Business Environment Factors


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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 the business. Further, the business environment involves factors such as customers, suppliers, owners and competitors. Also, it is essential for businesses to ensure that workers work in a good business environment so that they can be more productive. For instance, it is crucial for firm to develop effective business tactics 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, the company has grown subsequently by the end of 2012. Iceland Supermarket owns 238 branches across the UK, Ireland and Europe. The main focus of the 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 transitional etc. are also discussed in that attempt to allocate resources effectively (Clarkson, Miller and Cross, 2010).

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Organizational Purposes of Businesses

1.1 Identifying the purposes of different organizations

The purposes of different businesses are discussed below-

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. The main purpose of Iceland is to provide all types of food products i.e. from Pizza to fish and raw vegetables to desserts. Additionally, the business also focuses on providing better quality goods and services to clients at cost-effective prices (Macdonald, 2007). Thus, with all such factors, the business aims to become the number one leading company not only within the UK but in the worldwide market.

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

Transport for London- It is a public transport body that is responsible for the different aspects of an effective transport system within Greater London in England. The 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 on rendering safe and secure journeys to every person residing in London (Dawes, Zhang and Sarkis, 2005). Thus, providing a 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 individuals and decreasing the death rate of cancer patients (Eales-White, 2004). Further, the institute carries out varied research in order to prevent individuals from such types of diseases and provide the best treatment to 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 the 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 for the money that is invested for the products of the 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 with required products at minimum prices. Hence, in order to gain customer satisfaction, businesses should undertake the required steps to achieve targets. The 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 the enterprise. Therefore, it is essential for Iceland Supermarket to determine the needs of workers and fulfil them accordingly with the aim of providing proper satisfaction. Human resources of any organization require job security so that they can earn better livelihoods (Craig and Campbell, 2012). In order to satisfy employees in an effective manner, the organization needs to provide better salaries, incentives and working hours to them as per the industry standards.

Government- To satisfy the needs of the 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 its business practices in a legal manner by following the rules of government (Dave, 2012).

Suppliers- In the case of suppliers, timely payment should be provided to them in return for their raw materials so that they can be satisfied effectively. Due to this aspect, the 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 of satisfying the needs of clients. Also, business is required to employ effectual strategies to meet the responsibilities of the firm. These are discussed below-

  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 providing effective products, the organization is required to focus on its research and development programs so that the 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 a type of responsibility, business is required to employ 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 the business but should not compromise the quality of products. It is essential for business entities to employ such tactics so that stakeholders can be satisfied. For instance, if employees are satisfied the sales of the firm will automatically increase (Khattab and, 2012).
  4. Employment law- The management of Iceland Supermarket is required to follow employment law so that it can provide better opportunities to its employees and gain satisfaction. In regard to this, it assists firms in satisfying the requirements of workers and achieving results (Kulmala and Uusi-Rauva, 2005).

Iceland Supermarket is required to follow all such responsibilities with the aim of satisfying its stakeholders. Following a demonstrative strategy by the 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 the 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 help in allocating resources effectively and efficiently. It is as follows-

Command economy- It is also stated as a planned economy. However, in such type of economy government bodies play a crucial role in managing and controlling the activities. Here, the government is the main body that is responsible for deciding the quality and quantity of the raw materials used within the firm for producing the products. Labour, capital and oil are 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 a type of economy, the enterprise is solely responsible for managing and controlling the operations. Also, in a free enterprise economy, there is no involvement of the government as decisions are taken by the organizations themselves. For instance, when there is no involvement of government then it helps businesses in effectively implementing the actions in order to gain customer satisfaction (Dransfield, 2005). Thus, a free enterprise economy allocates resources in order to attain profit maximization.

Mixed and transitional economy- It is the last type of economic system that involves both the government and businesses in order to equally operate and control the functions. In regard to this, it can be stated that internal functions are managed by the business while the external factors are controlled by the government. However, in such type of economy allocation of resources is done in order to attain the 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 the mixed and transitional economy. Also, the allocation of resources is managed and controlled effectively by both the government and shareholders of the business. It is essential for the firms operating within India to share information about their operations with the 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 a public company that operates under a 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.

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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 a policy by the government badly affects the profitability of the enterprise. In addition to this, the government also imposes high tax rates upon the organization which impacts their sales and demand of goods and services. Because of high tax rates companies are forced to charge high prices to customers thus raising competition among industries (Sohal and Perry, 2006). As a result of this, the business decreases its brand image in the market and the profitability of the 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 the fight against the unavailability of monetary sources within the economy. However, the main aim of this policy was to stabilize the economy and thus enhance the current value of the nation. Thus, the introduction of such a policy not only affected the working culture of the business but also affected the financial conditions of both the business and its clients. Further, monetary policy also affects the research and development strategies undertaken by businesses. Monetary policy forced the banks to minimize the interest rates so that companies could take more loans and attain growth and development (Sparks, 2011).

2.3 The Impact of competition policy and other regulatory mechanism

The competition policy and other regulatory mechanisms and their impact on the Iceland Supermarket working are as follows-

1. Competition policy- Such policy has been introduced by the government in regard to introducing new and innovative products and that too at affordable prices. The 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 firms in the market (Ward and Lewandowska, 2008). However, introducing such a policy has affected the Iceland Supermarket in 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 that are providing better quality products at reasonable prices. Thus, it decreases the profit margin of Iceland Supermarket (Tokuoka, 2012).
  • Further, introducing a competition policy also affects the formulation of strategy within Iceland Supermarket. Hence, it helps the firm to raise their sales and also focus on developing effective strategy formulation in order to overcome rivals.

2. Regulatory mechanisms- However, such a policy was introduced by the government in order to supply the best quality products to clients at affordable prices. Additionally, the regulatory mechanism also focuses on reducing the unemployment rate by providing employment opportunities to people. Thus, the introduction of such a policy affects the profitability of Iceland Supermarket. Such mechanisms also force the 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 determines the pricing and output decisions of businesses

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

Perfect competition- Within the perfect market competition involves a varied number of businesses present that are producing identical products. Thus, the level of competition is very high within such a market and the size of firms is small. On the other hand, there are a 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 the firm owns a monopoly of producing the product. Thus, there is zero level of competition available within such a market structure (Blocher, 2006).

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

Monopolistic market- Such type of market structure, involves a 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 the firm is comparatively small (Macdonald, 2007).

Through analyzing the different market structures it can be stated that Iceland Supermarket undertakes an 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 attaining 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 a universal relation. For instance, if the price increases then demand for the product decreases and vice-versa. Thus, it can be assessed that increases in demand for the product will prove to be advantageous for the firm. It helps the firm to enhance its 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 a merger business merges with another similar company while at the time of acquisition firm acquires any company that is incurring losses. Normally such a type of condition arises among sick and healthy firms. Thus, it helps in proving to be beneficial for the firm in regard to enhancing sales and profitability. In regard to this, Iceland Supermarket can expand its operations in diverse countries by undertaking mergers and acquisitions (Harrison, 2013).

3.3 The business and cultural environments shape the behaviour of business

Following is the PESTLE analysis-

  • Political- Developing different challenges and opportunities to operate in different countries affects business functions (Pirttilä, 2008).
  • Economic- Iceland's organization is affected due to a decrease in the purchasing power of individuals and thus it affects the sales and profitability of the 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 carbon emissions as they affect the environment of the country. However, it increases the cost of Iceland Supermarket results in increasing the cost of products.;
  • Legal- Introducing different competition policies by the government affects the operations of the firm (Keillor, 2013).
  • Technological- By introducing new and innovative technology business is able to produce quality products at attractive prices and thus enhance the sales of the 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 the UK, Europe and Ireland it is essential for firm to employ different international trade policies so that the best operations can be carried out. The main importance of international trade is to give rise to the global economy which consists of prices, supply and demand that are affected by international events. In addition to this, the main aim of Iceland Supermarket is to develop international trade and raise its market share with the aim of generating high profits (Tokuoka, 2012). Diversifying the risks, improving the profit margins etc. are the varied benefits that help the 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. The varied advantages of international trade that help 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 the case of Iceland Supermarket (Conner, 2010).
  • The business also focuses on stabilizing prices and providing high-quality products.
  • It assists Iceland Supermarket to become a large level organization and gives 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 the business. Further, the top management of Iceland possesses varied duties and responsibilities in order to ensure that the business should focus on each aspect in order to make effectual decisions for the future (Ward and Lewandowska, 2008).

One of the main factors is the political environment that affects the operations of a firm in order to gain the best outcomes. Also, the political environment of the UK and Europe is best which helps the firm to start its operations in such countries and achieve profit maximization. In addition to this, evaluating the economies of both countries it states that they possess good economic conditions and thus create a chance for Iceland to work in the international market. Thus, it helps in developing international trade and thus spending power of individuals increases and helps firms 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 firms within the global market. Thus, at the time of expanding the business operations to the European market, top management of Iceland Supermarket is required to concentrate upon the cultural differences of the target market as it differs from the UK market. Business is required to focus on the changes in the products and services as the tastes and preferences of people are diverse. Thus, in order to gain high profits it is essential for firm to satisfy the needs of the 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 the EU which influence the operations of the firm. In contrast to this, the main objective behind European Union policies is to motivate or develop a high level of employment opportunities and also minimize the percentage of unemployed people. Also, it helps businesses to motivate and follow good practices of trade and commerce so that the best results can be attained (Khattab and, 2012). Below described are the European Union policies that affect the working practices of Iceland Supermarket-

Cultural policy- This policy 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 individuals to carry out business operations (Commander and Svejnar, 2011). Furthermore, cultural policy is the best strategy implemented within the firm as it assists in identifying the requirements of clients and meeting them efficiently.

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

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