Economic Environment

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HNC Business Management

Economic Environment

Module Leader:

Dan O’Hare

Essay By:

Nichola D. Robinson
(21042952)

Deadline Date
Tuesday 13th November 2012
A. Using economic concepts from the module; identify the key factors from the economic environment that affect an organisation of your choice.

B. Evaluate the effect of these factors on the organisation.

You should identify a range of relevant factors, and concisely ascertain the impact on your chosen organisation.

J D Wetherspoon plc. is a British pub chain founded in 1979 by Tim Martin, promoting low prices, long opening hours and no music, they also operate the Lloyds No. 1 chain, Wetherspoon Hotels and to date own 860 outlets.

Around the early 1990s, they began selling off their smaller or less profitable outlets and replacing them with larger premises close by, there are now around 100 outlets which were originally part of the chain and none of the earliest outlets in the chain are still part of the estate.

Reporting record sales in 2009 with takings growing by 1.2% and pre-tax profit up by 13% to £66.2 million; although it was a record for sales it did not reach record profits due to the increases in government tax and duty.

December 2009 saw a plan to invest £250 million in 250 new pubs across the country over a five year period.

Using both PESTEL and SWOT models to analyse the economic environment surrounding the UK Pub Industry, the following are key factors have been identified as having had an impact on J D Wetherspoon and their present position within the market, by outlining these factors and their current impact this will give insight into their future sustainability within the market;

The Licensing Act of 2003 was introduced in order to allow Clubs, Pubs, Bars, Supermarkets and Service Stations to apply for longer opening licences, granting of such licences is subject to the consideration of the impact they would have on the local community, ideally it is thought that this will reduce binge-drinking and public disorder by staggering closing times, however, in theory this would allow thousands of premises to stay open longer to the point of some opening 24/7.

In reality only a few establishments have been granted 24 hour licences of which only a small minority are Pubs and Clubs with the majority centred around off-trade outlets like Supermarkets, this has had less of an impact on the problems associated with the UK’s drinking culture as first envisaged as town pubs who do not have the licence to open later are finding it difficult to compete with any pubs that do.

J D Wetherspoons are one of the few establishments who have been granted the opportunity to open their doors earlier, for longer and close later and have ultimately reaped the rewards, becoming the first venue in 2007 to open its doors from 9am which contributed to a total of £250,000 breakfasts being sold each week, giving an overall increase of 40%.

2006 saw the first steps in the demise of the British Pub when the Government introduced the Smoking Ban in Scotland followed by England, Wales and Northern Ireland in 2007, the overall aim of banning smoking from workplaces and enclosed public places was to reduce exposure to second hand smoke (passive smoking), however, to the non-smoking consumer this was an inconvenience with most declaring they would prefer to ‘stay at home’, this was evident particularly around the winter months when the change in weather became a deciding factor and ultimately saw a rise in the ‘Stay at home drinker’.

The introduction of the Smoking Ban saw a slight dip in activity for J D Wetherspoon, up until 2008 revenue steadily grew at a rate of 1.7%, however, J D Wetherspoons had already prepared for the inevitable Smoking Ban as in 2005 they implemented no-smoking areas in some outlets before converting to a complete ban in 2006.

The evidence of the ban was seen between 2007...
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