Assessment Analysis on External Business Environment - Term Paper Example

ASSESSMENT REPORT ON EXTERNAL BUSINESS ENVIRONMENT [NAME] [INSTITUTION] [DATE] 1.0. INTRODUCTION The hotel and hospitality industry falls under the services industry. It is one of the fastest that creates employment for a vast majority of people. Despite its significant role, it faces external hindrance with regard to planning, organisation, directing and controlling all parts of the business. The purpose of this paper is to examine the impact of socio-economic change on the development of commercial organisations in a business and services industry context. It will also evaluate the effect of legal and political environments on business and services industries. Finally, it will discuss the statutory requirements for establishing and developing a business. 1.1 THE STRUCTURE AND OPERATION OF THE UK ECONOMY SIZE AND FEATURES The United Kingdom enjoys the status of being the sixth largest national economy in the world. This ranking is based on its nominal Gross Domestic Product that stands at 2.902 trillion US dollars as per the year 2014 (Ball & Jameson, 2004). The pie chart below illustrates how the various sectors have contributed to UK economy in the just concluded fiscal year 2014. Figure 1.1 (a) % contribution per sector Top on the list as illustrated in the pie chart above is the services industry that contributes 78.40 % to UK’s GDP (Ball & Jameson, 2004). Services industry consists of the financial services that contribute the lions share. This is accrued from revenue generated from taxes and levies on banks who are the major players in this domain. This amounts to an approximate 12 % of the total tax collected by the government in the region. Banks have the majority of employees thus helping the government amass huge amount of money from income tax, corporation tax and tax from contributions to social security funds. Others key players in the services industry are: the British Aerospace, pharmaceutical, automotive, North Sea gas and oil and the hotel industries. Production industry comes second. It accounts for over 3/4 of UK exports. Central players in this sector are the engineering and its related industries. Overseas companies that make vehicles like BMW dominate the motor vehicle export sector. Others include the British motor industry. The third key element is the construction industry. Its contribution is pegged at 6.4 % of the GDP .It encompasses both private sectors (like housing, infrastructure, industrial, commercial) and public sectors (housing, infrastructure and others). In 2012 the construction industry in the UK contributed 83b Euros to economic agricultural sector is the one that contributes the least with a meager per cent of 0.6 (Jan 2008). PHIOSOPHY OF UK ECONOMY AND REGULATION The philosophy of UK economy is a neoliberalism and this is a favorite approach applied by World Trade Organization(WTO) which has over years been the ideal approach for UK (Lashley, 2007). Neoliberalism is another term for economic liberalism .It is recently an acclaimed economic policy in the international domain. This political –economic philosophy encourages free market .Neoliberalists believe that government ought not to interfere with the economy of its country .It does so by making legislation that promotes people, businesses ,firms ,companies and institutions to start and operate their business without much curtailment or hindrance of any manner. These principle of free market is what is applied in the UK .There are fewer curtailments to operation of various business and the right to own property. There are many policy interventions to promote creation of new businesses especially in the financial services .These has catapulted growth and development of this industry to become UK’s leading economic sector . In order to cur unemployment, exploitation by private investors and raise the living standards of its people ,the government often makes policies .For instance , the Minimum Wage Bill that stipulates the minimum salary an employee in the lowest cadre can receive. Similarly, in the UK we have Personal Allowance .This exempts employees of the lowest cadre from taxation. In the fiscal year 2014 , the UK government increased Personal Allowance from six thousand five hundred Euros to ten thousand Euros (Chandler, 2007). DIRECTION OF THE UK ECONOMY In 2012 and 2013, the UK economy posted a slowdown. However, in the year 2014 in has shown steady growth and this is expected to continue. In first ¼ of this year the economy grew by a 0.7 per cent in comparison with the preceding quarter. This growth is accrued to the steady input by the services industry as well as the progressive comeback of the construction industry that is still ailing from the effects of the economic recession (Barrow, Powers & Reynolds 2012). The Gross Domestic growth is at 3.0 per cent and this is expected to be steady at 2.5 % next year (Chandler, 2007). Similarly, the same sources reveal that consumer spending is likely to rise by 0.3 per cent in 2015 from its current 2.2 per cent .This is because employment is on the rise thus increasing consumer spending. Other areas that are expected to continue growing include business investment. This will definitely give rise to new employment opportunities that will in turn contribute heavily to the growth of the GDP. Although public spending has shown a slowdown this is not likely to change anything but will rather continue to affect the economy for quite some years to come. Table 1.1 (b) illustrates how growth economic growth projections for the UK Table 1.1 (b) UK ECONOMIC PROJECTIONS Source: Offce for Budget Responsibility (March 2014), HM Treasury survey of independent forecasts (Average values in October 2014 survey) and PwC main scenario) 1.2 CURRENT GOVERNMENT ECONOMIC POLICY AND ITS EFFECT ON BUSINESS AND SERVICES INDUSTRIES UK government has adopted various policies in a bid to ensure steady growth .These policies have had both a positive and impact on business and service industry (D'annunzio-Green, Maxwell, & Watson, 2002). Below is an examination of the various policies and their impact. Privatization This is the act of shifting responsibilities for an industry or ownership of a company from the public to a private company (Parker, 2009). The aim of privatization is to make the companies more efficient, generate more money and increase share ownership. In 1981, the government relinquished its ownership of British Aerospace to private ownership. The British airways was also privitised.As a result ,efficiency of the two companies rose ,created more employment opportunities .Currently ,these tow companies form the backbone of the services sector in the UK. Privatization has not ceased and is continuously encouraging and promoting growth of business in the country. Government Borrowing Despite the government’s efforts to discourage borrowing at times it has proved inevitable especially in the period of economic recession. This is an escapable tool them to help raise funds for various developments. However, this has a negative impact on benefit. High government borrowing cause skyrocketing of interest rates or create a situation where most of the money available is owned by government. What this means is that business difficulty creditors. For instance, Individuals in the hotel industry found it difficulty accessing credit to help reinstate their business during the economic recession. Others who had interest in building new hotels could not find creditors to finance these projects. TAXATION UK ‘s VAT is the highest in Europe .VAT rate on accommodation is 20%,the highest in the region. This definitely raises costs in the hotel industry across UK. Most consumers are very sensitive on high cost of accommodation and food. As result , most people would prefer to settle for France ,German and other countries in the region. The other factor is high Air passenger Duty and the difficulty in accessing visas for anyone travelling to UK .While this is an important procedure it should be eased to make travelling to Europe more attractive. 1.3 INCOME, WEALTH, EMPLOYMENT AND OCCUPATIONAL DISTRIBUTION IN RELATION TO THE PROVISION OF BUSINESS AND SERVICES OPERATIONS. INCOME DISTRIBUTION The pie chart below indicates the income distribution in the UK in recent years Table : 1.3 (a) Source :Institute for Fiscal Studies, There is very wide gap between the top ten per cent of the highest earners and the lowest ten per cent. In the UK , is only ten per cent of the population that takes home close to forty per cent of the total personal income .The rest of the 60 % of the total income is among the middle class and low class earners (O'halloran, Jarvis & Allen-Chabot, 2006). UK economics have often complained of these tremendous inequalities that rose sharply in the years leading to 1990s. Individuals earning 10,000 Euros fall under the top ten per cent of the highest earners while those with an aggregate of 350 , 000 Euros fall in the category of the top 0.1 per cent . WEALTH DISTRIBUTION In the UK, most wealth is owned by the rich. The rich possess 9.5 trillions of property, assets in finances and pensions (Office of National Statistics). The hotel industry’s contribution to UK wealth is at 46b Euros as per 2010 Estimates (Office of National Statistics). EMPLOYMENT AND OCCUPATIONAL DISTRIBUTION IN THE HOTEL INDUSTRY The hotel industry accounts for 8 per cent of the total employment in the UK. It is said that it provides 2.44 jobs for the population (O'halloran, Jarvis & Allen-Chabot, 2006). In addition to this , it creates around 1.22 million jobs through ,multiplier effects(UK Economics). Services offered include accommodation, camping sites ,food and beverages ,conference facilities, trailers parks ,take away food, outside catering for events, club facilities, in-house catering among others. Workers in this industry are drawn from all walks of life . Most of the workers in the hotel industry are middle income earners, a few like the managerial staff and hotel owners are in the upper cadre while the other bulk is in the lower cadre. Most of the employees in this sector opt for the casual labourers given the unreliable nature of hospitality industry. 1.4 DEMOGRAPHIC TRENDS THAT INFLUENCE EMPLOYMENT IN THE HOSPITALITY INDUSTRY There four key demographic trends that are shaping employment patterns. One is rapid increase in population especially those aged sixty five and above. That of persons aged above sixteen and below sixty five comes second. The latter has a significant impact in employment patterns since the labour market is flooded with people looking for jobs. This in effect translates to poor remuneration for jobs in the lower cadre since demand is higher than surplus. The ageing population cannot be taken for granted .Its impact in the financial services is felt as more people are seeking pensions and medical schemes .A demand in these services has since led to increase in jobs in the financial sectors. On the other hand , the ageing population has high demand for hospitality services such as camping ,holiday accommodation as they tend to have more time at their disposal .The hospitality industry is experiencing an increase demand for their services thus helping them generate more income to create more jobs (Parker, 2009). Another factor is the rise in the number of women working (Parker, 2009). We are noting an increase in the number of women working both in the business and services industry. Most women find it convenient to work on part-time basis given the heavy responsibilities they have at home. That’s why they find it appropriate to look for jobs in the hotel industry. However, some hotel owners have had to change their working policies to accommodate needs of women working for them .For instance, they have to consider granting female workers a maternity leave. Similarly, they have created flexible working hours for female workers so as to allow women attend to their families. There are also a considerable growing number of small households (Rutherford & O'fallon, 2007). These categories of people in these households often prefer eating in hotels and restaurants instead of cooking at home. As a result, they are promoting growth of fast-food restaurants, hotels, café and in-house catering. Migration too, as it grows, increases demand for food and beverages in the UK. The number of people migrating to the UK is rapidly increasing each year 1.5 THE SOCIAL STRUCTURES OF PEOPLE EMPLOYED IN HILTON HOTEL The majority of workers in Hilton London Metropole consist of fresh talented graduates (Sigala, Christou & Gretzel, 2012). This hotel is located in the heart of London thus young and ambitious graduates from London’s colleges and universities flock here in search for jobs. Only the highly talented and qualified get the jobs in this hotel since they are very competitive. Given that most of them are single men and women without families it’s easier for them to bear the long working hours, unpredictable shifts among other challenges that married people face in hotel industry. Also, the young people working in this hotel have impacted positively in boosting marketing of the hotel especially through the social media. Sigala et al (2012) have indicated that the use of social media has contributed largely to growth of the hospitality industry via marketing On contrary ,young people are part of the reason why Hilton London Metropole experiences high employee turnover every year. This city centre offers myriad opportunities for these aggressive graduates and given the stress that hotel industry poses they are less likely to stick . In response to this ,the hotel is constantly changing its policies ,working conditions and its term of service to curb staff turnover and improve worker motivation. The other reason to study is how the top management, supervisors and rest of the staff relate in the hotel. More often than not , the management is absorbed with the economic costs and implications and detached from the harsh realities of the working conditions of the supervisors and other workers. In Hilton Metropole most of the supervisors have risen to the top as a result of their hard work over a long time .It’s not necessarily through their experience. Worse still there is limited training to foster their growth .The hotel thus has supervisors who lack the experience, qualification oh how to handle various emerging challenges at work place. In London there is generally a rise in the number of women working .The Hilton hotel has not been spared either. It has recruited quite a number of female staff too just like any other business organisation. This change is reflected in the structure and operation of the hotel. For instance ,it has had to create flexible working conditions ,shifts, and working hours to allow mothers attend to their families. 2.0. THE STRUCTURE, OPERATION AND INFLUENCE OF LOCAL GOVERNMENT. Chandler (2007) indicates that the local government in UK operates as either one tier system (unitary authorities) or a two tier system (distinct council).The local government entails the following branches: Metropolitan districts: their key roles are planning for education, collecting tax in their localities, collecting waste, in charge of transport of passengers, education, recreation and leisure(hotel industry fall here) District councils: They are in charge of a division of a county. They play similar roles as the Metroplitan districts except for education. County councils .Their area of jurisdiction is a whole county .They are responsible for the provision of public services. Unitary authority’s .These posses a tier of the local government and do roles similar to those of the local government. London boroughs. They too play similar roles as to those done by the Metropolitan districts. INFLUENCE OF THE LOCAL GOVERNMENT HOTEL GROUP STUDIED- BRITANIA HOTLES UK. The local government is an integral part in the hotel industry since it has power to form laws that can either promote or hinder its development. One is that the local government has the responsibility to monitor and control leisure and activities .The Food Standards Agency has given a framework for assessing hygiene of hotels and restaurants. For instance, the local authorities have proposed a possible closure of some the Britannia hotels like Britannia Hotel Stockport over poor hygiene standards. Even though this has not been affected, the notion of poor hygiene drastically affected sales of the hotel. Local authorities have the power to prosecute hotels if they fail to provide security and safety to its clients and workers. Britannia Grand Hotel located in Folkestone faced a possible prosecution from the local authorities for exposing its customers and employees to the risk of being infected with asbestos. Similarly, local governments have the power to issue, deny or retrieve issued licenses to hotels. These licenses include the licensing of liquor. Some of the branches of Britannia have been curtailed as pertains to the hours they can operate their bars. No alcohol can be sold between midnight and six in the morning .Local authorities have, within their jurisdiction, the power to introduce new laws on opening hours and closing hours of business .This can be done without any consultation .As a result, businesses have limitations to their operations and cannot maximize on profit making. 2.1 ROLE AND INFLUENCE OF THE EU, AND its IMPACT ON BUSINESS AND SERVICES INDUSTRIES. European Union is an economic intergovernmental union that has a trade policy governing its member states. It is more like one market for many states and in recent years has introduced the Euro currently used by 13 countries. Its purpose is to help in developing the less developed regions (Sigala, Christou & Gretzel, 2012). In the UK, the European Union has influenced business industry quite substantially through laws and regulations, business support, subsidies and grants and taxation. According to Skorstad & Ramsdal (2009), regulations by the European Union directly bind member states which the UK is a member of, without the government laws putting them in place. This automatically affects the legislation authority government has over UK. For instance, the government discourages imports and encourages export of its goods in order to promote trade. However, the EU might compromise the same trade by allowing goods coming into the country more than the exports in order to improve the less developed countries thereby affecting the economy of UK which is already developed. Another role the EU plays is to set goals achievable within a certain time frame but which are left to national authorities to implement (Skorstad & Ramsdal 2009). It would be more reasonable for EU to implement as well if they have to dictate the time under which the set objectives should be achieved. Subsidies and grants are given to regions that are less developed and which are highly deprived socially and where unemployment is rife, areas like rural France and the south of Italy. This deprivation was created by EU developing other areas which are now prosperous, creating loss of jobs elsewhere. The UK government has countered this by introducing “new deal” which is a chance for citizens to develop themselves using government programs for employment (Skorstad & Ramsdal (2009). The European Union has no tariffs on trading goods between states that are its members and places a common tariff on goods coming in from countries that are non-members. However, the EU has made it easier for services to be traded than goods by the principle that businesses can and should provide services to countries that are under EU or in other countries they choose. The EU has tax bias and favours services bought locally, and don’t recognize foreign academic and professional qualifications. Taxation by EU has improved communities in UK since the money raised is used on infrastructure and aid to poor countries. The EU introduced the services directive that UK has since embraced fully. This is because it has allowed service providers to compete and thereby provide the best in the market. 1. Laws and regulations like the recent one that passengers should wear seatbelts made it expensive for bus companies to have belts but at the end of the day it made travelling safer than it was. These rules on how trade should be done have set a good standard for businesses. 2. At consumer level, grants and subsidies given to farmers are given on the condition that standards like environmental and safety are met. The EU gives produce quotas for sugar and others thereby making sure maximum use of resources. This policy is found at fault for making cost of food high for consumers in the UK. Certain changes to the CAP governing farmers and EU involvement have made the EU reluctant to support farmers in UK which has led to less produce and more imports. 2.2 THE ROLE OF PRESSURE GROUPS AND THEIR POLITICAL INFLUENCE IN RELATION TO NATIONAL AND LOCAL ISSUES. Pressure groups are made up of a group of organized people who protest or lobby to influence government legislation. They are not known to vie for any political seat, as their aim is to influence those in political power. In the UK one such group protested against the rural policies by government which led to introduction of a ministry for the same. Pressure groups seek to influence by; threatening to vote as an entity, to influence lawmakers, writing bills, funding an election or campaigning in favour of someone or by indicating their preference to legislators (Van & Goonetilleke, 2007). UK has had its fair share of pressure groups. After the 2nd world war, the Trades Union Congress was sidelined in favour of institute of directors whose thinking was closer to that of government. The reason government might not want pressure groups are that they seem to influence local and national issues and the results are as follows. (a) Government policies seem illegitimate until pressure groups veto them informally, there is perceived need to govern with them in mind. (b) Citizens do not vote in large numbers (c) Politics is not trusted as a result of these groups which make it seem as though being a politician is based on pursuit of personal power and not to serve the public. (d) Media has taken over by elevating the need for people’s opinion and it glories in playing the blame game. Moreover, mobilization on social media has become cheap and fast (e) Many former members of pressure groups have been absorbed into the government and the introduction of civil society office. UK has had pressure groups influence on the following laws and regulations There has been lobbying by pressure groups including doctors to ban smoking due to health factors while the government oscillated towards the business that tobacco trade brings into the country. The pressure groups wanted a change of policy which made it a battle between the hospitality industry and tobacco trade. In the end the government gave in and there was a manifesto commitment (Van & Goonetilleke, 2007). The pressure groups have therefore had a huge impact on the hospitality industry in the following ways. They are now legitimate going up against political parties and mobilizing very fast. They equally dominate social media. Their driving goal is to stop things like oppressive laws and reforming part of legislation. They are viewed by government as independent groups unlike untrustworthy politicians and that’s why government cooperates and sometimes funds where necessary. Sometimes pressure groups members serve on government boards. 2.3 THE LEGAL FRAMEWORK WITHIN THE UK, ITS MAIN DIFFERENCES BETWEEN THE ENGLISH AND SCOTTISH SYSTEMS. English has over years adopted common law and its entirety. In fact, it is regarded as the mother of common law in the world today. Laws in England are not codified .The judges deliver rulings based on previous rulings, art of common sense and the nature of facts presented in the case at hand (Van & Goonetilleke, 2007). From these rulings laws are made. This is contrary to the Scottish law whose origin traces back to ancient law in Rome. The major difference to that of English is that Scottish legal system is pluralistic in nature. 2.4 LEGISLATIVE PROCESS AS IT AFFECTS BUSINESS AND SERVICES INDUSTRIES AT BOTH LOCAL AND NATIONAL LEVEL. The hygiene and of foods regulation of 2006 in UK has affected some Hotel Groups like Britannia Hotels .Its branch in Stockport was almost seized by the local authorities over reports of poor hygiene. Several others branches too have measured below the standards of this regulation thus tainting its reputation in the UK (Van & Goonetilleke, 2007). Smoking and drinking control laws that were suggested by the EU have been implemented in UK. For instance, since July 2006 smoking in hotels, restaurants, clubs and discos was banned in the UK. Also, selling of alcohol between midnight and six in the morning is not allowed. In response to this, Hilton has had to adhere to this rule and rebrand some of its branches as smoking free zones. However, sale on drinks on some of its branches in northern Europe has gone down. Both the EU has not been able to come with laws that curb exploitation of workers especially in the hotel industry. Working conditions in the hotel industry have been termed as the worst, Skorstad, E., & Ramsdal, H. (2009). They are characterised by long working hours, poor remuneration, lack of career progression and unpredictable shifts. This is why the Hilton Group of Hotels experiences turnover every year because employees are not well-motivated. The EU and UK should institute legal measures that will protect workers in this industry and in return service delivery in these industries will be go up. 3.0 THE DIFFERENT TYPES AND CHARACTERISTICS OF BUSINESS THAT OPERATE WITHIN THE BUSINESS AND SERVICES SECTOR. The service industry as indicated earlier is the backbone of UK economy. Service industry comprises of business that offer products and services that are intangible. They include companies in the hotel and hospitality sector, those that offer tourism, transport, retail and distribution and others (Van & Goonetilleke, 2007). These businesses are that they are consumer- driven .Their goal is to provide products and services that meet the immediate needs of their consumers. For instance, offering accommodation or food in a hotel goes a long way to give shelter /comfort to a guest and avert hunger. Such companies must always assess the needs of the consumers and invent ways of meeting those particular needs. Dissatisfaction of any sort can cause loss of clients. The other characteristic is vested in its labour. On average most companies have fewer employees or just enough to deliver the services required. Performance of the few hired is maximized by having long working hours and maximization of working hours. The driving force behind these criteria is the need to amass as much profit as possible (Yu, 1999). Further, these companies have ways to motivate its employees since this is a determinant in success of the business. Most of them are privately owned .They organize ,from time to time ,team building activities and offer incentives to its employees. 3.1. THE LEGAL PROCESSES NECESSARY FOR FORMATION AND DISSOLUTION OF A REGISTER A COMPANY FORTMATION OF A COMPANY Opening a company in UK can take a day if done electronically or several days if done manually by filling in forms. The government demands some legal prerequisites as seen below. Firstly, one needs to fill in the Articles of Association .These articles stipulate who is in charge of running day-to-day businesses of the company. This must be signed by each member of the company in the presence of a witness (Skorstad & Ramsdal, 2009). Secondly, the person, group wanting to start a company must present Memorandum of Association. This contains the list all the parties or people who want to register that company. In the event of a limited company each member must agree to take at least one share. The third legal requirement is Form 1N01 (Skorstad & Ramsdal, 2009). The members must indicate how the capital is shared among the various individuals 3.2. DISSOULUTION OF A REGISTERED COMPANY A company can only be dissolved if; it runs bankrupt and cannot pay its debts or it is inactive and does not pay its taxes for a period of three months. Before dissolution one must ensure that the company has not; conducted any business within the last three months, changed its name or has any case pending in court (Skorstad & Ramsdal, 2009). Subject to this, the owners of a company can dully fill Form DS01.This form must be filled by most of the company directors and then handed in to relevant authorities with a fee of 10 Euros. 3.3 STRUCTURE AND PROCESSES WHICH DETERMINE THE RESPONSIBILITIES AND CONTROL WITHIN A REGISTERED COMPANY. The size of a business will determine how responsibilities are going to shared out and means of control. A small business will need one or two managerial staff and a few employees. Social control in a group is easier since the manager can easily monitor and enhance control at close range. Nature of the business is the other factor. A business oriented towards marketing will structure its responsibilities in manner that favours more sections in the marketing departments as opposed to other sectors (Du et. al., 2007). Similarly, to some companies the image they portray to public may matter as opposed to others. These companies will thus have stringent regulations on staff conduct than others. Developmental level of a company will also influence its share of responsibilities and processes for control. In the beginning companies tend to focus their efforts in growing the needs of their customers. Consequently, the arrangement in that company wills in such a way that we have more workers to serve the needs of the customers and few in the management. Educational qualifications, experience and training will determine what responsibilities an individual will be assigned .The techniques for controlling people with diverse experience, culture and orientation have to be dynamic and inclusive 4.0. CONCLUSION The steps being taken by stakeholder’s best to improve working conditions, terms and conditions are justified. From the essay, it’s apparent that legislation is one major factor hindering growth of this sector. The earlier this was rectified the better the both the UK and services industry. REFERENCESTop of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form BALL, S., & JAMESON, S. (2004). Advances in hospitality management research. [Bradford, England], Emerald Group Pub. http://public.eblib.com/choice/publicfullrecord.aspx?p=289798. BARROWS, C. W., POWERS, T. F., & REYNOLDS, D. E. (2012). Introduction to the Hospitality Industry. Hoboken, New Jersey, Wiley. CHANDLER, J. A. (2007). Explaining local government local government in Britain since 1800. 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