JD Wetherspoons was founded by Tim Martin in 1979; it was a simple pub that offered cheap beer, food all day and good conversation. It became a PLC in 1992 and consisted of a chain of 44pubs, this had now grown and the company own over 750 pubs all over the United Kingdom, it is now established as one of the high street pub chains in Britain. In this report I have been asked to both analyse as well as identify changes in the business environment over the years and how this has affected the pub chain Wetherspoons. I will look into things such as the competative and external environment whilst finding key factors which are affecting the organisation. Meanwhile the company’s competitive strategies will be investigated.
2. PEST – External Environment
I have been told to analyse the external environment and from this identify the key factors which are affecting Wetherspoons, the majority of research I did for this was over the internet, reviewing different sites with relevant information then adding my personal views on the topics.
Firstly the political factors which contribute to how Wetherspoons will operate are things such as minimum wage as well as the minimum age their employees need to be which would be over 18 as they are selling alcohol. This will also result in them having to pay a slightly better wage than them under 18 costing the organisation more money. Wetherspoons has smoke free areas in pubs to cater the non-smoking customers and even converting some of its pubs into complete none smoking environments this was before the legislation took place. The smoking ban has not had that much of an effect on Wetherspoons, states BBC news because although there was a decline in bar sales, food sales had a good rise which outweighed the smaller intake through alcohol. Chief executive John Hutson states “The company revealed today that like-for-like sales for the 13 weeks ending 28 October fell 1% despite a 1.4% increase in food sales during the period.”
The current global economic crisis is a really big issue for most pubs and is affecting JD Wetherspoons. It has had to close a dozen of its pubs that where underperforming along with its staff as it feels the brutal force of the recession, meaning cutbacks in most areas. This is because customers have less expendable income in their pockets due to increases in inflation and tax over the last couple of years resulting in people having to be a lot more cautious and careful with spending.
I think that taxation and regulation has had a big impact on affecting the organisation especially with the increases on VAT and in particular alcohol duty which is up by 2%. This will affect Wetherspoons hugely in turns of profit margins as they will be spending on average 16million more than what they did in the previous year of 2012 By looking through the latest annual report of JD Wetherspoons I can see that the company’s and employees total taxes accumulates up to 519.3 million in 2012 compared to the smaller 461million in 2011. This increase in beer tax has been the main reason behind the closure of so many pubs as they are no longer maintaining a sustainable profit.
Nowadays the younger generation enjoy going to the pubs for both a meal and a drink with friends however they enjoy the social side which consist of listening to music and watching televisions etc. This is seen as a more fashionable thing to do now. Social habits are changing and therefore Wetherspoons needs to change in order to keep up to date and remain competitive with other organisations. They did this by acquiring the Lloyds chain which is a more entertainment based pub simply because the younger generation want to enjoy music on an evening out. “Lloyds No 1: Lloyds No 1 refers to the chain of bars that provide a dancing space and music for customers. It also provides the trademark cheap food and drinks.”
One final key external influence that is affecting Wetherspoons would be...