Expanding Business Services in International Markets: A PESTLE Analysis

Scope of Success is More in Such Market (Yannelis, 2004)

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
Briefly examining the corporate governance of White bread plc and the organizational
structure followed by White bread plc ..................................................................................1
PEST analyzes of South Asia in order to analyze how these factors can affect the expansion of
Whitebread Plc.......................................................................................................................3
Evaluating the level of competitive rivalry and threat from substitute products for coffee...5
Conclusion and recommendations...................................................................................................7
References........................................................................................................................................9

INTRODUCTION
Business environment is the combination of both internal and external factors that
influence the working of the organization. In other words, it can be said that operation of the
organization are affected by the change in the micro and macro environment (Ayyagari and
et.al., 2008). In this report, detail study about White bread plc has been done. White bread plc is
the UK based firm which is serving items related to food, accommodation and coffee. This
company is almost serving 25 million customers per month. Costa is one of the UK largest chain
and hotel brands specially serving coffee. In this report corporate governance and organizational
structure of Whitebread plc has been mentioned. In addition to this, PESTLE analysis of South
Asia has been done in order to concluded whether the selected country is suitable for Whitebread
plc to expand or not. At last, in this report, competitive environment analysis has been done find
out the level of competitive rivalry and threat of substitute products.
Briefly examining the corporate governance of White bread plc and the organizational structure
followed by White bread plc
Corporate governance is the system that is used by every organization in order to manage
and control the working of the organization. The role of shareholders of company is to select the
directors and the auditors to govern the working of firm and to satisfy themselves in regard to the
structure of the organization (Chen and Mohamed, 2008). Members of board of directors are
responsible for the governance of companies.
At Whiteboard plc corporate governance consider all the aspects of the business that
affects the employees in one or the other ways (Fernando, 2011). Chairman of Whitebread plc is
committing to maintain the better standards of governance in an organization and at the same
will ensure to manage and operate the company with integrity and transparency. Some of the
important activities of governance that are considered by the chairman of Whitebread Plc are as
follows:-
1. A review has been made of the way the members of board of directors are working.
2. In addition to this internal evaluation of board members has also been done (Gabriel,
2004).
3. Along with this analyze of succession plan for key executive roles have been done.
4. Succession process that is followed by the chairman of the company is also analyzed by
the members of board.
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In Whitebread plc, corporate responsibility advice has been provided by the team
members who are working with the specialist advisor. The executive committee overviews the
performance of the strategy developed and its implementation within the premises. In addition to
this alignment of business strategy is also analyzed. Whitebread plc is also responsible for
implementing the various performance of the employees within an organization (Kennerley and
Neely, 2003).
The members of board of directors take complete care about the high standard of
accountability. In addition to this it board of directors also take the responsibilities about the
ethical behaviour of employer and employee. In year 2012, chairman of Whitebread plc took a
complete review of the arrangement of corporate governance in order to measure the conformity
(Aziz and Fady, 2013).
Organization structure helps the company to identify the various activities that take place
within organizations like allocation of tasks, supervision and coordination of the activities
towards the achievement of the organizational desired objectives. In this a hierarchical is
developed which in turn help every employee to know, to whom they have to report and whose
instruction they should follow (Learning, 2005). This structure is considered as the viewing glass
through which an individual views the organization and its environment. This structure can be in
a horizontal and vertical form both.
Whitebread plc follow line and staff structure in order to allow the segregation of all the
tasks that take place within an organization. These structure help the Whitebread plc to analyze
the area where they are required to focus more (Matthews, 2005). Because by using this structure
firm will easily be able to distribute various role and responsibilities of every individual present
in the organization. In addition to this some experts are also included in this hierarchy for
advising the members of organization whenever they need help. Following of a proper
organizational structure will assist Whitebread plc to easily expand its business unit without
facing many problems in South Asia. In addition to this, formation of this structure aids the
company to examine the line authority which is developed for employees.
PEST analyzes of South Asia in order to analyze how these factors can affect the expansion of
Whitebread Plc
An organization functions under the influence of sum total of several factors. An external
environment that influences the organization's response and competitive actions outside the
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direct domain of its working is referred as external environment (Nimwegen and et al., 2008).
Analysis of external environment enables the organization to identify early signals of change and
trends, project anticipated outcomes and frame policies and strategies based on the results to
generate optimum returns by analysing market dynamics. In the present study based on
multinational hotel and coffee shop Whitbread PLC, PEST analysis is done to check the
competency of its establishment at selected South Asian region (Parkin, 2002).
PEST analysis is the tool that assesses appropriateness of environment for business,
determining the impact of four macroeconomic factors that are political, economic, social and
technological.
Political factors
Political factors analyze the extent to which there is the intervention of government
activities in the working of organization. Government influences the business in the form of laws
and regulations such as tariffs, trade restrictions, labour law, environmental law and other related
to industry in which organization is working. Further, degree of political stability existing in the
country is the significant determinant for the establishment of any organization (Sampat, 2007).
Whitbread PLC is a coffee shop and restaurant chain, its establishment in South Asian region
including countries like India, Pakistan, Sri Lanka, Bangladesh makes the organization to abide
by all the respective laws in nation with respect to health regulations and food preparation such
laws related to that are inclusion of some specific ingredient in menu is strictly prohibited.
Most of the businesses operating in 30 countries are owned and operated by franchise; in
that regard it eases the expansion of venture in the selected region due to liberal licensing and
norms for restaurant businesses. Moreover, stable political conditions prevailing in these markets
makes the entry of restaurant and coffee house chain hassle-free (Sevelli, 2009). Further, with
the diverse workforce, it is required that company get acquainted with the laws and regulations
for the protection of employees related to their hiring, compensation, training and repatriation
enforced by respective countries. Elucidating the above situation, it is inferred that establishment
in political stable by satisfying all the prerequisites for businesses which will enable it to get
success in foreign market. Asian market is not stable but it is continuously growing. In Asian
market, government offers relaxation in tax to the foreign investors with an aim to raise the
standard of living of people. Tax is one of the main factors which have high level of influence on
the growth and profitability aspect of firm (PESTLE analysis, 2016). Thus, government supports
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the firms and concessional tax policy is the main aspect which influences Whitbread plc to
expand its business operations in the Asian market.
Economic Factors
Economic determinants such as Economic growth, inflation rate, interest rates, exchange
rates. These determinants affect the costs incurred on the operations of the organizations and
profit generated by them (Stackelberg, 2011). Restaurant and coffee shops are luxury industry
rather than a necessity. Hence, it significantly gets affected by the macro economic factors.
Selected organization Whitbread operates in number of countries. Different inflation rate prevails
in every country which directly affects the price structure of the organization. Further, values of
indexes such as wholesale price indexes is he major determinant in the given case as it
determines the prices and values of food products having immediate impact on the inputs of
restaurants. Moreover, favourable exchange rate value of the currency in South Asian region
accrues lucrative benefits to the organization in the form of considerable amount of earnings
(Teranishi, 2005).
One of the crucial determinants of that decides the success of establishment in the region
is the purchasing power of people at that place. Restaurant and coffee shop being a luxury good
is enjoyed only by the people whose disposable income is relatively on higher side of income
line. These people are the potential customers for such leisure industry (Amabile and et.al.,
2006). But Whitbread will be benefited by the people belonging to all the groups of income
because it offers the wide range of products at the very affordable prices without compromising
quality and taste. This will enable the Whitbread Plc to have wide stream of customer base for its
establishment. Further, duties and tariffs on the inputs at the import bring changes in the
fluctuations in the prices of products and services offered by the organization. In the given case,
it keeps the Whitbread on favourable side as there are liberalisations on the grounds on import of
food inputs and products (Ayyagari and et.al., 2008). In addition to this, employment rate of
South East Asia increased by 1.6% in 2013-14 (Where is the unemployment rate the highest in
2014?, 2016). This is a positive sign for Whitbread that expands its business in the Asian
country. Moreover, purchasing and other decision making of customers is highly influenced by
the employment or income earned by them. Employment rate of Asian market is continuously
increasing. This aspect reflects that spending power of customers is also increasing. Thus, by
taking into account this fact, it can be said that higher employment has a positive impact on the
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development aspect of the firm. Thus, Whitbread will attain success by establishing its business
in Asia.
Social Factors
Social factors accounts for the choices and preferences of the customers with respect to
the products and services offered by the organization. Food and beverage is the dynamic industry
with the changing scenarios and trends. Peoples' requirements changes on very frequent basis.
Determinants in these factors include cultural aspects, health consciousness, safety emphasis, age
distribution and other related. South Asian region follows relatively high degree of rigidity in
their cultural proceedings (Aziz and Fady, 2013). There are certain ingredients which are
restricted in their norms hence for Whitbread Plc it is essential to exclude them from menu.
Further, realizing the fact that people are becoming more health conscious and particular about
their choices of their food, it offers healthy food. Focusing on age distribution factor, food
industry has been successful in attracting people belonging to the age group of 10-45, and going
through statistical data South Asian countries has been among the countries having highest
number of demographic dividend that people belonging to 18-30 (Borsch, 2004). Thus, from the
statistical data of Asian market, it can be stated that people who are in between the age of 18-30
years prefer more to drink coffee in restaurants (Zalengera and et.al., 2014). Moreover, in Asian
market, young aged people are highly trendy in nature and go restaurant for drinking coffee.
Therefore, by making focus on this customer segment, Whitbread plc is able to get desired
outcome or success in the Asian market. Hence, in this context, it proves to be beneficial for
Whitbread plc to launch its franchise in South Asian region.
Technological factors
Technological factors such as use of advance and high tech techniques, automation of
operations, efficiency of production and adoption of methods inculcating innovation and
advancements. Inclusion of these factors determines the success and development of
organization in any area (Chen and Mohamed, 2008). Whitbread is the technologically advanced
company which is efficient in its operations. It has infused new technology in al of its operations
such as use of better equipments for the production of different range of coffees at shops,
rotisserie oven at restaurants and other related. It using virtual platform that is internet for
marketing purposes in the form of digital marketing to reach large number of customers and
showcase their offerings at social media and websites (Ayyagari and et.al., 2008). Further,
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advancement in communication enables the organization Whitbread to bring better coordination
and connectivity among different places. The effective inventory system and value chain
management makes Whitbread to provide fresh food products to their customers in the prompt
and precise manner (Fernando, 2011). Asian countries are not yet fully developed but they are
developing in nature. Besides this, Asian countries also make focus on enhancing their capacity
of power generation. Thus, there is a medium level of availability in the Asian market in relation
to energy. Along with this, awareness among people about technological aspects is also
continuously increasing. Large number of people of Asian market accesses the internet (Yüksel,
2012). Thus, Whitbread plc can easily develop awareness among customers about the products
or services offered by them. Further, restaurant can also attract a wide group of people by
making promotion on social networking sites. All these aspects make contribution in the
attainment of organizational goals and objectives.
Analysing all the factors above, it can be articulated that establishing venture at South
Asian region will accrue lucrative benefits to Whitbread PLC
Evaluating the level of competitive rivalry and threat from substitute products for coffee
Coffee is one of the most selling products of Whitebread plc Costa is one of the largest
UK chain market where coffee has been sold out. Whitebread plc was already able to succeed in
Chinese market. At present company is operating over 350 coffee outlets. In lieu of which
Whitebread plc is further interested in expanding its coffee business in South Asia (Gabriel,
2004). But at the same time it cannot be ignored that in India threat of competitive rivalry is
high. In India two major brands; Nescafe and BrookBond are the two major brands that are
expanding its business in coffee at a great speed.
Thus, if Whitebread plc want to entry into the South Asia market for expansion of its
business that in that case they are required to introduce various innovation in the coffee (Gani,
2011). In addition to this, price of coffee should be less as compared to other brands in order to
attract more customers. Whitebread plc should also start forming various strategies in order to
beat its competitors in the South Asian market (Ayyagari and et.al., 2008). But if Whitebread plc
is available to bring new innovation in the coffee than in that case it would not be much difficult
to the firm to beat its competitors. Therefore, at last it can be interpreted that threat of Substitute
product is somewhat high if Company choose to expand its business to South Asia (Kennerley
and Neely, 2003).
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Whitebread has been facing competition from the rivalries because they are also selling
same sort of services and this also increases the degree of competition. Thus, it can be said that
the level of competition has been augmenting from other players especially in the retail industry.
Costa Coffee and Starbucks are the major entities that deliver these services to the customers;
thus this accelerates competition because of threat of substitutes (v). Competition also generates
from these entities because they are also most prominent service providers which delivers same
services to the clients. Both the entities delivers additional services to the clients; therefore
customers prefer to get services from these businesses as compared to Whitebread (Learning,
2005). Though the services of subsequent business are competent enough; still rivalries are
delivering affordable and valuable services to the clients; therefore, they are able to retain more
customers.
Thus, from the discussion, it can be said that Whitebread operates business in highly
competitive environment because numerous entities operate business in the same market place.
Hence, as per competitive analysis, it can be said that threats from substitute products are high
and this may also impact sustainability of the business in the external environment (Matthews,
2005). When the level of competition is higher at the market place, it becomes difficult for the
business entity to survive; thus in that case the organization should switch to different
transformations. New products and services can be added to the existing product line for
persuading the attention of customers. This is also beneficial in terms of retaining the customers
for longer period (Fernando, 2011).
CONCLUSION AND RECOMMENDATIONS
Concluding the entire case, it can be said that Whitebread plc has been operating its
business effectively in competitive market place; however the business needs to formulate
diverse strategies for long term sustainability. From the study, it is evident that Whitebread faces
competition from other business entities which impacts the performance of business (Nimwegen
and et al., 2008). Thus, according to that, it is vital for the business entity to analyze the factors
prevailing in the market place so that strategies for business strategies can be developed
accordingly. Whitebread plc should conduct market analysis so that the level of competition can
be identified and through this, needs and preferences of customers can also be ascertained (v).
It is also recommended to the business entity to contribute in corporate social
responsibility so that environmental relates issues can be minimized (Parkin, 2002). For every
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business entity, it is imperative to consider social and environmental aspects as that helps the
business entity to acquire attention from the customers. Apart from this, the business entity
should also introduce new products and services that are preferred by the client as that will
enhance customer satisfaction ratio (Reed, 2001). It is essential for the business to emphasize on
customer satisfaction and customer retention aspects and for that valuable and innovative
products should be brought at market place. Further, in terms of suggestion, Whitebread plc
should give more concern towards employee retention as they are the only entity that delivers all
types of services to the clients and they are also responsible in managing organizational work
processes. The business is also suggested to contribute in environmental safety and protection
and for that concern should be given towards CSR approach (Sampat, 2007).
Better relationships should be developed with the employees so that they can assist the
business entity to deliver prominent services to the clients. Moreover, employees should be
provided numerous benefits because it is apparent fact that motivated employee always
contributes in achieving organizational goals and objectives (Sevelli, 2009). Apart from
employees and customers, attention should be given towards suppliers and shareholders as they
contribute in business development. Thus, it is suggested to the business to give equal concern
towards all the resources so that sustainability aspects can be enhanced (Amabile and et.al.,
2006). Changes could also be made to organizational structure as per the business
transformations. In order to enhance growth factors, the subsequent business entity should focus
on technological aspects so that value of service provision can be encouraged (Stackelberg,
2011). Apart from this, it is also imperative for Whitebread to expand the business in new market
places so that customers can be attracted towards business products.
Moreover, the business should also conduct competitive analysis on frequent basis so that
changes in market conditions can be identified respectively (Teranishi, 2005). In order to retain
the customers, Whitebread should provide complementary services to the customers so that the
opportunities of customer switch over can be reduced. In order to become highly competent
brand, it is crucial for Whitebread to make transformations in the existing business services so
that new and innovative provisions can be included. As per the needs and preferences of
customers, Whitebread should emphasize on social factors so that values and beliefs of
customers can be included in the services of whitebread (Aziz and Fady, 2013). The business
should not sell those products which are not preferred by the clients as that will probably hamper
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the efficacy of business performance. The business should also expand the services in
international markets such as central Europe and South East Asia as the scope of success is more
in such market (Yannelis, 2004). Thus, from the entire discussion, it can be said that the business
should conduct the operations in an ethical and legal manner so that it can create a competitive
edge over other rivalries.
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