External business analysis

External business analysis

External business analysis is very critical to Wyatts’ strategists and other leaders of similar organizations for various reasons. It helps them get a better understanding of the effects of multiple factors in the organization’s macro-environment on its performance (Shtal, 2018, p. 3). Knowledge about these effects is very critical for organizations to make strategic decisions. Wyatts Café experiences significant opportunities and threats. The organization is among the many companies in the United Kingdom’s food. That factor offers Wyatts and similar organizations the chance to exploit the opportunity that comes with the fact that people must always eat at all times (Shtal, 2018, p. 5). One of the most significant challenges is the rising wages, something that significantly impacts the organization’s profits.  This paper covers some of the political, economic, socio-cultural, environmental, and legal factors that affect Wyatts’ performance. The essay analyses the current trends in each of the stated categories and their impact on the current and future performances of Wyatt.

Political Factors

The constitutional monarchy and the modern democratic parliament are some of the many factors that contribute to the UK’s political stability. The United Kingdom has, for over a significantly long time, maintained positive relations with many countries of the world, including the United States (Leyland, 2016, p. 7). The UK is a permanent member of the United Nations. That enables it to have significant influence over important matters that affect the world. For the same reason, it supports changes in the world’s affairs in areas such as politics, science, culture, military, and economy (Leyland, 2016, p. 17). In all the stated areas, the UK tries to ensure that the topics do not affect the nation negatively. It also supports all the projects that positively impact the UK’s economic development. However, the nation has received significant criticisms from individuals, organizations, and countries on its relations with some communist countries of the world (Cini and Borragán, 2016, p. 97). The positive political factors give Wyatts and similar organizations to reach their markets and raw materials without with less significant difficulties. The negative political factors call for Wyatts to employ various strategies to overcome them in its bid to achieve meaningful success.

The EU referendum is one of the most significant political changes that had significant impacts on the economic development of most European countries. The change created a lot of uncertainties about the relationship between the United Kingdom and the European Union (Vasilopoulou, 2016, p. 219). One of the significant results of the change is the depreciation of the pound, a factor that significantly impacts the performance of companies in the UK. Organizations such as Wyatt are now suffering a significant increase in the prices of commodities, something that substantially lowers their net income (Jensen and Snaith, 2016, p. 1302). The implementation of laws that restrict the movement of people between the European Union and the United Kingdom has significantly affected the entry of laborers to the UK, a change that causes an increase in wages.

Economic Factors

The economic stability experienced in the United Kingdom offers Wyatts and similar organizations in the United Kingdom many opportunities for development. According to the World Bank (2018), the United Kingdom is the fifth-largest economy in terms of GDP (Lee and Werner, 2018, p. 26). The government has always tried to maintain favorable economic conditions and implements various strategies for improvement. For example, the 2008 recession significantly affected UK’s financial performance, but the government implemented multiple strategies that prevented the occurrence of more economic trouble (Castaño, Méndez, and Galindo, 2015, p. 1496). In 2017, the United Kingdom experienced significant financial challenges as well. There was a substantial rise in the prices of almost all consumer products and services due to the increase in the cost of importing goods. Despite the negative change, companies such as Wyatts did not suffer a lot because the wage costs remained relatively constant. By April 2019, the minimum wage stood at about £8 (Filimonau and Mika, 2019, p. 357). Even though the wage costs have remained constant even during tough times, Wyatts needs to put in place measures that will enable it to overcome the rise in the same soon. The current trends in the nation’s economy present significant opportunities in terms of taxation as well (Filimonau and Mika, 2019, p. 358). The current tax rate for organizations such as Wyatts stands at about 19 percent, but it is expected to fall t about 18 percent by April 2020.

Even though international trade is not a significant part of Wyatt’s operations, the organization is still affected by its supply chain. Wyatts is involved in international trade, at least to some extent. The organization imports several products which it uses to prepare various products offered at the Café. Coffee is one of the significant products the Wyatts imports. Coffee also constitutes a significantly large percentage of the products offered by the Café (French, 2018, p. 23). The amount of coffee grown in the United Kingdom is by far much lower than the required by various restaurants and beverage companies in the region. For that reason, companies are forced to import most of the coffee they need for their daily operations. According to French, the coffee imported by various organizations in the United Kingdom in 2018 was worth about £393.5 million (French, 2018, p. 25). The product was bought from some of the significant coffee producers in the world, such as Colombia, Brazil, Indonesia, and Vietnam. The cost of coffee in the United Kingdom has increased significantly over the past few years, a factor that has been attributed to the fall in the value of the pound (French, 2018, p. 27). The situation has remained relatively constant over a significantly long time. The constancy squeezes profit margins for companies such as Wyatts. The decrease in profits is mainly due to the increase in the cost of production.

Cafes such as Wyatt and many coffee businesses in the United Kingdom have, for a significantly long time, relied on laborers from outside the region for many reasons. First, the number of immigrant laborers was significantly high (Filimonau and Mika, 2019, p. 361). That means that the supply of labor was relatively constant throughout the period in which the UK and the European Union had positive relations. Organizations kept wage costs relatively low, a factor that enables them to make more profit through their activities. According to a study by Cini and Borragán, more than 65 percent of workers in the UK’s hotel industry were from outside the UK but within the European Union (Cini and Borragán, 2016, p. 35). Many executives experienced that less than two out of 50 job applicants were from the UK during most of their recruitments. The research predicts the magnitude of the adverse effects Brexit will have on Wyatt and other organizations in the UK’s hotel industry in terms of labor supply and wage costs.

Social Factors

Several social factors affect Wyatts’ performance. Some cause threats, while others promote the organization’s activities. Population is one of the most critical factors for all forms of business (Castaño, Méndez, and Galindo, 2015, p. 1496). The number of people within a specific area is directly proportional to the number of customers available. The United Kingdom has a significantly high population. According to the population data (2019), the UK had about 664 people by the end of 2018 (Simon, 2019, p. 19). The population is expected to increase even with time to create more workers and more consumers. However, population growth poses some threats to the performance of Wyatts and other organizations in the UK’s hotel industry. One of the risks is the significant aging of the population with time.  According to Simon, more than 18 percent of the UK population was above 65 in 2016 (Simon, 2019, p. 23). The number appears to increase at a relatively fast rate, something that poses a significant challenge to Wyatts and other organizations in the region. The change will significantly reduce the number of workers, a factor that is also likely to increase labor wages due to the reduction in the labor pool (Vasilopoulou, 2016, p. 220).  The United Kingdom has, for a significantly long time, been known worldwide as a society that values social classes and religious differences. Wyatts can take that as an opportunity by making appropriate changes to meet the needs of all the different classes and religious groups.

Technological Factors

Several technological factors are likely to affect Wyatts’ performance. According to Gutierrez, Boukrami, and Lumsden, the United Kingdom is one of the most technologically developed countries in the world (Gutierrez, Boukrami, and Lumsden, 2015, p. 5). Organizations in the hotel industry are always trying new technological ideas in their bid to gain a competitive advantage over others. Wyatts has also made significant steps in the same area, but it needs to always update its systems to remain on top of the game (Gutierrez, Boukrami, and Lumsden, 2015, p. 17). However, Wyatts should understand that the introduction of new technological ideas is not only advantageous but disadvantageous as well. It presents a threat because it also enhances the performance of competitors who implement them.

Environment Factors

Environmentalism in the United Kingdom is one of the factors that present significant economic opportunities to Wyatts Café and other organizations in the region. According to [[]]], hospitality organizations can attract customers who value environmental conservation by investing in environmental programs. Wyatts can do the same by supporting the government, the media, and local councils in providing awareness about the impact of various economic activities on the environment. Wyatts can also make a significant impact by directly minimizing its implications on the environment. The weather conditions in the UK, particularly during summer, attract substantial numbers of tourists. That factor offers Wyatts and other organizations in the hospitality industry an opportunity to make more profit from the significantly large number of visitors who come to the UK during that period.

Legal Factors

Many legal factors affect the performance of Wyatts and other organizations within the UK’s hospitality industry. Environmental laws are among the many regulations that affect the performance of almost all the industries in the region (Arif and Hossin, 2016, p. 13). On the same, Wyatts can satisfy the requirements through ways that help it exploit the presented opportunities. The organization can include ecological conservation as part of its corporate social responsibility (Arif and Hossin, 2016, p. 17). Doing so will enable the organization to promote its corporate image, a change that can have a significant impact on the organization’s reputation at the local and international levels. The implementation of stronger consumer rights in various parts of the United Kingdom presents many opportunities for hospitality organizations such as Wyatts. The company can benefit from the change by improving the quality of its products and customer-service (Arif and Hossin, 2016, p. 21). Improving the quality of products is one of the ways to promote the attractiveness of the company’s products in the market, something that attracts more customers. The result is increased sales and net profit.

Conclusion

The above is a summary of Wyatts Cafe’s external analysis. The paper covers the political-economic, social, technological, and legal factors that can significantly affect the performance of the organization. Some of the elements present significant opportunities, while others cause threats. The essay shows how each of the elements creates either risks or opportunities. The manager and the strategists of the Wyatts Cafe can conduct a similar analysis in a bid to develop ways of overcoming the threats and exploit the opportunities to achieve meaningful progress.

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