Analyzing Whitbread plc's Business Environment for India Expansion

This report provides a comprehensive analysis of the business environment for Whitbread plc as it considers expanding into the Indian market. It begins by examining corporate governance theories and organizational structure within Whitbread plc, highlighting the application of stakeholder and steward theories. The report then conducts a PEST analysis of both India and Pakistan, evaluating the political, economic, social, and technological factors that could impact Whitbread's business performance. Positive and negative impacts of these factors are discussed, offering insights into potential opportunities and challenges. Furthermore, the report assesses the competitive environment in India, considering competitive rivalry and substitute products. Finally, the report concludes with recommendations for Whitbread plc to effectively establish and grow its business in the Indian market, emphasizing strategies to leverage opportunities and mitigate risks. Desklib provides students with access to this report and other solved assignments to help them in their studies.

BUSINESS ENVIRONMENT
ID: 415336/1554830
Word Count:
INTRODUCTION......................................................................................................................3
TASK 1......................................................................................................................................3
Corporate governance and organizational structure...................................................................3
2. Conducting PEST Analysis................................................................................................5
3. Assessing the competitive environment.............................................................................9
CONCLUSION AND RECOMMENDATION.......................................................................11
Conclusion............................................................................................................................11
Recommendations................................................................................................................11
REFERENCES.........................................................................................................................13
1

INTRODUCTION
Business environment is one which encompasses complete environment
which is prevailing outside the business organization. Further, this environment
affect the company’s working in one or the other manner. It is highly important to
assess the business environment of any business especially when it plans to expand
so that its impact could be known in advance (Cherunilam, 2010). This report is
primarily focused on the analysis of business environment of Whitbread plc. which is
one of the UK’s leading FT 500 companies. This corporate has diversified portfolio of
business ranging from food to accommodation to coffee. This company has largest
coffee chain in UK that is Costa Coffee and Premium Inn is the largest budgeted
hotel in UK. This company wants to expand its business in the emerging markets of
India for which business environment has been assessed. Furthermore, discussion
has been made on the competitive rivalry and substitute product in Indian market. At
last, recommendations have been made in order to establish its existing business in
Indian market.
TASK 1
CORPORATE GOVERNANCE AND ORGANIZATIONAL STRUCTURE
Corporate governance refers to as the measure through which corporations
govern. Further, it is basically a technique by which organizations are directed and
managed. A There are various theories associated with the concept of corporate
governance. The famous theory is of stakeholder theory (Klapper, Lewin and
Delgado, 2011). In Whitbread plc, stakeholder theory of corporate governance has
been used (Vitale, Giglierano and Pfoertsch, 2010). The basic motive of the business
is to maximize the profit but this theory states that a firm owes a responsibility to a
wider group which impact the business performance of Whitbread plc known as
stakeholders. Stakeholders include employees, customers, suppliers, creditors,
government, society etc. The organization works according to the wish and will of
stakeholders. They involves their employees in a decision making process so that
they can satisfy and motivate their workforce. Furthermore, they also take regular
feedback from their customers who help in providing product and services as per
2

their needs and preferences. Stakeholder theory also assists in performing
Corporate Social Responsibility which is a major activity being carried out by the
corporate so that they can generate maximum profits by doing welfare for the society
at large as well (Hazlina Ahmad and et.al., 2010). Along with this theory, Whitbread
plc is also governed by one more theory of that is steward theory (Chow and et.al,
2011). In this, manager of the company is a good steward and they work diligently in
order to attain goals of the firm. They want to maximize the profit and shareholder’s
value. Manager of this organization work in an effective manner to achieve the aims
and objectives of the company. They manage the working of Costa Coffee as well as
Premium Inn. Through this the company can governed themselves and manage to
earn maximum profit.
Furthermore, organizational structure of any firm can be described as how
activities of a company that is task allocation, coordination and supervision can be
directed in order to achieve the aims of organization (Xue, Shen and Ren, 2010).
This structure helps in determining the roles and responsibilities which should be
assigned to employees along with control mechanism and coordination. There are
mainly three types of organizational structure out of which any one is followed by all
the organization as per their nature and size. Moreover, the first kind of structure is
hierarchical structure in which hierarchy has been made where every line is superior
to another. In this, every subordinate is supervised with a supervisor and they are
required to report them. Thus span of control is done in this structure.
The hierarchical structure is followed in mainly large organizations where
many departments exist and they have large number of hierarchies. Second type of
organizational structure is flat structure. In this, no hierarchy is maintained and every
employee work in a single line. This way unity of command is followed. Small and
medium size organization follow this structure because of the small size they do not
have much departments and few employees (Chow and et.al, 2011). Third is matrix
organization structure where the company has complex divisions and one person
requires reporting to more than one supervisor. Furthermore, these are mainly
followed in those corporate which are highly diversified and work internationally.
3

Therefore, Whitbread plc follows matrix organizational structure because it is a highly
diversified company and carries out its working in several countries. Along with that,
the company is also large in size (Botha, Kourie and Snyman, 2014). In this
organization, employees are required to report to more than one supervisor and they
can communicate with each other using free flow pattern.
(Source: Matrix Organization Structure, 2016)
2. Conducting PEST Analysis
In order to establish or develop its business in new emerging markets of India
or Pakistan, the company is required to assess the external market of both countries
so that its effect could be known on the business performance of Whitbread plc. For
this aspect, PEST analysis is a tool of assessing the business environment. The
PEST analysis of India and Pakistan has been tabled below:
Figure 1 PEST Analysis
4
Illustration 1: Matrix Organizational Culture

(Source: External Environment, 2016)
Factors Result
Political  The government in India is federal republic
which shows that this nation has biggest
democracy in the world.
 The political condition in the country is more or
less stable (Chavis, Klapper and Love, 2011).
 Political condition in Pakistan is completely
unstable.
 The taxation system of India is well developed
and several taxes that are income tax, service
tax as well as sales tax are imposed by union
government.
 Privatization has been encouraged by the
government of India.
 There are high rate of corruption in the nation of
Pakistan and company laws are vague as well.
 The government has introduced the new
scheme program of Foreign Direct Investment
in India.
Economical  The economic condition of India is highly
stable. However, the inflation rate is high in this
nation.
 The worst condition of Pakistan has imposed
high threat on business.
 The GDP of nation is 5% which shows that
India possess great opportunities.
 The inflation in Pakistan is rising at a faster
pace and fuel prices are rising every day.
 The foreign exchange rate, employment rate
and many other economic growths indicates
that India has a good expansion opportunity
(Klapper and Love, 2010).
5

 Higher national income growth has boosted the
demand for products of company.
 Pakistan has been dubbed as an “under-
developed” country.
 Rate of recession is low in the country India
which is a positive impact on the industries.
Social  The social trends in India are highly changing
on a regular basis.
 Income inequality is high in India which impacts
majorly on the business performance of the
companies.
 The lifestyle of India is changing and this has
invited many foreign countries to this market.
 The population of the nation is very high which
shows that employment opportunity is very high
and this way company can get better and
skilled employees (Craig and Campbell, 2012).
 The lack of education has narrowed down the
mentality of the people of Pakistan.
 People are less optimistic and have mixed
attitudes towards Pakistan due to the lack of
good services and advanced technology.
 The age group of middle age is the highest
which is a positive point for the companies
entering in the country.
Technological  The technological aspect of India is less
advanced.
 India is increasing its base of technology and
has developed a complete IT sector.
 There is no advanced technology in Pakistan.
 However, there is an immense technological
improvement in Pakistan but the up-grading will
take a long time.
 India possesses one of the strongest IT sectors
in the world, promoting constant IT
development, software upgrades and other
technological advancements.
 Most of the time, India requires to import
technology from powerful nation which
increases the cost of the product (Hamilton and
Webster, 2015).
When the Whitbread plc enters India, then these factors would affect in one or
the other manner. There will be both positive as well as negative impact of these
6

external factors on the organization and its working. Discussion has been made on
the impact of PEST factors on Whitbread plc has been done as follows:
Positive Impact
The government of India is encouraging the investment from foreign investor
so this impacts positively on Whitbread plc. It is because company can do its
investment by opening new venture in the country which will be highly supported by
the government of this country. Along with that, the taxation system of the country is
also systematic which helps in marinating good record of the tax paid. This way
company can manage its cost when it will establish its company in this nation
(Wetherly and Otter, 2014). Moreover, government encourages the new
establishment so firm would face fewer issues while establishing the company.
On the other hand, economical factor will also impact lesser if the Whitbread
plc goes to India and establish its branch over there. It is because the taxation rate is
low in this country so firm is required to pay less taxes will help in generating more
revenue so that profits could be maximized(Cordes, Richerson and Schwesinger,
2010.).
Moreover, the socio-culture factor of India is highly diversified. This country
has numerous cultured people which create good opportunity for the company. The
firm can introduce unique and advanced services in this nation as per the culture of
the country. Furthermore, there are more people of age ranging from 15-45 which
means that the Whitbread plc can acquire larger market share as their segmentation
is mainly of this age group (Vitale, Giglierano and Pfoertsch, 2010). Along with that,
the lifestyle of people of India is changing and they have become more advanced
and shifted the paradigm from traditional to being modern or more westernised. Due
to highest population, employment opportunity is largest in this country which will
help the company to hire more talented and skilled people in the firm. On the other
hand, technological factor can also put positive impact on the working of Whitbread
plc. It is because; company can acquire advance technology using the major IT
sector in this nation. Further, India is emerging more in technological aspect thus;
this will impact positively to the company because they will not require importing
technologies from other countries (Cherunilam, 2010).
7

Negative Impact
The political factor of the country India is less stable and it is having the
federal republic system that is democratic government. Further, this leads to the
increment of heavy cost for establishing new venture in the country (Klapper, Lewin
and Delgado, 2011). Secondly, the economical factor can also put a negative impact
on the firm. It is because, the inflation of the country is too high and for this aspects
company cannot keep the high pricing for its products and services. Therefore,
company can face failure if they introduce the services at lower prices. Furthermore,
company can also face the issues like fluctuating foreign exchange rate while
importing any materials from other countries.
In a similar manner, company also get affected by social factor. The income
distribution in this country is highly unequal which may create issue for the company
to target its market. The ratio of poor people is more and thus the people are less
educated which will be difficult for the company to create awareness and to acquire
major market share in the nation (Chow et.al, 2011). Furthermore, the company may
also get impacted with the technological factor. The nation has little advancement in
the technological sector as compared to other nations of the world like UK and USA.
Thus, Whitbread plc has to import the latest equipments form other countries which
will add extra cost to the company which wail eventually reduce its overall profitability
and growth of the organization. Further, the technologies have not emerged
completely and it will take good amount of time to emerge in the Indian markets
(Klapper, Lewin and Delgado, 2011). Till then firm has to use older version of the
technologies which may lower down the company’s image.
3. Assessing the competitive environment
In order to expand one of the businesses of Costa Coffee in the Indian market,
Whitbread plc is required to assess the level of competition and the threat of
substitute product so that strategies could be designed accordingly. From the model
of Porter’s 5 Forces, 2 forces should be analyzed that are competitive rivalry and
threat from substitute product. For this aspect, it is necessary to understand the
meaning of both the terms. Generally, competitive rivalry refers to as the intensity of
rivalry among the existing competitors of the industry or it deals with the firms which
8

are competing within a given industry and the extent to which competitors put
pressure on each other (Klapper and Love, 2010).
However, this pressure limits the profit potential of all the firms within the
industry. The high rivalry shows that companies put efforts to the gain the most profit
and high market share from each other. In a similar manner, the competitive rivalry in
coffee shop industry in India is relatively high. It is because; there are already
existing competitors in India which has acquired great market in the country. The
largest coffee shop chain in India is Cafe Coffee Day which has captured most of the
share in the market. Barista cafe followed by CCD has the big share from the
market. Other then these, every restaurant and hotel have separate coffee menu
which shows that India has very fierce competition in this industry.
Further, the coffee consumption in the country is limited and every firm is trying
to generate the demand for coffee in the potential customers (Craig and Campbell,
2012). Other than these branded coffee chains, there are numerous local coffee
shops which are also a part of this competition. Each firm try to steal the profit and
market share from each other. Further, the middle income group people are more in
this country and they want best coffee at lower prices. Therefore, the coffee shops
aim to provide coffee at lower prices so that more market could be acquired by them.
Along with that, most of the college going students who are non-earners also aim to
socialise with their friends and have coffee at minimal price. Also, the changing
lifestyle of people of India has opened the gate for the branded coffee shop chains to
open up their outlets in several part of the country. Many international brands have
also entered the Indian market and they also became the part of this fierce
competition. Therefore, there is a cut in the throat competition in this emerging
market of the world and hence, if Costa Coffee entered this market then they are
require to lower down its prices if they want to acquire large market share in India
(Hamilton and Webster, 2015).
On the other hand, threat of substitute product means that the availability of
those products which a consumer can buy instead of a given industry product.
Further, the substitute products are those products of different industry but it gives
similar benefits to the customers (Wetherly and Otter, 2014). In India, the major
9

substitute product of coffee is tea. After that many other products that is milk, soft
drink, soda and liquor. However, it can be assessed that there is a highest threat of
substitute in Indian market. There are still large market which prefers tea over the
coffee. Furthermore, tea could be found available at numerous local vendors which
sell it at lowest prices. Therefore, it can be said that there is a high consumption of
tea by Indian people. This shows that Costa Coffee has a biggest threat of substitute
in Indian Market (Cordes, Richerson and Schwesinger, 2010).
CONCLUSION AND RECOMMENDATIONS
Conclusion
After preparing the report on the business environment of Whitbread plc who
wants to expand them in the emerging market of India or Pakistan, it has been
concluded that the company has a good governance system which helps the firm to
carry out its business in a smooth manner. Further, the PEST analysis of India
reveals that not all factors are in favour of the firm. The political environment is
relatively unfavourable because every opposition government put pressure on the
current government due to which policies get change in less period of time. Further,
the technologies are not advanced which is also not a positive point for the firm.
Moreover, the company has to face multicultural facet in this market while
establishing the outlet. Lastly the competitive rivalry is high in India because of
numerous local and branded coffee shops. Along with that, threat of substitute
product that is tea is also high because large market in India still prefers tea over the
coffee.
Recommendations
After the complete analysis, it can be recommended that Whitbread plc must
expand them in the Indian market as there is a high potential for the Costa Coffee in
this market. For this aspect, company must carry out the deep research on this
market and then make the strategies as to where to locate themselves. Further, the
company must comply themselves with the culture of India and bring changes in
their menu so as to survive in this market. Along with that, skilled and talented
personnel should be appointed in order to influence the people of India towards the
consumption of coffee. Furthermore, the organization must include tea products in
10

their menu so as to attract more and more customers towards their firm. The
penetration pricing strategy should be adopted in an effective manner which will help
in reaching ahead from the competitors. This is how company can get success in the
Indian Market.
11

REFERENCES
Books and Journals
Cherunilam, F., 2010. Business
environment. Himalaya Publishing
House.
Klapper, L., Lewin, A. and Delgado,
J. M. Q., 2011. The impact of the
business environment on the
business creation process. pp.108-
123.
Hazlina Ahmad, N. And et.al. 2010.
Is entrepreneurial competency and
business success relationship
contingent upon business
environment? A study of Malaysian
SMEs. International Journal of
Entrepreneurial Behaviour &
Research. 16(3). pp.182-203.
Xue, X., Shen, Q. and Ren, Z.,
2010. Critical review of collaborative
working in construction projects:
Business environment and human
behaviours. Journal of Management
in Engineering. 26(4). pp.196-208.
Chow, A. T. And et.al,
2011. Broadband network with
enterprise wireless communication
system for residential and business
environment. U.S. Patent.
12