Evaluating the Contemporary Business Environment: A Detailed Report

This report provides a comprehensive analysis of the contemporary business environment, focusing on the UK market. It begins by examining the market structure within which a company, specifically the German grocery retailer Penny Market, would operate, identifying it as an oligopolistic market....Read More

Contemporary business
environment
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
Explain the market structure in the UK within which a company will be operating.............3
TASK 2............................................................................................................................................4
What are the economic factors within UK that will affect the organisation..........................4
TASK 3............................................................................................................................................6
Impact of Brexit on the business operations of a company....................................................6
TASK 4............................................................................................................................................6
Impact of COVID-19 likely to have on the business.............................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................8
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INTRODUCTION
Business environment is the sum and collection of the all the internal and external factors over
which business has no control and but it effects the profitability and performance that has an
impact on to the growth of the organisation. Every entity operates in the different environment
that influence business and also get effected by its activities. Entity has no option rather than
responds and adopts changes according (Hamilton and Webster, 2018). A firm is a part of a big
environment so there are very few factors that under control of firm. If a business posses good
understanding and effective analysis about the business environment then they can easily
recognise then respond to the forces that affects the firm. Along with the threat environment is
also consist of the endless opportunity that can be grab to be successful at a market place.
This report is based on the penny market which is a grocery retailer supermarket chain based in
Germany and run 3500 stores. This study on the penny market involved market structure in UK
for grocery supermarket, economic factors that can affect the company, impact of Brexit on the
operations of the company. Furthermore it also includes impact of COVID-19 likely to have on
to the business entity (Dawson, 2018).
MAIN BODY
TASK 1
Explain the market structure in the UK within which a company will be operating
Market structure is refers to the number of firms in the market, their market shares and
other features that described the degree of the competition in the market that effects the
profitability of other business. There are many types of market structure that exist in the UK
market as according to the nature of the business. In relation to the penny market, market
structure for the grocery supermarket chain is oligopolistic market.
Oligopoly market structure: this refers to the market where few companies rule over the
particular market or industry. It has been said that there are few firms with the large number of
buyers, although there is no clarity about the number of firm exits. But few numbers of firms rule
and considered as the dominators for others. In this case firms either compete with each other or
collaborate together to rule the market(Luiz, Ganson and Wennmann, 2019). They use their
market image as to influence to set the price and in turn to maximum profit here consumer
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becomes price taker. There are barriers to entry and new firms generally find difficulty to
establish themselves. In UK there are four largest multiple retailer ASDA, MORRISONS’S,
SAINSBURY’S, TESCO who are covering 70% of the grocery market with the number stores
across the UK and has developed the oligopolistic market. As penny already has a good brand
recognition and image so it is easy for the company to enter into this market although it will
provide many advantages for the growth of the company along with some challenges that helps
in to increase the internal efficiency and effectiveness of the company(Arrowsmith, 2018).
Firms in oligopoly market are depended on each other and each of firm might sell the
distinctive product from other firms, their interdependence means that they have to set and
changes prices as according to their competitors. This market is characterized by the imperfect
knowledge where customers don’t know about the best prices and availability of the product as
there is wide range of industry types and products with the large number of buyers. This type of
market is tend to stay stable as this is consist of the few firms and large number of buyers where
demand is always high and always ready to take the prices which are offered by the companies
without negotiation and bargaining.
TASK 2
What are the economic factors within UK that will affect the organisation
Economic is one of the factors of business environment and is consisting of the goods,
services and money (Hillary, 2017). It includes the variables which are refers to financial state of
an economy that has direct impact on the profitability and financial operations of an
organisation. This factor involves interest rates, tax rates, law policies, wages and government
activities. Although, UK has stable and good economic conditions which is good for the business
operations. But there are also several factors that influence the activities in both negative and
positive. Some of them are discussed below:
Prices and interest rates: Price is a quantity of payment which is given by party to another in
return of goods and services. This gets affected by the rate of inflation in the country that directly
influences the spending of the consumers on the products and services significantly. And this is
why producer price index and consumer price index are considered as the indicators to leading
economic. Higher inflation rate destroy the purchasing power of the consumers (Savic, Lawton
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Smith and Bournakis, 2020). UK stands at a 3.5% inflation which by which a low level
companies can feel the pressure to provide higher salaries and on the confidence and willingness
to buy a particular product.
Interest rate also influences the level of spending on the consumer goods. And in UK,
interest rates are quite high which seems to be likely they will hold for the little longer time.
Thus, both the factor inflation and interest rates can affect the business operations negatively
although penny market is company with the good brand recognition and strong setup of an
organisation by which it got less effective by these factors.
Consumer confidence: It is an important aspect that affecting demand for consumer goods and
services. When consumer feel confident about their personal financial and overall economic
condition they are more likely to purchase more amounts of products and services. High level of
confident influence consumer’s willingness to make major purchase and to use credit to buy the
consumer goods (Nguyen, Charity and Robson, 2016). And when economic condition is not
good and lack of personal finance then customer is having low level of confidence this will
simultaneously effects the spending of the consumers and selling revenue of an company. As UK
has a good economic condition and consumers with the high confidence this will provide the
advantage to the penny company in to increase the sales and profit margin in UK with the strong
customer base as it already enjoying the brand recognition that support them to expand their
business successfully and in effective manner.
Exchange rates: This is refers to the value of a nation’s currency in respect to the currency of
another nation. Pound in UK has be low for some time although now it has been recovered and
even it could still rise significantly that makes their economic strong from other countries and
provides the financial strength to the customers, business and to the overall economy. This is an
positive aspect of the UK economy and will also provide to the corporate to have a strong
financial factor and a profit margin. For Penny Company this provides an advantage and positive
effects while operating the business in UK
Labour market: Wage rates and inflation id higher in UK. As employment rate currently stands
at 76.1% which is a highest on the records, but the fixed type of employment has been declined
as more people are engaged in the short term contract of employment. With this unemployment
has been decreasing from the last five years and currently it is evaluated fewer than 4%. This is
not that much big issue but can create a problem for the organisation depending upon the type of
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staff and human resource they need to hire(Oluwafemi, Mitchelmore and Nikolopoulos, 2019 ).
Here labour rates are moderate and will not effect that much in the internal cost and profitability
of an respective organisation.
Recession: It is refers to the economic recession that has an potential to change the customer
buying behaviour, that forced companies to drop out and or to decrease the prices. This is an two
consecutive quarters of negative impact and negative economic growth with the falling or
ineffective output of an economy and rise in spare capacity. This results in negative as firms
remain with un sold goods and excess inventories, lower wage rate as unemployment rises and
no competition is available in the job vacancies so it’s become harder for the workers to bargain
for their high wages. All though UK is not having this much bad condition over there thus, for
penny company UK will be a adequate place to get started for the operations and also provides
the prominent advantages to the activities to get the growth and success to the respective
organisation (Roberts, 2018).
Unemployment: this is referring to the people who are seeking for the employment buy are not
able find the work. But some people choose not to work either because they are financial strong
or stable and because they have family to look after it which is not be considered in the
unemployment. This means that an economy is not taking full use of the human resources that
are available. This reflects that economy is not growing as quickly as it could be. This influences
the purchasing power of the customers and also provides advantage as to get the worker easily at
a lower rate.
Taxes: A tax is refers to the financial charges that are made by the government on individuals,
consumers and business. This is basically the income of the government which they use as
expenditure in to the construction of the economy strong, UK has wide range of different types
of the taxes such as income tax, corporation tax, and value added- tax etc. that has to be pay by
the individuals of an country it is can be considered as the compulsory charges which is charged
by the government and mainly on the annual basis. Taxes rates in UK are moderate can be
payable by the every person of a country.
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TASK 3
Impact of Brexit on the business operations of a company
BREXIT is an international legal implication series that examine the political, legal, social
and economical factor that was discharge by the United Kingdom’ 2016 referendum and
responded by the government. European Union forces the both UK government and European
Union to indentify the dynamic challenges to solve the many threads that binds them together in
the same regulations (Crick, Chaudhry and Crick, 2016). Brexit facilitates many evaluations and
understanding of its international law implications. In addition to this Canada, the United States
and Europe spell out the challenges and threats that need to indentify in the wide range of fields
of trade, financial services, insolvency, intellectual property and environmental and human
rights. The EU and UK always had to agreed on the new rules which are executed for how to
live, work and trade together. While companies can buy or sell the products across the EU
boundaries and that is without paying taxes that is generally known as tariffs. Earlier there was
no trade deal and now business has to start paying these taxes or tariffs that makes the things
more expensive for the business as well as for the customers.
 Biggest disadvantage of the BREXIT is that it damages the economic growth of the UK.
Most of this is because of the uncertainty surrounding by the final outcome.
 This has been eliminates the Britain’s tariff free status that is exist earlier with the other
EU members. And tariffs will rise the cost of exports of the company that will
simultaneously increase the prices for the customers. That would going to be effect UK
exporters badly and their goods become more expensive. And this would also increase
the prices for the imports. And higher import prices will going to create the inflations that
would cause into the lowering standard of living of UK residents.
 Uk companies also could lose the ability and power to bid on the public contracts in EU
country. as earlier any member country are open to bidder as now this is going to be
effects due to the BREXIT. Overall it effects the large organisations and traders
negatively. That directly influence the economy of UK
 BREXIT immensely affects the many aspects of the businesses, one the biggest impact is
on the trade of the business and also has on the human rights and environmental laws.
Due to BREXIT there is disruption occurs in the economic environment of the UK that
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also results into the problem in the operations and performance of an entity (Beynon-
Davies, 2020).
TASK 4
Impact of COVID-19 likely to have on the business
The COVID-19 pandemic outbreak has the drastic impact on the business world and force many
organisations to close and leading to an unpredictable disruption and interference of trades in
most industry sectors. Retailers and brand faces might faces the short term challenges but it
become hard for the other sectors to overcome this challenges because of the world wide
lockdown that stops the trades and most of markets (Lee, 2018). Other then this there are several
challenges and impact faced by the organisations during COVID-19 pandemic are discussed
below:
Consumer behaviour: Around the globe, every country and societies are in lockdown as citizens
are asked to maintain social distancing and have to stay home. In respect to this people are
ignoring to going out without any urgency and important work and also stopped buying the
products that are not essential as they are focusing more on to the safety terms. Along with this
consumers are become more aware about the health safety and prefer the organic and safe
products. This results in to the decrease in sale s and profit margin of an organisation.
Market place: COVID-19 outbreak has likely to cause insolvency and failure for many well-
known brands in many sectors as consumer are staying home and economies are shut down for
the little longer period (Froud, Tischer and Williams, 2017). That slows down the market
activities and operations of the companies which effects on the efficiency and growth of the
organizations but as now markets are reopen again and with this companies are working harder
for the recovering and to attain the sustainability at a market place.
Impact on strategists: Along with this COVID-19 pandemic situation now companies are
working with their full potential in order to recover the situations and for the reinventions.
Leaders and mangers are facing crises and now working with the spirit of reinventions in their
strategies like accelerating digital transformation, establishing variable cost structure, and
implementing various actions plans for the future. These recovering strategies are made with the
more effectiveness and efficiency as to implement and get back to the earlier place.
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Workforce within the organisation: Organisations are facing unprecedented workforce
disruption globally. And companies are determining how they can work in short and long term as
workers are trying to function and perform along with strolling and cope up with the whatever
happing in daily lives (Sinkovics, Kurt and Sinkovics, 2018). Expertise in companies are
developing better employees strategies to maintain the economy viable nd providing support the
people and their family to survive financial in a current situation and in the future as well. Along
with this opportunities are rising as companies and industries are working together to keep
people engaging in work.
Operations: With the pandemic crises, fundamental changes in consumer behaviour, supply
chain and routes to market the product has been developed and also fall down the need of leaders
to adopt the effective ways of working and value chain transformation to help the unpredictable
risk and uncertainty. Also to overcome this organisations are ready with their strategies as like
adopting a distributed global services model that help large organisations across the industries
(McLean and Antony, 2017).
Financial issues: Because of this crises, business face the losses and financial resource problem
as sales falls down from the last months which is the most important aspect for the profit margin
and finance of the company. For this leaders have to respond on it quickly to rebalancing the risk
and liquidity of a company along with this company building new resources and seiz
opportunities to grab them. This is most essential as to sustain in the market. Once a company
becomes financially weak then it’s hard to sustain in the market for the longer period of time.
Technology: COVID-19 forced companies to rapidly operate in the new ways of IT and it has
been developed and implemented as never before. With this business establish a wide range of
new system priorities and challenges (Bragaand, and. et. al., 2019).
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CONCLUSION
From the above analysis it has been concluded that business environment is sum of all internal
and external factors in which company operates and affect the operations of the organisation. In
this it also includes market structure that is different depend on the particular industry that shows
the degree of competition for the firms exist in the industry. This affects the performance and
profitability of the company. Grocery market of UK is oligopoly where few firms has rule over
the industry with the large number of buyers, here companies considered as the prices maker and
consumers becomes price taker. Furthermore it has been explained the economic factors exist in
the UK that has an impact on the business in which Brexit impact on the trades is also included
that effects the operations of the companies related to trading which is done out from the country
boundaries. But it has been seen that economic condition is good as compare to the other
country. In addition to this COVID-19 has also impacted the business world badly some industry
got immensely effected the productivity and profitability but to overcome that companies are
working with the new ways and strategies that are more effective than the earlier, COVID-19
impact has forced the business to make themselves more effectively in all the ways.
REFERENCES
Books and Journals
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Luiz, J.M., Ganson, B. and Wennmann, A., 2019. Business environment reforms in fragile and
conflict-affected states: From a transactions towards a systems approach. Journal of
International Business Policy. 2(3). pp.217-236.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Savic, M., Lawton Smith, H. and Bournakis, I., 2020. Innovation and external knowledge
sources in knowledge intensive business services (KIBS): evidence from de-
industrialized UK regions. Entrepreneurship & Regional Development, pp.1-22.
Nguyen, T.H., Charity, I. and Robson, A., 2016. Students' perceptions of computer-based
learning environments, their attitude towards business statistics, and their academic
achievement: implications from a UK university. Studies in Higher Education. 41(4).
pp.734-755.
Roberts, J., 2018. Multinational business service firms: development of multinational
organization structures in the UK business service sector. Routledge.
Crick, D., Chaudhry, S. and Crick, J.M., 2016. Trading in a competitive environment: South‐
Asian restaurants in the UK. Strategic Change. 25(4). pp.371-382.
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Beynon-Davies, P., 2020. Business information systems. Red Globe Press.
Lee, D., 2018. Independent television production in the UK: From cottage industry to big
business. Springer.
Froud, J., Tischer, D. and Williams, K., 2017. It is the business model… Reframing the problems
of UK retail banking. Critical Perspectives on Accounting. 42. pp.1-19.
Sinkovics, R.R., Kurt, Y. and Sinkovics, N., 2018. The effect of matching on perceived export
barriers and performance in an era of globalization discontents: Empirical evidence from
UK SMEs. International Business Review, 27(5), pp.1065-1079.
McLean, R.S. and Antony, J., 2017. A conceptual continuous improvement implementation
framework for UK manufacturing companies. International Journal of Quality &
Reliability Management.
Braga, B.M., and. et. al., 2019. An institutional approach to ethical Human Resource
Management practice: comparing Brazil, Colombia and the UK. Journal of Business
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Oluwafemi, T.B., Mitchelmore, S. and Nikolopoulos, K., 2019. Leading innovation: Empirical
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Arrowsmith, S., 2018. The law of public and utilities procurement: regulation in the EU and UK.
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Dawson, D., 2018. Organisational virtue, moral attentiveness, and the perceived role of ethics
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