Iceland Supermarket Business Environment
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6188 Downloads I Published: 18 Feb ,2017
The internal and external environment of business organization refers to as the business environment. Business environment affect the activities of the organization in a different manner. Further, it is highly important to assess the business environment in order to cope up with the changes and opportunities prevailing in the environment (Allen and Raynor, 2011). Through this, competitive advantage can b be achieved and the firm can also become industry leader. In this report, business environment of Iceland Supermarket have been assessed and discussion have been made on the understanding of organizational purposes. Further, the report describes the national environment in which the organization is operating its businesses. In addition to this, the report covers the behaviour of the company in the environment in which the working is carrying out. Along with that, the discussion have been done on the assessment of significance of global factors which help ion shaping the business activities (Burch, Dixon and Lawrence, 2013).
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Customers: The organization responsibility towards the consumer is that they provide the quality product which is certified (Venter and et. al., 2009). These Iceland supermarket provide value for product which are at reasonable and affordable prices . It ensure that good quality product are maintained. The company also make sure that raw material are purchased from the approved by government for safety food supplied. It technologies are kept being supervised so that new product are provided to consumer and its been tested in their working space before it get supplied in the market.
Employees: The organization responsibility to is to provide job satisfaction to the employee and also give healthy working condition and also job securities (Hackney, Grant and Birtwistle, 2006).
Society: Company has a responsibilities towards the society that it should not pollute the environment. Along with that they want that company should fulfill the corporate social responsibilities such as providing education to the lower section of the society (Ho, Wang and Vitell, 2012). Moreover, the firm has to provide employment opportunities in order to eliminate the evil of unemployment.
Environment: The Iceland supermarket are certified and it has achieved in reducing carbon emission by near about 15% and in a year it reduces 2.5%. The organization has adopted and fitted energy saving equipment in the retailer stores and swap the freezers with the one which produces less warm air (Snyman, Kourie And Botha, 2014). They have robust that's keep an eye on the electricity so that it cant get wasted and also adopt lots of projects which save lighting. Iceland always one step ahead in respect to the environmental policies.
Economic system basically refers to as the system of production and exchange of products and services along with the allocation of resources in a society or nation. In other words, every country has its own economic system and there the resources are allocated in order to meet out the expectations of the people of the country (Casile and Blake, 2002). There are mainly three types of economic system that is free economic system, command economic system and mixed economic system.
Free Economic System: In this type of system business is set free in order to carry out their operations and activities (Giulietti, Price and Waterson, 2005). In this, the task of allocation of resources are totally depended on the market forces that are demand and supply. It implies that allocation of resources are done on the basis of supply of producers and the demand of consumer in the market.
Command Economic System:This is a type of economy in which the government of a country focuses on its financial system. Moreover, in command economy, the allocation of resources is determined by the government with the assistance of a centralized plan (Hackney, Grant and Birtwistle, 2006).
Mixed Economic System: Such kind of economy has both government and private sectors and they both play a very significant role in the economy of a nation (Halbert and Ingulli, 2014). Resource allocation in public limited companies take place with the help of centralized planning while in that of private sector, resources are allocated on the basis of market factors such as demand and supply.
Fiscal policy is that means by which government adjusts their spending levels and tax rates in order to monitor and affect the economy of nation (Harrison, 2013). There are various kinds of fiscal policy that is taxation rates and exchange rates which impact the working of Iceland supermarket. For instance, if the tax rates are increased by the government than company have to sell the products at higher prices. This will reduce the sales of the company because customers will reduce the consumption of products at higher prices. Thus, this hamper the sale turnover and eventually profitability of the firm will get reduce.
On the other hand, monetary policy refers to as the process through which monetary authority of a country that is apex bank controls the supply of money in the economy by controlling interest rates (Ho, Wang and Vitell, 2012). There are many policies such as interest rates, inflation and deflation rate. If the apex bank increases the interest rates, than company has to acquire the loan by incurring heavy cost. Thus, due to this reason company cannot invest more in expansion and other activities. This will reduce the level of innovation by the supermarket and thus eventually growth rate will start declining.
The competition policy laid down by the UK government has a direct impact on the retail sector. And due to this, Iceland Supermarket will get impacted. Competition policy and regulatory mechanism has reduced the rule of monopoly in the industry (Jones, Comfort and Hillier, 2006). The government provided the opportunity to many firms to enter the market and play fair game in the industry. Through this, customers can get variety of products in terms of quality and price. Iceland Supermarket has to adopt the policies such as Competition Act 2002 so that firm can get skills and abilities to play fair game in the industry. The impact which the firm has is that it became innovative in providing services so that competitive edge can be achieved. Along with that, expansion has also been done so that competition level can be increased which provides several opportunities to the business. Due to this competition, the workforce of the company will also become highly competent so that they can survive in the adverse situation.
On the contrary, company has also get impacted in a negative manner due to the imposition of competition policy and other regulatory mechanism. After the imposition of policies, the level of rivalry got increased because every firm wanted to be at top of industry. Moreover, the firms in the industry started adopting unfair practices so that they can achieve top position. Also the firm got impacted as the quality got compromised in order to reach at the top position (Jones, Comfort and Hillier, 2009.). It has been implied that the competition policy and other regulatory mechanisms has restricted the operations and activities of Iceland Supermarket to a great extent. This has forced the organization not to get involved in any kind of unfair practices. Additionally, it has affected the overall sales, profitability and growth of Iceland Supermarket.
There are basically 4 types of market structure in which the organization has to decide its pricing and output decision (Kandil, 2006). The types of market structure and the pricing and output decision of Iceland supermarket.
Various market force such as demand, supply, customers perception, elasticity of demand and supply, etc are present. This play an important role in Iceland Supermarket in order to shape its long term and short term responses. For instance, company charges high price for the milk product when demand for that product is high (Venter and et.al., 2009). This is done so that company can earn extra profits in short period of time. In a similar manner, when perception of customer changes and they look out for the same product having lower price in another retail store, than Iceland tries to form strategies in order to lower down the costs. For example, company can control its cost and lower down the prices by planning to hire a farm from where milk comes.
The Iceland Supermarket is working in 3 different nation that is UK, Ireland and European sectors. In every sector people lives who belongs to different culture. Thus those cultural aspects should be taken care by the company. It is said that business and cultural environment shape the behaviour of the Iceland supermarket in several manner (Iceland, 2015). Both the environment and its effect on the company has been discussed as follows:
Business Environment: Business environment comprises of many factors. Internally and externally the business operation is affected by the environment. For instance, if there is a increment in tax rate than the company's profitability may get hamper (Kandil, 2006). The firm's behaviour may get impacted. If the profitability get reduced than company have to pay less wages to the workforce and this may lead to the reduction in performance of employees because they are paid less. In this manner, the firm has to take other actions to motivate and retain the employees.
Cultural Environment: The people living in UK, Ireland and European states has diverse culture. Thus the beliefs, norms and values of all the customers are different. Therefore, company has to sell their products and services and the marketing of those products should be done in such a manner that the beliefs, customs and values of people does not get undermine. For instance, the product which is consider important in that religion than it should not be sold in a black color packaging because black is a sign for bad luck in some custom. Thus, firm has to form such strategies which value all the religions and culture (Casile and Blake, 2002). Through this the behaviour of firm will get affected. The company has to form different strategies in different sector. Due to this, the employees of the organization get frustrated thus, company has to make sure that people does not get dissatisfied. For that purpose, Iceland has to bring changes in its motivational programmes and wage structure should be changed.
International trade can be defined as global trade in that products and services are sold and bought or exchanged with other countries of the world (Rafiq and Fulford, 2005). Such trade give rise to the world economy which create a direct impact on the exchange rates, supply and demand of products and services of Iceland Supermarket. International trade have range of benefits to the Iceland Supermarket which are described below:
Economic Growth: By getting indulge in the international trade, the firm can contribute in raising the economy of UK. It is because the company can grow the GDP of the country by exporting goods and services which are manufactured in the UK. If the economy of UK will grow than the recession rate and inflation rate can go down. Further, the firm can also invest more in the expansion and diversification process (Casile and Blake, 2002). Through this the employment rate can also go down and the currency value of UK will get increase.
Optimum Utilization of Resources: By exchanging goods and services of Iceland Supermarket with other countries, the resources can be utilized in an optimum manner. Its is because there will not be any wastage of production by the firm. If the company is not having any particular kind of resource because that resource is scarce in UK than it can acquire it from the other country by providing any other resource in exchange (Harrison, 2013). This will help in producing the effective good which reach to satisfaction level of customers. If the firm fails to provide the product as per the customer's requirement because the resource was not available than the product will get wasted. This is how international trade helps in optimum utilization of resources.
Market Opportunities: If the international trade is done by the Iceland Supermarket than it get the opportunities to develop its brand in different market. Through this, company may gain more advantages because innovative services can be introduced which may lead to the growth of business by creating brand image in international market (Jones, Comfort and Hillier, 2006).
The Iceland Supermarket operates its business in global market and there are many global factors which are revolving around the firm. These factors have grater impact on the company's operations and activities. Some of the global factors and their impact are discussed as follows:
Technological Advancement: In this competitive world, a firm cannot survive if it does not possess high-end technologies. The technology in the world is changing and every time updation have to be done by the Iceland in order to say ahead in the line of competition (Allen and Raynor, 2011). For that purpose, timely updation have to be brought in. however, this has a negative impact on the company as they have to deploy many employees for bringing in automation. Along with that, firm has to incur heavy cost increasing the level of technology. This will impact the profitability of the company.
Cultural Diversity: There is a huge diversion in the cultural aspects in the world. Thus, due to this factor company has to employ culturally diverse workforce so that company can meet the organizational objectives in a more effective manner (Halbert and Ingulli, 2014). However, the firm has to deal with many changes and resistance so that objectives can be achieved. Additionally, company has to make the products and services in such a manner that they does not undermine the beliefs and values of any culture.
Exchange Rate Fluctuations: Due to the rising recession and high inflation rate in a whole world, the Iceland Supermarket' is facing serious issue (Hackney, Grant and Birtwistle, 2006). It is because, company has to import and export several goods and services from other countries. The fluctuation may result in incurring high cost during import and sometimes losses during export. This result in getting heavy losses to the company.
EU is an association of all the European countries. There are many countries in the Europe which are a member of EU (Topics of the European Union, 2015). This association impact the business of the UK in one or the other manner. The impact is described as follows:
EU Policies: The EU has several policies related to trading. Such as free trading in the EU member countries that is no tariffs should be charged while importing and exporting goods and services in EU member countries. Thus, this impact the Iceland in an effective manner. The cost of Tariffs and other tax can be eliminated which may not hamper the profitability of the company. However, the firm need not to change its policies as per the policies of another country (Burch, Dixon and Lawrence, 2013).
Exchange Rates: The currency which is being used for the trading purpose among the EU member countries are Euro. Thus, the fluctuations in these rates are exempted and due to which in a smooth manner trading can be done. There will not by any losses to the company because the exchange rate will be same in all the member countries.
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After preparing this report, it has been concluded that there lot many factors which has contributed for achieving success of the Iceland Supermarket. This firm has always took care about the business environment in which it operates. Further, the firm has always been successful in meeting out the objectives of all its stakeholders. Along with that, the responsibilities have been fulfilled by the company in a most effective manner. It can also be inferred that economic system influences allocation of resources in business. The impact of fiscal policy and monetary policy is greater on the Iceland supermarket. Moreover, the enterprise has also affected by competition policy, EU policies and global factors while doing international trading.
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