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Introduction to Business Environment

The environment of business can be stated as the combination of both internal and external factors which influence the operating situation of business. Further, business environment involves factors such as customers, suppliers, owners and competitors. Also, it is essential for business to ensure that workers should be working in good business environment so that they can be more productive. For instance, it is crucial for firm to develop effectual business tactic so that different challenges can be overcome. In the current study, Iceland Supermarket has been undertaken which is the subsidiary firm of Associated British Foods Group. However, the company was launched in 1969 in Ireland (Blocher, 2006). However, company has grown subsequently by the end of 2012. Iceland Supermarket owns 238 branches across the UK, Ireland and Europe. Main focus of supermarket is on selling frozen meals and vegetables. Further, the report depicts the purposes of different businesses. Also, it is focused on describing the extent to which Iceland Supermarket assists in meeting the objectives of its different stakeholders. Moreover, the importance of different economic systems such as command, free, mixed and transitional etc. are also discussed that attempt to allocate resources effectively (Clarkson, Miller and Cross, 2010).

Organizational Purposes of Businesses

1.1 Identifying the purposes of different organizations

Following are the purposes of different businesses which are discussed underneath-

Iceland Supermarket- It is a public company that focuses on selling frozen food items such as prepared meals and vegetables. Further, it also sells non-frozen grocery items such as meat, dairy and dry products. Main purpose of Iceland is to provide all types of food products i.e. from Pizza's to fish and raw vegetables to desserts. Additionally, business also focuses on providing better quality goods and services to clients at cost effective prices (Macdonald, 2007). Thus, with all such factors, business aims to become the number one leading company not within UK but in the worldwide market.

KFC- It is a private fast food company and specializes in fried chicken. However, main purpose of company is to deliver joy and happiness in the world and provide a convenient place for all the individuals to come together and spent their quality time. KFC focuses on to provide healthy food products with a wide range of products in chicken to grab attention of clients (Commander and Svejnar, 2011).

Transport for London- It is a public transport body who is responsible for the different aspects of effective transport system within Greater London in England. Main aim of TFL is to provide the best transport facility so that London can effectively work and grow at the fastest speed. In addition to this, business focuses to render safe and secure journey to every person residing in London (Dawes, Zhang and Sarkis, 2005). Thus, providing safe transport facility helps London to grow effectively.

Cancer Research- It is a charitable organization which was formed by the merger between Cancer Research Campaign and Imperial Cancer Research Funds. However, cancer research institute focuses on providing better facilities to individual and decreases the death rate of cancer patients (Eales-White, 2004). Further, institute carries out varied researches in order to prevent individuals from such type of diseases and provide the best treatment to the patients who are suffering from cancer disease.

1.2 The extent to which business meets the objectives

It can be evaluated that stakeholders are the individuals who carry out different activities and functions in order to meet the objectives of business. However, at present time, these stakeholders are influenced by the business’s actions, objectives and policies. Following are the different stakeholders of Iceland Supermarket which are as follows-

Customers- Customers are valued as the king of every business. Thus, they simply require value in return of their money that is invested for the products of firm. Also, they want the best quality products at reasonable prices. Thus, it is essential for Iceland to effectively meet the objectives of clients and provide them required products at minimum prices. Hence, in order to gain customer satisfaction, business should undertake required steps to achieve targets. Main focus of Iceland Supermarket is to provide fresh frozen and non-frozen food products at affordable prices (Gani, 2011).

Employees- They are the main integral part of business and also work effectively for the improvement of enterprise. Therefore, it is essential for Iceland Supermarket to determine the needs of workers and fulfill it accordingly with the aim to provide proper satisfaction. Human resources of any organization require job security so that they can earn better livelihood (Craig and Campbell, 2012). In order to satisfy employees in an effective manner, organization needs to provide better salary, incentives and working hours to them as per the industry standards.

Government- In order to satisfy the need of government, it is essential for company to generate employment opportunities for the citizens. Along with this, it is also needed for Iceland Supermarket to perform their business practices in a legal manner by following the rules of government (Dave, 2012).

Suppliers- In case of suppliers, timely payment should be provided to them in return of their raw material so that they can be satisfied effectively. Due to this aspect, management of Iceland Supermarket is focused on rendering advance payment at the time of purchasing raw materials (DeVries, 2011).

1.3 Considering various responsibilities of Iceland Supermarket

Following are the different responsibilities that Iceland Supermarket need to adopt with the aim to satisfy the needs of clients. Also, business is required to employ effectual strategies to meet the responsibilities of firm. These are discussed underneath-

  1. To deliver the best quality products- It is the main responsibility of Iceland to deliver the best quality products to each and every individual. Hence, in regard to provide effective products, organization is required to focus on its research and development programs so that best results can be attained (Harrison, 2013).
  2. Give value to consumer's health first and then profit generation- It is another responsibility which needs to be carried out by the management of Iceland Supermarket keeping in mind first the health of consumers and then profit generation. However, for such type of responsibility business is required to employee effectual strategies in order to meet the desired outcomes (Henderson and Kelliher, 2010).
  3. Enhancing profit margins- Here, it is the duty of management to improve the profit margins of business but should not compromise with the quality of products. It is essential for business entity to employ such tactics so that stakeholders can be satisfied. For instance, if employees will be satisfied that sales of firm will automatically increase (Khattab and et.al, 2012).
  4. Employment law- Management of Iceland Supermarket is required to follow employment law so that they can provide better opportunities to its employees and gain satisfaction. In regard to this, it assists firm to satisfy the requirements of workers and achieve results (Kulmala and Uusi-Rauva, 2005).

Iceland Supermarket is required to follow all such responsibilities with the aim to satisfy its stakeholders. Following demonstrative strategy by firm is the best in order to meet all these responsibilities in an effective manner. Business is required to follow different policies and procedures so that Iceland can perform effective operations and satisfy consumers (Miller and Cross, 2009). Also, such strategies are employed in order to help human resources of business and gain the best outcomes.

The Nature of The National Environment

2.1 Different economic systems

In regard to this, it can be stated that there are different types of economic systems available that helps in allocating the resources effectively and efficiently. It is as follows-

Command economy- It is also stated as planned economy. However, in such type of economy government bodies play a crucial role in managing and controlling the activities. Here, government is the main body who is responsible for deciding the quality and quantity of the raw materials used within firm for producing the products. Labor, capital and oil are the certain factors that are managed and controlled by the government forces (Pirttilä, 2008). Thus, resources are effectively allocated by the government in order to keep in mind the welfare of society.

Free economy- Furthermore, in such type of economy, enterprise is solely responsible for managing and controlling the operations. Also, in free enterprise economy there is no involvement of the government as decisions are taken by organization themselves. For instance, when there is no involvement of government then it helps business in effectively implementing the actions in order to gain customer satisfaction (Dransfield, 2005). Thus, free enterprise economy allocates the resources in order to attain profit maximization.

Mixed and transitional economy- It is the last type of economic systems that involves both the government and businesses in order to equally operates and control the functions. In regard to this, it can be stated that internal functions are managed by business while the external factors are controlled by the government. However, in such type of economy allocation of resources are done in order to attain welfare of society as well as profit maximization (John, 2002).

Here, the example has been taken of India because it is a developing country and thus operates all its functions within mixed and transitional economy. Also, the allocation of resources are managed and controlled effectively by both the government and shareholders of business. It is essential for the firms operating within India are required to share the information of its operations with government (Keillor, 2013). Thus, such organizations are required to pay taxes and duties timely. Also, it works for the betterment of society and maximizing profit. Further, Iceland supermarket is the public company that operates under the mixed economy. Hence, it is crucial for firm to involve different shareholders in order to develop strategies and overcome the problems to attain desired goals.

2.2 The impact of fiscal and monetary policy

Following are the impact of fiscal and monetary policy upon the functioning of Iceland Supermarket-

Fiscal policy- Such policy helps in controlling the inflow and outflow of the cash from the country. Introducing such policy by government badly affects the profitability of enterprise. In addition to this, government also imposes high tax rates upon the organization that impacts their sales and demand of goods and services. Because of high tax rates company is forced to charge high prices from customers and thus it raises competition among industry (Sohal and Perry, 2006). As a result of this, business decreases its brand image in market and profitability of firm decreases. Also, customers search for varied options available such as substitute products or switch over to other businesses.

Monetary policy- It is another policy that was introduced by the Federal Reserve Board in regard to fight with the unavailability of monetary sources within the economy. However, the main aim of this policy was to stabilize the economy and thus enhances the current value of nation. Thus, introduction of such policy not only affected the working culture of business but also affected the financial conditions of both the business and clients. Further, monetary policy also affects the research and development strategies undertaken by business. Monetary policy forced the banks to minimize the interest rates so that companies can take more loans and attain growth and development (Sparks, 2011).

2.3 The impact of competition policy and other regulatory mechanism

Following are the competition policy and other regulatory mechanisms and its impact upon the Iceland Supermarket working are as follows-

1.Competition policy- Such policy has been introduced by the government in regard to introduce new and innovative products and that too at affordable prices. Government focuses on such policy in order to develop the level of competition among businesses so that it helps in providing benefits to clients in getting better products at effective prices. Also, it assists in increasing the efficiency of firm in market (Ward and Lewandowska, 2008). However, introducing such policy has affected the Iceland Supermarket within different ways-

  • While implementing the policy it badly affects the demand and supply of different products. Because of the availability of similar products clients are trying to switch over to other businesses who are providing better quality products at reasonable prices. Thus, it decreases the profit margin of Iceland Supermarket (Tokuoka, 2012).
  • Further, introducing competition policy also affects the formulation of strategy within Iceland Supermarket. Hence, it helps firm to raise their sales and also focus on developing effective strategy formulation in order to overcome the rivals.

2.Regulatory mechanisms- However, such policy was introduced by government in order to supply the best quality products to client at affordable prices. Additionally, regulatory mechanism also focuses on reducing the unemployment rate by providing employment opportunities to people. Thus, introduction of such policy affects the profitability of Iceland Supermarket. Such mechanisms also forces company to maintain its price level in order to gain maximum profits (Conner, 2010).

Behaviour of Organizations in their Market Environment

3.1 How market structure determine the pricing and output decisions of businesses

Following are the different types of market structure that helps in determining the pricing and output decisions of businesses-

Perfect competition- Within the perfect market competition it involves varied number of businesses present that are producing the identical products. Thus, the level of competition is very high within such market and the size of firms is small. On the other hand, there are large number of buyers and sellers present within the marketplace (Scott, 2009).

Monopoly market- In such type of market there is only one firm present with no close substitutes. Also, entry of new business is restricted as firm owns monopoly of producing the product. Thus, there is zero level of competition available within such market structure (Blocher, 2006).

Oligopoly market- It involves the firms who are producing uniform products. However, industry possesses large number of buyers with limited or few sellers. Also, the level of competition is high within such industry. Here, medium size firm operates in order to attain goals.

Monopolistic market- In such type of market structure, it involves large number of businesses producing substitute products. Thus, the level of competition is high as compared to that of any other market structure. However, the substitute products are differentiated on the basis of branding. Here, the market structure of firm is comparatively small (Macdonald, 2007).

Trough analyzing the different market structure it can be stated that Iceland Supermarket undertakes oligopoly market in order to operate the business. Business operating under such type of market structure is the price maker. Thus, Iceland Supermarket determines the pricing and output decisions in regard to attain desired goals (Gani, 2011).

3.2 The way in which market forces shape Iceland Supermarket responses

Demand and Supply- Such type of forces helps the company to decide the price of the product. However, both these factors possess universe relation. For instance, if price increases than demand of the product decreases and vice-versa. Thus, it can be assessed that increases in demand of the product will prove to be advantageous form firm. It helps firm to enhance the sales and profitability condition. Here, for increasing the sales Iceland Supermarket is required to manufacture the products at cost effective prices and gain better profits (Dave, 2012).

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. Thus, it helps in proving to be beneficial for the firm in regard to enhance the sales and profitability. In regard to this, Iceland Supermarket can expand the operations in diverse countries by undertaking merger and acquisition (Harrison, 2013).

3.3 The business and cultural environments shape the behavior of business

Following is the PESTLE analysis-

  • Political- Developing different challenges and opportunities to operate in different countries affects the business functions (Pirttilä, 2008).
  • 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 business affects the operations of Iceland Supermarket. Thus, it is essential for business to determine the needs of clients and produce healthy products to attract consumers (Dransfield, 2005).
  • Environmental- Business is required to focus on green issues and thus reduce 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 (Keillor, 2013).
  • Technological- Through introducing new and innovative technology business is able to produce quality products at attractive prices and thus enhances the sales of firm.

The Significance of The Global Factors

4.1 The significance of international trade

International trade can be stated as the exchange of products and services among diverse economies. As Iceland Supermarket is operating within different countries such as UK, Europe and Ireland it is essential for firm to employ different international trade policies so that best operations can be carried out. The main importance of international trade is to give rise to global economy that consists of prices, supply and demand that gets affected by the international events. In addition to this, the main am of Iceland Supermarket is to develop international trade and rasie its market share with the aim to generate high profits (Tokuoka, 2012). Diversifying the risks, improving the profits margins etc. are the varied benefits that helps firm to effectively trade internationally and grow the firm. Also, after evaluating the current competitiveness within the supermarket industry business is required to grow internationally with the help of international trade. Following are the varied advantages of international trade that helps Iceland Supermarket to attain goals are as described below-

  • With the help of international trade optimum and effective utilization as well as allocation of natural resources can be conducted in an effective manner in case of Iceland Supermarket (Conner, 2010).
  • Business also focuses on stabilizing the prices and providing high quality products.
  • It assists Iceland Supermarket to become large level organization and giving tough competition to rivals.
  • Furthermore, it also improves the efficiency of business operations in an effective manner (Scott, 2009).

4.2 The impact of global factors on organization

Iceland Supermarket being a frozen food industry operates in a competitive market. Thus, it involves varied internal and external factors that influence the operations of business. Further, the top management of Iceland possesses varied duty and responsibility in order to ensure that business should focus on each aspect in order to make effectual decisions for future (Ward and Lewandowska, 2008).

One of the main factor is political environment that affects the operations of firm in order to gain the best outcomes. Also, the political environment of UK and Europe is best that helps firm to start its operations in such countries and achieve profit maximization. In addition to this, evaluating the economies of both the countries it states that they possess good economic conditions and thus creates chance for Iceland to work in international market. Thus, it helps in developing international trade and thus spending power of individual increases that helps firm to generate high profits (Sohal and Perry, 2006).

In addition to this, cultural differences are also one of the main concern which influences the operations of firm within global market. Thus, at the time of expanding the business operations to European market, top management of Iceland Supermarket is required to concentrate upon cultural differences of target market as it differs from UK market. Business is required to focus upon the changes in the products and services as the taste and preferences of people are diverse. Thus, in order to gain high profits it is essential for firm to satisfy the needs of target market (Craig and Campbell, 2012). Additionally, there are varied global factors which influence the operations of Iceland Supermarket as it is essential for the management of firm to build effective strategies and attain results.

4.3 Evaluating the impact of policies of the European Union

Following are the different policies of EU which influences the operations of firm. In contrast to this, the main objective behind European Union policies is to motivate or develop high level of employment opportunities and also minimize the percentage of unemployed people. Also, it helps business to motivate and follow good practices of trade and commerce so that best results can be attained (Khattab and et.al, 2012). Below described are the European Union policies that affect the working practices of Iceland Supermarket-

Cultural policy- Under this policy, it helps Iceland Supermarket to encourage the working environment of business and also involves the interest of workers to attain desired goals. In addition to this, cultural policy helps in developing various departments in order to develop culture and flexible thinking among individual to carry out the business operations (Commander and Svejnar, 2011). Furthermore, cultural policy is the best strategy implemented within firm as it assists in identifying the requirements of clients and meeting them efficiently.

Competition policy- It can be evaluated that retail industry is the most competitive industry in the global market. Also, Iceland Supermarket faces issues in regard of having various rivals who are giving tough competition to each other. Thus, it is essential for the management of firm in order to minimize their prices so that clients can be attracted. The intensity of competition helps in changing the nature and policies of firm to remain stable within the market. In addition to this, it can be evaluated that European Union competition policy ensures that Iceland Supermarket is required to undertake effective strategy that promotes its products well and also maintain the brand image of firm in market (Clarkson, Miller and Cross, 2010).


From the above study it can be concluded that business environment consists of several internal and external factors that put its impact on the national and international business activities of organization. In case of Iceland Supermarket political, legal, technological factors affects the working of company in terms of growth and development. On the other side, internal factors such as customers, employees and suppliers also impacts the working environment and business practices of company. Along with this, business environment also includes the culture and structure of company that are necessary to be maintained by the management in an effective manner. For Iceland Supermarket, following the rules and policies of European Union is necessary in order to conduct business effectively in UK market.


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  • Clarkson, K., Miller, R. and Cross, F., 2010. Business Law: Text and Cases: Legal, Ethical, Global, and Corporate Environment. Cengage Learning.
  • Commander, S. and Svejnar, J., 2011. BUSINESS ENVIRONMENT, EXPORTS, OWNERSHIP, AND FIRM PERFORMANCE. The Review of Economics and Statistics. 93
  • Craig, T. and Campbell, D., 2012. Organisations and the Business Environment. Routledge.
  • Dave, S., 2012. Business Environment. SAGE.
  • Dawes, S. S., Zhang, J. and Sarkis, J.,2005. Exploring stakeholders' expectations of the benefits and barriers of e-government knowledge sharing. Journal of Enterprise Information Management
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