Analysis of Penny Market's Business Environment in the UK

This report provides a comprehensive analysis of the contemporary business environment for Penny Market, a German grocery retail company, focusing on its potential entry into the UK market. The report begins with an introduction to the business environment, emphasizing the importance of adapt...Read More

CONTEMPORARY
BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAINBODY....................................................................................................................................3
Analyse the market structure in UK for operating a new business.............................................3
Analyse the economic factors within UK that can affects the function or business operation of
company......................................................................................................................................4
Impacts of Brexit on business operation of company.................................................................6
Assess the impact of COVID-19 on business of company.........................................................7
CONCLUSION ...............................................................................................................................8
REFERENCE...................................................................................................................................9

INTRODUCTION
Business environment refers to all micro and macro factors that possess ability to change
or affects the function and operation of business unit. In which it includes employees, customers,
suppliers, business regulations, government policies, rules, regulation and many more. In order
to adopt changes, company need to be flexible in nature so that their function and operation will
be running in smooth way without any hindrance (Beatty, Samuelson and Abril, 2018). In which
the present report is based on Penny market in order to explore all factors that can put impact on
operation of this company. This is a grocery retail based company of Germany which operate its
business in many other countries of Europe. In this report discussion about market structure of
UK where the chosen company wants to operate its business is carried out. Along with affects of
economic factor, Brexit and COVID-19.
MAINBODY
Analyse the market structure in UK for operating a new business.
Market structure refers to the competition prevailing in present market. There are
different types of market structures such as perfect competition, oligopoly and monopoly. In
prefect competition there are a lot of firms are present in the market place that are providing
identical goods and services thus there is higher competition between entities. There are ample of
substitute are available for the products and services at market place (Rosile,2016). Whereas in
Oligopoly, market is acquired by merely few firms and there are barriers for new organisations to
enter. The firms may sale identical or differentiate products and the activities of one entity put
significantly affect other. Monopoly refers to the control of a single company on overall market.
There is no perfect substitute are available for their product thus organization is able to charge
relatively higher price from customers.
Retail industry of UK is acquired by few firms such as Tesco, Sainsbury, Asda and so
on. These organization are working at large level and acquire a higher market share in retail or
grocery sector of country. Thus, it is difficult for new firms, start-ups to enter in market place
and compete with existing retail giants. It is analysed that Oligopoly market structure is followed
by retail industry of nation as there are maximum market share has been acquired by only few
prominent companies. These entities has good brand value among customers reason being they
give preference to their products or services. Consumers of UK prefer quality goods and they are

ready to pay an additional amount for quality goods and services. It provides an edge to these
companies and make them able to charge higher amounts from customers. Tesco is a renowned
retail giant of UK that dominates higher market share in country. There are also other firms like
Sanisbury, Asda that are giving extensive completion to company. Most of the supermarkets
giant of nation offers identical products to customers (Ricciardi,Zardini and Rossignoli, 2016).
Thus firms adopts competitive pricing strategy to attract target audience. These entities have
strong brand value at market place and consumers trust on their products and services.
It will be quiet complicated for Penny Market to operate in highly competitive market
place. Current market structure of retail sector in UK is Oligopoly that is acquired by few retail
giants that have already posses higher brand value. Thus the new entity need to make effective
product as well as pricing strategies to sustain at market place for a longer period of time. As per
the buying habits of customers it need to provide quality products with this it can create a
difference. This will provide competitive edge to company and help it sustain in market.
Therefore, the company need to operate in such a market space which is already acquired by
some prominent grocery retail companies. There are ample of constraints thus it need to prepare
appropriate strategies to meet with uncertainties in an efficient manner.
Analyse the economic factors within UK that can affects the function or business operation of
company.
Economic factors refers to those factors or fundamental data of market that can influence
the business operation of company. These are external in nature influence the business climate
along with investment values. In which it includes demand and supply, income level,
employment rates, recession, interest rate, Forex rate, inflation rate income level, laws &
policies, labour wages, exchange rate and so on. In order to penetrate in market or start business
at new marketplace, company needs to consider all these economic factors so that they will be
able to run their business without any impediment as these puts a huge impact on business. In
context of given company Penny market, they wants to develop or start its business operation in
UK market and for this the hire consultant need to analyse the economic factors of UK that can
affects the business function (Biloslavo, Bagnoli and Edgar, 2018). In which some of the factors
that posses ability to influence business unit is analyses as follows:
Changes in interest rate:

Changes in interest rate means the factors of demand and supply of credit, in which an
increase in demand of money will raise the interest rate and vice versa. If the rate of interest will
increase then consumer will spend less as it lowers the income of consumers. In context of given
firm if they will operates it business in UK and then suddenly increase the rate of interest then
they will face a big impact on it operation because the consumer need to pay more to lender
(Prajogo and Oke, 2016). Along with it high rate of interest creates difficulty for business unit to
obtain loans. In which the favourable for the Penny market is lower rate of interest so that they
will easily enter to market of UK and as this will increase the income rate of buyers. This will
hamper growth and success.
Employment rate:
The term employment rates refers to the ratio of persons who are working to
unemployed. These rates are sensitive to economic cycle. In relevance to Penny market, they
they will start their business then it provides opportunity to UK people or job which lowers that
rate of unemployment and this will provides benefits to all nation, company and the people too.
But some times if puts negative impacts also on business (Zeuli and O'Shea, 2017). Such as if the
rate of unemployment is too low, then business unit will not be able to fill vacant position in
lower rate of wage because the rate of Inflation of wages will increase if the rate of
unemployment will decrease. Along with it the company will not be able to find appropriate
candidate due to the decrement in employment rate. And this reduces the productivity rate and
company will face lose.
Forex Rate :
It is a foreign exchange rate which is the price of currency in term of another as it
compares two country currency. The rate of each currency will depends on value or the economy
of nation. In which there are three factors that can affects the forex rate i.e. relative purchasing
power of each currency, investment opportunity and risks of each country and the desirability of
products or services of each country. The mode by which the business are affected by currency is
dived into four parts (Hillary, 2017). These are transactional, translational, credit and liquidity
risks. In context of chosen firm, the rate of interest of UK is high which makes their currency
stronger which provides benefits to company for increasing the sales and profit.
Taxation:

It refers to collection of money from people or organisation by government for the public
welfare. This is based on the earning of people and the profitability of company. In which it
included various kind of taxation policies such as income tax, consumption tax, corporate tax,
stamp duty tax, national insurance contribution and many more . In which the most important is
income tax and VAT. In context of selected firm all companies of UK need to pay all these taxes
in order to carry out their business in smooth way. Otherwise it will leave negative impact on
business such as it reduces productivity, savings and then company will pay double rate interest.
And the positive impact is it increase the revenue for the government as well as less the
discretionary income after paying income tax (Cherunilam, 2020). All these will increase the
economy of nation and provides benefits to company towards development and growth.
So from above discussed factors it has been found that if company wants to perform its
business operation in UK then they need to follow all the rules that is proposed by government
with regarding to economy of nation like each and every firm need to pay income tax rate with
20 % but now it reduces in April 2010 to 17% and have to pay VAT (value added tax) with the
rate of 20 % currently.
Impacts of Brexit on business operation of company
Brexit is the abbreviation of British exit in which division of UK from EU is happen and
this is because of Boris Johnson as he wants to separate UK independent part from Britain. Due
to this conflicts will raised because the rules followed by both nation will not be same at all. The
UK introduce their new rules same EU launch their different rules. And this will puts a great
impact on the business unit of both nation (Alotaibi, 2016). This is because the company of UK
need to follow the new rules instead of EU.
Every industry of UK and EU is affected by the Brexit due to the potential economic
impacts as it reduces the investment and recessions. In which the major impact that bears due to
this Brexit is by retail industry because of manpower issues. In context of chosen firm, it is also a
retail firm, and every origination will faces challenges it come from EU to UK in which the
major challenges that could be face by Penny market are discussed below:
Supply chain: Brexit can delay the supply chain by bringing real risk of increased coat.
Consumer tariffs: It is very important for the exporters or importers to understand the
potential consumer for the implementation of business so that company will able to achieve
growth and success.

Regulation: The affects of this is potentially enormous and this is because in some areas
of UK, company are continue their works according to the standard of European. It is likely that
UK regulation will continue to comply with those standards (Sodeyfi, 2016).
Economic issues: All the section of nation and every sector in which company operates
its business are likely to experience the effects of Brexit because of change of economic growth.
Even though Brexit is frequently seen risky but it offers opportunity too for those who wish to
capitalised on them. In context of given firm, Penny market the volatility of currency will favour
to their business as well as to trade new relationship by exploring.
The changes in legal framework of UK can cause headache for business unit as they need
to navigate or forecast how the changes in policies can affects their operation including their
contracts and employees. In context of chosen firm they need to hire an expertise who provides a
proper info for devising an effective business strategies which minimize the risk of getting
unsuccessful and aware about opportunities.
Assess the impact of COVID-19 on business of company
The coronavirus leaves a huge impact on economy across globally as it forces all
government of country to implement restriction and lock down for the welfare of people. As well
as it puts significant impact on consumer behaviour, product demand, retail stores, factory,
company trade, logistic services of company because the rate of spreading of this coronavirus is
very high. In which the major impact are discussed below:
Demand and Supply : The demand and the supply of product is decreases due to the
restriction of exchange of goods from one country to another country. And this will affects the
economy of nation which can be stated as loss of economy with high weight. In addition, the
relative sector is very intensive in labour of any disruptions can disproportionate the employment
consequences.
Shortage of labour: This is the biggest issues that is arises due to the coronavirus and
some people get unemployed due to low rate of earning as the profitability of company will
reduces then company will suspends their employees in order to earn money or save company
from losses (Pratistha, 2016).
This is the situation of lock down but now it become normal even thought the vaccine is
not launched by for the protection government introduces same rules and regulation that should
be followed by each and every individual for the welfare of human. The safety measures that ned

to be taken by every firm is to check each and every individual when they came office and put
mask on face and sanitize itself before entering as well as make some distance. Along with it,
each and every individual needs to carry its negative covid report with itself so that the people
who are working in company will feel safe while working there (Hamilton and Webster, 2018).
If these rules will not followed by the firm otherwise government may cancel their licence which
ultimately affects the operation of business.
Recommendations
In order to run business in smooth way company need to follow all rules and regulation
that is introduced by the government of UK for the safety and security of people after covid-19
like each and every individual need to puts mask on Face and carry negative report of itself.
Another recommendation for Penny market could be that they have to pay income tax
rate 17 % according to the rules of UK company so that they will be able to operates it business
there in effective way.
In addition to this, if any company wants to expand its business at new marketplace then
they need to carry out PESTLE analysis which provide a great help to company and for the
chosen company it could acts as recommendation that they should analyse the all external factors
of UK market not along economical factor. As all these factors will provides info in order to
devise strategies in effective way (Akhtar and Sushil, 2018). This will become beneficial for
them to invest at UK market.
CONCLUSION
From above discussed report it has been analysed that the analysis of external factors
needs to be carry out for expanding of business at new marketplace. As these factor posses
power to influence the operation and function of company. And if Penny market wants to
penetrate in market of retail industry of UK then management team of company need to follow
the market structure of UK as well as need to considered all policies or rules of UK government.
So that their invest will become beneficial for them. And if penny market will invest money in
order to start business at UK market then they posses a great opportunity while considering all
rules and regulation of country.

REFERENCE
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