External Business Environment
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7310 Downloads I Published: 18 Jul ,2017
External business environment refers to all those factors that directly affects the operations carried out by entity and in turn acts as hurdle. By considering all the factors such as political, social, cultural company can easily gain competitive advantage. Firms operating in hospitality sector have to face various hurdles that prevents from achievement of desired objectives. In the present era it has become necessary for company to deal with the factors that reduces its efficiency (Frynas and Mellahi, 2011). Business environment is composed of both internal and external factors where internal factors are present inside the entity and external one are present outside the enterprise. Furthermore external factors present in the environment are not in control of management so effective strategy is required to deal with them. In the present report Marriott has been chosen as one of the enterprise that operates in hospitality sector and offers different kind of services to its customers. Different tasks have been covered in the study which includes structure and operations of UK economy, economy policy of government etc.
Economy of UK is considered as the sixth largest in the world by the year 2012 and agriculture sector contributes around 0.7% where industrial sector has share of 21.1% of GDP in the economy. Service sector of UK has share of 72.2 and plays significant role in the development of economy. UK is considered to be capitalist nation so regulatory authorities comply with the capitalism and main aim is to safeguard private entity on public business enterprise. UK’s population was 63.244 million in the year 2012 and has employed 2.5 million in its economy (Gitman and McDaniel, 2008). Hospitality industry is considered to be the fifth largest industry in UK that is a major source of income for the country and contributes around 361 billion. Furthermore the taxation policy is totally different from other countries as payment need to be minimum of two different levels of regulatory authorities namely local and central. Various laws and regulations are developed by the government so as to protect private entities and this is directly leading to rise in growth rate of economy. Whereas it is providing more employment opportunities to the people living in society. So it can be said that laws and regulations in the country are in favour of Marriott (Giudice, Kuenzel and Springbett, 2011).
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Economic policy refers to the action that are taken by regulatory authorities in the economic filed. It takes into consideration the system of setting level of taxation, money supply, interest rate and government budget. Through monetary and fiscal policy government takes various actions in the economy.
Fiscal policy: It is the type of policy developed by government through which spending level and tax rates are adjusted to control the economy. Government of the economy has to pay funds for the purpose of carrying out different tasks such as defence expense, infrastructure development etc (Kaplan and Norton, 2001). Furthermore tax is considered as major source of income and Marriott has to pay large amount in the form of tax to local services for the services rendered to its target market. It directly influences the business operations and affects people living in society to work for long hours in order to maintain their income level. Whereas increase in direct taxes raises post income tax and vice versa. Due to fiscal policy Marriott has to bring changes in its operations as when tax rates are lower then prices of services are kept low and vice versa.
Monetary policy: Through this policy government of the country controls money supply with the help of interest rate etc. This policy supports government in managing credit system, funds etc (Mugurel-Alin, 2014). In economy monetary system is regulated by central bank where NBFC play major role. In case of supply of money decreases then customers prefer to spend less on services of Marriott and this affects organization due to decline in sales.
In UK hospitality sector plays significant role and has highest share in the development of country. Marriott is well known in the market for range of services it offers and all its users are having high purchasing power which allows them to buy services. So it can be said that income level is high and it directly encourages firm to offer best services to its target market. Income refers to the money that individual receives from employment and is used in purchasing services. Wealth of entity was $ 626 million in the year 2013 and earned revenue of $12.784 billion by serving different type of customers (Pizam, 2010). Organization hires 199,929 employees who supports management in promoting its services and other products. Firm has hired large workforce as this industry is dynamic and changes are taking place rapidly so large workforce is necessarily required. It has been identified that people living in UK prefer to work in Marriott due to growth opportunities provided and more exposure as compared with other entities. In market users of the services are present in large amount so it has become important for Marriott to identify need of its target market and satisfy them. Furthermore different type of individual are served by company including travellers, corporate clients etc. Various departments operate in company like marketing, finance, logistics; IT, sales and other that have assigned different roles and responsibilities so as to serve customers in unique manner (Shaikh, 2010).
Demographic trends are related to historical changes that exist in the demography over a given period of time. It involves various factors that influence the pattern in hospitality sector like age, income level, caste, religion etc. All these factors have direct impact on the employment patterns and affects business enterprise in every manner. It has been found that majority of the young people are employed by Marriott as they possess the capability to understand the taste and preference of target market (Viramgami, 2007). They are more energetic and can work for long period of time. Income level is another trend as people who are having low income searches for new job and people of high income does not prefer to leave the existing job. Furthermore if any person is highly qualified then individual will not prefer to work for lower position. So management has to consider all these factors that are linked with employment. Presently the employment practices and patterns are changing rapidly because of alterations taking place in demographic patterns in the economy. Due to rise in standard of living people prefer to work in firms that can provide them high monetary benefits. Furthermore population of UK comprises of young people majorly who are searching for new job in order to live comfortable life. Whereas the employment practices followed by Marriott focuses on employing people who are young and can provide more support to the entity in every manner. On the other hand concept of male dominated society has totally diminished and both male and female have started to search for suitable job in the hospitality industry (Chun and Hahn, 2007).
Social structure is basically the outline of societal institutions that supports in development of society and establishes restrictions of behaviour. In Marriott health relationship is present between employer and employee, employees and guests. All the employees possess capability to understand need and preferences of its target market and accordingly services are rendered to them. It has been identified that majority of customers are satisfied with the services due to its unique quality. Furthermore majority of the customers are brand loyal due to highly talented employees present in the workplace (Dascalu and et. al, 2010). On the other hand social structure between employees and top management is friendly where staff members are encouraged to take part in the development of strategy and other crucial tasks. Through this it has become possible for Marriott to gain competitive advantage over its competitors such as Hilton etc. Furthermore qualification required to work in company is MBA or any other master degree. Timely it is ensured by the management that its staff members are skilled and talented and this provides base to serve customers in appropriate manner. Knowledge and other skills in the field of hospitality industry is important for the company as with the help of this management can easily understand the change in market trends and other factors that have direct impact (Fraser and Pong, 2009).
Local government of the country has directly influence on the company as it has been analyzed that regulatory authorities are very close to general public and services are offered in the form of municipalities and local wards. Basically five type of local authorities are present namely metropolitan, district council, country council, unitary district and London boroughs. In case if Marriott has to open its new branch then it is required to take permission from such regulatory authorities (Joardar, Kostova and Wu, 2014). Furthermore local government has started various operations and tasks have been considered so as to encourage tourism activities in the country. Whereas different laws and regulations have been developed that directly supports Marriott and all the tasks are carried out in accordance with that. Various changes have been made in the laws and regulations which organization has to comply with for its betterment. So it can be said that government has direct influence on the activities of entity and effective strategies are required in order to deal with them. VAT, tax and other duties are present which organization has to follow strictly and this increases expenditure level. Furthermore to save surroundings government has developed laws through which Marriott can easily reduce its environmental burden (Mariappanadar, 2012).
European Union has developed various policies for the welfare of economy and it directly or indirectly affects business operations. It is the political economic union that involves 28 member states and main purpose is to provide financial support to its members. Association of European Union considers council of EU, European central bank, commission etc (Xiao and Fu, 2009). It has been found that business and service industry is directly influenced by EU as means of spending and taxation.
Regional policy: According to this policy European Union provides financial help to regions where unemployment rate is quite high and main aim of this policy is to work in favour of regions where development is not up to the mark.
Inflation policy: Through this policy government controls inflation present in the economy and it is ensured that prices may not rise in future. It is done with the help of monetary policy committee and bank of England. Rise in interest rates badly affects Marriott as borrowing from financial institutions becomes costly (Yu and Ramanathan, 2012).
Labour policy: Main purpose of this policy is to save people working in companies from exploitation and it considers two areas such as consulting workers and working condition.
Pressure groups are considered to be the effective groups that affect the public policy in the interest of particular cause. They have authority to influence the laws developed by government with some specific purpose. In country like UK pressure group plays major role and they take initiatives so as to protect local environment and surroundings from negative impact of firm. They have direct impact on the hospitality sector by means of national as well as local concerns (Giechaskiel and et. al., 2012). Due to rise in interference of pressure groups Marriott has to keep a check on its environmental burden and management has taken various actions so as to reduce carbon emission. This directly helps in supporting this group and in turn has positive impact on the brand image. Whereas different campaigns have been introduced such as climate, waste watch with the main objective to save environment. Through this organization is able to provide more support to the pressure groups. Whereas every activity performed by Marriott is analyzed by such groups in order to ensure that they are ethical and no practices are adopted that are exploiting customers and employees of the entity. On the other hand it is necessary for company to comply with the guidelines developed by government like promotional message must not be against any caste, religion etc.
In economy of UK different legal system exists like Scotland, Wales and Northern Ireland. Furthermore main duty of EU is to administer public procurement that helps in determining the tasks carried out by entity as per guidelines. Two courts are present in the country namely criminal and civil. Civil court category considers Queen’s bench, Magistrate family and other chancery division (Hult, Hurley and Knight, 2004). Whereas criminal court considers crown fall. Legal system present in English and Wales states that it is necessary for Judges to sit in court and then use various legal principles to the facts and figures presented in front of them.
Legislative process of UK is complex in nature which has been adopted by broad means of government measures. In economy of UK bill can be introduced in lords of common. Furthermore the legislative process directly affects operations of Marriott at local as well as national level. Whereas different laws and regulations have been introduced with the main objective to safeguard to interest of hospitality industry. Such regulations are quite effective and in turn helps in the development of entire sector (Joardar, Kostova and Wu, 2014). Minimum wage act 1998 provides direct support to workers and employees working in Marriott as they receive fair payment for the actual work done and it is not possible for management to exploit them in any way. Furthermore government of UK along with EU has taken initiative for the welfare of surroundings by reducing environmental impact firms. Marriott has considered various laws to reduce Co2 emission and directly supports operations carried out by entity.
Different kind of companies and businesses operates in the economy of UK and they can be divided into partnership, private, sole proprietorship and public limited entities. In order to carry out business in hospitality industry of UK, sole proprietorship is considered to be appropriate. In this type of business only one person has power to take major decisions and this format is adopted by small scale companies such as restaurants etc (Klapper and Parker, 2011). Furthermore partnership is another format where two or more individual carries out business operations with the aim to earn profit and share profit, losses in predetermined ratios. Another way to do business in this sector is establishing private business where main objective is to increase profitability and sales.
In economy of UK all the companies are integrated electronically which are developed by individual and groups. Basically four weeks are required in formation of company and entire process of incorporation is shown below:
Paper process: As per guidelines issued in section 9 companies act 2006 it is required for every entity to submit essential documents along with fees.
Article of association: It considers laws and regulations that supports in conducting business activities along with duty and responsibilities of directors. Subscriber has to submit this paper after signing (Lenza, Pill and Reichlin, 2010).
IN 01 form: This form is associated with details of directors and secretaries along with share capital.
Memorandum of association: This document consists of details of shareholders along with subscriber.
Creditor’s voluntary liquidation: In this type of dissolution management is not able to pay debts so in this case directors and shareholder take decision to settle their entity.
Member voluntary liquidation: This type of dissolution occurs when directors are able to pay loan but they wants to close operations (Hayes, 2012). So for this it is necessary to select member who wishes to retire along with aspiration to step out from family business.
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Structure of limited entity considers its directors, shareholders and other members. They have different duties along with control in the registered company. Before introducing structure role and responsibility of every member is determined. Furthermore board of directors have different responsibilities like to carry out annual general meeting in order to communicate with shareholders so as to improve overall performance (Shaikh, 2010). They conduct operations for the accomplishment of desired objectives. On the other hand directors of company has duty to look after accounting books and other financial statements as it is required to comply with guidelines issued by government.
From the above report it has become easy to understand the impact of external business environment on business operations. Marriott operates in market where lot of challenges are present and this in turn leads to decline in efficiency. So it is necessary for company to cope up with them. Furthermore by complying with the guidelines issued by government performance can be improved like employment act, environmental laws etc. Whereas economy of UK is providing different opportunities to hospitality sector so this can help to grow in the market.
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