Penny Market: Contemporary Business Environment Analysis for UK Market

This report provides a comprehensive analysis of the contemporary business environment for Penny Market, focusing on its potential operations within the UK market. It begins with an introduction to the business environment and its impact on company performance, followed by an explanation of various market structures, including perfect competition, monopoly, oligopoly, and monopolistic competition. The report then delves into the specific market structure of the UK grocery sector, identifying it as an oligopoly dominated by a few major players. Furthermore, it examines the economic factors influencing Penny Market's operations in the UK, such as income levels, foreign exchange rates, tax rates, and recessionary trends, assessing their potential impact on the company. The report also analyzes the effects of Brexit on Penny Market's business, considering implications for food imports and supply chains. Additionally, it explores the immediate and long-term impacts of COVID-19 on the company's investment decisions and overall business performance. The report concludes with recommendations for Penny Market, providing insights on how to navigate the challenges and opportunities within the UK market.

Penny Market. Contemporary
Business Environment

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
DISCUSSION AND ANALYSIS..............................................................................................3
Explaining various market structure......................................................................................3
Explain the market structure of UK’s grocery sector along with reason...............................4
Assessing economic Factors that affects Penny Market of UK.............................................4
Identifying the impact of Brexit on the Penny Market’s Business in the UK........................7
Presenting the impact of Covid19 on Penny Market Should it Invest in UK........................8
CONCLUSION..........................................................................................................................9
RECOMMENDATION...........................................................................................................10
REFERENCES.........................................................................................................................11

INTRODUCTION
Business environment mainly includes internal and external factors that have
significant impact on company’s operations as well as performance level. In business unit,
manager is assigned with an accountability to take appropriate decision by doing evaluation
of all the aspects that related to the firm’s activities. Moreover, there are several factors such
as Brexit, current economic condition etc which have direct impact on firm’s performance in
terms of both financially and non-financially. The present report is based on Penny market
which owns and operates 3550 stores over the globe. It is one the discounted supermarket
chain which offers wide range of products or services to the customers. In this, the present
report will provide deeper insight about market structure in which Penny market operating.
Further, report also entails economic factors that affect operations of concerned business unit.
It will also shed light on the extent to which Brexit and COVID-19 will influence the
activities of Penny market.
DISCUSSION AND ANALYSIS
Explaining various market structure
Market structure implies for the level of competition exist in particular industry but it
influence from numerous factors such as nature of goods, economies of scale, number of
buyers and sellers etc. There are mainly four types of market structure in which companies
operate:
Perfect: In this, large number of buyers and sellers are available due to the
homogenous nature of products. Under perfect market, the main motive of the firm is to
maximize both productivity and sales but it lacks concept of consumer preference.
Monopoly: This structure is characterized with the availability of one seller who
controls whole market (Bogoviz, Lobova and Bugai, 2017). As per this, seller has
opportunity to set any price due to the unavailability of other option.
Oligopoly: Through evaluation, it has assessed that in oligopoly market, 3-5 firms’
secure dominant position in the industry. In other words, availability of buyers is higher in
comparison to the seller (The Firm and Market Structures, 2020). In order to get desired level

of profit margin concerned firms collaboratively sets prices for the products or services
offered by them.
Monopolistic: Unlike others, this market structure is usually found in the real business
environment. Moreover, with the motive to get competitive edge companies place emphasis
on offering innovative or differentiated products rather than homogenous. Further, in this,
buyers have option in relation to choose other retailer due to the availability of wide number
of sellers.
Explain the market structure of UK’s grocery sector along with reason
Research reports present that UK grocery market mainly includes four sectors such as
convenience stores, hypermarket or supermarket and online channels. In UK, oligopoly
market structure has identified because in this few numbers of retailers gained high market
share. In other words, it can be said that there are mainly four firms such as Tesco, Sainsbury,
ASDA and Morrison’s who controlled 70% of grocery market. Due to this, market activities
are determined by such 4 players who competing with each other in terms of price. All these
firms tend to focus on offering heavy discounts to the customers for gaining high market
share. Hence, activities of such leading giants act as barrier in front of new entrants. In
addition to this, there is non-collusion within these firms but healthy competition level exists.
Referring all these aspects, it can be mentioned that Penny Market operates in oligopoly
structure because it is also competing on the basis of price by developing attractive
discounting strategies.
Penny Market is also recognized as one of the most significant player who
encouraging customers by cutting price of existing products. In UK, customers decision
making in relation to the purchasing of retail products are highly affected from oligopolistic
supermarkets (Oligopoly - Market Shares and Competition in the UK Food Grocery Industry,
2020). Moreover, supermarket tends to focus on offering excellent services at affordable. In
this market structure, Penny market is required to set appropriate prices in line with
competitors. This in turn helps Penny Market in influencing UK customers and thereby
contributes in the attainment of objectives. Moreover, in the case high prices customers will
start to purchase products from other retailer. Thus, by focusing on all such aspects Penny
market can operate in oligopolistic structure prominently.

Assessing economic Factors that affects Penny Market of UK
Economic factors mainly includes income, interest, inflation, taxes, recession,
unemployment rate etc which in turn directly influences the operations of Penny market if
operates in UK. Here, there are mainly four factors which in turn impacts business activities
Income Level
In UK, after the period of global recession, occurred in 2008, disposable income of
customers were reduced to the significant level. This in turn places direct impact on the
purchasing power of customers. Moreover, customers prefer to spend more when they have
high disposable income (Li, Hallsworth and Coca‐Stefaniak, 2020). In order to reduce the
negative consequences of global recession government has introduced several supportive
policies that helped in maintaining unemployment rate relatively lower. This aspect has
increased customer’s confidence pertaining to financial condition. It gives clear indication to
Penny market that customers are ready to pay higher for the high quality products or services.
Moreover, as a result of government policies, disposable income of customers has been
increased in comparison to previous time period.
Further, now people prefer to eat at home instead of going to the restaurant.
Meanwhile, sales of food and related products have increased to a great extent. According to
this, Penny market has opportunity to provide customers with hygienic and healthier food
varieties. However, growth which takes place in the disposable income of customers is highly
lower. Thus, customers become reluctant in relation to spend disposable income in premium
or luxury products such as video games, fashionable products etc (Hood and et.al., 2020).
Hence, at the time of developing product portfolio, while entering in UK, Penny market
should keep in mind such aspects. On the basis of evaluation, it has assessed that Penny
market lays more focus on offering discounts to the customers with the motive to increase
market share and brand image as well. Thus, by offering products or services at affordable
prices Penny market can build distinct image in UK.
Forex rate
It has identified that after the introduction of globalization all the leading grocery
retailer are encouraged to perform operation at global level. In order to fulfil objectives in
relation to increase market share, maximize sales and profitability aspects companies operate
in grocery market started to trade internationally (Andrikopoulos, Dassiou and Zheng, 2020).

Furthermore, for gaining competitive edge over others Penny market is keenly interested in
international expansion. Nevertheless, fluctuations that take place in foreign exchange rates
have greater impact on the operations of Penny market. Forex market is uncertain which in
turn imposes high risk in front of retailers with regarding to pricing, profit and other aspects.
For example: If pound will fall continuously then it results into high prices of retail
offerings. Hence, changes that take place in exchange rate for longer period negative impacts
strategic framework of retailer who offers products at cheaper prices. Thus, for dealing with
the adverse effect of forex market fluctuations Penny market should undertake derivatives.
Moreover, it helps in avoiding the impact of uncertain market fluctuation on operational
aspects. UK reports present that 40% of consumed food is imported by retailers. Referring
this, it can be presented that change that takes place in exchange rates impose threat in front
of retailer who offers products at cheaper prices. Due to Brexit vote or announcement pound
has fallen approximately 11% in against to the dollar, Irrespective of this, due to having
tough competition with other retail chains Penny Market has to set lower prices of groceries
if deals in UK.
Tax rates
Government policies pertaining to taxation has greater impact on the profitability of
UK supermarket chains. In order to control business activities retailers government
authorities do changes in the fiscal policies. Moreover, when government charges lower tax
then companies perform at global level attracted to do business in UK. Moreover, high
corporation tax directly impacts company’s financial performance. In addition to this, lower
tax rates also motivates firm to boost sales and thereby makes positive contribution in the
GDP through investing money in expansionary activities (Supermarket tax ‘would push up
food prices’, says UK government, 2020). This in turn also results into high employment and
increasing purchasing power of customers. Hence, before entering in UK Penny Market
should analyze tax related obligations so that predetermined objectives can be attained.
Currently, government has asked by the local authorities to impose extra tax on
businesses up-to 8.5%. This will affect large retail outlet to the significant whose value is
more than £500,000 significantly. However, high tax rates will push prices of food and
thereby individual’s cost of living. Nevertheless, low income families will not encourage to
offers highly prices food products or services. Hence, Penny Market is required to develop
competent strategic and policy framework for dealing with the enormous burden of business

taxes. In order to ensure benefit to the local areas government is trying to decrease tax rate
charged from large retailers. In addition to this, tax levied by the government authority on
online sales is also higher. UK’s leading supermarkets namely Tesco etc urged to government
in relation to levy 2% tax on sales generated through online medium. Overall evaluation
clearly presents that Penny market should frame strategies to deal with high tax obligation
which in turn ensures smooth functioning of business in UK.
Recession
By doing research, it has assessed that, in 2008, UK economy faced recessionary
trend due to the slowdown occurred at global level. Due to recession, purchasing power of
customers was affected negatively as unemployment level rose after 2008. However, to
recover economic growth that hampered from recessionary period several effectual measures
have been taken by the government. Meanwhile, sales and profitability of UK supermarkets
have improved significantly (Sung and Qiu, 2020). Nevertheless, current pandemic also
results into slowdown in the income level of customers. Now, customers prefer to purchase
only essential products such as food etc. Sales level of UK supermarkets increased
prominently during pandemic. Hence, Penny Market should invest in UK retail industry by
keeping in mind current economic trends and fluctuations as well.
Identifying the impact of Brexit on the Penny Market’s Business in the UK
From evaluation, it has found that UK is planning to leave EU which in turn places
direct impact on UK grocery or supermarket chain. It has assessed that after Brexit there will
be significant reduction in the number of foods purchased by UK customers. The rationale
behind this, in UK, 62% fresh food is primarily imported from EU zones. Along with this, in
Europe, approx 32% or one-third portion of this arrives in Britain following EU guidelines.
Imported items include both perishable as well as non-perishables products which come at
risk. Moreover, earlier, non-perishable products such as wine was safely stored and shipped
for longer time period (Migdadi and Abdel-Rahman, 2020). On the other side, time is
recognized as an essence under the category of perishable goods such as fruits, vegetables
etc. Hence, as a result of Brexit, retailer or distributors are required to produce both kind of
products in home country by ensuring aspects pertaining to safety, quality and waste
management.
In UK, retailers are taking extraordinary measures for coping up with the negative
effect of Brexit. Companies are taking significant measures for simplifying current range of

imported products. In addition to this, companies operate in retail sector are focusing on
testing wide varieties of fruits and vegetables. Further, Penny Market in concerned how
customers will react towards the products, that comes under the category of out of stock, due
to having restrictions on import after Brexit (The impact of Brexit on UK grocery industry
and shoppers, 2020). Research shows that significant disruption will occur in UK market
after Brexit with regards to food supply. Penny Market will also face problem in appointing
highly skilled and efficient personnel for performing organizational activities or function.
Moreover, decision of Bexit will also affect working policies and procedure of UK. In order
to carry out operations successfully business unit requires personnel who are able to offer
quality services to the customers and bring innovative practices as well. Hence, for securing
profit margin and competing with leading giants after Brexit Penny Market is required to
come up with innovative business practices by doing evaluation of macro environmental
factors.
Presenting the impact of Covid19 on Penny Market Should it Invest in UK
Immediate impact
In UK, situation of COVID impacted customer’s choice and preferences to the
significant level. Moreover, for ensuring safety aspects customers consider mainly three
aspects such as proximity, cleanliness and crowd (Tatlow-Golden and Parker, 2020). In order
to maintain aspect pertaining to social distancing and secure themselves 16% customers
changed their primary grocer. Further, UK report also shows that 14% customers started to
use different grocery store in comparison to before. As, 41% shoppers are emphasizing on
purchasing retail products or services from less-crowded store (What impact is corona-virus
having on UK grocery market?, 2020). On the other side, 14% started to visit store which is
more cleaner and offering products at cheaper prices. This in turn clearly presents that present
sales and profitability of supermarket chain has affected significantly. In the category of
grocery or supermarket chain, customers give high level of preference to the store which
provides them with attractive promotional offers on relevant brands.
Along with this, store which offers home delivery or pick-up service, large assortment
and having long opening hours is highly preferred by the customers. Now, instead of going
large supermarkets customers start to visit coop and independent retailer in order to avoid
large queues found at large supermarket. Meanwhile market share of independent grocery
store has increased more than ever. During COVID or lockdown retail stores having online

presence boosted sales in comparison to others. Referring the current scenario, Penny market
is advised to invest money in UK as it offers numerous attractive discounts to the customers.
Nevertheless, company can attain success in UK market only when it offers home delivery
services to the customers (Li, Hallsworth and Coca-Stefaniak, 2020). Further, for attaining
success Penny market needs to make effectual arrangement which ensures social isolation
and cheaper prices.
Future Impact
As per the case scenario given, Penny Market is willing to invest in UK for expansion
purpose. UK’s report clearly exhibits that COVID-19 has placed dramatic impact on the
consumer buying behaviour. As a result of COVID-19 Penny Market is required to make
significant changes in the existing policies related to product, service, supply chain etc.
Moreover, after lockdown priorities of shoppers have been completely changed. Now, no
vaccination is introduced for avoiding the impact of COVID-19. Due to this, in the near
future, for safety purpose, people will avoid to visit crowded stores for shopping purpose.
Along with this, online sales will be increased in the near future as compared to the
traditional one (MIRCHEVA, 2020). Thus, Penny Market is required to focus on building
sound online network and framework pertaining to home delivery services. By this, firm
would become able to maximize sales level and grab high market share. In addition to this,
customers’ income has been negatively affected due to the situation of Lockdown and
COVID. Thus, they will give preference to the retailer which offers heavy discounts to them.
Along with this, by offering high quality packed food to the customers Penny market can get
success during crisis and in the near future as well.
CONCLUSION
By summing up this report, it can be concluded that Penny market exists in oligopoly
structure. It can be seen in the report that market in which supermarket operates falls under
the category of imperfectly competitive. Further, it has been articulated from the evaluation
that BREXIT will affect UK retail business operations to the large level. Moreover, business
activities and functions of UK grocery market are highly interrelated with EU. Meanwhile, if
UK will leave EU, then demand for grocery products and profitability affected in an adverse
manner. Thus, for entering in UK, Penny market is required to develop competent strategic

and policy framework. Through this, Penny market would become to attain success in UK
and thereby gets competitive edge.
Along with this, it can be stated that economic factors have wider impact on the
business activities of Penny market. It has found that that disposable income, forex and
recession closely influences the activities of Penny market. Thus, before entering in UK,
Penny market needs to monitor all the economic variables that have impact on its
performance level. Thus, by identifying concerned risk level Penny market should develop
sound framework. It can depicted from the evaluation that situation of COVID-19 has impact
on the activities of UK grocery market in terms of both immediate and future aspects.
RECOMMENDATION
The above depicted assessment clearly exhibits that UK external market conditions
has both positive and negative impact on the operations of Penny Market. Thus, for building
and sustaining competitive position Penny Market is required to take significant measures so
that negative impact of adverse situation can be minimized:
 For coping up with highly competitive situation Penny Market should focus on
evaluating and monitoring pricing strategies followed by other supermarket. By this,
company would become able to set appropriate pricing structure and thereby attracts
more customers.
 In UK, retail sector is filled up with high level of competition due to the availability
of several retailers. Hence, for attaining success Penny should focus on offering
healthier food options to the customers at lower price level. Moreover, after recession
and pandemic purchasing power of customers have decreased.
 Management team of Penny Market should focus on investing money in derivative
instruments. This in turn helps firm in reducing the adverse effect of forex rate
fluctuation and thereby enhance profitability level.
 In order to maintain and enhance sales level during Pandemic Penny market requires
to make changes in the existing strategies In other words, company needs to sanitize
store within specific time and avoid crowded situation. Further, standardized free
home delivery services should be introduced to remain competitive in the dynamic
business arena.

REFERENCES
Books and Journals
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the agro-industrial complex: Competition or monopoly?. In International conference on
Humans as an Object of Study by Modern Science (pp. 30-36). Springer, Cham.
Hood, N. and et.al., 2020. Sociodemographic and spatial disaggregation of e-commerce
channel use in the grocery market in Great Britain. Journal of Retailing and Consumer
Services. 55. p.102076.
Li, J., Hallsworth, A. G. and Coca‐Stefaniak, J. A., 2020. Changing Grocery Shopping
Behaviours Among Chinese Consumers At The Outset Of The COVID‐19
Outbreak. Tijdschrift voor economische en sociale geografie. 111(3). pp.574-583.
Li, J., Hallsworth, A. G. and Coca-Stefaniak, J. A., 2020. THE CHANGING GROCERY
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Migdadi, Y. K. A. A. and Abdel-Rahman, E. H. A., 2020. The impact of grocery retail
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Sung, J. and Qiu, Q., 2020. The Impact of Housing Prices on Health in the United States
Before, During, and After the Great Recession. Southern Economic Journal. 86(3).
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Tatlow-Golden, M. and Parker, D., 2020. The Devil Is in the Detail: Challenging the UK
Government’s 2019 Impact Assessment of the Extent of Online Marketing of Unhealthy

Foods to Children. International Journal of Environmental Research and Public
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