BABS Contemporary Business Environment Report: Penny Market in UK

This report provides a comprehensive analysis of the contemporary business environment in the UK, focusing on the challenges and opportunities for Penny Market, a retail company. It begins by examining the UK's oligopolistic market structure, highlighting the competitive dynamics and the importance of digitalization. The report then delves into the economic factors influencing the UK market, including Brexit, interest rates, exchange rates, recession, inflation, unemployment, development rates, and trade tariffs, and their potential impact on Penny Market's operations. Furthermore, it assesses the specific impacts of Brexit on the company, including commercial issues, compliance with trade requirements, and legal uncertainties. The report also considers the impact of COVID-19 on the business. The analysis provides a detailed understanding of the external environment that Penny Market must navigate to succeed in the UK market.

CONTEMPORARY
BUSINESSES
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1 Market structure of UK.............................................................................................................3
2 Effect of economic factors of UK on Penny market.................................................................4
3 Impacts of Brexit on the business operations...........................................................................7
4 Impact of covid 19 on the business...........................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Contemporary business environment is the type of business environment which are
having the competitive market which changes rapidly with the market trends and under this the
organization should understand the requirement which is needed to face the fast market change.
Under this companies should adopt logical business strategies and use management tool to
control over market. Penny market is a retail company which deals in grocery. It is a Germany
based company which has its branches in many European countries. It has a complete range of
grocery items. Penny market is known for the quality product they serve. This report will discuss
market structure in the UK within which company will operate. Economic factors in UK that will
affect the business. Impacts of Brexit on the business operations and also the impact of covid 19
on the business operations of the company.
MAIN BODY
1 Market structure of UK
The market structure of UK is oligopoly. Normally in UK there is oligopolistic market.
Oligopoly means there are few companies in the market which are manufacturing similar goods
and services. Because of limited companies in the market that's why in oligopoly there are
limited competition. Under this all the firms are affected by the prices or different factors of each
other. So in that case price remain rigid only. In oligopoly there are barriers to enter the market.
Because big companies don't allow other company to come in the market. They want that few
companies are there and that will only rule over the market (Picard, 2017). Company under
oligopoly do aggressive advertising campaign because they have intention to capture large
market share. In this, behaviour of one company affects remaining other companies as well.
Under oligopoly there are few companies but have strong competition between them. The entry
is also restricted because under this high capital is required. If any of the firm reduce the prices
of its products then the remaining company will also do the same and eventually that will not
benefit to any of them. For example in UK companies under oligopoly started loyalty cards
facility to increase their profits like Tesco issue club card facility, free home delivery etc.
oligopoly can create problem for the company in entering the market. Company have to come up
with such strategies through which they can easily enter into the market as penny market have to
face tough competition form the few companies which are already there in the market.

Digitalization or doing business by using digital platforms is emerged in UK. Consumers now
are more interested and comfortable buying online. Penny market if comes in UK should use
digital platforms to target the consumers. Companies of the UK has understood that it is the
market demand of the country to sell online. Because online shopping is very convenient for the
consumers. There they can easily compare products of different companies and then select the
best and or buying goods consumers do not have to go to the store with the help of mobile
application only they can do it. Digitalization got high because of the coronavirus also. People in
this pandemic are not ready to go out from the home to buy products and in this case they chose
the option of online shopping. Many companies now having its presence online which earlier
was not available online.
UK has completely adopted digitalization. From food to clothing to electronics everything are
not available online. Online shopping saves time, provide easy comparison option, flexible can
do it at any time and on some products consumers even get free home delivery. It is also the
strategy of some companies of UK of providing free home delivery to the customer in order to
attract them to buy. Digitalization is the new era and it will grow more in future so its better for
the company to adopt this as soon as possible. Digital platforms also help the company in the
promotion (Benetton, 2018). Social media promotion is the cost effective, consume less time and
efforts. Nowadays people are using social media so doing promotion on them will create good
customer base.
Government of the UK are very supportive towards the company who bring innovation and
innovation is also the market demand nowadays. If penny market comes with innovative
products then the company can easily enter into the market and can create the market space for
them. For innovation expertise are required.
2 Effect of economic factors of UK on Penny market
Economic factors:
Economic factors or economic environment consists of various forces including the
situation of economy, interest rate, inflation rate, current trends and many more which affects the
business or companies as well as there working and sales or profits on a serious note. Thus, in
order to sustain in the market or meet the competition of the existing market or starting the
business in the local market of different country it is very much essential for companies to
carefully analyse the economic factors and their impacts over the business so that companies can

prepare themselves in advance as well as minimise the impacts of economic environment.
Economic environment of UK consists of various factors which has severe impacts over the
companies, these factors includes:
Brexit and raising of taxes:
It is one of the major factor which brings many changes in the economic environment of
UK or it would be right to said that the whole economy of UK has changes due to Brexit. Brexit
has put many restriction over the trade relating to European union and UK which directly affects
the economic environment of UK to a great extent. Also due to Brexit, the rate of taxes for the
exchange of goods also increases, which affects the business of the existing companies as well as
Penny market at an equal extent (Clarke, 2017). Thus, decrease in the sale or profits of the
Penny market with a more spending of money in paying high taxes, may all occurs due to the
impact of Brexit over the economy of UK.
Interest rates:
It is also one of the essential economic factor which may affect the whole economy of
UK and the whole business of the company, which means that if the rate of interest is high in the
market or bank offers loan or money at high interest rate, then the companies like Penny market
who is going to start its business and dependent on the loan from bank will be greatly affected in
terms of setting up of business or running the business (Fiorentini, 2018). If there is high interest
rate in UK then Penny market have to Due to pay more interest on loan amount which will
directly affects the profit as well as working of it. On the other hand, if the rate of interest
prevailing in the market of UK are low then it becomes very easy for Penny market to establish
or starts its business in the UK.
Exchange rate:
Exchange rate is the rate of exchange of currency between two or more than two
countries which means, by exchange rate the actual value of currency can be known and
identified. If the exchange rate is high between two countries then it is obvious that it will
directly affects in increasing the cost for buying or selling of goods and import or export of
goods between two countries. Thus, penny market have to carefully analyse the current currency
rate before setting up business or before performing the exchange activity in order to protect
itself from loss.
Recession:

Recession or economic recession is also a major factor which influence the buying habit
of customer which means that during the stage of economic recession the customers spend less
money while buying the goods which directly affects the profit earning capacity of the company.
Also, due to the impact of recession companies have to lower down their prices which leads to
the incurring of loss by the company (Gertler and Gilchrist, 2018). Thus, companies like penny
market have to carefully analyse the current economic situation of the UK before setting up its
business or before making plan regarding performing the business.
Inflation:
It is also one of the major economic factor which directly affect the buying habit or
purchasing power of the customers. During the situation of inflation in the country the prices
suddenly rise in the market which leads to decrease in the purchasing power of the customers
which directly affects the business of the companies. During inflation when prices rise then
companies like penny market may have to face major challenge in terms of selling its goods or
buying of raw material for the production of goods. This makes the sustainability of the Penny
market in UK very difficult.
Unemployment rate:
It is also an important economic factor which affects the companies in terms of hiring of
employees for the company as well as payments to the staffs. If the rate of unemployment is
high then it becomes very easy for the Penny market to hire the employee or find the employees
due to low demand with high availability of employees in the market. While if the rate of
unemployment is low then it becomes very difficult for Penny market to find the employees or
hire the employees.
Development rate:
Development rate or stage of development is also an important economic factor which
leads the whole economy which means that it is very essential to identify about the current stage
of development of economy. As a developing economy offers many more opportunities in terms
of availability of labour or availability of raw material and many more in comparison to
developed countries (Allodi, 2017). Thus Penny market have to identify that what is the actual
stage of development of UK before stetting up of its business because stage of development
affects the companies in terms of offering opportunities or threatening the existing ability of the
company.

Trade tariffs:
Penny market also have to consider regarding the trade tariff before setting up its
business in UK because it is common that the countries usually set trade tariff to protect the
interest of local merchants or companies as well as prevent the entry of new companies in the
local market so that they can't ruin the local market or affect the local market (Kinzius,
Sandkamp and Yalcin, 2019). Thus, it is also very much essential to carefully analyse the
prevailing trade tariff before entering into the market so that the business or the the working of
the company will not being affected.
3 Impacts of Brexit on the business operations
Brexit: it happened when united states has left the European union. Now new trade rules are to
be made between EU and UK. New guidelines regarding tariffs, legal guidelines etc are made.
Impacts of Brexit on Penny market are:
commercial issues:
There are already many businesses in the UK which are experiencing the change in the labour
market and currency. The availability of goods has changed or cost of the goods which are sent
by the supplier are also changed (Tetlow and Stojanovic, 2018). Penny market can face
commercial issues due to Brexit.
Compliance with tariffs and trade requirements:
Importers and exporters now need to pay the additional tariffs. They also have to deal with the
additional rules of the administration. Now the government has changed the trade requirements.
The UK government has also revised its tax policies. Whereas earlier there was no tariff between
the trade done by UK and EU.
Legal uncertainty:
Now the UK regulations will replace the EU laws, and they will bring new trade arrangements in
the future. Legal uncertainty will definitely there when these changes are properly not
announced.
Change in employment requirements:
EU citizens who are working in the UK countries and the UK citizens who are working outside
UK can face challenges regarding working requirements, travel and residence. So penny market
have to face staff employment challenges (Bloom and et.al., 2019). Now many issues will be

there in migration. The skilled workforce of EU now will face difficulty to go and work in UK
and now UK will also easily not get the benefit of skilled and low cost workers.
Supply chain issues:
The flow of goods and services will adversely affect after Brexit. Tariffs and country
requirements can affect the supply chain. In the case where goods have constituents from many
sources the rules of country origin may change. This is the major impact from Brexit and
company should consider that before they enter.
Changes in the source of funding:
Now EU funding will be ceased. Likewise, all the administrative requirements which are related
to that. Funding will change for some sectors (Chetty and et.al., 2020). This has created major
impacts on the business because UK business take funds from EU now, that option will no
longer available for them.
Border issues:
Businesses who are completely dependent on the cross border transit can face additional
problems. Now government make new laws for cross border transport. Earlier there were no such
laws so businesses are able to do easy transit. Limited relaxation company will get.
Issues regarding brand names:
Companies who have rights for their brand names and designs now they will apply for separate
UK trademarks and also the EU rights after the UK exited EU. Now the existing rights will be
changed.
Effects on customer base:
That companies will not face any issues who have supply chain and customers within UK only.
But companies who are coming from overseas may face issues. They have to pay more regarding
taxes, supply chain or other expenses (Lawless and Morgenroth, 2019). So oversea company
have to bear all these which will automatically increase the price of their products. With these
increased price it will difficult for the company to create their customer base and fight the
competition.
Regulations:
Brexit will have impact on regulations. In many areas of UK businesses are working with the
European standards and now they all have to follow the UK working standards.

4 Impact of covid 19 on the business
Covid 19 has a great impact on the business. This pandemic will create changes on the
businesses. Due to coronavirus existing companies had shut down so the entry of new company
can be very challenging. Coronavirus has cut down the profits and sales of the old companies.
Consumer purchasing power has also reduced due to the pandemic. There earning is not same as
of previous (De Ville and Siles-Brügge, 2019). As a result they are earning less which adversely
affected the spending power. Now the customer buying items what is necessary for them. Covid
19 has risen the prices of raw materials, equipments, packaging costs etc. so if Penny market
wish to enter in UK market after this pandemic then they have to face rise in cost in everything.
Unemployment are raising rapidly so people don't have money for their necessary so why they
will go for extra purchase.
Penny market is the new company so the consumers of UK will take time in trusting the
company. People don't have enough money due to covid, so they will not take risk in buying
goods from new company. They will purchase from their old trusted companies only. Many
small and big companies has shut down due to corona and government has also made strict rules
regarding entry of foreign companies as they want to support their local companies. Already
local companies are facing problems due to corona and if the foreign company also enter into the
market then company have to face tough competition. In that case their survival will be in
danger. Penny market will also not able to generate that much sales and profits because already
existing businesses has faced and are facing huge losses due to coronavirus and in that case it
will be difficult for the new company to capture the market share.
Company have to follow new guidelines which will be laid by the government regarding covid.
Now companies have to work by considering all the aspects related to workplace hygiene etc.
which can increase the expense for the company. Due to this pandemic company have to face the
change in the consumer behaviour, supply chain etc. company have to face finance issues also
because due to covid interest rates had increased on business loan which can influence the
liquidity of the company. Technology is also another issue for the company as technology is
rapidly changing and adoption of advanced technology will make the work of the company easy
but due to coronavirus company don't have that capacity to adopt the change in technology
(Bartik and et.al., 2020). Covid 19 has brought crisis worldwide. So have to take steps in
managing the crisis. In this covid situation it will be difficult for the company to invest on

training and training is very necessary for the workforce to enhance their skills or learn some
new skills and if training is not provided then the workforce will not work effectively and it will
difficult for the company to achieve the objectives. Company will also not able to take new
opportunities as companies are shaken financially.
CONCLUSION
From above report it can be concluded that the market structure of UK is oligopoly and in
oligopoly few companies are there which will not allow new entry easily. Digitalization has great
impact at UK businesses. Consumers now had shifted towards online shopping. It is trending day
by day. Economic factors of UK can affect the business operation of penny market like taxes,
inflation rate, tariffs, unemployment, demand and supply etc. now the country will apply high
taxes to restrict foreign countries as they want to support their local companies. Customer
behaviour has also changed now consumers are not ready to pay more because in this pandemic
they don't have that much earning. Brexit can also put impact on the business. It will create
restrictions on cross border trades, supply chain, workforce employment. Now company have to
face new laws which is made by the UK government. Covid 19 has the biggest impact on the
company. Due to coronavirus many companies has shut down in UK. There are possibilities that
the company will not get the expected sales and profits which they had imagined. Everything has
become expensive from raw materials to transportation and after bearing all the expenses
company will increase price on their products and that will create difficulty for the company to
fight against their competition and to create large customer base.

REFERENCES
Books and journals
Allodi, L., 2017, October. Economic factors of vulnerability trade and exploitation.
In Proceedings of the 2017 ACM SIGSAC conference on computer and communications
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Bartik, A.W. and et.al., 2020. The impact of COVID-19 on small business outcomes and
expectations. Proceedings of the National Academy of Sciences. 117(30). pp.17656-
17666.
Benetton, M., 2018. Leverage regulation and market structure: A structural model of the UK
mortgage market. Working paper.
Bloom, N. and et.al., 2019. The impact of Brexit on UK firms (No. w26218). National Bureau of
Economic Research.
Chetty, R. and et.al., 2020. How did covid-19 and stabilization policies affect spending and
employment? a new real-time economic tracker based on private sector data (No.
w27431). National Bureau of Economic Research.
Clarke, and et.al., 2017. Brexit. Cambridge University Press.
De Ville, F. and Siles-Brügge, G., 2019. The impact of Brexit on EU trade policy. Politics and
Governance. 7(3). pp.7-18.
Fiorentini, and et.al., 2018. The rise and fall of the natural interest rate.
Gertler, M. and Gilchrist, S., 2018. What happened: Financial factors in the great
recession. Journal of Economic Perspectives.32(3). pp.3-30.
Kinzius, L., Sandkamp, A. and Yalcin, E., 2019. Trade protection and the role of non-tariff
barriers. Review of World Economics.155(4). pp.603-643.
Lawless, M. and Morgenroth, E.L., 2019. The product and sector level impact of a hard Brexit
across the EU. Contemporary social science. 14(2). pp.189-207.
Picard, R.G., 2017. Market structure and innovation policies in the United Kingdom.
In Innovation Policies in the European News Media Industry (pp. 219-226). Springer,
Cham.
Tetlow, G. and Stojanovic, A., 2018. Understanding the economic impact of Brexit. Institute for
government, pp.2-76.
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