Business Environment Analysis of Iceland Supermarkets: A Report

This report provides a comprehensive analysis of the business environment of Iceland Supermarkets. It begins by identifying the purposes of different organizations, including Iceland Supermarkets, KFC, Transport for London, and Cancer Research. The report then evaluates the extent to which Iceland Supermarkets meets the objectives of its stakeholders (government, customers, employees, investors, suppliers, and the community) and details the company's responsibilities and strategies to meet them. The analysis extends to different economic systems, including traditional, market, command, and mixed systems, and their impact on resource allocation. The report also examines the impact of fiscal and monetary policies, competition policies, and market structures on Iceland Supermarkets. Furthermore, it explores how market forces and business and cultural environments shape the company's behavior. Finally, the report assesses the significance of international trade, global factors, and the policies of the European Union on Iceland Supermarkets' operations and strategies. This report offers valuable insights into the challenges and opportunities within the dynamic business environment of the UK retail sector.

Business Environment

TABLE OF CONTENTS
Introduction .....................................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Identifying purposes of the following organizations.............................................................3
1.2 Extent to which Iceland Supermarkets meeting the objectives of its stakeholders...............4
1.3 Responsibilities of Iceland Supermarkets and its strategies to meet them............................5
Task 2 ..............................................................................................................................................6
2.1 How different economic systems attempt to allocate resources effectively?........................6
2.2 Impact of fiscal and monetary policy and other regulatory mechanism ...............................7
2.3 Impact of competition policy and other regulatory mechanism on Iceland Supermarkets....8
Task 3...............................................................................................................................................8
3.1 How market structures determine the pricing and output decisions of businesses?..............8
3.2 Ways in which market forces shape Iceland Supermarket responses....................................9
3.3 How business and cultural environments shape the behavior of Iceland Supermarket?.....10
Task 4.............................................................................................................................................10
4.1 Significance of International trade on Iceland Supermarket................................................10
4.2 Analyzing the impact of global factors on Iceland Supermarket.........................................11
4.3 Impact of policies of European Union on Iceland Supermarket..........................................13
Conclusion ....................................................................................................................................13
REFERENCE.................................................................................................................................15
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INTRODUCTION
Business Environment refers to combination of internal and external determinants which
impact organization’s business operations (Babin, Boles and Griffin 2015). The internal factors
are those factors that are present within business and are usually controllable such as objectives,
policies, production capacity, organizational structure and culture, manufacturing techniques and
employees of the firm. On the contrary, external factors are those determinants that exist outside
the organizations such as customers, suppliers, competitors and marketing intermediaries. The
present report features business environment of Iceland Supermarkets which is a supermarket
chain in UK (Bah and Fang, 2015). The report covers various aspects that impact the operations
of the chosen retail company in national and international markets.
TASK 1
1.1 Identifying purposes of the following organizations
Every organization runs business to achieve their organizational purposes. The main
purpose of businesses is to earn profits by increasing their sales. The purpose of the following
organizations is as follows:
A) Iceland Supermarkets (Private organization): Iceland Supermarkets is a British supermarket
chain that offers great deals on frozen food items to its customers. The purpose of the
organization is to maximize its profits by increasing sales of its frozen food products through
attractive deals. The British retailer lately introduced a free national home delivery service of its
products to its valued consumers. For this, Iceland Supermarkets developed online shopping
service and had made it available to 84 percent of its UK customers. In addition to this, the
company has developed new products to capture larger market share. Besides this, the retailer
also came up with innovative idea called The Food Warehouse that sells wide range of luxury
and specialty frozen food including vegetables and meat items (The Iceland Story, 2015).
B) KFC (Fast food chain): Kentucky Fried Chicken is very well known fast food restaurant
chain in the world. The company specializes in fried chicken and its aim is to popularize the
concept of franchise business all around the globe. The purpose of fast food giant is to expand its
market share and profits across the globe (Gaskill, Van Auken and Kim, 2015).
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C) Transport for London (TFL) (Public sector) - TFL is a government organization which is
responsible for providing transport services to the population of Greater London in UK. The
main purpose of TFL is to implement transport strategy across London to provide transportation
services to people through rails, roads, cross rails and underground commutation facilities.
D) Cancer Research (charity firm): Cancer Research is a registered charity organization in UK
that aims to pioneer research to cure cancer without government funding (Cancer Research UK,
2015). The main purpose of the organization is to raise funds for the research for all types of
cancer in order to cure it. The firm collects money from public for a social cause and does not
aim to make profits.
1.2 Extent to which Iceland Supermarkets meeting the objectives of its stakeholders
Stakeholders are those individuals or groups who can significantly affect the actions and
objectives as well as policies of an organization. The key stakeholders of Iceland Supermarkets
are government, customers, employees, investors, suppliers and community. The company’s aim
is to become a responsible retailer to meet objectives of its key stakeholders. Iceland
Supermarkets is committed to provide healthy, safe and ethically sourced food products to
consumers. In order to achieve this objective, it became the first retailer of UK to eliminate
artificial colors, flavors and unimportant preservatives from its own brand. In addition to this, it
also banned genetically modified components from its brand products. Besides this, it also
banned mechanically recovered meat and hydrogenated fats which is a form of man-made trans
fats from its products (Lee, Kim, Seo and Hight, 2015). Iceland Supermarkets source its products
from approved suppliers in order to meet global food safety standards set by British Retail
Consortium (BRC). It encourages healthy eating among consumers by providing them with full
information about nutrition value and ingredients of its products through well defined labeled
products. In addition to this, it also provides information related to allergies on the product labels
to make those customers aware of the food allergens that are allergic to certain food items.
Apart from this, it also meets objectives of UK community by taking certain remarkable
initiatives. This involves working as an official partner with UK government to promote public
health by providing healthy and artificial trans fats free food items to its consumers. Further it
adheres strictly to follow animal welfare policy regulated by Farm Welfare Council. In addition
to this, the retail company ensures that Iceland brand suppliers must follow Fish Welfare Policy
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effectively. Iceland makes continuous efforts to reduce impact on the environment by
minimizing carbon footprints. It successfully ventured environmental projects which aimed to
achieve Carbon Trust Standard that include more energy efficient lighting and air conditioning
system in its stores. This also includes methods of recycling and waste management. Besides
this, Iceland also values its employees and provides great working place for them to work, enjoy
and grow (The Iceland Story, 2015).
1.3 Responsibilities of Iceland Supermarkets and its strategies to meet them
As stated above, Iceland Supermarkets is committed to become the most responsible
retailer of UK. In order to meet its objectives and responsibilities towards key stakeholders, it
has formulated certain strategies which are discussed in the following passage.
Community
In order to fulfill its responsibilities towards community, it crafted various strategies to
protect environment by working with partners like Carbon Trust and British Retail Consortium
Environmental Policy Action Group. The retail company undertook certain projects to minimize
its impact on environment by installing energy efficient lighting and air conditioning systems in
its stores. This enabled the Iceland to reduce carbon footprints to a certain level. In addition to
this, it made agreements with Climate Change Agreement with DEFRA including all of its
distribution centers to reduce energy consumption. Besides this, it followed policy to replace its
vehicles after five years to reduce vehicle emissions.
Customers
Iceland values its customer’s health and strictly follows strategies to maintain highest
standards of food quality and safety. It strongly discards the use of artificial colors, flavors and
preservatives in its brand owned products to promote health and well being of consumers. It
sources food products from approved and reliable suppliers who meet the standards set by BRC.
At the time of new product development, Iceland makes sure that its technologists monitor the
first production batch (The Iceland Story, 2015). In addition to this, quality assurance systems of
the retailer regularly check products for their quality against set standards after delivering it to its
depots. In addition to this, it works in partnership with UK government health promotion
program to encourage public to opt for a healthy life. In order to achieve this objective, it
strategically promotes consumption of food products which are healthy and are free from
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genetically modified ingredients. Further it banned the use of hydrogenated fats which is a form
of man-made trans fats responsible for major cardiovascular diseases. Therefore it makes efforts
to promote health and well being of its customers through sage and healthy products.
Employees
For its employees, Iceland always makes efforts to provide clean, healthy and safe
working conditions to fulfill its duties as a responsible employer. It works closely with
Gangmasters Licensing Authority (GLA) to safeguard the rights of workers (Van Auken, 2015).
TASK 2
2.1 How different economic systems attempt to allocate resources effectively?
An economic system refers to a system of manufacturing and exchange of products and
services along with allocation of resources in a community. The global economic systems fall
into four categories which are discussed briefly under the following headings:
Traditional Economic System
This economic system produces goods and services which are basically outcomes of
traditional beliefs, traditions, customs, religions, etc. It relies greatly on historic success of social
customs. For instance: Asia, Africa and South America support this type of economic system
where agricultural farming is still a primary economic activity.
Market Economic System
Market economies are based on customers and their purchasing decisions. The
government does not control resources, valuable goods and other segments of the economy.
Market trends and demand of product impact business decisions of the organizations. The
producer manufactures the products by selecting right production methods, machines, labor and
capital (Turley, Langkamp and Milliman, 2015). In this economy, the market decisions rely upon
demand and supply for pricing. Production is stimulated by a motive to increase profits.
Organizations operating in market economies prefer less regulations of industry by the
government. Separation of market and government proves to be biggest advantage in market
economy as there is less control of government over resource allocation.
Command Economic System
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In this economic system, government controls all the economic activities. In command
economies, market does not play any significant role in the production decisions. The
government regulated economies are less flexible than market economic system and react
gradually to demand and supply fluctuations. Demand is not impacted by consumer’s buying
behavior. The government regulates vital resources and it owns industrial processes, machinery
and production facilities. One such example of this type of economic system is China (Wang,
2015).
Mixed Economic System
This type of economic system combines properties of both market and command
economic systems. In mixed economies, both government and business firms work together to
facilitate the production. There are certain resources which are allocated by government whereas
others are allocated by business entities (Mitrega and Pfajfar, 2015). UK's economic system is a
perfect illustration of Mixed Economic system where resources are allocated mainly by the
market forces.
2.2 Impact of fiscal and monetary policy and other regulatory mechanism
Fiscal Policy refers to a means by which a nation's government adjusts tax rates and
spending levels to monitor economy of the nation. On the contrary, monetary policy is defined as
a tool by which the central bank of a nation controls supply of money in the economy. Fiscal and
monetary policies significantly impact Iceland Supermarkets and its activities. The government
utilizes fiscal policies for setting tax rates and adjusts levels of spending to steer economy of UK
in the right direction to increase or decrease the demand and supply of goods and services (Liebl,
2015). Similarly, monetary policy controls the flow of money in the economy which in turn
affects the purchasing power of public to spend on retail goods which in turn influences the
demand for products of the retail firm. For Iceland Supermarkets, fiscal policy impacts the
investment decisions, cost of business operations, consumer demand and ability to fight the
competition. These are elaborated in the following passage:
Fiscal policy related to taxes directly affects the disposable income of consumers. When
taxes are high people will have less net income which can provoke them to limit their
expenditures. On the contrary, reduced tax rates will enable consumers to have more disposable
income to purchase retail products and services of Iceland Supermarkets which in turn increases
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its sales as well as profits. When government imposes low taxes, the retail company may want to
invest in other sectors which can create job opportunities for people. In addition to this, fiscal
policy largely influence the investment decisions of Iceland Supermarkets as lowered taxes and
tax incentives encourage the retailer to invest in business expansion and funding into staff hiring
and training (Hamilton and Webster, 2015). In addition to this, fiscal and monetary policies
greatly impact competitiveness of Iceland as few store visited by the buyers can lead to reduced
sales and profitability.
2.3 Impact of competition policy and other regulatory mechanism on Iceland Supermarkets
Competitive policies significantly impact business activities of Iceland Supermarkets.
Retail market is highly competitive. In order to gain competitive advantage over rival retail
firms, Iceland Supermarkets makes competitive policy. Competitive policies improve the
efficiency of retail firm as the company develops strategies to ameliorate its product range and
operations to fight competition. The policy ensures broad range of products for customers to
choose at the competitive prices. In addition to this, the competition policy positively increases
productivity of labor in the retail sector.
There are four policies on which the competition policy is based. These are market
liberalization, state aid control, merger control and antitrust and cartels. Competition encourages
Iceland to improve quality of its products and services which in turn enable the firm to capture
larger market share to maximize profit (Kindsfaterienė and Lukaševičius, 2015). On the contrary,
regulatory actions of government impact the business operations of Iceland Supermarkets. The
regulatory mechanism involves functions such as to monitor prices of product offerings, and
quality of customer’s services. In addition to this, they also check whether Iceland is conducting
business as per environmental policies or not in order to reduce pressure on environmental
resources.
TASK 3
3.1 How market structures determine the pricing and output decisions of businesses?
Market structures refer to nature and extent of competition in a market for goods and
services. In other words, it can also be defined as number of organizations in market that
manufacture identical goods and services. Market structures greatly influence behavior of retail
firms. It plays important role in determining pricing and production decisions of Iceland
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Supermarkets. UK's retail market structure is oligopoly in nature. In oligopoly markets, there are
few retail firms and the competition is also fierce. These retail players compete with each other
in the market for fewer commodities. The pricing decisions of Iceland are greatly influenced by
the pricing strategies of its rivals. If the retail leader changes prices of the commodities, Iceland
Supermarkets will react to this change in order to capture larger market share in that product
range (Coetzee and Baker, 2015).The behavior of retail firms in oligopoly markets is
interdependent. In addition to this, it is also difficult for the new entrant to enter in these market
structures. In order to fight with rival firms, Iceland Supermarkets is required to keep the prices
low in order to retain price sensitive customers. In order to attract larger market share, the
company needs to provide differentiation over customer’s services to gain competitive
advantage.
3.2 Ways in which market forces shape Iceland Supermarket responses
Market forces largely impact the demand and supply of products in a market. Responses
to market forces greatly influence Iceland Supermarkets brand image and profit earning. Iceland
is a popular British supermarket chain which indulges in a great deal of market research to
analyze market demand and consumers preferences. Iceland has been successfully established in
UK market as a responsible retailer (Beatty and Samuelson, 2015). It carried out extensive
research to know preferences of its target customers. Iceland’s majority of its business revenue
generation is from the sale of frozen food items. The retailer sells high quality of frozen meats
and vegetables that are free from artificial colors and flavors which are liked by health conscious
customers.
The retailer correctly estimates the demand for its frozen food and maintains the stocks in
its stores to meet the demand. In addition to this, it also helps the company from over stocking of
products and reduces the cost of cold storage. Further, Iceland gives attractive offers and deals to
its customers in order to increase sales. This in turn maximizes the profit generation of Iceland.
Increasing profit further enables the retailer to invest in new technology, product development or
business expansion (Mitrega and Pfajfar, 2015).Thus, market research is very important for
Iceland to keep track of market trends in order to respond effectively to the market forces.
Further it regularly interact with suppliers to convey them the advance demand of specified
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products such as meat, seafood, vegetables and fruits in order to meet the market demand in
timely manner.
3.3 How business and cultural environments shape the behavior of Iceland Supermarket?
Business and cultural environment significantly shape the behavior of Iceland
Supermarket. The business environment falls into two types: Economic and Non- Economic
environments. The economic environment consist of economic systems, conditions and policies
whereas non economic environment include demographic, technological, legal, political and
social environment. Since Iceland Supermarket operate in different markets its business depends
largely on business and cultural environment. Economic environment is different in different
markets. Economic policies such as fiscal , monetary, EU policies, international trade laws affect
the operations of Iceland Supermarket in EU region as well as in UK.
Cultural factors also shape up the organizational behavior of Iceland Supermarket. Social
determinants such life expectancy, social and cultural belief, educational level, traditions,
customs determine the buying behavior of consumers. Political factors include stability of
national and foreign governments which pave the way for business expansions of organizations.
If there is no political stability then Iceland Supermarket will not move into those markets.
Further technological factors affect the methods and techniques of product storage and their
distribution in Iceland Supermarkets. Since the company is majorly into the business of frozen
food items it need to install technologically advanced cold storage systems in its stores to
maintain the quality of the perishable items such as meat, fruits and vegetables. Apart from this,
Iceland formulate business practices that are in accordance with national and EU policies.
Iceland Supermarket is also committed to various environmental laws to reduce pressure on
environment (Bah and Fang, 2015). Thus the retail company need to consider all these factors in
account while formulating an effective operational strategy to achieve its business objectives
successfully.
TASK 4
4.1 Significance of International trade on Iceland Supermarket
International trade plays very significant role for Iceland Supermarket business as it is not
feasible for any organization to expand its operations only within domestic markets. In addition
to this, all goods needed for manufacturing is not available in domestic economy. For acquiring
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raw materials and services organizations need to cross international boundaries (Turley,
Langkamp and Milliman, 2015). This is where International trade comes into picture.
International trading is very profitable and economic for Iceland Supermarkets. In order to
discuss the significance of International trade in detail following points can be elaborated:
Larger market share
Iceland Supermarkets if expands its business in global markets then there are lot of
growth opportunities for the retailer. Operating in national market provide limited market share
to Iceland which means limited profitability and growth. On the other hand, by making its retail
business global the firm has opportunity to explore untapped potential markets and better
revenue generation.
Better brand image
International presence of Iceland Supermarkets create a better brand image in global
markets. It enables the retail firm to create desired brand value among global consumers. This
not only helps in fulfilling organizational goals but a sustainable future for its business (Gold,
2015).
Availability of meat and fruits
For the supply of many seafood items such as fishes, prawns, etc. Iceland Supermarkets
depend on other nations. Similarly it also depend upon other countries for the supply of certain
fruits such as banana and mango as they do not grow in UK. Therefore Iceland need to import
these goods in order to make them available to consumers in UK.
Lower operational cost
Operating business in other countries may be economic for Iceland due to low production
cost. Availability of cheap land and labor reduces the operation cost of the retailer. This proves
very profitable and economic for Iceland Supermarkets. This enable the retailer to save for future
investment plans for its business growth and expansion.
4.2 Analyzing the impact of global factors on Iceland Supermarket
The impact of global factors on Iceland Supermarket can be analyzed effectively through
PESTLE Analysis (Dudovskiy, 2013). It is an abbreviation for Political, Economical, Social,
Technological, Environmental and Legal factors.
Political Factors
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These are the determinants that explain the level of political stability of the global
markets. It is very important for Iceland Supermarket to expand its business in a politically stable
economy. Further other aspects such as international trade tariffs, threat of terrorism, global
patents and intellectual rights are also considered important for business expansion. For example:
Iceland Supermarket will discard the idea of opening its store in nations that support terrorist
activities.
Economical Factors
These factors include economic conditions prevailing in global markets. World Bank and
World Trade Organization also play important role in determining the expansion decisions of
Iceland Supermarket. The retailer will consider economic conditions and market fluctuations of
foreign markets into account to open its offshore stores. The fiscal and monetary policies of
different nations impact the business decisions of Iceland Supermarkets.
Social Factors
These factors determine the social and cultural aspects of markets. Changes in family
values, sexual orientation, size of families, social and cultural beliefs of people, their income
levels, age gender all are considered by Iceland Supermarket to formulate an effective marketing
plan to address consumers needs in international markets. For example: If Iceland plans to
operate in Indian markets then it need to stop the sale of beef as cow is treated as a sacred animal
in Indian culture (Keršienė and Savanevičienė, 2015).
Technological Factors
The level of technological infrastructure is another important factor that Iceland
Supermarket need to consider for global business expansion. In a technologically advanced
market the retailer need to invest in technological development of its operations in order to gain
the competitive advantage over established foreign retail rivals. The firm has set up innovative
technological infrastructure at its stores in order to increase its operational efficiency.
Environmental Factors
These include environmental laws which Iceland need to abide by while operating in
foreign markets. These laws are meant to regulate the impact of businesses on global
environment. Iceland Supermarkets make serious efforts to address the ecological issues by
making effective changes in its operations to reduce pressure on global environmental resources.
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