Impact of Business Environment on Iceland Supermarket Operations

This report provides a comprehensive analysis of the business environment surrounding Iceland Supermarket, a British food chain. It begins by identifying the purposes of different organizations, including Iceland, KFC, Transport for London, and Cancer Research, and explores how these organizations meet the needs of their stakeholders such as customers, employees, suppliers, and the government. The report then delves into various economic systems, including common, free enterprise, mixed, and transitional economies, and assesses the impact of monetary and fiscal policies, as well as competition policies and regulatory mechanisms, on Iceland Supermarket. Furthermore, it examines market structures, determining pricing, and shapes market forces. The report also discusses the influence of business and cultural environments. Finally, it explores the significance of international trade and the impact of global factors and European Union policies on Iceland Supermarket's operations, providing a detailed overview of the challenges and opportunities within its business environment.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Identifying the purpose of different organizations................................................................1
1.2 Things done to meet the needs of stakeholders.....................................................................2
1.3 Various steps taken by Iceland supermarket to meet stakeholders needs.............................2
TASK 2............................................................................................................................................3
2.1 Explaining different economic system..................................................................................3
2.1 Impact of monitory and fiscal policy on Iceland supermarket..............................................4
2.3 Impact of competition policy and other regulatory mechanisms..........................................4
TASK 3............................................................................................................................................5
3.1 Market structure determining the pricing..............................................................................5
3.2 Ways to shape market forces for Iceland supermarket.........................................................5
3.3 Ways in which business and cultural environment shape behaviour of Iceland supermarket
.....................................................................................................................................................6
TASK 4............................................................................................................................................7
4.1 Significance of International trade........................................................................................7
4.2 Impact of global factors on Iceland Supermarket.................................................................7
4.3 Impact of policies of European Union..................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business environment can be determined as all the internal as well as external factors
which affect the business operations of organization. All internal factors can easily be resolved
by firm but it does not have any control over external factors (Tayur, Ganeshan and Magazine,
2012). Factors which affect the organization externally are related to changes in technology,
trends, policies and laws made by the government. On the other hand, factors which affect the
firm internally include customers, suppliers, employees, competitors, etc. (Trkman, 2010). The
present report is about Iceland supermarket which is a British food chain company that provides
frozen foods and also other grocery items. This report covers the purpose of different businesses
operated by various organizations. Further, it covers the nature of national environment in which
businesses operate. Moreover, it covers the behaviour of organizations in their market
environment. Lastly, it also includes the significance of global factors which shape the national
business activities.
TASK 1
1.1 Identifying the purpose of different organizations
Different organizations have their own purposes and aim. This is chosen according to the
type of services or products that they provide to their customers (Kang, Lee and Kim, 2010).
There are different types of organizations among which KFC and Iceland supermarket falls
under the private companies, Transport for London is a public company and Cancer research
falls under non-government organization.
Purpose:
Iceland supermarket: The main aim of this firm to provide quality services to their
customers. Mostly, frozen products are not preferred as they are termed unhealthy or unhygienic.
Organization has focused on changing the perception of people and aims to provide their
customers with nutritious products (Iceland Supermarket, 2014). Moreover, it has listed down
the ingredients or elements which they include in their products.
KFC: Kentucky Fried Chicken (KFC) has operations at different places and in order to do
it effectively, they conduct market research. It is very helpful in knowing the needs and wants of
customers effectively. It makes changes in its products according to the trend and taste of their
service users. In this context, they focus on providing their services users with quality product so
that they could be satisfied.
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Transport for London: This organization provides transport facilities to the people of
London. In this context, they focus on improving the quality of services so that they could satisfy
their customers effectively (Cronan, Douglas and Schmidt, 2011). Services included by it
involves transportation through railways, buses and also services.
Cancer research: According to this company, they conduct research so as to reduce the
number of cancer patients and providing them with appropriate services through which they
would be able to kill cancer from the UK. In this context, they provide information about cancer
in order to make people aware.
1.2 Things done to meet the needs of stakeholders
Stakeholders are the one who provide support to the firm in order to grow. It is very
important for the organization to understand the needs and wants of customers and provide them
services accordingly which will be helpful in satisfying all the stakeholders (Khajvand,
Zolfaghar and Alizadeh, 2011). Following are the stakeholders of company: Customers: They
are the one with the help of which firm earns profit. It is very essential for the organization to
understand the needs and wants of them so that they could provide better services through which
they will be able to attract more and more customers.
Employees: They are the face of firm. They have close interaction with customers. They
deliver services and provide adequate information. Through skilful and capable employees, firm
will be able to attract new customers and it will also be able to retain them.
Suppliers: They provide or deliver the materials which are required for Iceland
supermarket. When suppliers provide materials on time, then organization will be able to supply
finished products effectively according to customer’s demand (Carroll and Shabana, 2010).
Government: There are many cases in which government makes changes on their policies
or laws. They are very important stakeholders as it is important for the firm to follow all the rules
and regulation given by them or else it would be punishable by law.
1.3 Various steps taken by Iceland supermarket to meet stakeholders needs
In order to gain profit, it is very essential for the management of Iceland supermarket to
understand their stakeholder’s needs and wants. Accordingly, they should provide them services
so as to satisfy them. Following are the various things which are done by Iceland supermarket to
meet the needs of their stakeholders:
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Customers: It is very essential for the organization to meet the needs and wants of
customers so that it could gain profit (Cavusgil, Knight and Rose, 2014). In order to do it
effectively, it can conduct market research so that it could understand the requirements of service
users.
Employees: It is very essential for the management to select capable and skilful employees
so that it would be able to understand their customers and could satisfy them. In order to meet
their demand, firm provides rewards according to their performance. This is very helpful in
motivating them and in encouraging to work with their full efficiency.
Suppliers: As it was discussed above, they provide required materials to the organization. In
this context, it is very important for the firm to maintain a strong relationship with their suppliers
so that it can get material on time and could supply their products to the customers according to
their demand.
Government: In order to meet the needs and wants of such stakeholder, it is very essential
for the firm to follow all the policies or laws so that it can work in an ethical way ( Al-Debei and
Avison, 2010).
TASK 2
2.1 Explaining different economic system
There are many types of economic system which play a vital role in allocating resources.
Following are the different types of economic systems: Common economy: It is a market
economy in which all the decisions related to resource quality and quantity are taken by the
government (Hoang, Tran and Le, 2010). All the government agencies which are included in this
aspect take decision related to the price of products or services. The market which follows this
economy is China.
Free enterprise: This is a market economy where producers and customers make decision
related to products and services which have be delivered. They have power to decide what has to
be developed, where has to be delivered and in what quantity. This economy is followed by
Russia.
Mixed economy: According to this type of economic system, it consists of both the feature
of common as well Free enterprise. Organization has the authority to make decisions related to
allocation of resources but they have to work according to the guidelines given by the
government (Bøllingtoft, 2012). This types of economic structure is followed by UK.
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Transitional system: In this market structure, price of the commodities are fixed through
market forces. This type of economic system is followed in Poland.
2.2 Impact of monetary and fiscal policy on Iceland supermarket
In order to run all the operations of Iceland supermarket effectively, fiscal and monetary
policies play an essential role. Both these policies are managed by government and following are
the impact of it over Iceland supermarket:
Tax rate: Changes in tax rate affect highly to the organization as it has to make changes
accordingly (Wheelen and Hunger, 2011). When, tax rates is high, then customers fail to spend
more on commodities and this results to decrease in the sale of products and services of Iceland
supermarket.
Exchange rate: The value of money differs from country to country. When, exchange
rate decreases, then it will affect the organization as fluctuation in exchange rate affects the
operation of businesses.
Interest rate: When interest rate increases, then customers could spend highly. It is very
helpful for the organization as it affects directly on the productivity (Bughin, Chui and Manyika,
2010). Along with this, in such case customers will buy more and it will automatically affect the
growth of firm.
2.3 Impact of competition policy and other regulatory mechanisms
There are many other retail stores in UK like Tesco, ASDA, etc. These organizations
adopt different strategies so as to attract more and more customers. All the competition policies
and other mechanisms have direct impact over the Iceland supermarket. There are many policies
related to competition which have to be followed by all the firms (Tan, 2011). Competition
policies include different types of norms which have to be followed and it helps in attracting
customers by giving then the feeling of proper integrity as well as security. According to this
policy, it is very essential for the firm to provide quality products to their service users so as to
increase their satisfaction level. Further, this policy ensures the flow of work in a systematic
manner. Moreover, organization is able to develop pricing strategies so that they could compete
effectively (Boons and Lüdeke-Freund, 2013). These types of strategies help the firm to attract
new and existing customers along with retaining both of them.
Regulatory mechanisms have to be followed by the organization so that their productivity
and working practices could be managed effectively. It is very essential for the Iceland
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supermarket to follow all the rules and regulations developed by the government (Olawale and
Garwe, 2010). For protecting customer’s personal information, it is very important for the firms
to main software which protects all the information of service users effectively.
TASK 3
3.1 Market structure determining the pricing
Market structure is a place where all types of buyer and sellers are involved. There are
different types of structure and division on the basis of type and nature of product or services
which the firm delivers. Different market structure are:
Perfect competition: It is a market structure in which there are many firms which deliver
similar type of products or services. In this structure, it is very essential for the firm to provide
quality services as there are many competitors (Smallbone, Welter and Egorov, 2010). Even if,
the price of commodities is changed, even then there will not have huge impact over the growth
of firm.
Monopoly competition: According to this, there is only one manufacturer of the particular
commodity. In this structure, customers do not have any option to buy the product on the price
which firm wishes to give. In this structure, organization has the power to increase or decrease
the price.
Oligopoly competition: It is a market structure in which there are few firms which deliver
similar products or services. Iceland supermarket falls under this market structure as it has few
competitors (Market structure, 2012). Change in price will affect highly to the organization. For
example, if Iceland supermarket decreases the price of commodities, then customers of Tesco,
ASDA, etc. will automatically shift to it.
3.2 Ways to shape market forces for Iceland supermarket
There are many market forces because of which it affects firm in many ways. Following
are the factors which affect the firm’s practices:
Demand and supply: It is very essential for the organization to provide its products and
services in the regular basis. It is important for the Iceland supermarket to supply their
commodities according to customer’s demand (Tayur, Ganeshan and Magazine, 2012). On the
contrary, if they fail to provide their products according to the demand, then it would affect the
firm negatively.
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Perception of customers: It is very essential for the organization to develop good
customer perception. If, perception of services user would not be good, then they will not prefer
to buy the products of Iceland supermarket. In this context, it is very important for the firm to
develop good perception as it highly affects the market forces.
Price and quality: It is very essential for the firm to provide their customers with quality
products and at reasonable price. As it was discussed above, Iceland supermarket has many
competitors which apply different strategies to attract customers (Trkman, 2010). In this context,
it is very important for the firm to set the prices its products in a competitive manner after
considering the pricing strategies of its competitors. Otherwise, it will affect negatively to the
brand image of company in the market.
3.3 Ways in which business and cultural environment shape behaviour of Iceland supermarket
The best way through which culture and business environment could be understand is
related to PESTLE analysis. It will help in knowing the factors which affect the working
practices of Iceland supermarket. These factors are:
Political: There are many rules and policies made by the government. All the policies
have to be followed by the organization effectively (Kang, Lee and Kim, 2010). It is very
essential for the firm to perform their operations legally. In order to attract more and more
customers, it is necessary for the organization to follow all the norms and policies.
Economical: It is very essential for the organization to manage all the economic factors
like crisis, recession, etc. These factors effect highly on the performance and growth of
organization.
Social: Change takes place frequently and in order to adapt change, it is very important
for the management to make appropriate strategies according to the trend and lifestyle of people
(Cronan, Douglas and Schmidt, 2011).
Technology: Making changes in technology is helpful in understanding customers more
closely by using various modes of communication and providing them more improved services.
On the other hand, if they do not make changes in their technology, then it would affect Iceland
supermarket inversely.
Legal: It is very important for the firm to follow all the laws so that it could maintain good
perception among the mind of customers.
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TASK 4
4.1 Significance of International trade
International trade can be determined as exchange of goods, services, money, value, etc.
in between the national and international market. It will be very helpful for the firm to expand
their businesses internationally. If, Iceland supermarket will operate their businesses globally,
then they will be able attract more number of customers and improve the quality of their services
(Khajvand, Zolfaghar and Alizadeh, 2011). This will help firm to gain more profit as well as its
productivity. In this context, it can be stated that international trade will help the firm to get
many benefits like gaining profit, high productivity, large scale customers, etc. In addition to
this, organization can also get tax benefits as tax rates differ for country to country. In case, tax
rate is high at certain market, then there would be problems for Iceland supermarket to provide
their customers with cheap products. On the other hand, if tax rate in a market is low, then firm
will be able to provide its services effectively and at low cost. Further, organization will be able
to provide employment opportunities through international trade (Carroll and Shabana, 2010).
One of the big disadvantages in international trade is high competition. There would be many
retail firms which provide similar products or services to the customers. It is very essential for
Iceland supermarket to adopt different strategies which would help it to compete effectively.
4.2 Impact of global factors on Iceland Supermarket
There are many external factors which affect business to a great extent. Following are the
factors which affect the business of Iceland supermarket:
Change in technology: It is very important for the firm to adopt new technology so that
they could provide their products according to the demand and could satisfy their customers
(Cavusgil, Knight and Rose, 2014). If, they do not make changes according to advancement in
technology, then it would affect the organization inversely.
Environmental factors: Economic crisis like recession would affect the buying capacity
of customers and firm will face losses. This is a critical situation in which services users will not
have sufficient amount to spend on products.
Economic factor: Both inflation and interest rates are related with each other. It has high
impact over the business of Iceland supermarket (Al-Debei and Avison, 2010). In case, interest
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rate increases, then the firm will increase the price of commodities. As a result, customers will
not be able to purchase effectively as their buying power will get reduced.
4.3 Impact of policies of European Union
According to the records, retail industry contributes about 11.2% to GDP. Thus, it can be
stated that retail sector is one of the major sources of generating income for the economy of
European Union. In addition to this, such sector is also helpful in generating 34 million jobs for
the society (Hoang, Tran and Le, 2010). There are many policies involved in EU and it also helps
organizations to grow internationally. Data protection act is one of the acts developed by
European Union. According to this act, firm like Iceland super has to protect the information
collected from the customers. In this context, it is very important for the organization to set a
software or security system in which they can protect all the information collected for services
users. It ensures that information will not be misused and will be kept safe. In addition to this,
one more policy is related to support the organizations to expand their business internationally
(Bøllingtoft, 2012). It is very helpful in gaining huge profit and attracts more number of
customers. Further, it also helps in increasing employment opportunities.
CONCLUSION
From this report, it can be articulated that it is very important for the organizations to
develop their aim and objectives. This is helpful in developing path through which they could
achieve their desired goals and objectives effectively. Further, there are many stakeholders
involved with the firm. Among these stakeholders, customers are the most important as with
their help, firm gets to know whether they are gaining profit or facing losses. With this respect,
research and surveys are the essential methods so as to understand the customer’s requirements
and accordingly providing them services which would satisfy them. There are different types of
market structure among which Iceland supermarket falls under the oligopoly competition. In this
competition, if a firm reduces the price of its products, then customers will shift to that particular
firm. Moreover, EU has developed data protection act which ensures that all the data collected
from the services users should not be misused and must be protected.
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Online
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[Accessed on 10th February 2016].
Market structure. 2012. [Online]. Available through: <http://fintowin.com/2011/07/market-
structure-monopoly-oligopoly-monopolistic-and-perfect-competition/>. [Accessed on 10th
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