External Business Environment of Hospitality Industry - Term Paper Example

Running head: EXTERNAL BUSINESS ENVIRONMENT ANALYSIS External Business Environment Analysis s Abstract: The report aims at the observation and analysis of the impact of socio-economic change on the development of commercial organisations in a business and services industry context. The report will examine current government economic policy and its effect on hospitality industry further explaining the wealth, employment and occupational distribution in relation to the provision of hospitality industry. The assessment of the demographic trends that influence employment patterns in hospitality industry is also undertaken. The second part of the report will explain how the legal and political environments affect hospitality industry. It further discusses the structure, operation and influence of local government. The report also discusses the legislative process as it affects hospitality industry at both local and national level. De Rome (2006) describes environment as the surroundings where a person or an entity gets influenced. This means the circumstances that surround us are the environment. Same as we perceive the surroundings, the businesses gets affected the same way. Environment is very important when we discuss the nature of the business and its location. Perhaps, the environment controls businesses and can either make them profitable or else shut these off. The word external is described as any force, issue, person, or anything connected to outside, (Bradley C. Karkkainen, 1994 ; William H. Rodgers, 1994). This refers to everything that is connected with the exterior of a certain thing, is called external. External in this report, will be discussed with reference to the forces that influence a change in the business environment and its strategies. U.K. is a well stabled, prosper and a developed nation, and that's a major reason behind many businessmen who want to invest in United Kingdom. United Kingdom's environment is a business friendly and is also very welcoming to new trends, which makes the market profitable and every business find a way to the profits because of the cosmopolitan nature of the country. London is considered to be a magnet for global businesses and investors. Moreover, the European Union serves as an addition to the market of London. Businessmen just intend to enter in to the single largest market of the world, with the world leading financial services of the world. By now, it is fairly understood that how is the U.K. environment in terms of businesses, operate and why are the investors so keen to invest in the pool. Additionally, the U.K economy holds one of the highest GDPs (Gross Domestic Products) in the whole world. It is the Fifth largest economy of the world with the GDP of $2,727 billion (Source: World Bank, 2008). It means that the economy of United Kingdom is doing its very best for the investors and lenders, because in the future big amounts shall be returned as the dividend or the profit shares. It has been forecasted, that the economy of U.K. will do the best in all the European Union countries from the period of 2008 to 2012 (Source: EIU, 2008). It is because U.K. holds most of the tertiary sector and produce manufactured goods. The ideal country to invest for a business shall be U.K. It is because neither instability in the economy exists nor any fluctuations in the past years have been observed yet. Economically, U.K. is by far the best place to invest for a business in. According to the sources, the population of the United Kingdom has a figure of 61 million (ONS, 2008). It means that the population according to the area occupied by the country, is less, and as it is a centre place for investors, other families from different countries may migrate to London. In this case, families and individuals of other countries may increase the population of the country, but the native British people are just the number shown above. Discussing about the value of UK as an investment destination, we may see through the facts that UK was considered to be the second largest recipient of foreign direct investment (FDI) in 2007. This figure does not only include the European Union Countries, but the whole world (UNCTAD, 2008). Additionally, U.K. is a top global trading nation. These facts may help the service industry, like consulting businesses invest in London. U.K. is measured to be the second largest exporter and third largest importer of commercial services, or say tertiary sector. That holds a major part of the whole system of trade in services. U.K. being the seventh largest exporter and forth largest importer of goods and commodities, still stand in lead with other developed nations in the world (World Trade Organization, 2008). Eurostat (2008) defines U.K. to be a pivotal player in the European Union. It is said that the European Union is the world's largest trading unit with almost 500 million consumers. It is also reported to have a yearly GDP of nearly US$19,000 billion (Eurostat, 2008). These figures are the latest version of UK. economy. These numbers were gathered in the previous year. United Kingdom is an urbanized and prosperous country. It holds the position of one of the currently most competitive environments in the world. In the era of recession and slump, U.K. still maintains its economy and leads in the services sector. Healey & Baker,( October 2008) listed United Kingdom to be one of those countries which have maintained low employment rate, as compare to the European Union Countries and the whole world as well. The average rate of unemployment in European Union is much higher than that of U.K., where as London is considered to be the best city for undertaking businesses (Healey & Baker, 2008). Talking about the tax ratings in the country like U.K is not a new issue. It is may be surprising for some, that the United Kingdom offers lower corporate tax than any other G7 country. It was introduced in April, 2008, by the U.K. government; the new tax rate for businesses operating in U.K. shall pay. The rate was defined at 28 per cent of the total sales or profit earned by the business in a year. The corporate tax rates in other G7 countries are much higher than the one defined by the U.K. government to attract investors to invest their money in UK. There is a separate body which checks on to the foreigner's businesses in U.K. for their betterment. This means that the personnel are paid to check whether the foreign businesses may not be charged twice for the tax in U.K. Double taxation is, hence, avoided and especially foreign businesses are taken care of pivotally operating in U.K. The government has made a committee to ensure that the double taxation may not take place. It is defined by the U.K. government to offer competitive and fairly less personal taxes to the people living there or have migrated in U.K. for some purpose. Despite of fewer taxes, U.K. government unconstrained the residents to pay the basic tax that is applied on an individual. The residents of U.K. are entitled to have a basic tax-free allowance instead. The services sector in U.K. is doing fairly well in the times of recessions as well. The top 10 major services in U.K. in the past year include customer contact centre, shared service centres and business consultancy services. In these major services, U.K. services gained the highest average of the total sales (FDImarkets, 2008). The highest average rate was recorded as being 45 per cent annual increase, and those services companies were actually settled, had their head quarters in U.K. and made money while having a services business in U.K. So, the country is in fact profitable for services, being the major trade in this business as described above. The government of UK has amended the legislation in the previous year. It is specified while making amendments that the law shall be made easy for new businesses to join the league in U.K., especially attracting services industry. The new law majors include the eradication of a title called 'company secretary'. However, if a company wish to have a secretary, then there are no restrictions. Even, after the elimination of the secretary, the chores done by that person have to be compensated to the other officials. This act may reduce the cost of employment for a new company to start. On April 6 (2008), it was implemented on the businesses of U.K. that the small companies shall exempt themselves from the audit, if certain thresholds are met. Although those thresholds are not defined to public, but it is an option for small industries to get themselves excused for the audit. Moving to the external forces, which may affect a business in London, there are several factors that may contribute to the changing strategies of the businesses existing in U.K. There are certain pros and cons of starting a business in London. Factors that may affect a business include the laws of U.K. for starting a business, labour laws, climate, legalities, political environment, competitors, government, stakeholders, technological, socio-cultural, etc. First of all, labour laws defined by the U.K. government are well-built and the violation ends up in shape of penalty on the employer. These laws are made in order to protect U.K employees to be exploited. As U.K is a developed country it may be understood that the labour is not cheaper at all. The employees enjoy a high standard of living and are more educated as compare to third world countries. Other than higher wages, the employer shall motivate its workforce by giving yearly bonuses or a part of share in the profits. It is not a certain law in the government of U.K., but it is considered to be done to motivate and keep the employees spirits high. Furthermore, the employment levels at U.K. are very high. This country has a total labour force of around 30 million people employed, which is the second largest labour force in the whole of European Union countries. The employment figure at work is 29.42 million people, having approximately 21.91 million on fulltime basis while 7.51 million people on part time basis (ONS, 2008). The employment level of United Kingdom is 74.4 per cent, where as employment level refers to the employed people at working age. Apart from this percentage, the specified average per cent of employment in European Union Countries is 65.6 per cent (ONS, 2008). Comparing the two figures, we shall understand that the U.K. employment stand above the average of the other European nations. The ONS, 2008, further define the economy of U.K. as having the unemployment rate of 5.4 per cent only. Unemployed here means the number of people willing and able to do a job, remains without a job. Where as the average unemployment rate of the other nations in European Countries stand higher than the U.K. as being 6.9 per cent. This is a fair comparison of the economies of U.K. alone as a country and the whole European Union. The labour costs are competitive a both the services and manufacturing businesses. Where as the cost of labour in hourly basis is less in U.K. than in other European Union Countries. The hourly compensation rate stand highest with Netherlands as having US$33.34 and U.K. goes with US$27.10. The lowest of the hourly rate is in US$6.43 in Taiwan. Labour costs in the U.K. vary by region to region. In cities, London has the highest labour cost, being the heart of business in U.K. where as the regions which holds the lowest labour cost include North-east of England, Wales and Northern Ireland. The minimum wage rate defined by the government of U.K. is 5.73; this rate is applied after the 21st birthday of the worker. The minimum wage rate for 18-21 working individuals is 4.77 per hour nationwide. This rate may also imply to the person of 21 years of age, but having his first 6 months of the job or even working as a trainee. 3.53 per hour is the minimum wage rate of the employee aged 16 and 17. These were the specifications of the minimum wages according to the age defined. A certain cost that is called the National Insurance contributions (NIC), must be paid to the government of the United Kingdom by the employers and the employees. In the previous year, this amount was not paid by the people 105 per week. This means that the amount is specified to be more than 105 per week, to pay NIC. The NIC is paid on the 11 per cent of the total earnings of the employer. Then, it is obligatory for employers to pay their employees with other costs as well. These costs may include pension schemes, medical insurance, subsidised meals, and company cars and children schemes. Pensions are those amounts of money which s paid to an individual after he has retired from his job. It is necessary for the businesses to pay these amounts to the person who work all a life there in that firm. Medical insurance is also done by the company of its employees. It is because if any employee gets sick or something, then the company shall pay its bills. Subsidised meals may include the meals at work place. If the employee is working at a lunch time, then it is business's job to provide him with lunch at cheaper rate. Company cars are not a necessity. Cars are rewarded to employees who are of higher rank or designation. It does not come in a right of employee to get a car. It can be given as a motivator for a hardworking employee. Children schemes may include some special allowances to be paid to the parent worker, so that he/she may pay the fee of children or may help in the over all expenses other wise. Some companies offer their shares to the company employees, so that they may get a share in the profits of the company. It can be used as a motivator again. It is not that necessary or obligatory for a company to provide its workers with a share of profits. These shares are actually provided to the employees at a cost without taxes. This means that the shares are provided at a cheaper rate with an incentive to earn as well. Also, they may be given partnership in the company. These things and many more strategies can be used in motivating employees and in U.K., they are actually being used, as labour is inevitable factor in starting a business. In the conclusion, one may agree to the fact that U.K. is one of the most favourite places for an investor to invest. It cannot be wrong if we say that U.K. businesses usually prosper and it is the most happening place in business. It is called a magnet and heart of investors, as every one like to invest his money to U.K. businesses. We just learnt the factors why U.K. is considered the best for any industry to start up. Even the consulting firm should do something in United Kingdom, as it is a safe place to invest. Peering at the levels of employment and labour, it is not that expensive or even the legislations are very lenient for foreign firms as well. I believe investing in U.K. will be a smart choice rather than risking the money at this point of time when the whole world is at slump. Still, the U.K. government is welcoming companies to invest and seeing at the scenario of global instability, U.K maintains to be stable and prosper. Bibliography http://www.ukessays.com/essays/business/external-business-environment.php De Rome, L. (2006) .The injury reduction benefits of motorcycle protective clothing. Motorcycle Safety Forum. Nantulya V and Reich M. (2002). The neglected epidemic: road traffic injuries in developing countries. British Medical Journal. http://www.answers.com/environment Bradley C. Karkkainen (1994), Plain Meaning: Justice Scalia's Jurisprudence of Strict Statutory Construction, Harvard Journal of Law and Public Policy 17: 401-477. William H. Rodgers, (1994; exp. ed., 1999). Environmental Law, 2d Ed. Richard B. Stewart (2001). A New Generation of Environmental Regulation, Capital University Law Review 29: 21-182 http://www.fco.gov.uk/en/business-trade/doing-business/business-enviro/ http://www.ukinvest.gov.uk/Information-sheets/4018290/en-GB.html http://www.ukinvest.gov.uk/Tax-environment/en-GB-list.htmlnav http://www.ukinvest.gov.uk/Information-sheets/4018971/en-GB.html Read More