Understanding the Business Environment

This assignment requires you to analyze the external business environment of a firm using PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) and Porter’s Five Forces models. You will examine key factors such as political stability, economic growth, social trends, technological advancements, legal regulations, environmental concerns, and competitive forces within the industry. The analysis should help you understand the opportunities and threats facing the firm in its current market.

External Business
Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 2............................................................................................................................................3
2.1 Structure, operations and influence of local government in major UK hotel group..............3
2.2 Role and influence of EU and its impact on business and service industries........................4
2.3 Role of pressure groups and their political influence with respect to national and local
issues of hospitality industry........................................................................................................5
2.4 Analysis of legal framework within UK................................................................................5
2.5 UK and EU legislative process as it affects major UK hotel group.......................................6
TASK 3............................................................................................................................................7
3.1 Different types and characteristics of business that operate within the business and service
......................................................................................................................................................7
3.2 Legal processes necessary for formation and dissolution of registered company.................8
3.3 Analysis of structure and processes which determine the responsibilities and control within
registered company......................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
2

INTRODUCTION
External environment of the business is referred to as those factors that exist outside the
firm and influence ability of the company to perform its business functions. This is due to the
reason that such factors cannot be controlled and managed by the executives even after the
implementation of wide range of strategies (Fraser and Pong, 2009). In the present study,
external business environment has been discussed with respect to Ritz Carlton. It is a luxury
hotel brand that was founded in 1983. The present report entails to understand the impact of
socio-economic change on the development of commercial firm. Further, it includes the impact
of legal and political environment on business and service industries.
TASK 2
2.1 Structure, operations and influence of local government in major UK hotel group
The structure of local government of England is categorized into various divisions that
include country council, district, borough and city council. In certain part of country, unitary trier
of local government can be viewed. It is comprised of unitary authorities, London borough and
metropolitan borough. There is greater responsibility of local government of England for the
varied services (Boons and Lüdeke-Freund, 2013). For example: Country council takes decisions
with respect to the transportation, waste management, education and trading. Likewise, city
council has the responsibility related with tax collection, recycling and housing. Functions of
different government have huge impact on Ritz Carlton. This presents the structure of local
government and their areas that are covered by them. For instance: waste management function
is managed by country council. Therefore, such needs to be followed by the firm. In case of non-
fulfillment, operations of organization are affected significantly.
It is essential for local government of UK to develop sound relationship with public. This
can be done through designing of rules and regulations that offer greater benefit to residents of
the country. It has been gained that both structure and operations of UK government affect Ritz
Carlton. Government of UK includes various divisions such as country council, district council
etc that have potential to affect hospitality business operations (Hamilton and Webster, 2015). In
case of new product launch, prior approval needs to be taken from government. Major challenge
arises for Ritz Carlton in case of regulatory authority denies for the same.
3

Local council's rules and regulations also affect the operations of hospitality business. For
instance: various legislations have been developed by UK government regarding sustainability
measures. This assists in reducing the impact of hotel on environment. In case, firm does not
comply with these regulations then UK government will possess authority to cancel the permit of
hospitality firm. Thus, it is essential for the organization to comply with the rules of UK
government with the aim to attain pre-determined targets.
2.2 Role and influence of EU and its impact on business and service industries
European Union is regarded as politico as well as economic union which are comprised
of 28 member states. Operations of EU are carried out through super national institution.
Members working in this union possess objectives of developing regulations for the country that
operates its function in European area. It has been determined that law developed by European
Union exerts greater impact on business and service industries.
There is certain legislation developed by EU members. Authority has devised regulations
in relation with labors who are working within firm. This policy functions for the interest of
employees. The stated policy demonstrates that organization is required to offer suitable working
environment to the personnel. Further, it protects employee from the exploitation by employer.
Therefore, it has been determined that this policy has implications on Ritz Carlton. This is due to
the reason that it exerts pressure on business to make sure that safety and security measures for
personnel are complied with (Hult, Hurley and Knight, 2004). Such can be carried out by the
executives through performance of alterations within human resource policy. In addition to this,
European Union has devised competition policy in UK. The policy aims at building sound
competitive environment in the country. In this relation, the stated policy presents that
organization needs to use fair and suitable technique for the purpose of competing with rivalries.
With the application of such policy, company is restricted from the use of ineffective technique
for competing with other firms in the hospitality sector. This results in compelling business to
follow all the ethical practices when developing strategy for competing with other businesses
performing in the country.
4

2.3 Role of pressure groups and their political influence with respect to national and local issues
of hospitality industry
Pressure group is referred to as the group which does not put any candidate for election
but influence the regulations that are being devised by the authorities of country. They play an
essential role in developing political and social systems. Moreover, they possess capacity to
influence the rules and policies imposed by regulatory authority within UK. Thus, there is greater
need for the UK government to include such groups within business. As such it assists in
attaining suitable outcomes in an effective manner. This group performs protest against major
causes emerging in the nation (Rodiek, 2008). For example, in case it is determined by pressure
groups that local environment of the country is influenced by the inappropriate environmental
protection practices performed by Ritz Carlton, and then such would result in affecting the
performance of business in the UK. With the aim to resolve such, pressure group impose force
on organizations so as to attain desired goals.
In contrast to this, in case pressure group determines that UK government is imposing
ineffective policies and legislation on hotel then at this they can influence regulatory authority by
associating with hotel in not complying with the regulations. Thus, it is important for both hotel
as well as government to perform suitable practices so that pressure groups will not affect
business operations within UK. There is need for Ritz Carlton to carry out effective measures in
order to resolve issues that are being faced by them in maintaining relation with pressure group.
Moreover, such groups organize several campaigns like protecting contamination food and
disposal of waste at safe place (Chang, Hughes and Hotho, 2011). Therefore, by conducting such
campaigns, it can force organization to improve the type of services provided by them. Thus, it
can be stated that business needs to comply with the rules and regulations developed by pressure
groups.
2.4 Analysis of legal framework within UK
It includes several kind of legal systems examined within the firm which are required to
be complied with by UK system. Wales, Scotland and Northern Ireland are the countries that
need to follow such kind of legal system in order to attain desired outcomes. European Union is
answerable for developing several legislations that assist in taking suitable decisions for the
5

nation. In addition to this there are two types of courts being determined within UK. This
includes criminal and civil court. Moreover it has been gained that civil court has magistrate
family court, Queen’s Bench as well as chancery division.
There are several basis of difference among English and Scottish system. This has been
enumerated in the manner below: Responsibilities: In case of English system there is responsibility of regulatory authority
for the act performed by them. In contrast to this, under Scottish system regulators have
no obligation to prosecute their right but they can breach the issues. Formal cautions: In English system the regulators needs to perform their duty in relation
with publishing of formal cautions while conducting their prosecuting procedure.
However in case of Scottish system they do not take into account stated kind of caution. Legal system: English system complies with common law. Moreover this law protects
the children under age 18 years from the legal cases (Singh and Mahmood, 2014). Along
with this both hotel and bars posses legal right to offer alcohol 24 hours a day. In contrast
to this Scottish system follows both civil and common law. Under this law children
below 16 years are prevented from legal cases. In addition to this only hotel have legal
power to serve alcohol 24 hours a day.
 Witness statement: Under English system, this statement plays a critical role while
conducting criminal procedure and acts like evidence. In Scottish system, witness
statement is not considered as evidence in law court (Smith, 2008). This effectively
demonstrates the difference between both the system and their requirements.
2.5 UK and EU legislative process as it affects major UK hotel group
Following is the legislative procedure that is being complied with by UK and EU. This
influences the operations of Ritz Carlton at both national and local level. In this relation it has
been determined that legislative procedure being followed by European Union is more complex
in comparison with UK system. UK government has introduced certain laws and regulations that
assist in protecting hospitality firms. There is existence of various legislations followed by firm
including Minimum Wade Act 1998 and Environmental Protection Act. Organizations need to
undergo Minimum Wage act so that this can act as an aid for employees in receiving suitable
6

wages from Ritz Carlton. Therefore such does not affect their employment rights. The
implication of this act is in terms that the organization needs to follow appropriate wage rate so
that rights of employees are not affected.
Moreover in case organization fails to carry out such act then individual has complete
right to file complaint against the hotel. In contrast to this European Union carries out several
legislative practices like Right to equality and Right to employment. For example, there is
greater need for the business to undergo such right with the aim to ensure effective practices and
provides satisfaction to the workers in order to gain desired goals (Stackelberg and et.al, 2010).
The Right to Equality act demonstrates that employees should not be discriminated and further
equal opportunities needs to be provided to them. Further they are required to take into account
skills and capabilities of workers and provide them appropriate task. This is order to gain best
services from them and satisfy the needs of workers in an effective manner. In case it is
determined that firm performs discrimination within the employees then EU has power to take
legal actions against the hotel.
TASK 3
3.1 Different types and characteristics of business that operate within the business and service
There is existence of various kinds of firms that operates in hospitality sector. All such
businesses carry out operations with an objective to offer high quality of services to the
customers. This is due to the reason that through this activity business like Ritz Carlton can
maintain satisfaction among customers. The types of business that operates within hospitality
sector have been enumerated in the manner below: Travel agent: All the travel agents are involved under this category. Their role is towards
booking tickets and arranging holiday packages for the customers. The major feature of
such business is to resolve the customer’s queries in relation with traveling. The major
advantage that is being possessed by them is related with the mobility. However, the
major demerit of travel agents is the internet. This is because; it is considered to be the
first industry that left real world and succeed online. Sole trader: It is a kind of business that is owned and managed by an individual. The
owner has full control over firm (Titheesawad, 2012). Therefore, such is considered as
7

major benefit of this type of organization. The profits of organizations are wholly enjoyed
by single individual. However, sole proprietor possesses limited capacity regarding rising
of profits in shorter time span which acts as its major demerit. Partnership: It is referred to as the firm in which two or more individual’s makes
investment and pool skills and resources in order to attain greater profits. Under this, an
individual alone does not have control over the business which acts as a major demerit to
this. However, major merit of partnership business is that through adoption of such
business type, issue in relation with rising of capital is resolved to a greater extent. Private company by shares: Under this type of business offers shares to shareholders and
in turn delivers ownership to them. In this manner organization is able to fulfill the
requirement related with funds. It is considered as the popular technique for obtaining
finance which is the major merit to this. However, with private company by shares,
organization tends to lose control over operations that acts as it major drawback. Private company by guarantee: It is the kind of organization wherein business does not
possess shareholders. Under this liability of members is limited. It is referred as a private
limited organization that possesses guarantors instead of shareholders. Thus, it is
appropriate for voluntary business. Here, the members agreed to make payment of fixed
amount referred as guarantee towards the debt of firm in case it goes into liquidation.
However, major drawback to this is that it requires formal registration process relating
with the creation of firm. Moreover, to gain recognition as charity, it has to get registered
with OSCR.
 Public limited company: It is regarded as firm that aims at working for the benefit of the
society (Manral, 2010). The major advantage of this business is to raise funds in shorter
time span. In such business, it is important to comply with several legal obligations. For
instance: public limited company needs to have at least 2 directors. The major drawback
of public limited company is that it requires a lot of legal formalities. Thus, it is costly
and time consuming.
8

3.2 Legal processes necessary for formation and dissolution of registered company
The individuals who are required to open new organization have to comply with certain
legal procedure. This is due to the reason that in case it is not followed then the company
formulated would not be considered valid. The legal processes for formation need to be abide by
both public as well as private firm. There are certain key legislations that are related with number
of directors and shareholders which need to be possessed by company while formation. Further,
there are varied legislations associated with increasing funds in different types of organizations.
In this regard, following steps will be followed for formation of new registered company. Memorandum of association: The procedure of formation of registered company begins
with Memorandum of association. It is the document that covers detail on name of
company, location of business headquarter and liabilities of parties involved. It is
important for the organization to develop such kind of document. This is because with
this firm can establish itself in an effective manner. Articles of association: After preparation of Memorandum of association another step
relates with development of article of association. This document presents the rules and
regulations which need to be complied with by organization (Klapper and Parker, 2011).
It is effective as it acts as an aid in setting direction of organization towards regulatory
and ethical path. Form 10 and form 12: Following the preparation of both types of document next step is
related with development of two types of forms. Form 10 provides information regarding
date of birth of members, their home address and passport number. Similarly form 12 is a
kind of declaration wherein director of the business needs to declare that in case of
bankruptcy they will be considered accountable.
 Deciding the company name: After the fulfillment of above aspects the last phase relates
with decision regarding name of the organization.
Apart from this the steps that need to be followed by managers in case of dissolution of
registered company are enumerated in the manner below: Creditor’s voluntary liquidation: In this type of dissolution director of the firm and
stakeholders makes mutual decision regarding whether or not to dilute the organization
9

(Abubakr and Esposito, 2012). In this kind of liquidation members does not have any
liability in relation to payment of loan and debt of organization?
 Member’s voluntary liquidation: Such form of dissolution emerges when the board of
director offers statutory declaration of solvency. Under this members will be liable to
make payment of loan and debt of organization.
3.3 Analysis of structure and processes which determine the responsibilities and control within
registered company
The firm having limited structure possesses the members such as director, secretary of
company and shareholder etc. The stated individuals need to fulfill several roles and
responsibilities. For example, broad of directors of business are responsible for organizing
annual meeting of business. Along with this they are responsible for taking important decision
regarding firm. Further it provides direction towards increase in sales and profitability. Moreover
board of director of business provides useful information to the shareholders on time. By
complying with such kind of activity organization can maintain satisfaction among stakeholders.
In contrast to this, secretary of business has to comply with several kinds of roles and
responsibilities. This ensures that business needs to follow all the legal practices and financial
standards. Moreover shareholders of the business act as an aid for the manager while making
decision regarding company in an effective manner (External business environment, 2015).
Along with this business organize several types of meetings like statutory meeting, annual
general meeting and member's meeting. Such are arranged by the broad of directors. Right to
vote lies in the hand of shareholders. Their votes are taken into account in the general meeting of
firm.
CONCLUSION
It can be concluded from the study that it is essential for the executive to collect
information regarding the factors existing in the external environment of the business. This is
due to the reason that through such factors suitable decision can be taken by the manager of Ritz
Carlton hotel. Along with this by gaining insight to the current economic policy several
strategies can be developed by hotel so as to deal with it in an effective manner.
10

REFERENCES
Journals and Books
Abubakr, S. and Esposito, F., 2012. Bank concentration and financial constraints on firm
investment in UK. Studies in Economics and Finance. 29(1). pp.11–25.
Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable innovation: state-of-
the-art and steps towards a research agenda. Journal of Cleaner Production. 45. pp.9-19.
Chang, Y. Y., Hughes, M. and Hotho, S., 2011. Internal and external antecedents of SMEs'
innovation ambidexterity outcomes. Management Decision. 49(10). pp. 1658-1676.
Fraser, I. and Pong, C., 2009. The future of the external audit function. Managerial Auditing
Journal. 24(2). pp. 104–113.
Hamilton, L. and Webster., 2015. The International Business Environment. Oxford University
Press.
Hult, G. T. M., Hurley, R. F. and Knight, G. A., 2004. Innovativeness: its antecedents and impact
on business performance. Industrial marketing management. 33(5). Pp. 429-438.
Klapper, L. F. and Parker, S. C., 2011. Gender and the business environment for new firm
creation. The World Bank Research Observer. 26(2). pp. 237-257.
Lenza, M. Pill, H. and Reichlin, L., 2010. Monetary policy in exceptional times. Economic
Policy. 25(62). pp. 295-339.
Manral, L., 2010. Towards a theory of endogenous market structure in strategy: Exploring the
endogeneity of demand-side determinants of firm investment strategy and market structure.
Journal of Strategy and Management. 3(4). pp. 352–373.
Rodiek, C., 2008. External Environmental Analysis - The U.S. Television Manufacturing
Industry. GRIN Verlag.
Singh, H. and Mahmood, R., 2014. Manufacturing Strategy and Export Performance of Small
and Medium Enterprises in Malaysia: Moderating Role of External Environment.
International Journal of Business & Commerce. pp. 3(5).
Stackelberg, H. V. and et.al., 2010. Market Structure and Equilibrium. Springer.
Titheesawad, I., 2012. The External Ties of Boards of Directors and the Execution on Directors'
Function. AU Journal of Management. 10(1).
Online
11

External business environment. 2015. [Online]. Available through:
<http://www.cliffsnotes.com/more-subjects/principles-of-management/managerial-
environments/the-external-environment>. [Accessed on 27th January 2016].
Smith, M., 2008. The Legal System of Scotland. [PDF]. Accessed through
<http://www.consumerfocus.org.uk/scotland/files/2009/10/LSOS-Text-2008-Final-
LORES-4th-ed.pdf>. [Accessed on 27th January 2016].
12