Write about the External Environmental Factors Affecting Business.
A business plan gives a general overview of how a business intends to operate, citing its objectives, visions and missions as well as the intended functioning. In short, it’s a guide to the business. A successful business plan means a successful business as a whole. However, no single operation is free from challenges and factor either around or within it and in this case a business plan is no exemption (Nixon, 2010). This paper will seek to identify the external environmental factor that affects the success of a business plan. The article will use Sephia Restaurant in Sydney as a case study.
A business environment is divided into parts, internal environment and the external environment. The internal business consists of factors inside the business that directly affect the functioning of the business plan, while external factors are factors outside the business that either directly or indirectly affects the business success (Kotler, 2006). The market research done in Sydney restaurants shows that it’s a dynamic industry that calls for proper management if at all the business are to realize their objectives successfully.
The success of any business plan to a large degree depends on how effective the organization management is handling the different internal and external factors (Albright, 2008). Sephia Restaurant for inst ant must consider the nature of the entire external business environment in Sydney location. It’s worth noting that, the factors are dependent on the physical location of the business (Palmer, 2014, p. 34). However, some factors like the natural factors are hard to control, but this does not mean that there is nothing the organization can do about them. The Restaurants’ business plan in its feasibility analysis should have identified measures which can be used to save the situations in times of catastrophes beyond human control.
Sephia is a Restaurant in Sussex, Sydney which opened its doors of operations in 2009. Sephia Restaurant, being in the Hospitality industry is likely to face the following factors. The external environment as per the pestle analysis comprises of the following main environments each of which affects the business success
The political environment keeps changing due to change in government policies and regulations. Most of the government regulations impacts on businesses either positively or negatively. Government regulations might affect the company’s wages, menus, or the level of customer satisfaction. For the company to realize its goals and objective, it’s important to keep an eye on the current government trends that might affect the company’s success (Albright, 2008). Political factors include all the state laws, regulations from the government agencies and any other government of Sydney’s Laws that might influence the running of restaurants in Sydney. The regulations are effectively managed impacts on the success of the company’s business plan positively.
The second factor affecting business plan success is the rates of taxation. Taxation of Sydney is not static and thus keeps fluctuating, changes in tax if not planned for can lead to the company making losses. This, therefore, means that is Sephia Restaurant is to succeed in its business plan, it’s important to consider the taxation rates in the country. Tax affects the overall net profits and revenue
The second class of factors that affects business success is on the economic factors. Sydney just like any other economy faces good and bad economic times. These changes in economic status determine how consumers will take their meals in the restraints. If there are hardships in Sydney, it means that Sephia Restaurant will experience a decline in the flow of customers. Depending on how the condition is managed it results to either success or failure of the company’s business plan. Economic downturns are, therefore, a primary factor that business owners in Sydney should lay under consideration on and adjust their prices in accordance with the current market conditions. During recessions, for example, the company should consider lowering their prices to remain competitive and attract customers.
Mergers. Business merging during tough economic times is also a common aspect in Sydney. Most businesses in the restaurant industry have considered merging up, which strengthens their market share and increases the company’s profits. When such a case arises, Sephia Restaurant will experience a challenge in meeting its objectives since its market share will have. The company can as well decide to merge with another company in the same industry to increase the chances of realizing their objectives and success of their business plans.
Prices of commodities; the restaurant success is as well affected by the prices of the commodities and ingredients they use in their food preparation process. When the economy is tough prices of these commodities goes up and vice versa (Albright, 2008). This means that the Cafes’ business plan success will at a great extent are affected by the economic change which in turn affects the prices of different commodities used as raw ma trials in food preparation. Examples of these products are meat, vegetables, and prices of cooking oil among others.
Unemployment; when the rates of unemployed citizens n are high people will not be in a position to afford consuming tea at the star buck, people view it more of a luxury. Unemployment leads to tough economies as the majority of individuals cannot afford most of the services offered by the restaurants. This, therefore, means that the company might not manage to realize its business plan.
The cultural factors surrounding the location of Café Sydney as well results to either success or failure of the business. The cultural belief of the people determines their taste and food preferences. This is because people’s norms and beliefs affect the food they eat. In this case, the business plan of Café in Sydney is to succeed a thorough research should be conducted on the cultural beliefs of the target consumer base and food preparation made depending on their preferences (, Keller & Burton, 2009, Kotler, 2009. P.14).
Secondly, the current cultural forces in Sydney are developing and project favorable conditions in the performance of restaurant industry. There is an increasing trend in the population for example. Population increase means an increased consumer base. Sydney’s population is growing to say that the successes of businesses in the hospitality industry have a higher chance to flourish
In addition to the increase in the population, the level of middle-class citizens is also on the rise in Sydney. The increase in incomes means an increase in the purchasing powers of customers as well as an increase in the consumer base (Palmer, 2014). This has led to alterations in the rate of food consumptions hence positively affecting the success of the Sephia Restaurant’s business plan.
The last cultural factor affecting the restraint performance is people’s preferences and tastes for their wellness and fitness. People have lately realized the need to eat healthy food with fewer health risks. As a result, fast food restaurants have been threatened due to the effects of obesity resulting from excessive consumption of fast foods. This, therefore, means that the success of Sephia Restaurant is to some extent affected by the customer’s preferences on their health as well as their heath fitness.
Technology is as well a contributing factor to the levels of food consumption to café Sydney. Technology affects the manufacturing and processing of food ingredient and the entire supply of food. Technology is drastically changing worldwide. This means that any organization aiming to succeed and remain competitive in the current market trends must incorporate operations that meet the up to date technologies (Armstrong G. , 2013). The current trends in technology in the world as well as in Sydney have seen the life of consumers shaped in certain ways, several innovations have been made in the food industry which includes; phone apps through which can order and pay his meals, eco-friendly food packaging, freeze dried coffee. This, therefore, means that technology has an open-ended restaurant to make money several avenues for reaching and increasing their customer base.
To enjoy the benefits of technological innovations, Sephia Restaurant should ensure they incorporate the latest technology into their business operations (Kotler, 2006). The extent to which a company embraces and makes use of technological innovations affects how successful his business will be. Technology has enabled the company to produce healthy friendly food hence attracting more customers who are keen on their health.
Technology also helps the restaurants in reducing wastages, as the current technology allows for proper food conservations. For instance, use of the deep freezers to preserve food. Once the company has cut on losses, this helps reduce operating costs and hence increasing the chances of increased profits (Nixon, 2010, pp. 23-25).
The company has embraced the current technology and is making good use of the internet to market itself and make its presence known worldwide. There are also mobile apps that the company has created which the customers can use to make online orders and payment. This has helped the company tap an extensive customer base and increase its revenue due to the wide market penetration and competitiveness.
The natural environment as well determines the success of a restaurant. When the climatic conditions are favourable it means that the supply of food commodities will be high, as a result, their prices will go down. For a company like Sephia Restaurant which primarily depends on these food products in their daily operations, this will be an advantage. The company will prepare food at favorable costs hence their prices will also be low and competitive to attract more customers and grow their market share. This has been one of the natural factors in Sydney. On the other hand, unfavorable natural conditions like droughts and floods result in high prices of conventional market commodities hence influencing their costs, increase in costs impacts on the operating expenses of the restraint hence affecting the business plan success of the hotel (Armstrong, 2012, p. 234).
In each country, there exists a series of legal regulations that govern the restaurant industry. These bodies are concerned with the health of the people. For, Sephia Sydney success in its business plan can be affected by these statutory factors. For instance in Australia their regulation that must provide information on the amounts of calories in the food on the restaurant’s menus. The regulation requires that the calories count be indicated on the food menu so that the customer make the right decision (Albright, 2008, p. 116). To implement such laws are made the managers must critically think of how to convey such information as well as make decisions regarding the company’s menu to fit the health preferences of the consumers. Failure by managers to effectively manage the legal factors can result to the company failing to realize its objectives as per its business plan.
The restaurants as well are faced with the task of notifying that food security of its existence and activities. For the business plan to be successful, the owners must ensure that the hotel legal requirements as per the food regulations body and any other set laws. The health legal matters as well affecting the existence of the restaurant and should be adhered to at all times if the business is to realize its success and growth
The company faces stiff competitions from other business in the same industry. For the company to achieve its business plan success, the management should ensure that the company acquires a competitive advantage and that it has a growing market share (Nixon, 2010). Failure to remain competitive means that its competitors challenge the business success. Companies should engage in a constructive competition which results into positive contributions towards the success of the company as stipulated in the initial business plan for the organizations (Armstrong G. , 2013, p. 96).
In conclusion, it’s evident that several factors affect cafés in Sydney; other food joints also experience the factors in the foods and beverages industry. The success of any business highly depends on how well the company can manage its internal and external factors. Restaurant managers and owners should, therefore, be on the look out to identify the various factors affecting their business from the external business environment and attend to the in the best ways possible. The political, economic, legal, environmental, cultural and any other external factors should all be given equal weight. Failure to manage one of them may result in the business not realizing its objectives (Armstrong, 2012). Effective management of the factors explained above as well as the internal factors increase the chances of an organizational success through achievement of growth strategies and objectives in the company’s business plan.
Business success or failure will result from how the business factors are managed. The factors cause either positive or negative effects on business success. As have been seen in the entire discussion a business plan success is very critical as its results portray the results of the entire business. Successful business plan means a successful business as a whole.
Reference
Albright, K. (2008). . “Environmental Scanning: Radar For Success”. Information Management Journal , 112-116.
Armstrong. (2012). Principles Of Marketing. N.S.W: Pearson Australia. New Zealand: Cengage Learning.
Armstrong, G. (2013). Principles of Marketing (5th ed.). Pearson Education Inc: ISBN 9781442531109.
Kotler, P. a. (2006). Principles of Marketing. New Jersey: Pearson Education Inc.
Nixon, J. (2010). “Exploring SWOT analysis – where are we now?: A review of academic research from the last decade”. J. Journal of Strategy and Management. , 23-25.
Palmer, D. (2014). Heinz keen to grow Golden Circle brand, Australian Food News,. Australia: <www.ausfoodnews.com.au>.
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