Penny Supermarket: Contemporary UK Business Environment Report

This report provides a comprehensive analysis of Penny Supermarket's potential expansion into the UK market. It begins with an introduction to the company, its background, and its operational model as a discount grocery chain. The main body of the report delves into the market structure in the UK, focusing on the oligopolistic nature of the supermarket industry. It examines the economic factors influencing the business, including inflation, fuel prices, employment rates, and government spending. The report then assesses the impacts of Brexit on the company's operations, including trade agreements, tariffs, and supply chain disruptions. Furthermore, it investigates the effects of the COVID-19 pandemic on Penny Supermarket's business. The report concludes by summarizing the key findings and implications for the company's success in the UK market.

Contemporary business environment

Table of contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Market structure in the UK..........................................................................................................3
Economic factors within the UK that will affect the business of the company...........................4
Impacts of Brexit on the business operations of the company....................................................6
Impact COVID-19 on the business of the company....................................................................7
CONCLUSION................................................................................................................................9
REFRENCES...................................................................................................................................9

INTRODUCTION
The report consists of the impact on the business of Penney supermarket on the expansion
in the UK market. The company is an international market of grocery and retail business. It is a
discount chain market of Germany and operates in 3550 stores. The founder of the market is
Leibbrand Gruppe in the year 1973. The market operates in Austria, Czech Republic, Germany,
Hungary, Italy and Romania. The headquarters of the company are in Cologne, Germany. The
company sells the products in discounted prices. The report discusses about the market structure
in which the company is going to operate. The phenomenon of the oligopoly supermarkets is
explained. The economic factors that are able to impact the operation of the company are
discussed. The impact of the Brexit laws on the business of the company is discussed. The report
also consists of the impacts of covid-19 on the business of the company.
MAIN BODY
Market structure in the UK
The oligopolistic supermarkets are get benefited from the markets of UK, the customers in
UK are provided with the lower as well as rigid prices. There are only four countries that are
dominating in the UK market. The companies are competing in the market; the price will be the
relative stability for the market. The companies in the UK market are capable of deciding the
prices and gain profit from the market in the long run. But the companies have to be in
accordance with the other companies for the pricing of their products if one company in the
market keeps the product value too high forms the other companies than the other companies
will be compete and make the company to fall and collapse. The oligopolistic supermarkets have
to provide rigid and cheaper prices for the products for the eliminating the barriers to the entry in
the market (Scarborough and et.al, 2020). The customers are provided with the discounts on the
products as the wholesalers provide products in low price.
The phenomenon observed in the oligopoly market is that the oligopolistic supermarket
wanted to turn into monopolistic in the industry of England. The phenomenon can be explained
by the kinked demand curve, the competitors in the UK market is lower their prices from the
other competitor’s product and prices in the UK market so they have the lower prices within the
oligopolistic supermarket. The second highest advantage for the customers in the oligopolistic
supermarkets is the quality of services provide to them. The oligopolistic supermarket of UK
manage the supermarket from avoiding the other competitors to enter in the market by managing

the quality of services, attitudes as well as the after sale services along with the management of
the operating system (Rodríguez and Hollenstein). For example, the supermarket provide the
customers with enough parking area, customer services for providing answers to the question of
the customers, the products of the same kind are provided together, rest areas for the customers
as well as service delivery options. The service delivery services of the supermarket set the
image for the market in the eyes of customers. The customers prefer the supermarkets where they
are provide with the best services. The better service in the supermarket play a crucial role in the
reducing the advertisement expenses for the organization and also help in acquiring more
customers, the customers feel pleased while shopping in the market. The customers feel valued
due the better services at the supermarket. The oligopolistic supermarkets provide the best
quality services in the UK market.
Along with the advantages in the market the oligopolistic markets are also proving
disadvantage to the customers in the market. The companies in the market never refuse for
making more profit from the customers. The oligopoly knowledge is imperfect and the prices are
not compete this allows the supermarkets in UK to collude that in turn are able to control the
prices and the supply of the products for gaining the profit. This is the disadvantage for the
customers in UK as the customers have to pay more for the products in the unwitting situations.
The oligopolistic supermarkets protect themselves and make high profits. The collusion of the
supermarkets is very harmful for the customer of UK market (Ogundijo, Tas and Onarinde,
2021). The UK market has more advantage over disadvantage for the customers and the
customers enjoy more services with the rigid price and lower prices.
Economic factors within the UK that will affect the business of the company
The business analysis will help to find the economic factors that are able to affect the
supermarket industry in the market. The influences as well as the threats of the economic factors
that are faced by the business will decide the certainty of the business being successful in the
market. The economic factors provide with the information of the external environment for the
business in the market. The grocery retail company are the fastest growing companies in the
market are influenced by various factors. The supermarket industries are large and steadily
leading the in the market. The current economic state of UK is responsible for the impact of
economic factors on the business of Penny Market. In 2013 there was food inflation that is

noticeable instead of the recovery of the economy gradually as well as average income boost in
UK (Aston). The wage growth of UK was outpacing, this impacts the recovery of economy and
makes it unapparent for supermarket industry of UK as well as for the UK households.
The supermarket get effected by the hike in the fuel prices in UK as the increased prices
keep the customers away from shopping in the stores that are away from the town in faraway
distances, the customers want to cut the prices in the fuel expenses for going so far for shopping.
The nearby store gets profit from this as the customers are increased. Penny market will be
affected by the fuel prices as the items have to be transported and the trucks and the vehicles
owned by the company have to expand the fuel expenses for the transportation. The delivery
services will become more expensive for the company due to the increase in the fuel price. It is
argued that the social factors are responsible for the customer’s buying behaviour but the
behaviours are directly linked with the economic situation (Atalla, Blazquez,, Hunt and
Manzano, 2017). Thus, customer buying behaviour is listed in the economic factors for the
company.
The other factor that influences the Penny supermarket is the real state that is owned by
the retail marketers. The two third of the market stores are owned by the supermarket chains and
they are the free holders. For example, Ws Morisons hold 90% of the stores they run. These
supermarkets are thus trading below the value of their property. The supermarket can get more
cash for the business and become competitive by selling the property and leasing it in the market.
The global financial crisis are shown in UK due to the unemployment rate, there was a severe
drop in the employment in 2009. The recovery in economy is also seen in the market in the year
2013 with the rising rate of 72.1% in the employment. The employment rates were again seen
decreasing the last two to three years. The employment rate highly influences the supermarket
industry in UK as the spending structure is highly depended on the employment (Bhattacharya
and Jain, 2020). The employment rate is dependent on the economic situations of UK. Hence the
economic factors are interlinked with the business of the supermarket. The impact can be broken
by encouraging the customers for spending more, this initiative can be taken by the company by
providing with better incentive as well as offers to the customers.

The growth rates of UK will be a deciding factor for the company to be successful in the
UK market of not. The projection in the economy of UK is flat by far for the new projects but
they can be grown with proper planning. The business should be confident for the becoming
successful in the future, thus the company should always look for the growth rate for setting up
the business in the market. The customer price index is 1.8% currently and the retailing price
index is found to be more that is 2.4%, the average wage inflation of UK is 3.5% that make
pressure on the company for increasing the employee’s salaries more than the inflation rate
(Cuestas and Ordóñez, 2018). The increase in the wages of the employees will put pressure on
the inflation rate and make it rise even more but the pressure is dissolved by the low level of
business in the market along with the confidence of the customers.
The control in the inflation rate and the as well as the low confidence of the business in
the market it is highly unlikely to increase the interest rates by the banks. The bank of England
was showing signs for increasing the interest rates but now they have to hold for the increase of
rates for a little longer due to the economic conditions. The government spending on the different
laws will also impact the business of the company. It is expected that there will not be a big
spending from the government side. The spending of the government on the business and the
market will be dependent upon the Brexit. The value of the currency in UK is low for some time
but now it is being increased significantly (Lee and Werner, 2018). If Penney supermarket is
going to business internationally then the company have to look for strategic planning for the
dealing with different currencies and have to make sure that the company did not get exposed to
the other markets.
Impacts of Brexit on the business operations of the company
The European Union was separated from the UK in 2020. The future trading relationship
deals between the two governments was settled by a Trade and Cooperation Agreement (TCA).
The impact on the UK exports are seen by leaving the custom unions, the trade deals are
subjected to tariff’s that are non-EU markets with the most favoured- nation clause (MFN) that is
WTO’s. The EU membership is convenient as it is tariff free. After UK being separated it was
able to form a trade-free trade with the neighbours EU. The only difference is that the rules are a
bit different form before for the separation. UK is out so for exporting or importing the goods

they have to qualify for the preferential treatment or the tariff-free trading terms that are set
under the TCA. The good that are imported or exported if did not follow the set rules than they
are subjected to pay the imposed tariff by UK as well as EU respectively (Barron and Boutary,
2020). The goods following all the rules are also met with the unexpected custom duty charges.
The business in both UK and EU require an Economic Operator registration as well as
identification number (EROI) for trading between the continents. The products from UK are
made less attractive for the EU markets due to the introduction of new rules as well as extra
charges. The Brexit have an impact on the supply chain also. The anticipated effect of the Brexit
is that it has the disruption on the flow of the goods as well as the services from UK to EU. The
business will not be as easy as it is with the rules for trading the goods and for meeting the
customers’ orders. The withdrawal of UK from the EU has affected the business form the both
the sides of the channel and for continuing the trade across the borders the company have to keep
up the good relations with the EU suppliers as well as keeping transparency in the trade practices
for fluent business (Schomburg and Oehmichen, 2021). The strategies that once were very useful
and effective may not be useful after the Brexit. The company for keeping the business
productive need to keep the reviewing the relationship with the suppliers along with making
changes when it is necessary. The company can use Lightspeed that will be helpful for
maintaining the supplier relationship more easily. Through the software the company can also be
able to monitor as well as compare the prices of supplier; this can help the company to make
better decisions for the supply.
The Brexit will have its impact on the customer base as well. The Brexit will cause a loss
in the GDP growth and it will impact the UK customers have due to the economic stock. The
Brexit has also positive impact as it is able to give the opportunity to the company for expanding
its customer base away from EU and UK. The other positive cause of Brexit is that the
international sales of UK companies are increased by 10% that is followed by the referendum
vote. The fall of the currency of UK has made it cheaper for marketing in the international
market. The company can look for the emerging markets for the expansion of the business. The
company can look if their products as well as services are in demand and after using an effective
strategy for the competitive in the market that are already in the market. The company can take

help from the Lightspeed software for the getting the data about the product selling in UK or in
EU using the feature of sales analytics as well as reporting.
The UK businesses can take advantage form the skilled EU migrants due to the low
labour coast and high skills (Diesendorf and Wiedmann, 2020). The new Brexit system imposed
immigration laws for the EU as well as non-EU migrants in which they are subjected to the point
based system for the eligibility for visa.
Impact COVID-19 on the business of the company
The covid -19 has impacted the business of the company in UK. The customer facing
businesses are highly impacted by the pandemic. The employment is decreased by 5% and the
cost of investment is 33%. The main ain of the company in the pandemic is to protect the
employees as well as customers of the company from the covid-19 pandemic. The employees
have to remotely, make plans and maintain the morale that is difficult for the management team
of the company are taking use of technological solutions for managing the crisis. The frontline
employees at the company that are the cashiers, shelf stockers, warehouse worker and the drivers
are exposed more to the pandemic. The company have the challenge to maintain the safety of the
employees, for this the company have to minimize the human contact (Indriastuti and Fuad,
2020). The company changed the rules for cash payment and increase the payment through the
internet services. The stock is exchanged with the grocery items only after and before the selling
hour of the stores to keep more distance from the people as much as possible.
The deliveries of the items to the home are done with the doorstep deliveries for
managing the safety of the customer and the employee delivering the products. The company
have to maintain the store as well as workplace safety along with that the company have to make
environments that allows more social distancing as well as isolation for protecting the sick and
vulnerable people. The employees are provided with the more facilities from the company’s side
by proving them with the paid sick leaves, free testing along with stay home policies for the sick
and effected employees. The company have to always be ready with the plan B for managing the
sudden changes and emergencies due to the covid pandemic. The employees are divided into two
to four teams for working in the shifts during the time of pandemic. The workers are provided

with the flexible working hours for the so they do not get tired managing the work in less
workforce.
The challenge that need to be faced by the retail stores are they have to keep the lights of
the stores on, have to distribute the items from their centres, employees have to work as well as
the home deliveries have to be made along with the serving the customers with their demands.
The stores have to deal with the spike in the e-commerce sites (Sulaiman, Ahmed and Shabbir,
2020). The company have to deal with the problems like lack of delivery drivers, giving the
accurate delivery time slots to the customers and keeping the IT systems running through the
pandemic time. The retail company have to listen to the necessary needs of the customers and
have to find ways for delivering the products to the customers for short as well as medium terms.
The company have to sometimes flex the spaces allocation radically for meeting the demands
and sometimes they have to switch between the selected stores for maintaining the safety of the
customer and employees.
The company have to provide the stores with the hand sanitizers and the sanitising machines
all the time for ensuring the safety at the stores. The company have to collaborate with the local
authorities for maintaining the working and the opening time of the stores.
CONCLUSION
It can be concluded from the report that the chain stores of the Penney market can expand
the business in the UK market while keeping some points in the consideration for achieving the
success. The market structure is discussed in the report where the advantage sand the
disadvantage of the company are discussed and it was found that the advantages of making
business in the market of UK is more than the disadvantages. The price and the dominance of the
four companies in the oligopoly market are discussed. The economic factors that affect the
operations of the business such as inflation rate, employment rate and the GDP grow is
discussed. The government spending on the laws that impact the operation of the companies are
discussed. The impact of Brexit on the growth of the continents, impact on the employment rate,
GDP rate and the customer behaviour is discussed. The impact of covid-19 on the company is
discussed and various challenges for making the workplace environment safe for the worker and
the staff were discussed along it.

REFRENCES
Books and Journals
Aston, The Impact of Various Economic Factors in accessing Finance within the Business
Sector: Cases from UK Financial Services Companies.
Atalla, Blazquez,, Hunt and Manzano, 2017. Prices versus policy: An analysis of the drivers of
the primary fossil fuel mix. Energy Policy. 106. pp.536-546.
Barron and Boutary, 2020. The Brexit dilemma for small business: European companies
respond. Journal of Business Strategy.
Bhattacharya and Jain, 2020. Can monetary policy stabilise food inflation? Evidence from
advanced and emerging economies. Economic Modelling. 89. pp.122-141.
Cuestas and Ordóñez, 2018. Oil prices and unemployment in the UK before and after the crisis:
A Bayesian VAR approach. A note. Physica A: Statistical Mechanics and its
Applications. 510. pp.200-207.
Diesendorf and Wiedmann, 2020. Implications of trends in energy return on energy invested
(EROI) for transitioning to renewable electricity. Ecological Economics. 176. p.106726.
Indriastuti and Fuad, 2020, July. Impact of covid-19 on digital transformation and sustainability
in small and medium enterprises (smes): A conceptual framework. In Conference on
Complex, Intelligent, and Software Intensive Systems (pp. 471-476). Springer, Cham.
Lee and Werner, 2018. Reconsidering monetary policy: An empirical examination of the
relationship between interest rates and nominal GDP growth in the US, UK, Germany
and Japan. Ecological Economics. 146. pp.26-34.
Ogundijo, Tas and Onarinde, 2021. An assessment of nutrition information on front of pack
labels and healthiness of foods in the United Kingdom retail market. BMC Public
Health. 21(1). pp.1-10.
Rodríguez and Hollenstein, SEARCHING FOR ALTERNATIVES TO OLIGOPOLISTIC
MODERNISATION. CITIES OF DIGNITY.
Scarborough and et.al, 2020. Impact of the announcement and implementation of the UK Soft
Drinks Industry Levy on sugar content, price, product size and number of available soft
drinks in the UK, 2015-19: A controlled interrupted time series analysis. PLoS
medicine. 17(2). p.e1003025.
Schomburg and Oehmichen, 2021. Brexit: First observations on the EU–UK Trade and
Cooperation Agreement in criminal law. New Journal of European Criminal Law. 12(2).
pp.193-201.
Sulaiman, Ahmed and Shabbir, 2020. Covid-19 challenges and human resource management in
organized retail operations. Utopia y Praxis Latinoamericana. 25(12). pp.81-92.