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Business environment comprises all the internal as well as external factors that affect the organization operations in both the direction. Internal factors prevails inside the business corporation hence, it can be controlled by the business. However, external factors comprise all the market factors that cannot be controlled by the organization (Hamilton and Webster, 2015). Iceland Supermarket is a subsidiary company of Associated British Foods shortened to ABF. The company was founded in the year 1969 in Ireland trading as Penny's headquartered in Deeside, Wales, UK. In the year 2000, there were 100 Iceland Supermarket stores across Britain and Ireland. By year 2012, total 238 Supermarket branches are operating across UK, Ireland and Europe.
Present project report will helps to understand the business environment of the Supermarket in which the business is operating. The report will helps to determine the organizational purpose of business. Moreover, the report will discuss the stakeholders of the business with their interest and how they are satisfying. On contrary, the types of economic system and the impact of fiscal and monetary policies and other regulatory mechanism will be discussed in the report. Furthermore, this report from global assignment help Australia will determine the role of market structure in pricing and output decisions. At last, Importance of international trade with the impact of global factors on Iceland Supermarket will be analysed.
Iceland Supermarket: It is a UK retail supermarket chain, established in the year 1969. It sales frozen and non frozen grocery items in the market. Frozen goods comprise prepared meals and vegetable products while non frozen items involves meat, dairy and other kind of dry products in UK food market. The organization mainly aims at providing best quality of products to the customers so as to enhance their returns (Cetindamar, 2015). The organization is regularly satisfying the customer demands that help to achieve greater the returns for the business.
KFC: Kentucky Fried Chicken (KFC) is the world second fast food restaurant chain after McDonald, headquartered in Gardiner Lane Louisville, Kentucky in the United States. The restaurant chain provides specialised fried chicken products to large number of customers. The organizational objectives is to enhance the market share, increase their profit margins and provide greater the return on investment. Achieving the business objectives helps to ensure organizational growth of the business.
Transport for London: TFL is a local government body that is responsible for providing transport services to the customers. Headquarter of TFL is established in Windsor House, Victoria Street, Westminister, UK. The primary objectives of the organization are to invest billions of amounts in capital transport network. It aims at providing best quality of transport services to the consumers (Walraven, Laenen and D'haeseleer, 2015). Therefore, organization is making transport strategy and manages the transport system effectively.
Cancer Research: It is the world's largest charitable organization that has been established in the year 2002 in UK. It was established through merging two organizations that are Cancer Research Campaign and the Imperial Cancer Research fund. The purpose of the organization to aware the citizens about the cancer disease in order to reduce the number of deaths caused by cancer.
There are number of internal and external stakeholders existed in the Iceland Supermarket. Their objectives are describing here as under:
Customers: The customers are the source of generating income and profit for the business. Therefore they utilize the products and services offered by Iceland Supermarket. Iceland Supermarket is fulfilling their objectives through providing various kinds of qualitative products and services at affordable prices (Baldwin and Scott, 2013).
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Employees: workers are engaging in providing products and services to the users. Therefore, they are the internal stakeholder of the company. In Iceland Supermarket, their objectives are satisfying through providing better monetary terms, better working environment and working culture.
Suppliers: They provide credit to the business therefore as an external stakeholder; they have the objectives to ensure security of their credit (Chiang and Chen, 2015). Increased profitability and good creditworthiness of Iceland Supermarket helps to satisfying the supplier’s objectives to a great extent.
Managers: Running the business operations successfully is the primary responsibility of managers. As an internal stakeholder, they have the objectives to maximize their remuneration, better pay scale and recognise their position in the organization.
Government: Government generate tax incomes on the business profits having objectives of getting larger and regular the tax incomes ensure legal business practices, business development and creating jobs. Iceland Supermarket is satisfying the government objectives by paying regular the tax charges and employing number of people in the organization helps to reduce unemployment rates (Kumar and Siddharthan, 2013).
Lenders: Organization can borrow funds from the lenders at an implied cost. Their objectives can be satisfying by making regular payment of interest and having good solvency position. Better availability of profits, good corporate image and better financial position satisfying the lenders objectives to a great extent.
Iceland Supermarket business has certain kind of responsibilities towards the stakeholders. The business is satisfying their stakeholders’ objectives by implementing different strategies that are explained here:
Customers: Iceland Supermarket has the responsibility to provide large variety of products and services to the customers. Moreover, organization is meeting their objectives by making product improvement and giving additional benefits to them (Codro and et. al., 2014). They create value for the products and the services and providing a convenient way to purchase variety of products at single place.
Employees: Iceland Supermarket making strategies to provide better salaries to the workers and maintain good working environment. The organization decides better pay rates and provides job security to them. Further, employees are satisfying by achieving good public image. Their performance are appreciated and rewarded on a regular basis to motivate them.
Suppliers: Iceland satisfying their responsibility towards the suppliers by getting increased revenue, improving relationship and higher the profit availability (McChesney, Reksulak and Shughart, 2015). This in turn, suppliers will be highly satisfied because of their credit security. Iceland is responsible to make timely payment to the suppliers. The organization is managing adequate liquidity in the business for that purpose.
Government: All the business organization has the responsibility to ensure good business operations, following the governmental laws and regulations and pay tax on time. Therefore, Iceland Supermarket has the responsibility to calculate their tax obligations and make payments on right time with right amount (Asche and et. al., 2015). Further, any illegal and fraud business activities must be eliminated.
Lenders: Iceland Supermarket has the responsibility to make timely payment of interest to the shareholders. Moreover, enhancing the revenues, profits and cash generating ability tends to meet the lenders objectives to a great extent. Another, good solvency position also helps to satisfy the lenders.
For solving the problem related to allocation of resources as well as economic issues, it is more important to adopt an economic system (Nestle, 2013). There are many kinds of economic system by which a company can allocate the resources in appropriate manner. Some of the economic systems are as follows.
Free market economy: It is commonly used economic system where a company can identify market values of its products by intersection of supply and demand curve. In the following system, the government has not made any kind of interference. For example, in UK, the companies can sell the goods at high prices because the demand of that service is high in the market and customer is ready to pay for it (Gould, 2012). In the same thing, to increase the supply of good in market, the employee has required to make more efforts. In this context, they are demanding high salary and firms are willing to pay it.
Transitional economy: In this system, the present market related organizations have developed where central plan economy has transformed into free market economy. The intention behind adopting the system is developing own industries to give strength to economy of country (Kissinger, 2012).
Command economy: Here, the government has right to take decision alone regarding supply of goods and its pricing in market. Along with this, it may appoint any other organization which helps in allocation of resources (Mueller, Anderson and Wallington, 2011). For instance, UK government has restricted the different industries to pay taxes and then take the decision to utilized that funds in either development of community or else.
Mixed economy: It is mixer of command and free market economic system where both government and industry mutually or individually towards allocation of resources. For instance, the markets forces have considered by UK government at first priorities during allocate resources at grocery industry.
The impact of fiscal and monitory policy on Iceland Supermarket is as follows.
Fiscal Policy: Government of UK uses fiscal policy for monitoring and influencing the national economy. It adjusts the government spending and tax rates for maintaining national economy. The increase and decrease in the taxes and government spending affects the working of Iceland Supermarket (Malik, Willett and Hu, 2013). If government increases its spending then it results to increase in the demand of food products of Supermarket. This increase in demand results to increase in sales of the food items which directly results to increase in profitability. But if the spending is decreased by the UK government than it this case, Supermarket has to suffer a great loss due to the decrease in demands of food items. On the other hand, if tax rates are decreased by the UK government than it results to increase the profitability of the Iceland. And if the tax rates are increased by the government than in such case Iceland has to suffer (Arrow and Kruz, 2013).
Monetary Policy: UK government uses this policy for improving the economic condition of the nation and for this it adjusts the supply of money and interest rates. Money supply and interest rates are inversely proportional to each other as on the rise of money supply, interest rate decreases. This decrease in interest rates results to give opportunity of taking cheaper loans to Iceland Supermarket. However increases in interest rates results to increase inflation in the country which is not good for the nation and organisations as well. Government can handle the inflation by decreasing the interest rates but this makes Iceland to suffer due to cut in spending (Gertler and Karadi, 2011).
Competition is playing a major role in growth of a company and delivered various benefits. In this context, UK government has developed various kinds of competition policies for all type of industries. Competition Act 1998 has ensured that in a market place, there should be a fair competition between the organizations (Bigliardi and Galati, 2013). The impact of this framework on Iceland Supermarket is it helps in develop new services and products for community. With the help of this, firm has been able to take competitive advantages and survive in the market. On the other hand, various regulatory mechanism like improved working conditions, employment opportunities, health and safety at workplace etc has made impacts on business activities of Iceland Supermarket. In this regards, company has developed several types of strategies and other framework to raise the organization as a sustainable company in marketplace (Ilagan-Manzano, 2013). The result of this it has helped firm to create a good image between competitors and showing presence at international level. Overall impacts of both competition and other regulatory mechanism on Iceland Supermarket are company has able to meet the objectives of business and provided greater customer satisfaction level.
Pricing and output decision within organization are greatly influenced by market structure. Therefore, Iceland Supermarket takes several decisions associated with pricing and output with reference to market structure:
Perfect competition- In the perfect market competition, there are several companies are offering similar kinds of products and services. Therefore, there is great competition identified among companies in prefect competition (Hendrix and Haggard, 2015). In this context, company takes pricing decision with reference to prices of similar products of other companies as well as market demand of particular product.
Monopoly market- In such type of market there is only one company controls the supply of particular product and service due to unavailability of other competitors. In addition to that, entry of new companies is also restricted by particular organization (Mueller, Anderson and Wallington, 2011). In this context, an organization takes pricing decision of different products and services with reference to its profit motive.
Oligopoly market- It is identified as important market structure in which limited number of companies is managing the demand of large number of buyers. Therefore, there is high competition addressed among companies. In the situation, the management of Iceland Supermarket has to take appropriate pricing decisions with reference to demand of different products and service as well as level competition among companies.
Monopolistic market- In Monopolistic market structure, it involves limited number of companies that are producing wide range of substitute products. In context, there is high rivalry among business addressed due limited number of companies (Kissinger, 2012). However, the substitute products are differentiated with reference to branding. In this regard, an organization requires considering several factors for taking appropriate pricing decisions.
As per the above assessment of different market structure it can be stated that Iceland Supermarket is operating business within oligopoly market. Therefore, organization has to consider pricing of similar products of other companies in order to appropriate pricing decisions. In addition to that management has to carry out detail evaluation of supply and demand of different goods and services along with market share of different companies. These decisions are having direct impact on the overall growth and profitability of retail organization.
There several market forces are playing important role for shaping Iceland Supermarket responses to improve performance of organization. In this regards, some most important element are discussed below:
Demand and Supply- It is termed as most important market force which is great impact on the pricing decisions of company. For example if demand of particular product decreases then organization has to restructure the pricing different products and services to order to manage sales of particular product. In addition to that business entity has to consider demand of other products that are associated with other companies (Codro and et. al., 2014). This information assists management of Iceland Supermarket for taking appropriate decision related to marketing of different products and service as well as pricing to manage market competition. Here, for increasing the sales, Iceland Supermarket is required to manage production cost.
Merger and Acquisition- Within merger business merges with another similar company while at the time of acquisition firm acquires any company who is incurring losses. Normally such type of condition arises among sick and healthy firms. This approach finds very effective in order to increase and market share of company in new oversee market (McChesney, Reksulak and Shughart, 2015). In regard to this, Iceland Supermarket can expand the operations in diverse countries by undertaking merger and acquisition that plays important role for increasing market share of company along with goodwill of company in new overseas market.
For evaluation of various factors of external environment that are significant impact on management decision, PESTLE analysis is carried out below:
Political- Every business entity has to manage different operations and strategies as per the different government rules and regulations (PEST Analysis: What is PESTLE Analysis?, 2016). It includes taxation policies and other regulations that influence business decisions.
Economic- Iceland organization gets affected due to decrease in purchasing power of individual and thus it affects the sales and profitability of firm.
Social- Change in the taste and preference of people about different products and services is also facing business operations of Iceland Supermarket. Thus, it is essential for business to determine the needs of clients while developing different products and services (Nestle, 2013).
Environmental- Business has to consider issues associated with safety of environment so as management has to develop appropriate strategies for reducing the carbon emission as it affects the environment of country. However, it increases the cost of Iceland Supermarket that results in increasing the cost of products.
Legal- By introducing different competition policies by government it affects the operations of firm. In addition to that management has to follow different government rules and regulations in determination of pricing and quality standards.
Technological- By introducing new and innovative technology in different business operation, business entity is able to produce high quality products at attractive prices and thus enhances the sales of firm. It plays important role to increase satisfaction level of consumers.
International trade means exchange of good as well as services between two or more oversees nations. Such type of business has raised the economic condition of world which has affected demand, supply and price of goods and services at international level (Nestle, 2013). The significance of international business to Iceland Supermarket is as follows.
Organization exchanges their products with many countries in order to increase their productivity. Global factors influence the operations of business by considering external factor of business-environment. External factors includes behaviour of customers and business, risk awareness, taste and preferences (Kennerley and neely, 2003). Factors influence the operations of Iceland Supermarket are as given below by modifying the strategic polices and plans of the business:
Economic: UK has the 2th largest economy if they consider their GDP and GNP. With the stability in the economics of UK business require to conduct various operational activities in the business. The economy of business consists with several factors such as size, structure, growth and population which help in increasing the sales faster than their competitors. With the good economy, company increases its profitability and productivity by maintaining effective structure.
Political: Political conditions of UK get influenced by business operation. Government introduced several policies for the organization and it is compulsory for them to be followed (Batra, Kaufmann and Stone, 2003). Factors which company need to consider such as tax changes, trade barriers and opportunities to enter into new market.
Social: Social factors influenced the personality of Iceland Supermarket. In order to improve business activities of company, they need to considered tastes and preferences of their customers. At the time of recession people are unemployed so they don't afford to purchase their products with high rates.
Technology: Business activities affected by adopting various technologies in business in order to survive in a competitive environment. With the help of technology, company enhance its product quality and reduces the cost. Company need to develop their services, because people prefer online services to shop goods and products rather than going store to store.
European Union acquires various policies and has direct impact on Iceland Supermarket. Policies of the European Unions help in increasing the efficiency of business in order to make Iceland Supermarket as the leading company (Kennerley and Neely, 2003). They promote high level of employment by protecting member country rights and powers. The European Union policies have huge impact on the supermarket business. Some of the policies are as measures below:
Taxation policy: The EU policy will force the business to pay huge amount of tax. This has impact on the savings of Iceland Supermarket. Further, taxation policy will be finding out by considering two aspects such as, individual and business tax. By considering individual tax in Iceland Supermarket, if tax rate is high then consumption will low in the business which affects the demand of the product and service (Thomas, 2007). On the other hand, if tax is low then the cost of purchase the products will be high and Iceland Supermarket reduces its market.
Employment policy: Through the change in the employment policy the activities of Iceland Supermarket greatly influenced. Company need to bring changes in its hiring procedure of this policy (Yew Wong and Aspinwall, 2004). Thus, standards will be maintained within the firm which would result in increasing its performance in the business.
Fiscal policy: This policy is generated through government of the country in order to adjust their spending and taxation rates. Iceland Supermarket needs to increase its demands for the products they required to spend more on goods and services in order to increase its growth.
As per the above assessment, it can be concluded that every organization has to consider wide range of external and internal elements such as government and employees for taking appropriate business decision. This report has addressed that market structure of particular economy is having significant impact on the management decisions such as pricing and production. This study has addressed that the business entity has to manage various element such as international trade regulations while expanding business in overseas markets.
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