Analysis of Compass Group Plc's Business Environment and Strategies

This report offers a comprehensive analysis of Compass Group Plc, a British multinational contract food service company and the largest in the world. It delves into the external factors influencing the organization, employing PESTLE analysis to examine political, economic, social, technological, environmental, and legal aspects impacting its operations, particularly within the context of the Japanese market. Furthermore, the report utilizes Porter's Five Forces to assess the competitive landscape, including the threat of new entrants and the bargaining power of suppliers. The analysis incorporates data and examples to illustrate the company's strategies and challenges, culminating in recommendations based on the findings. The report also highlights Compass Group's market position, competitive advantages, and challenges such as competition, technological advancements, and environmental regulations, and concludes with a strategic overview of the company's performance and potential.

Compass Group Plc Company

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Information of the selected business organization.................................................................1
Allocated business environment.............................................................................................3
Appropriate analytical approach.............................................................................................5
Application of appropriate data and example.........................................................................7
Recommendation....................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
To understand the Business environment its necessary to analysis the element of external
factors and the component of host country. That impact overall structure of organisation and
employer are also affected by it. In this report of Compass Group plc company, the PESTLE
analysis of the organisation will be discussed in detail. Also, porter's five forces and other factors
will be studied. Compass Group plc company is basically a British multinational contact food
service company. Also, this is the largest food service company in the world. This company is
operating in more than 50 countries(Wright and Coyne, 2018.). Here report will discuss about
allocation of business environment and also about application of anyone analytical approach.
Will use application for appropriate data with examples. Therefore, will discuss every analysis
in context of this organisation.
MAIN BODY
Information of the selected business organisation
The Compass Group plc is basically a British multinational contract food service and
companies’ headquarters is in Chertsey, Surrey. This organisation is the largest contract food
service in the world. Compass Group plc was introduced in 1941, 77 years ago and this is a
public limited company. Also, serve their food services all over the world and there are more
than 550,000 employees working in this organization(Weber, 2017. ). Dominic Blakemore is the
CEO of Compress Group plc and Paul S. Walsh is the chairman. The company's major
competitor are Aramark and Sodexo. The chosen company is reaching potential market through
strong distribution network over the year. Through training and development programs, they are
having highly skills workforce in the company. The employees are not only highly skilled but
also motivated for achieving more targets and goals. The group is executing the new projects and
generating better returns of capital expenditures by structuring new revenues flows. They built
strong culture from dealers and distributors not only for promote of products but also investing in
training of sales team for customers’ extraction. Through merger and acquisition, they are
tracking records of integration of complimentary firms.
Compass Group PLC Company is not able to tackle situations by new entry in the
segment and has lost small market share. They are using internal feedback of facing these
challenges by the sales team. The group is higher spending on training and development of

employees as compare to its competitors. Forecasting of products demand is not very good and
leading to high rate of missed opportunities as comparison to its rivals. In industry average,
company's profitability ration and contribution are below (Feng, Wang and Huang, 2014). Firms
are raising more capital to invest in the channels which impact on long term growth of company.
Entity is increasing the competitiveness by market development as comparison of its
competitors. Compass Group PLC Company is adopting new technology which is an opportunity
to practices different pricing strategies in new market. The government is to provide free trade
agreement is a possibility to enter in new market (Rosenberg, 2016). Customer are more
spending on their products and economic transactions are chances to capture new customers and
increasing its market share. The new trends in consumer behaviour is to open of new market.
The shortage of skilled employees in global market which impacts growth of profits of
Compass Group PLC Company. The competitors are adopting new technologies is critical threat
for long term future. Local distributors are growing strengths and competitors are paying higher
margins to the supplier. The demand of highly profitable products is seasonal in natures
(Worldwide, 2014). Under Paris agreement (2016), new environment regulations are threat of
existing products. Increasing trends towards foreign policy in American economy which
negatively impacts on international sales. The currency fluctuation is giving volatile political
environmental condition of market across the world.
Illustration 1: About Compass Group Plc
Source: (Compass Group PLC (CPG.L), 2018)

Compass Group plc provides food and support services. This organisation includes North
America, Europe, rest of the world includes Japan. The firm provides services in business and
industry. The company's finance chief on 4 July said that director Johnny Thomson is set to leave
the company by this year end. This is the biggest catering firm said organic revenue grew 4.8
percent in the first half of the year. Therefore, the organisation is driven by strong performance
in North America and is growing worldwide at increasing rate.
Allocated business environment
PESTLE analysis provides great detail about external factors affecting Compass Group
plc have to face in prevailing macro environment other than competitive forces. Those forces are
not in the control of organisation but can find solution tom it (Heasman and Lang, 2015). These
factors are as following:
 Political factors: This factor play a very importance role in determining the external
component of Compass Group plc's long term profitability in certain country or market.
Therefore, before entering into other country they look at political stability and
importance of travel, food services of that sector in the country's economy. Also, sees
interference of government in travel and leisure industry (Hughes, Champion and
Murdoch, 2015). Also, they look at every political aspect before entering into the new
market. Japan tries to maintain relations with other powerful countries like UK, India,
France. An effort to grow their businesses and politically contentious it may impact on
trade, foreign direct investment. Therefore, can help Compass Group plc to establish as
well as expand its business. Help Compass Group plc can explore and capture various
market opportunities by expanding business in Japan. Politiciansth are now highlighting
an integrated immigration policy to draw vital foreign workers to reduce the skill gap.
This can help the organisation to grow faster. This country has major source of global
capital and credit. Therefore, this can help Compass Group plc to grow faster and earn
more profit.

Illustration 2: Japan's grape
(source: Japan, 2018. )
Japan's economic freedom score is 72.3, marking it economy the 30th freest in the 2018
index. This has increased by 2.7 points and this country has developed a lot. Therefore, will give
positive impact Compass Group plc.
 Economic factors: while going through macro environment Compass Group plc sees
factors such as inflation rate, saving rate, interest rate, foreign exchange. Therefore,
economic cycle that determine the aggregate demand and aggregate investment in the
economy factor is also very importance (Hayward, 2015). They look at comparative
advantages of host country and consumer services sector in the particular country. Also,
before entering the new market economic growth rate of that country is considered. By
this way company can forecast the growth rate of their organisation as well. Japan in the

second largest economy in Asia and it has a mixed economic system. Albeit the
government closely works with industries. Therefore, motor vehicles, ship and processed
food industry are some major industries in Japan. This country need to pay corporate tax
on the income they generate in Japan and abroad. Foreign companies operating in japan
pay tax only on the income generated within the country. So, its beneficial for Compass
Group plc to establish their business over here.
 Social factors: Japan is highly populated country in the world and has to face number of
social problems like long term and slow improvement. Compass Group plc try to
understand the customers of a given market and design the marketing strategies according
to their culture and beliefs. Its very importance to interpret the culture and tradition of the
host country before entering their market (Wisniewski and Yekini, 2015). They look at
entrepreneurship spirit and the nature of the society. Some societies encourage
entrepreneurship while some don't. Due to large population people have to face
unemployment. Therefore, all this factor affects the organisation culture of host country
as well. Firm should be flexible enough to accept culture of other country, so that local
employees can get mix in the organisation culture. Japan ranked as 10th most populated
country in the world. Therefore, japan has to face social challenges.
 Technological factors: This factor helps the organisation to bring development in their
techniques and improve the quality of product. Compass Group plc competitors have
recently has change their technology. Therefore, the organisation to win competitive
advantages in the market has to bring improvement in their goods and services (Köroğlu
Göğüş, Beyhan and Ararat, 2016). The firm before entering host country look at the
technological impact on their product and services. Also, they saw value chain structure
in consumer services sector. Japan is one of the most technologically advanced countries
in the world. This will help Compass Group plc to grow faster.
 Environment factors: Before entering the new market organisation should study
environmental norms and standards of host countries. This factors impact the profitability
of the company in the market. Therefore, firm should see that climate condition whether
it is suitable for their product or not. Compass Group plc should support renewable
energy and use goods and services which are environment friendly in nature. They should
adopt waste management in consumer service sector and this will help industry to grow

faster (Weiss, 2014). Japan is relatively clean and environmentally responsible nation but
there is high risk of natural calamities. Therefore, this is the biggest disadvantage for the
Compass Group plc to establish business over here.
 Legal factors: The organisation should carefully evaluate before entering the market of
host country. Therefore, should look at consumer protection and e-commerce right of the
customer's and this impact the whole company. Compass Group plc should see the anti-
trust law in travel and leisure industry of their host countries. Also, they have to
understand employment law, health and safety law of that countries (Bergamini and
Zambon, 2016). They have to consider copyright and intellectual property law of that
nation. Japan provides good opportunities to employees working there and it is beneficial
for organisation and well as general people. Japan in developing at very high speed and
for Compass Group its beneficial to establish new business. Therefore, this county can
help the organisation to grow more and earn more profit. Japan has advance technology
and is politically also very strong. From this PESTLE it is concluded that company can
become more strong and grow faster.
Appropriate analytical approach
This analysis is the strategy's management tool is used to understand levers of
profitability in the industry. Compass Group plc can use this five competitive forces to influence
the gain power and develops strategies for enhancing long term profit in travel and leisure
industry. This organisation has redefined the way of doing business in consumer services. The
porter five forces analysis are as following:
 Threat of new entrants (High): This highly impact the growth of the company as
customers are satisfied with their market. Therefore, company has to bring more new and
innovative idea. Has to perform better than their competitors. Due to new entry in the
market Compass Group plc has pressure of lower pricing strategy, reduction cost to their
product and providing new value to the customers. To win the competitive advantages
over their arrival firm they need to bring innovation in the product and services (Sullivan
and Amos, 2018). Therefore, can gain advantages by introducing new product in the
market and can attract new customer's. Also, the old customer get reason to buy from
Compass Group plc. This organisation is spending more money on research and
development. New entrants are less likely to compete with dynamic industry where they

regularly defined the standards of their firm. Therefore, the firm reduces the profit
capacity of new company in the market and discourage entry of new firms in the market.
 Bargaining power of suppliers (Low): suppliers have low bargaining power because
there is lot of competition in the market and however provide low price organisation will
buy from them. The company buy their raw material from various suppliers. Compass
Group plc as regular customers of dominant provider position can decrease the margins
of raw material and can earn more profit. The organisation builds efficient supply chain
with multiple suppliers and get the best martial at lowest price (Davis, Lockwood and
Pantelidis, 2018). Company also experiments with product designs so that if the price of
one goes high than they can shift to another. Therefore, Compass Group plc should
develop dedicated supplies whose whole manufactures depend upon significantly less
bargaining power. This can help the organisation to reduces their cost of production.
 Bargaining power of buyers (Moderate): Buyers have moderate power because they
buy goods according to the quality of the product. This put more pressure on Compass
Group plc to earn profit in long run. Customers want to buy the best product at very low
cost. Higher the buyer's ability to bargaining the company provide more discount and
offer. By building large base for their costumers and this helps the organisation to
increases their sales and production process (Zábojníková, 2016). They bring innovation
in goods and services this helps them to limit the bargaining power of their buyers.
Therefore, new product will also reduce the defection of exiting buyers in the market and
help them to do better than their competitors.
 Threats of substitute (Low): if, customer's find substitute goods more useful than they
will buy them. This is the reason that threat of substitute is low. When the substitute of
the goods arises in the market or new product which is similar and meets the need of
customer's. Then, this affect the profitability of the organisation and its threat is higher if
the product offers more value to the customers in Japan. Therefore, Compass Group plc
has to be service oriented rather than just product oriented organisation to become better
than they rival firm. The company need to do market survey for better understanding of
customer's needs and bring innovation according to it (Feng, Wang and Huang, 2014).
Therefore, increasing the switching cost of the customer's and doing bette will lead to
increasing profit.

 Rivalry among the existing competitors (High): Due to huge competition in the market
there is high rivalry among the exiting competitors. Compass Group plc has many
competitors in the market and they have high pressure of doing better than their rivalry
firm in Japan. For competing against their competitors they need to bring better products
and more innovation ideas. Therefore, by this way their can win customers trust and win
competitive advantages over other firms (Hughes, Champion and Murdoch, 2015). By
making product that are unique and differentiation of goods should be of good quality.
Also, by maintaining high standard in their product that can compete better in the market.
They can also collaborate with they with their competitors to increase they market size
rather than just competing for small market. This helps organisation to increases their
profitable in the competitive market. Therefore, can help them to grab more opportunity.
Application of appropriate data and example
In order to consider systematic work performances, it can be stated that Compass Group
PLC deliver great food and support with services in more than 50 nations. For instance, they
provide products and services with online medium to develop significant advantages.
Furthermore, they also consider right thing for people and environment as well. Unique brand
has been sold so that customer attraction could be develop successfully in several areas. In
addition to this, the company can also deliver fully offset pricing and efficiencies that increases
trading statement as well (Köroğlu Göğüş, Beyhan and Ararat, 2016). Profit margin also
successfully developed that provide innovative tools and techniques to work as long term.
Along with this, Compass Group PLC implement forecasting system that expected to
create several benefits with actions. Cost pressure also reduced with replacement of company
performances. As per the company success, it can be stated that cost pressure also reduced
successfully from the business environment.
Recommendation
Compass Group PLC is the British multinational contract foods services company
headquartered in Chertsey Surrey, UK. It has operations in about 50 countries, 55000 employees
are working. They are serving 5.5 billion meals in year. They are operating various brands and
business such as hospitality, restaurants, facilitating management catering, waste management
and building operation (Bergamini and Zambon, 2016).

The company is establishing new business in Japan. So that, they will face many
problems and issues. They should know about cultures, environment, laws and regulations,
policies and procedures, competitors in country. They should know regarding location,
transportation, suppliers, buyers, substitutes products (Sullivan and Amos, 2018). Therefore, they
are implementing strategies and policies for expanding their businesses.
 Location: Compass Group PLC should research and plan for selecting the best location
in Japan. After that they should make sure that choice of location is good for establishing
business. They should know regarding environment of placement. They should know
about skilled employees, easily availability of transportation, suppliers and buyers in the
selecting location (Davis, Lockwood and Pantelidis, 2018). They should analysis of
market where they will sale their products or services.
 Cultures: The company should identify cultures, values, beliefs of peoples who are
leaving in that country. According to cultures, they should establish new business in the
location. They should know about customers’ attraction, taste and preferences, trends,
competitors and substituted products (Zábojníková, 2016). They should identify the
current trends, new technologies etc. They should make sure about cultures, so that they
can establish their business.
 Laws and Regulation: Compass Group PLC should know about all government rules,
regulations regarding employment in country. So that, they should know all policies and
procedures regarding pricing, marketing, customers’ services and others. They should
identify all the internal and external factors which influences their business. As per
economy conditions, they should change rates. So that, they should expand their business
in the Japan (Leistra, 2016).
CONCLUSION
From this report it has been concluded that Compass Group plc for entering into Japan
market has to focus on all the about mention steps in the study. Also, serve their food services all
over the world and there are more than 550,000 employees working in this organization. This
organisation is world leading public sector. In this study PESTLE analysis is done on the basic of
Compass Group plc. This also involves porters five force model analysis which give brief
information about profitability of the organisation. Therefore, shows who to win competitive
advantages in the market.