Comprehensive Business Environment Analysis of Iceland Supermarket

This report provides a comprehensive analysis of the business environment surrounding Iceland Supermarket, a UK-based frozen food retailer. The report begins by defining the purpose of different organizational structures, including private, public, and non-profit sectors, and then assesses how Iceland Supermarket meets the objectives of its various stakeholders, such as customers, employees, suppliers, and government organizations. It then delves into the different economic systems, including mixed, free market, and centrally planned economies, and analyzes the impact of fiscal and monetary policies on Iceland's operations. Furthermore, the report examines the effects of competition policies and regulatory mechanisms on the supermarket's activities, including the impact of market structure and market forces. Finally, the report explores the significance of international trade, the impact of global factors, and the effects of European Union policies on Iceland Supermarket's performance. The report concludes with a summary of the key findings and their implications for the company's future.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purpose of different organizations.........................................................................................1
1.2 Extent to which Iceland meets objectives of different stakeholders......................................2
1.3 Various responsibilities of Iceland and the strategies employs to meet them.......................4
TASK 2............................................................................................................................................4
2.1 Different economic systems to allocate resources effectively...............................................4
2.2 Impact of fiscal and monetary policies on Iceland supermarket and their activities.............5
2.3 Impact of competition policies and other regulatory mechanism on the activities of Iceland
supermarket..................................................................................................................................6
TASK 3............................................................................................................................................6
3.1 Market structure determining the pricing and output decisions of business including
Iceland supermarkets...................................................................................................................6
3.2 Way in which market forces shape Iceland supermarket responses using examples............8
TASK 4..........................................................................................................................................10
4.1 Significance of international trade to Iceland supermarkets................................................10
4.2 Impact of global factors on Iceland Supermarket................................................................11
4.3 Impact of European Union policies on Iceland Supermarket..............................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

TABLE OF FIGURES
Figure 1: Different stakeholders of organization............................................................................3
Figure 2: Types of market structure................................................................................................7
Figure 3: PESTLE analysis.............................................................................................................9

INTRODUCTION
The overall business environment can be defined as a combination of both external as
well as internal factors. Companies can easily maintain their dominant market share with the
help of effectively managing its business operations. By adopting some of the most successful
marketing strategies, firms can easily enhance their market contribution (Teece, 2010). Within
this concern, the present study is based on the scenario and working operations of Iceland
supermarkets. It is a subsidiary company of Associated British Food having their 238 branches
across the UK as well as Europe and Ireland. It is British supermarket chain which emphasis on
the sale of frozen foods as well as fresh prepared food (Iceland supermarkets, 2016). This
supermarket is famous for its quality services as well as products related to the frozen and non-
frozen items. This study gives profound insights about the purpose of different organizations as
well as nature of the national environment in which business operates. This study carries out the
proper understanding of the business, cultural, economic and regulatory environment in which
Iceland operates.
TASK 1
1.1 Purpose of different organizations
Private sector firms: This is a privately owned sector where individual works firm with
the motive of personal growth. It can also run through the partnership under which equal amount
of profit can be gained. Here, it can be stated that by undertaking privately owned firms,
companies can easily increase their overall growth. Iceland supermarket is a private retailing
company which has approximately 1.8% share of UK food market (Cherunilam, 2010). These
types of firms are formed by the group of people who are sharing profits and liabilities among
each other.
In addition to this, KFC (Kentucky Fried Chicken) is also another example of private
sector firms. However, it is a subsidiary company as they have their parent company as well.
This organization functions to comply with the laws and rules developed by its parent company.
However, there is no such existence of constant interferences of that parent company in the
working of business entities such as KFC as they present with its own existence. KFC is a
subsidiary of fast food chain in the world.
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Public sector firms: These types of companies provide benefit to the whole community.
These corporations of PSUs (Public Sector Units) are owned by the government. Transport for
London is a type of statutory organization which is created by the act of parliament under which
specific provisions are needed to be abided (Klapper and et.al., 2011). This type of firms also
referred as the public body and established to provide excellent transport facilities to many
countrymen.
Non-profit organization: One of the primary objectives of these businesses is just to
fulfill the needs and demands of all their target audiences. It precisely fills their specific
requirements with the help of running several development programs (Wheelen and Hunger,
2011). The best example of the non-profit organization is Cancer research firm which serves
various business operations for the benefits of people. It is determined as a voluntary
organization which works for the betterment of society by addressing sensitive issues.
Further, from the overall above discussion, it can be entailed that private sector entities
are composed of the business sector where profit is earned for the owner of the company. On the
other hand, voluntary organizations usually include charitable trusts.
1.2 Extent to which Iceland meets objectives of different stakeholders
To meet out the objectives of various stakeholders, it can be determined that company
requires setting their mission and vision as-well-as long and short term goals. With the help of
this, they can easily meet out the needs and demands of their stakeholders. They are the key
concern of any organization. It can be individual or a group of people. All of them require being
associated with different activities of organizations. Some of the main stakeholders of Iceland
supermarkets are as follows:
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Figure 1: Different stakeholders of organization
Customers: They are the key stakeholders of Iceland and are highly essential for them to
serve high-quality services to all their customers (Sorescu and et.al., 2011). With the help of this,
they can make and develop the positive brand identity in their mindset and enhance their
satisfaction level as well.
Employees: Company needs to provide effective training to all their workers as they are
the most important stakeholders of the company.
Suppliers: They are the most important stakeholder of Iceland supermarket as they have
their presence worldwide (Björklund, 2011). Due to this factor, the company comprises different
suppliers who provide raw materials and fresh goods to all their customers on an effective cost as
well. Further, it is highly essential for Iceland to meet with the different demands of all its
suppliers and provide them effective pricing. It is the best way to meet out their changing needs
and objectives.
Government organizations: Government plays a most important role and is highly
essential for different organizations to follow all the rules developed by their country’s governing
bodies. In this respect, there are certain rules and regulations for food industry which are
essential to follow by the Iceland supermarket related to the nutrition and freshness. It has been
found that they usually abide all the rules and stated regulations (Zhu and et.al., 2010).
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Different
stakeholders
Employees
Customers
Government
organizations
Suppliers

1.3 Various responsibilities of Iceland and the strategies employs to meet them
One of an essential tasks of Iceland is to provide high-quality services to their customers.
To do so, they require assigning various roles and responsibilities to their stakeholders. All of
them have different roles and duties, and it is essential for them to fill those responsibilities
effectively (Björklund, 2011). All the suppliers of Iceland are responsible for good management
of their whole supply chain process. They must deal and negotiate appropriately so that better
services can be delivered. Workers are responsible for providing better customer services to
match their desires. They require providing better customer support services at the time of any
issue or problem. Moreover, clienteles are one of the most important stakeholders of the
company, and it is highly essential to fill their needs and demands. They are responsible to
provide various feedbacks by their past experience.
To meet the aspect that all the responsibilities of employees at Iceland are effectively
fulfilled, it is highly essential to go through proper monitoring (DeFusco and et.al., 2015). In
addition to this, a company needs to pay appropriate attention to their employee’s health and
development as well. Effective training leads to quality service and is also helpful in enhancing
the level of customer satisfaction. With the help of training sessions, overall future development
can also be regarded. Further, it can be determined that with the help of filling all the
responsibilities appropriately, Iceland supermarket can easily deliver the best services and
enhance maximum profit.
TASK 2
2.1 Different economic systems to allocate resources effectively
The overall market economy system depends on the supply and demand with no or little
government control. There are different types of economic systems which help various
organizations in allocating all their resources effectively. Given below are different economic
systems with their discussion about effective allocation of resources:
Mixed Economic System: There are various publically owned firms in which resources
are allocated by the government. With the effective use of all these resources, companies can
fulfill various needs and demands of their customers. At the time of using capital, this also
allows a level of private economic freedom (Frey and George, 2010). The government can also
interfere with these activities to achieve social aims. It comprises both the state and private
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entities. There are various countries which possess mixed economy under which the UK is one
among those nations. Here, the selected organization that is Iceland lies under this economic
system due to its existence in the UK.
Free market economic system: Here, all resources are managed by the private system.
Every privately owned company can properly use various resources and effectively decide their
prices as per the desires of customers (Kim and Ko, 2012). In this type of economic system, the
government does not interfere in any of the business activity at any cost. This can be explained
by the example: Here, Canada is one such example of those countries which follows free market
enterprise with the flexible labor market.
Centrally planned economic system: It is controlled by the government only and all the
resources are effectively allocated, and it seeks to have control over what to produce. Here,
companies are required to go effectively through the production process, and there must be the
appropriate distribution of resources (Smallbone and et.al., 2010).
Transition economy: This type of economy undergoes through the structural
transformation due to its transition. It has shifted from centrally planned economy to market
economy which is referred to as a transitional economy.
2.2 Impact of fiscal and monetary policies on Iceland supermarket and their activities
There is a huge impact of various policies formed by the government on the different
business operations. Economic recession is one of the most common factors due to which
companies might lead to decrease their market share. In the year of 2008, the total cause of Gross
domestic share falls (Loshin, 2012). There are various fiscal policies which are set to reduce
fiscal deficits such as; Value Added Tax (VAT), income tax, etc. These policies highly affect the
business operations of Iceland as well. Due to the increasing VAT and income tax, the demand
of customers would automatically reduce. Thus, Iceland will certainly order less of those goods
from its suppliers. This is the major factor which might lead to decrease their market share as
well as customer loyalty.
On the other hand, there are various other monetary policies such as interest rate,
increasing the money supply, etc. (Morecroft, 2015). With the reduction in interest rates, Iceland
will able to do borrow more at lower costs thereby leads to increase their spending on its
activities. In addition to this, due to the increasing money supply, inflation might occur which
ultimately reduces the demand. One of the major causes of these policies is fall in the quantity of
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supply ordered from suppliers’ as-well-as low-profit margin for companies. Further, it can be
easily stated that fiscal and monetary policies highly affects the overall business operations of
Iceland supermarket.
2.3 Impact of competition policies and other regulatory mechanism on the activities of Iceland
supermarket
The competition policy in the UK economy is currently based on the Competition Act
1998, Enterprise Bill 2002, Office of Fair Trading (OFT) as well as other regulatory
mechanisms. These are inclusive of other acts such as Companies Act 2006, industrial policy,
training and skills policy, etc. The overall sales growth of Iceland slows down under pressure
from supermarkets promotions (Wheelen and Hunger, 2011). It has been clearly evident that the
whole UK grocery supermarket sector is increasingly dominated by various firms such as Tesco,
Sainsbury, and Asda, etc. This industry is facing stiff competition and is the major reason due to
which they require attaining various effective strategies.
As per given case scenario of Iceland supermarket, all the retail shops of UK are facing
huge competition due to equal capital and business policies. To meet out the desires of customers
and enhancing appropriate competitive advantage, it is highly essential for Iceland supermarket
to adjust its policies to the existing market to cope up with the competition. An effective
competition policy assisted and influenced Iceland to consider cost and product diversification
(Teece, 2010). In addition to this, companies can become more customers friendly with the help
of liberalization and easily retain their consumers by providing them high-quality services.
Further, it can be stated that there is an enormous impact of legal changes as well as competition
policies on the sales and market growth of Iceland supermarkets.
TASK 3
3.1 Market structure determining the pricing and output decisions of business including Iceland
supermarkets
There are different types of the market structure followed by various organizations as per
their area of competition. There are mainly four types of market structure which are as follows:
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Figure 2: Types of market structure
Perfect competition
In this kind of structure, there is an existence of fierce market competition as there are many
sellers and buyers (Schuler and et.al., 2011). Here, vendors are responsible for deciding the
prices as per the market forces.
Monopoly competition
In this type of market structure, there is only one seller, and company possess the share of
more 25% in the market.
Monopolistic competition
Under this structure, only a few seller but many buyers are there with the high degree of
competition (Kumar and et.al., 2011). In this regards, company can get the huge amount of profit
with the help of differentiation strategies.
Oligopolistic competition
All the decisions regarding the price and output are taken by the sellers who are
interdependent. These sellers are closely linked with each other and help to take individual
decisions.
From the whole above discussion, it can be determined that as per the given case, Iceland
supermarket follows monopolistic market structure as there is high competition within the retail
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Types of
market
structure
Perfect
competition
Monopolistic
competition
Oligopolistic
competition
Monopoly
competition

sector (Cherunilam, 2010). However, it is the best suitable structure as these types of companies
usually try to distinguish their products so that number of customers can be attracted. It provides
close competition to Iceland with its competitors, and they can attract a number of customers as
well. It highly affects the overall output decision of business as well as the level of customer
satisfaction.
3.2 Way in which market forces shape Iceland supermarket responses using examples
There are various market forces which impact the whole working as well as business
operations of Iceland supermarkets. These forces are as follows:
Demand and supply
The overall demand and supply of all the frozen and non-frozen product range can
directly affect the working of Iceland supermarkets. It can be clearly stated by the set example
such as; to earn the huge profit, this company increases its prices thereby gain their sales and
profit margin (Dowling and Moran, 2012). On the other hand, at the time of recession, Iceland
lowers its prices for the people who have low purchasing power and at that time they retain all
their customers. At that time, they effectively enhance the level of customer satisfaction as well.
Research and Development (R&D)
R&D is considered as the most important functions of any organization and is very
essential to maintain its working with the current business environment. It led towards the
success of Iceland within various areas. Their main objective is to provide fresh and quality
frozen food products (Klapper and et.al., 2011). With the help of this, the company can easily
retain their customers.
Elasticity of demand
This is another most important market force which is defined as a degree of change in
demand as compared to the fluctuations in prices. There are different stores of Iceland
supermarkets all around the globe and is highly essential for them to serve excellent quality
products (Holcombe and Ipate, 2012). For the same, differentiation strategy is one of the most
crucial strategies under which Iceland usually keeps high prices for its products and has the low
elasticity of demand.
3.3 Business and cultural environments factors shaping behavior of Iceland Supermarket
Business and cultural environment can be defined as a combination of change brought
about the influence of political, economic, technological, social, legal and environmental factors.
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Their role is to shape the behavior of employees and their working at Iceland supermarket. This
has been discussed with the help of PESTLE analysis as follows:
Figure 3: PESTLE analysis
(Source: Introduction to PESTLE Analysis, 2015)
Political factors
Due to this factor, Iceland is having restrictions regarding entry and stability of
organization in different countries. One of the major reasons for these limitations is related to the
various rules, regulations as-well-as the political scenario of UK (Griffin, 2013). Iceland
supermarket usually finds easier to enter borders where laws are quite liberal.
Economic factors
These factors are highly related to different economic conditions of the country such as
inflation rate, interest rate, etc. These aspects might lead to affect the overall business operations
and strategies of Iceland supermarket.
Social factors
Due to the changing needs and demands of customers, it is becoming highly difficult for
Iceland supermarket to fulfill all their demands (Fernie and Sparks, 2014). In this regard, Iceland
supermarket always takes several feedbacks from their customers through survey and feedback
forms. It helps them in identifying their requirements and providing quality services to them.
Technological factors
9