Changes in the Global Environment due to Financial Crisis
Impact of Financial Crisis on Internationalisation
Fast food has transformed the eating habits of the entire population, whether they are resided in UK, U.S., Asia or any other country. The changing trend of the eating habits evidently exhibits that fast food industry is one of the industries that have developed over the time. Even though fast food consumption has shown an increasing pattern of factors that has affected the health in many ways such as increased overall calorie intake, contribution to weight gain, and elevation in the risk for various diseases, yet, the consumption trend at the same time has represented an escalation in the recent years (Parsa & Kwansa, 2002).
The popularity of the fast food restaurants has escalated the level of competition within the industry marketplace, especially in UK and even in the rest of the world. In fact, the trend of extreme high competition is being alleged to remain the same in the future as well considering the fast life, time convenience, cost of living, changing habits of food intake and so forth (Parsa & Kwansa, 2002).
Globalisation and the increased demand of fast food restaurants are the leading and prominent aspects that persuade to internationalise our operations from the UK and European market to other countries as well. In this regard, it is vital to gain an insight about the environment of the country so that future trends can be analysed on the basis of how the changes would affect the company and its operations in the future (Parsa & Kwansa, 2002).
PEST (Political, Economical, Social and Technical) analysis is one of the most appropriate and effective tool that facilitates in evaluating and forming the most effective strategies to determine the opportunities that can lead to growth. According to Griffin (2010, p. 127), "PEST analysis is a useful strategic tool for understanding business position, market growth or decline, potential and direction for operations of business."
Considering the prospect countries to which the operations of our fast food franchise can be expanded, India and the U.S. seems to be promising and feasible options when internationalisation is concerned. However, the PEST analysis is the tool that would help in determining the overall environment in association with the strong and weak points for business expansions to these countries.
PEST Analysis for India
India is a country with culturally diverse people, which clearly signifies that different cultural taste is present at large. This also means that fast food industry is likely to grow and succeed at the national level due to different cultural appetite and tastes. However, the deep analysis from PEST would explicate the clear position of the overall environment of the country.
The political environment is one of the external forces that are characteristically controlled by the government. Moreover, the change in policies, legislations, regulations, trading standards and the quality of the product are also enforced by law (Mehta, 2006).
Considering the Indian market of the food and fast food industry, political liberalisation is one of the attributes of the country that allows the international companies of the industry to easily enter into the market and run business operations. The government promotes the international fast food and other companies to come and operate in India, for which the Indian government has removed and minimised the tariff and non-tariff barriers from the boundaries (Mehta, 2006).
Taking into account the economic trends, it typically incorporates the disposable income, employment, inflation, exchange rates, distribution trends and market routes, and so forth. The economic environment leaves a huge impact on the competition prevalent in the market. Employment is one of the most significant factors with reference to the fast food industry. Furthermore, the trend of the fast industry has significantly elevated even at the time when the world has experienced the economic downturn (Nagle, 1999).
Taking the Indian market into consideration, it is one of the emerging markets for the global players in the fast food industry. The economic trend of the country apparently demonstrates the fact that the rapidly growing population especially in the middle class is changing the overall lifestyles of the people. This indicates the fact that more people are being engaged in the work life, which leaves them less time for preparing the foods. Due to this reason, fast food market within the country is growing at an unprecedented rate (Nagle, 1999).
Another factor is the recovery of the setup costs of fast food restaurant. Since the potential Indian market is growing at a constant speed, thus the increased sales alleviate the recovery of the costs involved in the setups and lead the industry towards growth and profitability (Nagle, 1999).
The socio cultural environment is substantial to consider while international expansion is concerned, because it has a direct relationship to the costumer behavior which is the key driving force. The demographic structure of markets, formation of attitudes and opinions are the imperative aspects to observe (Whit, 1995).
However, from the current social trend of the Indian market, it is noticeable that the competition in the overall life of the common people has transformed the simple life into a busy lifestyle. This means that more members of the families are working, which is leaving them less time to make prepared foods at home. This is eventually making them shift on the fast foods, which is quickly prepared with not spending huge amount of money (Whit, 1995).
Technology and its advancements in the recent times have entirely changed the ways of doing businesses, regardless of the industry. Technological factors typically include the industry focus on technological effort, speed of technology transfer, rates of obsolescence and so on. In this regard, various new advancements in technology such as SAP (Business Information Systems) have resulted in faster bill processing, global tracking systems and like that with the prime motive to facilitate the consumers with convenience as well as enable the management to pull out information in just few clicks regarding the sales and turnover (Mukherjee & Patel, 2005).
India, in this regard, is already a state that constantly makes investments in technological systems. With matured technological industry, India is one of the potentials for the fast food industry that would facilitate the company with hi-tech applications and experts (Mukherjee & Patel, 2005).
PEST Analysis for United States
United Stated on the other hand is also a country where millions of people reside belonging to diverse cultural backgrounds, which indicates the fact that this country is also culturally diverse when taste and fast food consumption is concerned. The fast food industry in the U.S. is one of the dominating industries, as the incline towards the fast food consumption is relatively high amongst all age groups. In relation to the overall country analysis, the in-depth PEST evaluation would provide a much better understanding of the trends of the people.
The government of the United States plays an active role in defining, controlling and monitoring the policies and regulations with reference to the international trade (import and export). Even though, the government encourages international bodies to operate business activities, but at the same time, they have defined very strict policies for the international businesses related to the food industry (Nestle, 2007).
This is usually implemented with the intention to keep the food industry in a good condition. Therefore, policies are a pivotal element within the food industry, mainly due to the reason that the epidemic of obesity in the recent times have escalated, which has affected the health of many of the people, especially the children. Therefore, the policies with reference to the fast food industry have become very authoritative. Additionally, the government and the legislation also implements laws and regulations to keep a check and balance on the fast food industry with the prime objective to offer the population with environmental friendly products (Nestle, 2007).
The economical environment on a broad spectrum explicates the fact that fast food industry, despite of all the economic downturn and rise, has increased and exposed high profits under all economic circumstances. In addition, the low cost of investment for a fast food restaurant is another economic aspect that has helped the enterprises to grow within the region. This is generally because the modules need to be followed that are predefined from before (Haberberg & Rieple, 2007).
The employees are the major constituents of the fast food restaurants. The cheap and flexible labor in this industry is one of the advantages, who are trained by the companies. The low cost of fast foods make it a demanding item within the industry, while the economic flux does not make the employees lose their jobs, as the demand is not lowered (Haberberg & Rieple, 2007).