External Business Management - Term Paper Example

Table of Contents Introduction 2 2 Economic Policy 2 2 Fiscal policy 3 2.2 Monetary Policy 3 3 Income, Wealth, Employment and Occupational Distribution 3 1.4 Demographic Trends in Hospitality Industry 4 1.5 Social Structures of People Employed in Hospitality Industry 5 2.1 Structure and operations of the Local Government 5 2.2 Role and Influence of European Union 6 2.3 Role of Pressure Groups 7 2.4 Legal Framework within the United Kingdom 7 2.5 The UK legislative Process 9 3.1 Types of Businesses in Hospitality Industry 10 3.2 Legal requirements for formation and dissolution of Company 10 3.21 Public Company 11 3.22 Procedure for Formation 11 3.23 Registration of a Private Company 12 3.24 Dissolution of a Registered Company 12 3.3 Structure of a Registered Company 13 3.3.1 Directors 13 3.3.2 Company Secretary 13 3.3.3 Shares and Shareholders 14 3.3.4 Registered Office 14 References 15 Introduction The business these days is associated with quite big structure of different human activities. Actions over the extraction of materials, production of goods, all kind of services including distribution and sales, are performed for profit. Those three main parts of business forms the extractive, processing and servicing sectors, all of each has their own specific characteristics. Even very different in first look they all have been influenced by the same sort of factors mainly two types-internal and external. Internal are those factors which come from within the business itself. They include the so called five M’s-man, material, money, machinery and management. The external factors on the other hand are those factors that do not come from with the organization. Those factors are not controllable as the internal factors and their impact given: could have significant and sometimes dramatic effect over business. The external can be looked as two big groups-micro and macro. Their names best describe the size and the effect they may cause. The micro factors have smaller scale, but do not necessary means their effect is smaller than that of macro factors. It is just the smaller scale they have, compared to the macro factors. For instance, a good example of micro factors can be given: suppliers must be competitive, reliable, trusted and so on. The business should be careful of not become dependable of them, as this hide a risk of negative consequences. Customers: different types of customers have different needs, achieving a customer satisfaction determines the success. Competitors: it is important to know what is happening on the market in way of being competitive. Public: This is any individual or organization which has an interest in business. As an example for macro factors can be given: Political, Economical, Social, technological, Environmental, Legal and Ethical. 1.2 Economic Policy United Kingdom has two types of economic policies namely; Fiscal policy and monetary policy. The three main stances of fiscal policy include; neutral fiscal policy which is put in practice when the economy is in equilibrium, expansionary fiscal policy that involves government spending exceeding tax revenue and is usually undertaken during recessions and the last fiscal policy is the contractionary policy which occurs when the government spending is lower than the tax revenue collected and is usually carried out to pay down the government debt. On the other hand the monetary policy refers to the actual control over the cash flow. The control is done by the government and the central bank that usually looks after the money that is available to avoid the excess money supply in circulation that can lead to imbalance in money circulation in the economy. The monetary policy is also concerned with the control of currency value and the percentage of interests by the banks (www.businesslink.gov.uk). 1.2.1 Fiscal policy The three main stances of fiscal policy are; Neutral fiscal policy which is usually undertaken when an economy is in equilibrium, expansionary fiscal policy involves government spending exceeding tax revenue and is usually undertaken during recessions and finally Contractionary fiscal policy which occurs when government spending is lower than tax revenue, and is usually undertaken to pay down government debt. 1.2.2 Monetary Policy The interest rates in the United Kingdom have stayed at 0.5% for some time although the rate has been between 3% - 4% in the past. However street banks should have passed the savings and public something that has not been done. Interest rates are an important tool in economy control and help keep the inflation rate to manageable levels at approximately 2%. The exchange rates have caused economic challenges to various sectors of the economy including the hospitality industry in the United Kingdom. 1.3 Income, Wealth, Employment and Occupational Distribution The UK hospitality industry contributes approximately 45 billion pounds to the UK according to a report by the British Hospitality Association in 2010. The hotel industry has employed about 3.64 million people both directly and indirectly making it the fifth largest industry in the UK in terms of labour force (British Hospitality Association, 2010). The Hotel industry is very important to the economy of the United Kingdom as it creates a vast employment opportunities to the youths in the United Kingdom. The users of the Hotel facilities are classified into mainly three groups: Leisure travelers, Business travelers and Organizations like the London 2012 committee. The process of globalization, migration of work, had their impact over employment in the sector as well. Many people mainly from Eastern Europe come to Britain with hope for better future. The tendency has helped by bringing good professionals who are working for less which may cause a drop in pay rates in the long run and on the other hand this tendency causes brain drain to the mother countries of the immigrants. 1.4 Demographic Trends in Hospitality Industry The hospitality industry has experienced chronic recruitment difficulties and has a high proportion of hard-to-fill vacancies (Sector Information). The hospitality industry contributes to approximately 14% of the job vacancies in the United Kingdom according to the British Hospitality Industry reports. These vacancies include the positions for chefs and cooks, bar staff, waiting staff and catering assistants. Nevertheless, Bar and waiting occupations are predicted to grow in the next decade at a rate above the industry average and therefore the recruitment for the positions in the hospitality industry is likely to continue being problematic, although since 2001 there has been some fall in the number of vacancies. The south west is focused to have the largest percentage increase in employment in the hospitality sector. Approximately 40% of the jobs in the hospitality sector are classified as elementary occupation while the current form of the industry’s workforce indicates a predominance of young and female workers. The required qualifications, skills gaps and training are among the key challenges in the United Kingdom hospitality sector. Nevertheless, workforce development is also a major constraint in the sector. On the other hand, its predicted that by the year 2010, almost a third of the UK workforce will be over the age of 50, 48% of the hospitality industry workshop is under 29, compared with 18% of the UK economy as a whole. Between 2011 and 2021, UK demographic change would mean; the 55-59 age group will increase by almost one quarter, the 40-44 and 45-49 age groups will decrease by 13%, the 34-39 year old age group will rise by 12%, the 30-34 age group will increase by 22%, the 20-24 age group will fall by 10% and the 15-19 age group will fall by 6% (www.businesslink.gov.uk). As a result, there will be a significant decline in the number of younger workers-the traditional age cohort recruited in the hospitality sector. 1.5 Social Structures of People Employed in Hospitality Industry UK hospitality industry employs over 2.4 million people and a further 1.2 million indirect jobs through the industry’s multiplier effect on the other sectors, such as food supply and building industries in over 170,000 commercial establishment and 90,000 not for profit establishments in both the public and private sectors, amounting to 8% of the nation’s jobs. The hospitality industry is spread throughout the UK and with tourism is the economic driver of many parts of the country’s 406 UK local authorities (Van der Wagen, A2012). The largest local authority is Westminster in terms of the hospitality employment. Nevertheless the areas with the highest number of hospitality jobs are local authorities in major urban areas. The key role that the local authorities play in growing the tourism and hospitality industry in their area lies not just in funding local tourism initiatives but in their general approach to the economic development of the locality and the industry can play in this. 2.1 Structure and operations of the Local Government The structure of local government in the United Kingdom is dependent on the area. In England, there exist two tiers-county and district-which is responsible for the various counties. Although in London, other metropolitan areas and parts of shire England operate under a single structure. The entire county is covered by the county councils which provide around 80% of the services in these areas. Each district council covers a smaller area and provides more local services (www.businesslink.gov.uk). There are five forms of local authorities in the United Kingdom which include: County councils-which covers the whole of the county and provide approximately 80% of services in these areas, including children’s services and adult social care District councils-these covers smaller area although usually provide more local services such as housing, local planning, waste and recreational facilities but not children’s services or adult social care, can be called district, borough or city councils. Unitary Authorities-just one level of local government responsible for all local service, can be called a council (e.g. Medway council), a city council (e.g. Nottingham city council) or borough council (e.g. Reading Borough Council) London boroughs-each of the 33 boroughs is a unitary authority, but the Greater London Authority provides London-wide government, including special responsibility for police, fire, strategic planning and transport Metropolitan districts-effectively unitary authorities, the name being a relic from past organization arrangements, and can be called metropolitan borough or city councils. Below the district level, in some parts of England, there are town and parish councils responsible for services such as management of town and village centers, litter, verges, cemeteries, parks, ponds, allotments, war memorials, and community halls. There are around 10,000 such councils in England and Wales. 2.2 Role and Influence of European Union The United Kingdom Government and the European Union play a big part in influencing the businesses in the industry and among them is the hospitality sector (www.gaurdian.co.uk). This is achieved through taxation, laws, directives and regulations, through encouraging business activity by giving subsidies and support and finally by providing advice and support for business. The European law makes it compulsory for coach passengers to wear seatbelts to boost the safety of tourists who travel by the road and rail transport 2.3 Role of Pressure Groups Pressure groups are the groups representing broad interests of people in order to create benefit over an expanded period of time and include; consumer organizations, professional associations, trade associations and trade unions. The advocacy groups/pressure groups, lobby groups, campaign groups, interest groups or special interest groups use various forms of advocacy to influence public opinion; they have played and continue to play an important part in the development of political and social systems (www.bbc.co.uk). These groups vary considerably in size, influence, and motive; some have wide ranging long term social purposes, others are focused and are a response to an immediate issue or concern. These groups use varied methods to try to achieve aims including lobbying, media campaigns, publicity stunts, polls, research, and policy briefings. Nevertheless, some groups are supported by powerful business or political process and others have few such resources. 2.4 Legal Framework within the United Kingdom There are three different legal systems in the UK (Scotland, Northern Ireland, England and Wales). These are enacted by the UK parliament except the Scottish legal system. It consists of the civil courts, Criminal courts and courts of appeals (www.out-law.com). The legal frameworks in the UK include; The United Kingdom of Great Britain and Northern Ireland, Devolution-England, Wales and Scotland, The law of other countries-foreign domestic law and International law The main differences between the English and Scottish legal systems include; property ownership where there are only two verdicts in criminal law in a trial in England, one is either guilty or not guilty as opposed to that in England where one could be found non- proven. The Scottish system has completely different court structure, again some legislation applies in Scotland but not in England and Wales for instance the Acts/Statutory instruments of either the Westminster or the southern government and finally some cases in England are decided differently to the way they could be decided in England, even though the underlying law is exactly the same. Some of the differences between the English and Scottish jurisdictions include the age of legal capacity (16 years old in Scotland, 18 years old in England and Wales), the use of the 15-member juries for criminal trials in Scotland (compared with 12-member juries in England and Wales) judges and juries of criminal trials have the third “verdict” of “not proven” available to them. Many areas Scot law are legislated for by the Scottish parliament, in matters devolved from the parliament of the United Kingdom. Areas of Scots law over which the Scottish parliament has competency include health, education, criminal justice, local government, environment and civil justice amongst others. However certain powers are reserved to the Westminster including defense, international relations, fiscal and economic policy, drugs law, and broadcasting. The Scottish parliament also has been granted limited tax raising powers although technically the parliament of the United Kingdom retains full power to legislate for Scotland, under the Sewell Convention it will not legislate on devolved matters without the Scottish parliament 2.5 The UK legislative Process The government announces the Queen’s speech at the beginning of each parliament session to introduce the legislation during that session. The bill is presented to the house to receive the first reading; the title of the bill is read out and the House orders the printing of the bill which is always done by the HM stationery office. Most bills are usually introduced in either the commons or the lords but money bills must be introduced in the commons first. The bill is then taken to the house for the second reading where the house considers the key principles of the bill and a wide ranging debate is done. The bill can be thrown out at this stage otherwise it proceeds to the committee stage where the bill is considered in great details and amendments are tabled by the government and the opposition parties. Each amendment has to be agreed by the committee before it can be made part of the bill. There would be votes/divisions on controversial amendments especially on major bills and this stage can take months after which the bill is reprinted to take account of any amendments. The bill then proceeds to the standing committee, to the committee of the whole house then to the special standing committee and finally to the Report stage where the bill returns to the main chamber of the commons. The bill receives further amendments from the MPs in the House of Commons and the government is allowed time to give further thought to some of the raised points during the committee stage. The bill is then taken to the house for third reading where further debate is done on the bill after which the bill is taken to the house of lords and finally to the Royal Assent stage. The European Union is principally composed of the European parliament and the council of the European Union. Competencies in scrutinizing and amending legislation are usually divided equally between the two, while the power to initiate laws is held by the European commission. Legislative proposals require approval by both the parliament and the council to become law. European Union and UK legislative practices have opened new markets, the EU enlargement has expanded the internal market and with it EU standards that now apply in new member states. This has allowed for considerable economic growth and, as an EU member, the UK has enjoyed preferential access to these new markets. The EU market is a negotiating tool; the traditional principle is that the larger the domestic market relative to that of one’s trading partners, the greater one’s negotiating power. The European Union policy would promote the growth of Hospitality industry in UK for instance to the Hilton group of Hotels in the United Kingdom. The tourists would be able to travel freely and this would develop the accommodation sector greatly 3.1 Types of Businesses in Hospitality Industry The hospitality sector includes employment in a wide varieties of businesses based around the provision of food, drink and accommodation (www.hotelmanagement-network.com). The following are the main categories of businesses in the sector; restaurants which usually offer recreational facilities, pubs, clubs and bars, and hotels which offers accommodation facilities as which is key in hospitality industry, contract catering and hospitality services which includes hospitality occupations in non-hospitality businesses e.g. catering staff in a hospital. For example the former National Training Organization was the hospitality Training Foundation which currently combines former travel, tourism and events to develop a sector skills council for hospitality, leisure, travel and tourism 3.2 Legal requirements for formation and dissolution of Company Companies are classified according to the work of their formation rather than according to their intrinsic attributes and includes; Chartered Companies, Statutory Companies and Registered Companies. The procedure for registration of company depends on whether the company is public or private. 3.21 Public Company This is a company where the public can buy shares without various restrictions as compared to private company some commonwealth jurisdictions, and the republic of Ireland. It is a limited company whose shares are freely sold and traded to the public, with a minimum share capital of £50,000 and the letters PLC after its name. Similar companies are called publicly traded companies in United States of America. A good example is Hilton Hotels in United Kingdom. A PLC can either be an unlisted or listed company on the stock exchanges. In the United Kingdom, a public limited company or the abbreviation “PLC” at the end and as part of the legal company name. 3.22 Procedure for Formation The promoters who are desirous of forming a public company must prepare a document called MOA to which at least 7 of them will subscribe their names. The MOA must contain a declaration by the promoters that they are desirous of being formed into a company pursuant thereto and must state; the name of the company with limited as the last word of the name of the company in case the company is limited by shares or by guarantee, objects of the company and in the case of a company having a share capital; the amount of capital with which the company is to be registered with. The MOA of a limited company must also state that the liability of the members is limited. The memo must also contain a clause declaring that the promoters desire to form a company pursuant thereto and the clause is called Association Clause. The MOA is then delivered to the registrar of companies together with some of the following documents: I. Articles of Association a. This contains the regulations for management of the company II. Consent to act as Director If any person is appointed director of the company by the articles which are to be delivered for registration, form No.209 (in company’s Act) must be delivered for registration after being duly completed and signed by him or his agent. 1. List of persons who have consented to be directors 2. Statement of the nominal share capital 3. Declaration of compliance If the aforesaid documents are correctly prepared in accordance with the provisions of the companies Act, they are registered, the registrar grants a certificate of incorporation and the company is formed from the date of incorporation written in the certificate 3.23 Registration of a Private Company The registration of a private limited company does not require many formalities as compared to a public company. The promoters of the company drafts the memorandum of association and then a list of at least one director is submitted with the memorandum of association to the registrar of companies in the United Kingdom for approval. Once a company is incorporated, it becomes a legal person that is separate legal entity from its members. The law however requires that all the limited companies in the United Kingdom to have a registration number which consists of six or seven digits. The number is given upon its incorporation by Companies House, the Government body charged with incorporating UK limited entities. The limited companies are run by one or more directors which by law, there must be at least one at any time throughout the company’s existence. However failure to comply with this requirement might result in the company being struck off and dissolved. 3.24 Dissolution of a Registered Company The process of the dissolution of a registered company is usually outlined in the company’s act. However, a limited company can file an application to the registrar of companies to be closed or dissolved under section 1003 of the companies’ act 2006, providing that it meets the following requirements: 1. When the company has not been involved in active trade within the last 3 months preceding the application 2. When a court order has been issued to the company to change its name and it has failed to comply within 3 months after the court order then the company can be dissolved. 3. Is not subject to any legal proceedings, current or proposed 4. Has not made disposal for the value of property or rights-it is always required in the company’s act that a company submits its annual returns to the registrar of companies of which failure to abide by that may lead to termination of the company 3.3 Structure of a Registered Company A registered company is composed of the following: Directors who are usually in charge of the days to day running of the company operations, Company Secretary, Shares and Shareholders and Registered office. 3.3.1 Directors The law requires that a private company should have at least one director while a public company must have at least two directors. Although there is no limit to the number of directors allowed. There must be at least one real person listed as director, therefore it is not possible for a company to have a sole corporate director. The companies act lays down strict rules regarding the duties and the conduct of directors, and is worthwhile investigating such rules upon taking such appointment. Directors have a personal responsibility to ensure that matters of company law are adhered to at all times and can be held personally liable for non-filling of companies house returns and other infringements of law conducted by a company. 3.3.2 Company Secretary The company secretary is usually responsible for administrative matters. It is generally the duty of the company secretary to maintain official company minute books, statutory registers and prepare and lodge any necessary returns required by the companies’ house. 3.3.3 Shares and Shareholders In general, the rules regarding shares are quite complex, although with the vast majority companies, there is little to consider other than the initial allotment of shares, which may not change from year to year. 3.3.4 Registered Office A registered company in UK must have a registered office, which must be an address within the borders of England, Wales, Scotland, and Northern Ireland. The company registration must state that the company is registered in England & Wales, England, Wales, Scotland or Northern Ireland References Association, B. H. (2010). Contribution of Hospitality Industry to The Economy. London. Dodgshun, G. &. (2004). Cookery for the Hospitality Industry, 5th Edition. UK: Cambridge University Press. Halloway, T. I. (2009). Hospitality, 2nd Edition. Port Melbourne: Cambridge University Press. Jones, P. (2003). Introduction to Hospitality Operations. London: Thomson Learning. Powers, T. &. (CW2008). Introduction to Management in the Hospitality Industry. New Jersey: John Wiley. Van der Wagen, L. &. (A2012). Hospitality Management: Strategies and Operations, 3rd Edition. Pearson Australia: Frenchs Forest, NSW. www.hotelmanagement-network.com. (n.d.). Retrieved March Wednesday, 2014, from htt://www.hotelmanagement.com www.out-law.com. (n.d.). Retrieved March Wednesday, 2014, from http://www.out-law.com Read More