Penny Market: Economic Factors, Brexit, and COVID-19 Impact in UK

This report provides a detailed analysis of the contemporary business environment in the UK, focusing on the context of Penny Market, a German retail company planning expansion. The report examines the UK's market structure, highlighting the competitive landscape, particularly the oligopoly ...Read More

Evaluating the contemporary
business environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1: Market structure of UK............................................................................................................3
2: Economic factors within UK affecting economic growth of company...................................4
3: Impact of Brexit on Penny market...........................................................................................7
4: Impact of COVID-19 on Penny market...................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
The market and market conditions of the country plays an important role in the functioning and
running of business or companies. A good market condition helps the company in the form of
achieving success or growth while the adverse conditions of the market may affect the whole
business of company. Since market and its favourable condition is very important for the
company and when any fluctuation in the market due to any reason including the changes in the
economic environment of the country or changing in the market structure of the country occurs
then it will put a severe impact over the running of business of the company. Like the market
structure or economic environment, changes in the political factors of the country like Brexit in
UK also affects the functioning of the companies. Apart from that the recent problem in the form
of COVID-19 which has changed the entire world and the working of entire world also affects
the companies as well as markets of the country in serious mode. This project will study about
the impacts of changes in market structure or economic conditions of the country along with the
impacts of Brexit which is UK's biggest economic or political change and world's biggest
pandemic COVID-19 over the Penny market, which is one of the famous and biggest retailing
company of Germany.
MAIN BODY
1: Market structure of UK
Market structure is the base on which different forms are differentiated and categorized
on the basis of products and services provided by them. The type of market structure in which
the firm operates makes a direct impact on its customer count and because of which organization
have to closely evaluate the market structure. UK's market is fill with tough supermarket
competition and because of which oligopoly can often be seen in this case (Schoon, 2020). This
is important because according to case study Penny Market is a retail industry which is going to
increase its geographic reach in UK because of which market competition will increase in UK
and with that in order to achieve efficient customer count company has to implement market
penetration and has to establish competitive pricing on its products. By which high customer
count can be achieved but with that the threat for new entry will increase for the existing market
competition because of which company may have to face premium pricing on raw materials, by
which pricing on final product will increase at the customer side by which sales will be reduced.
With that customers are changing the ways of buying products and because of which purchasing

of products through online portals as increased because of which company also has to increase
its engagement in online activities by which high sales can be achieved. In order to achieve high
sales Penny Market has to implement digitalization in its organizational activities by which it can
achieve high sales and also at the same time this will reduce expenditures.
Thus it can be analysed that company has to implement a proper integration of traditional
means of selling products and then compare it with the modern digitalization by which customer
count can be increased and with the effectiveness of brand awareness can also be increased. This
is important because UK's market is fill with other big supermarket chains because of which
monopoly can be experienced by the new entries. Changes in market competition will make
changes in market structure and because of which Penny Market has to efficiently choose the
location in such a way that it tend to face low market competition and also at the same time
achieve high customer count (Grubb and Newbery, 2018). For achieving high customer loyalty
company has to develop customer touch points by which it can make direct contact with the
customer and for achieving this organization has to make expenditures. This is important because
in order to achieve high sales Penny Market has to increase its customer count and for which it
has to make sure that it is able to showcase itself in such a way that new customer can be
attracted towards the organization and also at the same time it manages the loyalty of existing
customer count. Therefore it has to evaluate the market competition and choose a location at
which company faces low market competition and also at the same time it has to analyse the
current market trends by which organizational sale can be increased. Thus even though UK's
supermarket retail market is fill with oligopoly, in which the market competition is dominated by
few market competitors, but still through proper analysis of market trend and customer
requirement company can achieve high sales by which it can achieve efficient economic growth.
2: Economic factors within UK affecting economic growth of company
Brexit-
UK's decision of leaving has made a direct negative impact on businesses and because of
which companies have to pay taxes in the areas which were freely available before the events of
Brexit. Thus as per the case study Penny Market is increasing its geographic reach in the UK
because of which company has to make sure that it establish organizational working strategy in
such a way that it is able to minimize the negative impact of Brexit by which it can achieve
efficient economic growth.

Education and Training-
In order to provide high level of customer satisfaction company has to make sure that it is
able to recruit efficient and educated workforces by which customer experience can be improved
and with that company also has to make sure that it recruit educated workforces. This is
important because organizations have to change their working strategy as per the changing
market trend and because of which it has to provide efficient training to employees by which
their work productivity and creativity increases (Kim, Yu and Hassan, 2018). Thus in order to
achieve this company has to provide training to employees for increasing their productivity and
which will increase organizational expenditures making a direct impact on economic growth.
Transportation Cost-
As per the case study Penny Market is a retail industry which operates in several
European countries and is planning to start operations in UK because of which company has to
establish transportation costs to make sure that customers are able to achieve same high level of
quality products because of which products has to be transported to UK. Thus transportation cost
is also a factor which will affect the economic growth of the organization in UK, this is
important because if customers are not able to achieve a unified same high quality of products
then in that case their engagement with the organization will be reduced.
Employment Wages-
Employment and wages is another factor which makes a direct impact on the economic
growth of Penny Market in UK because in order to provide high organizational services
company has to recruit sufficient amount of workforces by which high sales can be achieved
(Kim, Yu and Hassan, 2018). Thus if the unemployment rates in country is high then high
quality workforces can be achieved in low pricing and vice-versa also goes that if unemployment
rates is low then high expenditures have to be made in order to get suitable workforces for the
organizational requirements.
Interest Rate-
In order to provide high work productivity and accuracy company has to make large
amount of capital investments because of which is has to take loans from banks in such a way
that company is able to maintain a strong economic background. Thus in order to achieve large
capital investments organizations have to take loans and because of which it has to make sure

that it is having low interest rate by which it can reduce the expenditures and thus strong
economic growth can be achieved thus interest rate of banks is also a factor for the organization.
Inflation-
Inflation rate is the declining purchasing power of customer from the same amount of
money overtime, thus due to increasing inflation rates customers have to pay additional amount
for purchasing the same product which makes a direct negative impact on customer's buying
capability. Thus penny market has to have sure that it establish pricing on product is as per the
current inflation rate of UK which is expected to fall 1.2% in 2020 (Clark D, 2020). This is
important because it makes a direct impact on the buying capability of the customers.
Government spending-
In the present time of COVID-19, governments all across the globe have to put total
lockdown and because of which organizational sales were reduced drastically. Thus in order to
provide efficient boost to the business's government is providing special tax benefits to the
businesses by which economic growth can be increased (Durusu-Ciftci, Ispir and Yetkiner,
2017). Through this type of government expenditure Penny Market can achieve a efficient
economic growth in UK and thus company can use this economic advantage for advertising
itself by which high brand awareness can be achieved.
Exchange Rate-
Exchange rate is the value of one nation's currency in compared with other country's
currency, this difference makes changes in product pricing during the process of import and
export (Sergi and et.al, 2019). According to case study Penny Market is a German based
organization which is to start its operations in UK and because of which company has to closely
evaluate the changes in exchange rate between Germany and UK by which it can establish
pricing on products in such a way that high profit margin can be achieved.
Tax Rate-
It is important for organizations to pay taxes to the government by which it can reduce
the chances of facing penalties and due to which Penny Market has to make sure that it is able to
fulfil all governmental criteria by fulfilling all the taxations (Taiwo, Falohun and Agwu, 2016).
This is one of the most important factor which has to be evaluated by the Penny Market because
if the tax rates are higher than it will make negative impact on company's economic growth.

Therefore in order to fulfil all the taxations company has to achieve base level sales by which
efficient economic position can be achieved by paying all the governmental taxes.
3: Impact of Brexit on Penny market
Brexit:
It is one of the main event happened in UK which affects the economy of the UK at a
severe stage. Brexit includes the withdrawal of UK from the European nation and European
atomic energy community. Due to this withdrawal the economy and the market of the UK has
shaken up which affects the business of existing companies of UK as well as the new companies.
Due to Brexit outbreak the prices in the Market has risen up or it would be right to said that the
situation of inflation has come because due to the withdrawal of UK from European union the
tax rate has risen which means during the exchange of goods in European union, now the
companies have to pay tax or more tax in comparison to the previous situation where no tax was
levied during the sale or exchange of goods in European union (Bloom, 2019). In simple words it
would be right to said that the Brexit has affected the export in serious way.
As Penny market which is German company who mainly deals in groceries and retail
industry and has most of the business in European union. As, a new company having main
business in European union and if it wants to enter in UK and want to do business in UK then it
will be affected the Penny market on a great note. Being a start-up company in UK firstly it has
to face the tough market competition of UK which is already existing in the market of retail
industry of UK. It also has to face the different business environment of UK along with the great
impact of Brexit over its business and its activities.
Due to the breaking of supply chain between UK and European union which is the major
impact of Brexit over UK also affects the business of Penny market in drastic way. The Penny
market will also face difficulty in selling its goods or performing its usual operations or do the
import and export between UK and European union because of the applicability of taxes which
will increase the cost of production of Penny market and will directly affect the sale and profit
percentage of Penny market (Clarke, 2017).
Since due to Brexit the whole economic and political environment of the UK has affected
which will directly influence the activities or functioning of the activities of Penny market. The
scope of operation and working of Penny market will also be shortened up because of the
imposition of various regulations and barriers in the UK regarding the trading of goods in

European countries which results in acting as a barrier or a wall in the global expansion of the
business of Penny market (Dorling, 2016). Due to Brexit and increase in the competition among
the local trader in UK, the sale and consumer grabbing by the Penny market will also be affected
because now it will be very difficult for Penny market to attract the local customers of UK and
bit the existing traders who are working in UK from many years.
Since the situation of every country is different from other and as Penny market is a
German based company so it will also face difficulties in the form of different business situation
and environment in UK. As specially due to Brexit, the market situation and condition of UK has
completely changed in comparison of German market which will again affect the Penny market
in one or the other way (Sampson, 2017).
4: Impact of COVID-19 on Penny market
COVID-19 one of the biggest pandemic of 2020 has affected every country and every
business of the entire world. With the outbreak of novel coronavirus in UK, the entire country
and its business are being affected. Almost every sector of the economy of the UK has affected
due to the COVID-19. Also, COVID-19 has eradicated the employment and many occupations
and small business from the market which includes the shutting down of many industries or
companies.
Penny market which is a German based company whose main business operation covers
the retail industry or groceries are also affected. Since a start-up it will face many difficulties in
business operations because due to COVID-19 people don't want to take risk and shift their
buying habit to the new company without knowing anything about it. Thus, Penny market first
have to develop the trust among the local customers of the UK to deal and continue its business
in the UK (Kuckertz, 2020). Since due to COVID-19 people are very much conscious about the
health and hygiene factors so accordingly Penny market also have to be very careful regarding
the hygiene element in its operations otherwise it will incur severe losses.
Being a start-up company in UK, Penny market also have to suffer financial difficulty in the UK
market because due to COVID-19 the money in the market is almost disappeared and those who
have money are very much aware and careful regarding the spending of money which could also
affects the sale and profit of the Penny market. Apart from that, the Penny market will also face
difficulty in maintaining its sales and earning profit which is almost the main objective of every

company because Sampson, T., 2017of the bad situation and non-availability of target customer
in the market due to COVID-19.
Also, due to COVID-19 government has puts many precautionary regulations in the
country regarding the market or dealing in market or buying of customer habit or selling of
products by the companies will also affect the Penny market because now it has to perform its
business operation under the framework of government regulations only, which will again bound
its scope of operating activities (Shen, 2020). Due to the COVID-19 pandemic the growth and
development of almost every company of UK has affected and slower down which also bound
the growth of Penny market in UK.
COVID-19 has also shaken up the whole economy of UK which results in increase in the
prices of goods along with affecting the working of the companies which means due to COVID-
19 and due to its impact in the form of lock down of the country has not only winded up the
small companies in fact it affects the working and business of many big companies. Due to lock
down the whole market of UK has completely changes along with its functioning, will again
directly affects the Penny market and its business.
CONCLUSION
From this project it is understood that market and its conditions puts a major impact over
the companies and their business. Since, Brexit is one of the biggest change in the economy of
UK has restricted many activities in the market or increases the inflation in the market of UK
affects the Penny market which is a start-up company in UK on a great note. Also, due to
COVID-19 the entire condition of the whole world including the UK has changed in terms of
working or functioning of any activity of the existing as well as new start-ups. However, the
market structure and economic conditions of the country is also equally important which could
affect the working and functioning of the companies. As changes in the economic conditions
including the inflation rate or interest rate or financial conditions along with changes in market
structure or market trends like digitalization will affects the every company of the concerned
country in terms of raising the cost of operation and not earning of profit in comparison of cost
incurred which could result in performing of the business by the company in loss situation.

REFERENCES
Books and journals
Schoon, I., 2020. Navigating an Uncertain Labor Market in the UK: The Role of Structure and
Agency in the Transition from School to Work. The ANNALS of the American Academy
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Grubb, M. and Newbery, D., 2018. UK electricity market reform and the energy transition:
Emerging lessons. The Energy Journal. 39(6).
Kim, D.W., Yu, J.S. and Hassan, M.K., 2018. Financial inclusion and economic growth in OIC
countries. Research in International Business and Finance. 43. pp.1-14.
Kim, D.W., Yu, J.S. and Hassan, M.K., 2018. Financial inclusion and economic growth in OIC
countries. Research in International Business and Finance. 43. pp.1-14.
Durusu-Ciftci, D., Ispir, M.S. and Yetkiner, H., 2017. Financial development and economic
growth: Some theory and more evidence. Journal of Policy Modeling. 39(2). pp.290-
306.
Sergi, B.S. and et.al, 2019. Entrepreneurship and economic growth: the experience of developed
and developing countries. In Entrepreneurship and Development in the 21st Century.
Emerald publishing limited.
Taiwo, J.N., Falohun, T.O. and Agwu, P.E., 2016. SMEs financing and its effects on Nigerian
economic growth. European Journal of Business, Economics and Accountancy. 4(4).
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Economic Research.
Clarke, and et.al., 2017. Brexit. Cambridge University Press.
Dorling, D., 2016. BrShen, and et.al., 2020exit: the decision of a divided country.
Kuckertz, and et.al., 2020. Startups in times of crisis–A rapid response to the COVID-19
pandemic. Journal of Business Venturing Insights, p.e00169.
Sampson, T., 2017. Brexit: the economics of international disintegration. Journal of Economic
perspectives.31(4). pp.163-84.
Shen, and et.al., 2020. The impact of the COVID-19 pandemic on firm performance. Emerging
Markets Finance and Trade.56(10). pp.2213-2230.
Virdee, S. and McGeever, B., 2018. Racism, crisis, brexit. Ethnic and racial studies.41(10).
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Clark D, RPI rate forecast UK 2014-2024, 2020 [Online]. Available
through:<https://www.statista.com/statistics/374890/rpi-rate-forecast-uk/>
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