Penny Market: Analysis of UK Grocery Market and Business Factors

This report provides a comprehensive analysis of the contemporary business environment in the UK, with a specific focus on the grocery market and Penny Market, a German discount supermarket chain. The report begins with an introduction to the business environment and its impact on company performance, followed by a detailed discussion and analysis. This includes an overview of various market structures, with a focus on the oligopolistic structure of the UK grocery industry, featuring key players like Tesco and Sainsbury's. The report also examines key economic factors influencing the UK market, such as demand and supply, income levels, foreign exchange rates, interest rates, taxes, recession, employment rates, and inflation rates, and their respective impacts on businesses. Furthermore, it explores the impact of Brexit and COVID-19 on business operations, particularly focusing on supply chain management and consumer behavior changes. Finally, the report concludes with recommendations for Penny Market to expand its business operations within the UK market. The document is contributed by a student to be published on the website Desklib. Desklib is a platform which provides all the necessary AI based study tools for students.

Contemporary Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
DISCUSSION AND ANALSIS......................................................................................................3
Various Market structure.............................................................................................................3
Market structure of UK's grocery industry .................................................................................4
Economic Factors of UK and its affect on organisation.............................................................5
Impact of BREXIT over business operations of organisation....................................................7
Impact of COVID-19 on business operations of company.........................................................8
RECOMMENDATIONS...............................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment comprises several internal as well external environment such as
demand, supply, customers, employees and many more which significantly affect overall
performance of company at market place (Bruter and Harrison, 2016). It is analysed that retail
industry is evolving rapidly across the globe. Here, several new and advance techniques are
required to adopt to grab the opportunities of success and growth within retail industry. The
following discussed insights regarding retail market of UK along with several factors which
affect it. In this, Penny Market has been taken into consideration which is a renowned discount
supermarkets store based on Germany. It has nearly 3500 stores in different countries. Company
was started in the year of 1973. It analyse existing structure of grocery market within UK along
with several economic elements such as inflation rate, demand, supply, foreign exchange and
many more. In addition, impact of Brexit and Covid 19 over business also discussed in the
following report. Lastly, some recommendations has also been given in report that will be
helpful for Penny Market to expand its business in country.
DISCUSSION AND ANALSIS
Various Market structure
Market structure refers to the level of competition prevailing at market place for goods
and services. It comprises number of firms, their market share and other factors which influnece
the presence of company in market. There are several kind of structure are present in market in
which organisation work and perform various activities (Cahen-Fourot, 2020). It is analysed that
market structure of UK is centralized as majority of business functions and operations are taking
place in London. Here, service sector gives significant contribution in overall GDP of country.
There are several renowned Hotels, resorts are present in nation which are major source of
employment and revenue for individuals. In addition, financial sector of UK is also evolving
rapidly as there are numerous financial institutions, banks and investment companies that are
working at wide level. Some other industries such as Oil, gas, pharmaceutical, agriculture and
construction are also present at market place and play a major role in overall growth and
development of nation. It is analysed that Aerospace industry of UK has been ranked between 2nd
and 3rd worldwide. In addition, research, development and pharmaceutical has been ranked as
third largest globally. Further, tourism industry of country is also making money and give

significant contribution in growth of nation. There are several individuals visit the country every
year that is enlarging the industry at wide level. Due to Covid 19 a deep recession has been
monitored in tour and travel sector of country.
Market structure of UK's grocery industry
There are numerous structure such as perfect competition, oligopoly, monopoly are
present at market place under which companies operate their business. It is analysed that
Oligopoly market structure is prevailing in retail industry of UK. It is a market place where
lower number of firms acquire higher share at market place (Graham and Mudambi, 2016). In
this, number of firms are limited but they acquire exponential market share. In UK, there are
certain organisations such as TESCO, Sainsbury and more that are working at large level and
have great influence over customers. They are consider as market leaders for retail industry who
bring new and evolve practices which follow by other companies of respective field. TESCO and
Sainsbury are two large and renowned organisations of retail sector in UK. In addition, ASDA is
also giving higher competition to these two large firms. Prior the concept of Discount stores
there were mainly four big retail stores in UK such as TESCO, Sanisbury, ASDA and Morrisons.
It is analysed that in 2015 nearly 73.2 % market of grocery is owned by these firms. After
Brexit, there is a great shift has been analysed in consumer's interest as now they look for more
cheaper products and services that were rendered by small firms such as Aldi and Lidl. There
were several takeovers has been done by organisations in order to enhance their market share.
For instance, Aldi takeover Co-operative and Waitrose were acquired by Lidl.
Here, grocery market of UK was nearly 190 billion pounds in 2018. This market grow
post 2004. Although, between 2013 to 2016 rate of business growth in grocery market was slow
but in recent years higher growth ratio has been analysed. In recent years, online channels are
generating higher revenue than traditional approaches of selling (Hudson, Urquhart and Zhang,
2020). It is monitored that there are huge opportunities are present in grocery market of UK
which can be avail by Penny market. Likewise Aldi which is also a German company that grab
the opportunities of success and growth within UK grocery market.
From the above discussion, it is examined that there is extensive competition is prevailing
in market of United Kingdom as there are already several organisation who are working as
market leader. However, there are also numerous opportunities of future growth which can be

avail by Penny markets to enlarge its business function that will generate huge sales and
profitability.
Economic Factors of UK and its affect on organisation
Demand and Supply: Here, demand and supply of products in UK is changed as per
season. Besides this, food is also frozen, bottled and store to fulfil future requirements. It is
analysed that due to Covid 19 demand of packaged food and groceries have increased in UK. So,
there are several individuals who are looking opportunities in this industry and planning to open
new grocery stores in order to meet with demand arise at market place. Entrepreneurs can enter
into supermarkets business to avail present business opportunities and meet with then current
requirements of consumers (Oehler, Horn and Wendt, 2017). It will provide huge opportunities
to earn higher profit margin by increasing in sales and revenue.
Income level: There are unequal distribution of income within UK. There are several
people who are leaving lavishly on the another side there are some people who are below than
poverty line. Majority of individuals within United Kingdom have lower disposable income.
Thus, Penny market has great opportunity to enter into new market place and target lower
income group people. It is monitored that organisation is providing products at lower price which
is helpful to grab the attention of buyers. With this, it will get higher competitive edge.
Therefore, initiate business of super markets will be beneficial for entity.
For-ex rate: Consumer's spending gives huge contribution in the GDP of country. It is
analysed that companies import necessary raw material and resources from countries. Higher
fore ex exchange rate leads to higher cost of production. That will increase overall cost of
production and minimize its profit. Therefore, Penny market is required to manage its imports
and exports in an efficient manner. Manager are needed to consider current foreign exchange rate
while preparing strategies and policies (Peirce, 2017).
Interest rate: It is an economic factors which significantly affects the purchasing power
of consumers. Sometimes, customers need to borrow loans and debts to purchase necessary
goods & services. For this, they take loans from banks and other financial institutions. Customers
also need to pay interest on borrowed money which further influenced their buying behaviour.
Although, interest rate in UK is not so high and easily afford by customers. This condition is
beneficial for new companies that are entering in UK market as they will be able to get necessary
amount to operate business at relatively ,lower rate.

Taxes: There are several taxes, duties, VAT and other charges are applicable on
organisation working within UK. It is monitored that it will affect overall business performance,
sales as well as profit margin of Penny market in UK. Here, several charges are imposed over
import and export of goods and services between EU and United Kingdom. For this, organisation
have to pay higher amount of taxes to the higher authorities of country (Rosenbach, 2018). To
pay higher amount of tax company will require more revenue and it may crate huge losses. In
addition, major fields in which Penny market is dealing are processes, semi processed and
unprocessed food. Here, high rate of traffic is imposed on processed food. Therefore, tax rate
will significantly affect business performance of organisation while it will expand operations in
United Kingdom.
Recession: It will put significant impact over performance of Penny market. Due to the
current pandemic company is encountering huge constraints. Now, several people have lost theor
job and employment rate is increasing rapidly which is reducing revenue of individuals. So,
people are moving towards cheaper products that are easily affordable. Here, purchasing power
of individuals has also been decreased so that they prefers to purchase products from discount
stores at lower price. This opportunity can avail by Penny market with its discount policy.
Company is looking forward to introduce some new products al lower price in market place to
attract more number of buyers. Therefore, with this, organisation will be able to deal with
recession and manage business efficiency during tough time by increasing sales and profit
margin.
Employment rate: It is an essential factor which affect income level, living standard and
spending level of individuals within country. After Covid 19, employment rate in UK has been
reduce down as now economy is facing deep recession ( Sher, 2020). Several people of nation
are unemployed and not able to meet with their basic needs and requirements. It will further
reduce down income level and purchasing power of individuals in United Kingdom. In this time,
people seek for products and services at relatively lower price. Here, Penny Market need to focus
on quality of its product to make a distinct identity in market. However, there are several rival
firms are present in market who provides goods at reasonable price but quality of products is not
remarkable. So, Penny market need to focus on quality of its products along with price as it will
provide competitive edge to company. It is analysed that organisation also recruit several people
from country which is essential for societal development and well-being. On the positive note

now managers can easily hire work force at rate as due to employment people are ready to work
even at lower pay. Hence, employment rate is also a significant factor and need to consider by
organisation while it is expanding business.
Inflation rate: Here, Supermarkets are highly affected with current pandemic condition
which has been created a chaos. Now, price of products and services is increasing drastically.
Demand of grocery products has also been increased tremendously and there is not sufficient
supply available at market place. So, price of products are increasing which lead to higher
inflation rate. Thus, there is higher demand of grocery products in United Kingdom which is a
great opportunity for Penny Market to earn substantial profit margin. Managers of company are
required to produce higher quality goods and services at lower price to operate business
effectively in current pandemic condition (Shima, 2016).
Impact of BREXIT over business operations of organisation
There are several changes have been introduced by Brexit that significantly affect
business performance along with its sales and profitability. Here, Penny market is planning to
expand operations in United Kingdom that is highly affected with Brexit. There are trade deals
have been signed during Brexit which will affect supply chain management of grocery stores and
supermarkets. It is affecting grocery sector as majority of foods and drinks are imported by
companies from European unions. Due to Brexit relationship between UK and European
countries are hampered. Because of amendments and change in existing policies now traffic rate
has been increased which is now 27% for food items. In addition, traffic rate on non food items
also have been increased with 3 to 4 %. It is also affecting overall cost of production thus
minimize profit margin. Although, higher authorities are taking initiatives to minimize traffic and
tax rates but unable to get predefined purpose. It is analysed that Brexit has been created several
uncertainties within country and also affects purchasing power of customers. Here, Penny market
is planning to expand business in UK market and will be affected with Brexit at each and every
step of its supply chain management. Retailers who are dealing in processed food such as Penny
market are highly affected with changes as it has increased their duties, roles and responsibilities.
On the another side, wholesalers are relatively less affected.

Penny market is working on discounting policy and more likely affected with traffic
which has been imposed on trading of dairy, wines and cereals. There are some certain duties
and charges are imposed over imports and exports which will affect business performance at
wide level (Sorbe and Johansson, 2017) . There is no wide approaches to impose traffic specially
for grocery market. It is analysed that there is 0% traffic rate in some MFN( Most favoured
nations). Some companies of Germany which are working in UK are worse affected with Brexit
and its impact. In addition, there are certain companies that are planning to take out their
investment form UK and relocate it in some other countries such as Germany and European
Union. In this situation, Penny market will have to face several hurdles and barriers while
exploring business at wide level. This deal is already affecting existing companies negatively. In
addition, it hampered trade relationship between different countries. Due to Brexit, German
British trade is declining drastically. There is huge uncertainty is associated with economy of
Germany thus companies are either relocating or redirecting their operations. Therefore, Penny
market need to have huge revenue to pay tariff and other charges as per the current economic
system of United Kingdom.
Impact of COVID-19 on business operations of company
Immediate impact
Pandemic negatively affected the business of physical stores, local markets and more. On
the another side, it has also created huge opportunities for growth and success of online retailers
and supermarkets. Now, people prefers to purchase products online rather visit physical store. It
is analysed that Penny market can get higher revenue and profit through online platforms. In this
way, company will be able to operate business successfully within UK. As per current situation,
buyers are not likely to visit to different stores to purchase goods and services rather they wish to
get all necessary products at one single place. It is creating huge opportunities for Penny Market
as they can easily operate business with online approaches of selling.
In addition, company is working in food segment and as per prevailing situation need to
follow all guidelines provided by WHO carefully. They need to take appropriate measures
related to hygiene and sanitization to protect customers. In addition, employees are required to
educate about virus and ways to prevent its transmission, maintain social distancing and more.
These factors are required to analyse by managers of Penny market while enlarging business
within UK market.

Future impact
In case of Penny market, it is analysed that there are huge opportunities for Penny market
to grow and prosper in United Kingdom. It can take the benefit of shift in attitude and behaviour
of customers who prefer to purchase products online due to current pandemic situation. There is
an anticipation to rise in number of online buyers while will lead the business of organisation to
great heights. It is analysed that some stores such as Aldi and more which are discounting stores
and growing regardless of Covid 19. Likewise, Penny market can also grow and expand business
as a discount store in United Kingdom even in current pandemic condition.

RECOMMENDATIONS
In above report, several factors related to market structure of retail industry within UK
have been discussed in above stated report. There are some improvements which need to be
adopt by Penny Market in order to enlarge business in United Kingdom and earn potential profit
margin. These recommendations are given as under:
Market of United Kingdom is highly diverse thus Penny market is required to analyse
produce products to meet with cultural diversity and met with the needs and requirements of
customers in an efficient manner.
Here, it is essential to conduct proper market research by Penny market in order to gather
required information from market and provide products as per the requirement of customers. For
this, organisation can use several sources that are provided by government bodies. It will help
them to conduct market research in better manner.
There are several new and advance techniques are required to adopt by Penny market to
survive in market for longer run. As per the shift in consumer trends, organisation is required to
make effective use of various online platforms to enlarge business operations.

CONCLUSION
From above report, it is analysed that there are huge opportunities in grocery market of
United Kingdom. Market structure of country is also effective and inculcate several opportunities
for growth and success for new entrants. Although, there are numerous large companies that
acquire higher share in market but some new companies are providing extensive competition to
them. Some important economic factors such as inflation, interest rate, taxes, employment rate
and more affect business operations in significant manner. Brexit brings several uncertainties and
adversely affect operations of organisation and its sales & profit margin. Penny market is
required to make sure that it is formulating effective stragies and plocies to minimize the impact
of Brexit upon business setting. Discussion has been carried out about impact of Covid 19 over
performance of organisation. Here, current and future impact of pandemic have also been
discussed that is essential to attain predefined objectives. There are numerous opportunities for
Penny market which will provide it great platform for future growth and success in supermarkets
of United Kingdom.

REFERENCES
Books and journals
Bruter, M. and Harrison, S., 2016. The impact of Brexit on consumer behaviour.
Cahen-Fourot, L., 2020. Contemporary capitalisms and their social relation to the
environment. Ecological Economics, 172, p.106634.
Graham, J.L. and Mudambi, S.M., 2016. Looking at the future of B2B branding. The Routledge
companion to contemporary brand management, p.271À279.
Hudson, R., Urquhart, A. and Zhang, H., 2020. Political uncertainty and sentiment: Evidence
from the impact of Brexit on financial markets. European Economic Review, 129,
p.103523.
Oehler, A., Horn, M. and Wendt, S., 2017. Brexit: Short-term stock price effects and the impact
of firm-level internationalization. Finance Research Letters, 22, pp.175-181.
Peirce, H., 2017. Meeting Market Structure Challenges Where They Are. J. Corp. L., 43, p.335.
Rosenbach, W.E., 2018. Contemporary issues in leadership. Routledge.
Sher, L., 2020. The impact of the COVID-19 pandemic on suicide rates. QJM: An International
Journal of Medicine, 113(10), pp.707-712.
Shima, K., 2016. Negative uncertainty sensitivity of investment and market structure. Economics
Letters, 147, pp.93-95.