesses the significance of international trade to Iceland Supermarket, the impact of global factors, and the effects of European Union policies on the company, concluding with a summary of the key findings and recommendations.

Business Environment
1

Table of Contents
INTRODUCTION ...............................................................................................................................3
LO 1......................................................................................................................................................3
1.1 Purpose of various organisations ..............................................................................................3
1.2 The extent to which Iceland Supermarket meets the objectives of its different stakeholders...4
1.3 Responsibility of Iceland supermarket and strategies employed ..............................................6
LO 2......................................................................................................................................................7
2.1 How economic systems attempt to allocate resources effectively.............................................7
2.2 Impact of fiscal and monetary policy on Iceland supermarket. ................................................8
2.3 Impact of competition policy and regulatory mechanism on Iceland supermarket...................8
LO 3......................................................................................................................................................9
3.1 Explain how market structure determine's pricing and output decision....................................9
3.2 Illustrate how market force shape Iceland's responses............................................................10
3.3 How business and cultural environment shapes Iceland's behaviour .....................................10
LO 4....................................................................................................................................................11
4.1 Significance of international trade to Iceland supermarket.....................................................11
4.2 Analyse impact of global factors on Iceland supermarket.......................................................12
4.3 Evaluation of the impact of European union's policies............................................................13
CONCLUSION..................................................................................................................................13
REFERENCES...................................................................................................................................14
2

INTRODUCTION
Business Environment refers to set of internal and external forces which impact the business
as well as the stakeholders. These forces are always changing in nature and have a drastic impact on
the overall working of company (Adam, Dasgupta and Titman, 2007). In this regard, it is very
crucial to gather information about these factors followed by understanding its influence on
working of organizations. By following this only the firm can attain objectives in an effective
manner.
In order to understand the impact of business environment, Iceland Supermarket has been
considered. It is a Britain based supermarket chain that deals with selling of frozen foods, dry
goods, fruits and vegetables all over UK. In this regard, the study has given emphasis on the factors
of external and internal environment that are affecting the business prospects of the supermarket.
The report discusses about the aims and objectives of the organization(A great place to work, 2016).
It is important for a business to study the relevance of stakeholders in their firm’s activities. Thus,
the report studies the responsibilities of stakeholders in Iceland supermarket. Furthermore, it is
evident that market types amidst various counties affect the business operations in an international
market. Thus, the report studies about significance of global factors on Iceland Supermarket.
LO 1
1.1 Purpose of various organisations
Organisations Purpose
Iceland Supermarket: limited company To provide quality products to the consumers.
To ensure that product offered are healthy
To ensure optimal price range of products.
KFC (Kentucky Fried Chicken): private
organization
To bring joy and happiness to consumers.
To be the best in fast food industry
Ensure consumer satisfaction.
Transport for London (TFL): public
government organization
To strive for social welfare rather than profit
earning (Healthy Eating at Iceland, 2016)
To provide users with high quality and
innovative solutions in the area of transportation
To minimize negative environmental impacts of
its operations.
3

Cancer Research: a non-government
organisation
To minimize the number of cancer deaths.
To provide essential information about cancer in
terms of treatments option, available medicines,
its diagnosis and prevention (Strategy For Safe
Chicken, 2016)
1.2 The extent to which Iceland Supermarket meets the objectives of its different stakeholders
Stakeholders can be defined as a group of individuals that are affected by the decisions and
actions that are undertaken by the organization (Adam, Dasgupta and Titman, 2007). Every
stakeholder is important for Iceland supermarket. Hence, the aim of the supermarket chain is to
meet their diverse objectives in the best possible manner. The following sections further present
stakeholder analysis as well as the extent to which Iceland Supermarket meets the objectives of its
stakeholders.
Table 1 Stakeholder analysis matrix
High power Low power
High influence Key stakeholders
Consumer, government
Keep satisfied
Investors, shareholders,
employees
Low influence Keep them informed
Suppliers
Negligible
None
Stakeholder Objectives How Iceland Supermarket
meets the objectives
Employees job satisfaction
good working environment
good salary
career growth
The Supermarket chain
Conducts training and
development programs as
per need of employees
The company carries out
Individual performance
reviews to assess strength
4

and future potential of
employees (A great place to
work, 2016).
Ensures internal promotion
opportunities.
Carries out employee
engagement activities to
ensure good work culture.
Government Adherence with all the policies,
rules and regulations as
formulated by government.
Following the policies
related to employees,
environment. (Fish
Sustainability Policy, animal
welfare policy)
Maintaining transparency on
business operations,
Paying taxes on time.
Undertaking CSR activities
Customer To get quality and value for
money products
To get good consumer services.
Providing consumers with
easy and accessible services.
Iceland supermarket has
launched health product
range.
It has further undertaken
program to ensure healthy
eating habits among
consumers (Healthy Eating
at Iceland, 2016).
Make sure that prices are
affordable by the
5

consumers.
Iceland supermarket further
adheres with food safety
practices like undertaking
Campylobacter reduction
efforts, carrying out a 10
Point Reduction Plan
(Strategy For Safe Chicken,
2016)
Supplier To get timely payment Proper coordinating with its
suppliers
Sharing crucial information
with them (Björklund,
2011)
Providing them with timely
payment.
1.3 Responsibility of Iceland supermarket and strategies employed
Iceland has a prime responsibility towards its key stakeholders. In order to explain
responsibilities of the retail company and its strategies to meet the objectives of stakeholders
following points can be elaborated: Customers: Iceland Supermarkets is responsible to provide high quality products and
services to consumers at reasonable prices. Customers also look for value for their money in
return. In addition to this, they also loo for better customer care services to resolver their
issues related to retailer's offerings (Asutay, 2007). Therefore, Iceland Supermarkets is
required to formulated effective strategies to provide superior quality products and services
to consumer at affordable prices. Besides this, Iceland Supermarkets can establish efficient
customer support system to resolve heir issues in order to elevate their satisfaction level.
 Employees: Retail staff of the company plays very cardinal role in executing its policies and
strategies to increase its operational efficiency. Therefore, it is the responsibility of Iceland
Supermarkets to provide good working atmosphere and growth opportunities to its
employees in order to meet their expectations (Björklund, 2011). The retailer can develop
6

and implement strategies that are linked to staffing, management, training and development
of its retail staff to elevate their motivation level.
 Government: Iceland Supermarkets have major responsibilities towards national and local
governments in UK which include compliance of certain laws and regulations. Violation of
these laws and policies are subject to legal implications. Therefore, Iceland Supermarkets is
required to follow economic policies to run its operations smoothly (Cini and McGowan,
2008). For this, the retailer is required to develop and implement strategies that are in line
with legal and economic policies and framework.
 Suppliers: Iceland Supermarkets is responsible for maintaining good relationship with its
suppliers as they supply superior quality materials and low prices to the retailer (Correia,
Nicolini and Teles, 2008). Therefore, Iceland Supermarkets is required to formulate reward
strategies for suppliers in order to motivate them.
LO 2
2.1 How economic systems attempt to allocate resources effectively
An economic system is referred to as a system of production, exchange, distribution and
allocation of resources (Kovacic and Winerman, 2010). There are different types of economic
systems like traditional, command or mixed economy. Each economic system works differently
from one another. How an economic system affects the economic systems to allocate resources is
explained below.
 Traditional economy- In this type of economy, traditions and beliefs are given more
importance (Hipp and Warner, 2008). Whatever the producer produces in the economy will
be distributed based on the customs and beliefs followed in the country. Agriculture, fishing
or hunting are the main occupations followed in the traditional economy. The goods are
produced as per the demands and there is no surplus of production in this economy.
 Command economy- In this economy, only government has the sole right to determine the
price of goods and services in the economy (Holt and Lampke, 2010). What should be
produced and how should be produced is determined only by the public enterprise. The
government will decide the prices of these goods and services in the organisation.
 Mixed economy- In the United Kingdom, this type of economic structure is followed. As
per this economy, there are both private and public firms who operate in the market. The
production and distribution of goods and services are based on supply and demand. The free
7

price system i.e. Iceland is allowed to make pricing decision as per the industry standards.
The interaction of the supermarket with the customers provides base of production.
Customer’s needs and wants are the main priority of the company (Iskanius, Page and
Anbuudayasankar, 2010). Although, there is little intervention of government in Iceland's
business activity. The company has to abide by the rules and regulations formulated by the
political framework.
2.2 Impact of fiscal and monetary policy on Iceland supermarket.
Fiscal policy are those government frameworks that are related to revenue and taxation. The
government does this to regulate the spending and taxing in the economy (Rios, McConnell and
Brue, 2013). Government is responsible to make fiscal policies that enables the company to
stimulate growth. On the other hand, decisions made by the government or the central bank are
regarding supply of money and interest rates. The entire control to decrease or to increase money
supply in the economy lies with the central government.
 Impact of fiscal policies on Iceland Supermarket- The fiscal policies created by the
government deeply impact their functionality of the supermarket. The demand and supply of
goods ad services is balanced only when there is no stability in the economy. If spending in
Iceland increases due to customers high buying power (Kovacic and Winerman, 2010). Or in
simple words if demand for products of the retailer increases then automatically this
supermarket chain will initiate an increase in its supply. Thus, the cycle of growth will also
continue. This way formulation of policies is directly proportionate to the business prospects
of the supermarket. On the other hand if the government finds that there is an overheating
situation in the economy. That is the industries and is growing too fast then it may control
this by making changes in the fiscal policy of the government.
 Impact of monetary policies on Iceland Supermarket- As the federal reserve this the sole
authoriser who can make monetary policies. It is important for the supermarket chain to
abide by the regulations of the central bank. It is also considered as the primary tool
exercised by the bank to regulate money supply in the economy (Lim and et.al., 2013). The
bank may decide interest rates on which loans and bonds has to be provided. This way it can
control the supply of money from the bank. On the other hand, in order to increase money
supply bank may buy securities. If interest rates are high then supermarket will have to take
loan on high rates. It will then increase goods of cost sold to maintain its profitability.
2.3 Impact of competition policy and regulatory mechanism on Iceland supermarket
It is vital for the supermarket to evaluate the impact of governments policies and
8

frameworks. Competition act 1998, The Office of Gas and Electricity Markets
(Ofgem) or office of fair trading were created by the government of the United Kingdom to regulate
supermarket industry.
 Competition Act, 1998- This act was created to restrict business to increase
competitiveness in this industry. The act has made provision's that Iceland supermarket must
not dominate market by either increasing or decreasing pricing policies. The main purpose
of this act was to harmonise the extent of competitive abilities between firms. In context to
this Iceland supermarket has to adhere by the limited output or fix price as instructed in the
act (Rios, McConnell and Brue, 2013). This organization can not abuse the customers or the
market by predating prices in the industry, refuse to supply, maximise profit by
discriminating through profit or restrict competition.
 The Office of Gas and Electricity Markets (Ofgem)- It is a government regulatory to
organise gas and electricity markets. It is the responsible body to regulate electricity supply
and downstream gas in the organization. The main aim of the organisation is to protect the
interest of existing and future customers (Temin and Vines, 2013). In order to this Iceland
supermarket has to control the use of energy and instead use renewable sources of energy in
the business operations of the organisation. This way it can safeguard future generations
interest by reducing the impact of greenhouse gases on the environment.
 Office of Fair Trading (OFT)- It is a not profit organisation establishes to regulate trading
in the economy. As per fair trading act 1973, OFT was created to regulate consumer
protection and competition amidst industries (Becker, Chen and Greenberg, 2013). In
compliance with The goal of this organization Iceland supermarket had to ensure fair trading
in its business operations. The supermarket must not scam or cartel with the customers
rights.
LO 3
3.1 Explain how market structure determine's pricing and output decision
Market structure is the place where firms are producing same or identical products
(Fernando, 2011). The market can be divided into perfect, monopoly and monopolistic.
 Perfect market- In this market there are many firms thus this implies that there is freedom
of entry. Many firms produce same or identical product in this particular market. All the
firms are price takers none of them can solely decide pricing polices of entire industry.
Iceland supermarket performs in this type of market (Bruckner and et.al., 2012). This
organisation can regulate supply in alliance with the speculated demand of goods and
9

services of the company.
 Monopoly market- In this market one firms dominates the entire market. This is because
there are high barriers to entry. None of the new entrant can enter in the market. There are
generally high prices of the goods and services in this market. There is a supply constraint as
the firm will only decide the output of supply in the marker. The pricing decision are
controlled entirely by the monopoly company. The consumers have to follow these as the
firm is the sole producer of the goods and services required by the customers.
 Monopolistic market- Although this market has resemblance with the monopoly market,
the firms producing goods and services have differentiated products (Crafts, 2012). Each
product and services provided by the firm will differ from one another. There is freedom of
entry for new entrants as competition does not hamper demands of foods and services. Thus
pricing is decided by each firm individually and supply is calculated on the basis of
consumers demands.
3.2 Illustrate how market force shape Iceland's responses
The market force are those factors of the market in which Iceland supermarket operates.
These forces are responsible to shape the responses and decision making of the business in
supermarket industry (Patron and Smith, 2013). There are many factors like customers perceptions,
elasticity of demand and supply, economies of scale or supply of demand. Two among them are
discussed as below.
 Customers perceptions and actions- Customers are the most important element of an
organisation. The company produces goods and services to fulfil the needs of their
customers. Perceptions ans action affect the strategies and policies of Iceland supermarket
(Fernando, 2011). Iceland has to change its product or pricing as per the consumer's outlook
toward company. This is because Iceland can only generate profits if it meets with the needs
of thee customers. If the customers of the supermarket chain demand more for a certain
product then company will have to provide sufficient supply to meet there needs.
 Economies of scale- It refers to the cost advantage exercised by a firm. In supermarket
industry it is relevant for a firm to achieve cost advantage by lowering cost and increasing
profits. There is high rate of competition in this particular industry (Herz and Hohberger,
2013). The market force's i.e. the scale of operations affects companies objectives. Iceland
has to regulate its cost of output by regulating size and output if its business in compliance
with the demands. +By doing this the firm achieves cost advantage. This is an important
market force that directly affects business activities. Any firm in supermarket industry will
10

try to achieve higher profits by lowering cost.
3.3 How business and cultural environment shapes Iceland's behaviour
Business environment consist of those factors that comprises the external environment of the
company. Iceland supermarket is affected by the political, economic, social, technical, legal and
environmental factors.
 Political- The political environment consists of the policies and regulations created by the
government of the United Kingdom (Krautheim, 2012). There are some restrictions for the
supermarket chains in context of conducting business activities. The firm have to follow the
actions and treaties of government signed within and outside the country.
 Economical- the change in interest rates, cost of raw materials or wages influence the
business of this supermarket. Company is forced increase or decrease prices of the goods
sold to the consumers (Patron and Smith, 2013). High rate of inflation may reduce
consumers buying ability this may in return affects Iceland's profitably.
 Social- The lifestyle of consumers religion, choice, desire, needs and wealth are also
responsible in moulding business of Iceland supermarket. First the supermarket chain has to
manufacture those products which are adaptable with the preference and needs of the
consumers (Stern, 2015). On the other hand if consumers taste change then Iceland may loss
its revenue and this will reduce companies profitability.
 Technical- The technological advancements been implemented in the organisation may
affect the cost of production of the company (Wodak and Boukala, 2015). It is Iceland's
ability to use those technological machines which may help in reducing cost and help in
achieving higher profits.
 Legal- The legal framework of the United kingdom have made many acts and laws. The
firm has to make sure to abide by these laws in the business objectives (Wallace, Pollac and
Young, 2015). Apart from this Iceland is also affected by the charges or cases registered due
to a faulty practice or consumers complaints.
 Environmental- Iceland has to adopt renewable modes of energy. This is done to reduce the
carbon footprints and pollution caused by the manufacturing plants of the supermarket
(Wodak and Boukala, 2015). By ding this companies cost increase and thus it has increase
the selling price of its products. Consumers may decide not to buy products from Iceland
and find cheaper alternatives.
11

LO 4
4.1 Significance of international trade to Iceland supermarket
International trade plays a vital role in enhancing Iceland's profitability and growth. It is
refereed to as the exchange of goods and services between countries (Asutay, 2007). It is generally
done between international boundaries i.e. supermarket chain wither establishes itself in an
international country or sells products through export in those areas. Thus, international trade plays
a key role in increasing Iceland profitability from international market. The significance of
international trade can be analysed from the following points.
 Increased market opportunities- International trade increase companies opportunities to
raise consumer traffic and revenue by establishing itself in new markets. This way there are
plenty of opportunities available for the company in new potential market. With the help of
these opportunities Iceland build new strategies to raise its business prospect (Cini and
McGowan, 2008). Through international trade company gets to explore new regions which
creates curiosity among customers. Brand image of the company also rises as it conducts its
international operations. When an organisation explores new are for operations it invites
new business opportunities as well. These are considered to be favourable for an
organisation.
 Global growth- In terms of global growth international trade provides plenty of options.
Iceland is able to increase its growth by expanding in new markets. Growth is the extension
of revenue generated by an organisation (Holt and Lampke, 2010). If a company is doing
financially well it is assumed that company will grow exponentially well. When Iceland
conducts international trade it generates, more output and this sales increases. When sale of
the company are enhancing then it can be said that supermarket's growth amidst
international country is also rising.
4.2 Analyse impact of global factors on Iceland supermarket
The global factors are responsible to impact the business of Iceland supermarket in
international country (Asutay, 2007). As company has to regulate its strategies it successfully runs
its business in different countries. The global factors influence the same in the following way.
 World trade organisation- The main purpose of world trade organisation is to deal with
trade between countries. It is an intergovernmental organization which creates rule for
international trade between countries (Kovacic and Winerman, 2010). Iceland can contact
WTO if its faces any trade related issues. In case there is inter-country problems regards
operations or pricing this supermarket chain can seek help from world trade organisation. If
12

any country creates trade barrier fr supermarket chain, then WTO may serve as a regulatory
framework in solving disputes of the organisation. This trade organisation may at many
instance interrupt in between business prospects if the supermarket as well thus affecting its
operations.
 Emerging markets- BRIC economies are considered as emerging market for international
trade. Brazil, Russia, India and China are considered as the main rising market in terms of
international trade of supermarket industry (Rios, McConnell and Brue, 2013). At many
instances low labour cost that is available ion China plus the technologically advanced
services this country provides. It raises competition for the company. These economies are
emerging i.e. the rate of expansion is higher than compared to other countries. In this case
Iceland has to conduct high research while establishing itself in these markets.
It can be said that the international trade plays a vital role in shaping international business
prospect of this supermarket chain worldwide (Kovacic and Winerman, 2010).
4.3 Evaluation of the impact of European union's policies.
The main aim of European union policy is to ensure that organisation conduct business
activities in a prosper and secured manner. The framework focuses on creating a global system
when fair trade can be conduced between European countries. European union consists of 28
members that are located in Europe itself (Becker, Chen and Greenberg, 2013). There are many
policies created by EU, major among them is the environmental policy. The union serves to
maintain the climate change problems that has raised from high rate if industrialisation. It is
mandatory for supermarket industry to reduce the carbon footprint. It is vital for Iceland to
implement renewable sources of energy to reduce the impact of global warming for the future
generation. The European Union has regulated the environmental damage that occurs while
establishing new supermarkets in the countries. For example in order to save endangered species
Iceland has to make sure that it does not establish itself in this area which are protected by the
government. This way EU has paid a significant role improving the count of endangered species or
habitat in various European countries (Krautheim, 2012). The quality of water and air in the
members states of EU have exponentially improved as there is low rate of pollution in these
countries.
CONCLUSION
From the above research it can be said that external factors affect business profitability and
growth. Iceland is influentially affected by the global factors that influences companies
13

functionality. It can be analysed from the above research that different economies and market types
also affect how Iceland responses to the achievement of goals. It is vital for the supermarket chain
to analyse the affect of different legal framework and governmental policies on the business
prospects. Thus, it can be said that the business environment in which Iceland performs its
operation plays a key role moulding companies growth and profitability.
14

REFERENCES
Books and Journals
Adam, T., Dasgupta, S. and Titman, S., 2007. Financial constraints, competition, and hedging in
industry equilibrium. The Journal of Finance. 62(5). pp.2445-2473.
Asutay, M., 2007. A political economy approach to Islamic economics: Systemic understanding for
an alternative economic system. Kyoto Bulletin of Islamic Area Studies. 1(2). pp.3-
18.Bernard, A. B. and et.al., 2007. Firms in international trade (No. w13054). National
Bureau of Economic Research.
Becker, B., Chen, J. and Greenberg, D., 2013. Financial development, fixed costs, and international
trade. Review of corporate finance studies. 2(1). pp.1-28.
Björklund, M., 2011. Influence from the business environment on environmental purchasing—
Drivers and hinders of purchasing green transportation services. Journal of Purchasing and
Supply Management. 17(1). pp.11-22.
Bruckner, M. and et.al., 2012. Materials embodied in international trade–Global material extraction
and consumption between 1995 and 2005. Global Environmental Change. 22(3). pp.568-
576.
Cini, M. and McGowan, L., 2008. Competition policy in the European Union. Palgrave Macmillan.
Correia, I., Nicolini, J. P. and Teles, P., 2008. Optimal fiscal and monetary policy: Equivalence
results. Journal of Political Economy. 116(1). pp.141-170.
Crafts, N., 2012. British relative economic decline revisited: The role of competition. Explorations
in Economic History. 49(1). pp.17-29.
Fernando, A. C., 2011. Business Environment. Pearson Education India.Gutiérrez, J. and et.al.,
2013. Road pricing in the European Union: direct revenue transfer between countries.Journal
of Transport Geography. 33. pp.95-104.
Herz, B. and Hohberger, S., 2013. Fiscal policy, monetary regimes and current account
dynamics. Review of International Economics. 21(1). pp.118-136.
Hipp, L. and Warner, M. E., 2008. Market forces for the unemployed? Training vouchers in
Germany and the USA. Social Policy & Administration. 42(1). pp.77-101.
Holt, T. J. and Lampke, E., 2010. Exploring stolen data markets online: products and market forces.
Criminal Justice Studies. 23(1). pp.33-50.
Iskanius, P., Page, T. and Anbuudayasankar, S. P., 2010. The traditional industry sector in the
changing business environment-a case study of the Finnish steel product industry.
International Journal of Electronic Customer Relationship Management. 4(4). pp.395-414.
Kovacic, W. E. and Winerman, M., 2010. Competition Policy and the Application of Section 5 of
the Federal Trade Commission Act. Antitrust Law Journal. pp.929-950.
Krautheim, S., 2012. Heterogeneous firms, exporter networks and the effect of distance on
international trade. Journal of International Economics. 87(1). pp.27-35.
Lim, S. S. and et.al., 2013. A comparative risk assessment of burden of disease and injury
attributable to 67 risk factors and risk factor clusters in 21 regions, 1990–2010: a systematic
analysis for the Global Burden of Disease Study 2010. The lancet. 380(9859). pp.2224-2260.
Patron, H. and Smith, W. J., 2013. The Effects of Fiscal and Monetary Policies on Economic
Outcomes: A Classroom Activity Using Mankiw’s “Presidential Game”. Journal for
Economic Educators. (1). pp.39-43.
Rios, M. C., McConnell, C. R. and Brue, S. L., 2013. Economics: Principles, problems, and
policies. McGraw-Hill.
Stern, J., 2015. sectoral regulation and competition policy: the uk's concurrency arrangements—an
economic perspective. Journal of Competition Law and Economics. pp.29.
15