External business environment analysis for Hilton Food Group PLC

Executive summary

Hilton food group is publicly-traded company headquartered in the United Kingdom. This report conducted the macro-environment scan to assess the strengths, risks, and opportunities facing the Hilton food group business model. The first part introduced the organisational hierarchy within the board of management and their profiles. The second part identified the importance of conducting a PESTEL analysis for businesses. External business analysis is a crucial tool for use by the management team to monitor and analyze macro-environmental factors. (Needle 2010 p 416). The macro business environment consisted of six elements, namely political, economic, social, technological, environmental, and legal analysis, was discussed in detail and the Hilton food group business. The conclusion highlighted the key points discussed in the report’s body and reinforced the importance of conducting a macro business environmental analysis.

1.0 Introduction

Hilton food group is an international business corporation dealing with meatpacking. The company based in the United Kingdom but operated in other market segments such as Denmark, Sweden, Australia, and Hungary, among many other European countries. The company also operated under different subsidiaries such as the Hilton Zaandam, Hilton foods U.K, and Hilton foods Denmark. (Hilton Food Group 2020 para 2). The Hilton food group operated within the external business environment. Therefore, it is crucial for the business to understand how each of the factors affect it and the appropriate strategies to conquer more markets using innovative business strategies.

2.0 History of Hilton food group

The first Hilton group meat parking facility opened its doors in 1994 in Huntingdon, United Kingdom. The next 25 years to date is a story of successful expansion of the business facilities both locally and internationally. Hilton food group adopts organic and inorganic growth strategies to reach out to the European and Australian meat markets. Each of the new facilities dedicates its efforts towards meeting the needs of local customers within its jurisdiction. By the year 2000, Hilton had taken over a new meatpacking facility in Zaandam, the Netherlands marking its first attempt to expand to international markets. Inspired by the Netherlands’ success, the organisation opened new facilities in Sweden to supply ICA and Tesco. In 2006 the Hilton Food group opened a new facility in central Europe to serve Slovakia and Czech Republic. The organisation continued with its international expansion into the Australian market by forming a joint venture with Woolworth operating in the Australian market. By 2017 the Hilton food company successfully negotiated another joint venture with Sonae to enter the Portugal market. (Hilton Food Group 2019 para 3).Currently the organisations employ 4944 people with annual revenue of 1.815 billion pounds (Hilton Food Group 2019 para 3).

3.0 Organisational structure

The board of directors is the top decision making organ in the Hilton organisation, led by the executive chairman. The chairman is responsible for the image of the company and its financial performance. His role include leadership and guidance of the board of directors. The board of directors determines the strategy and adopts the strategic moves to help the organisation operate effectively. The board is responsible for creating the policy direction and the business goals with the management team’s help and all employees in the organisation. The chief executive officer is responsible for day to day running of the organisation. There is a chief financial officer responsible for managing all financial matters and advising the board of directors on the same (Hilton Food Group 2020 para 4).
There are also additional four non-executive directors in charge of various departments and business segments in different geographical locations. Robert Watson is the Hilton Food Group executive chairman and joined the organisation in 2002 until he was promoted on 1st July 2018. Before joining Hilton, Robert had worked his way up at Fyole to become the company’s chief executive officer. At Hilton’s current chief executive officer is Phillip Hoffer joined the organisation at its formation in 1994 at the managing director position. Through hard work and discipline, he was appointed as CEO of the group company on 1st July 2018. Christine is a non-executive director and joined Hilton in 2016 after working for 14 years as a food scientist at Tesco Company. She previously worked with food and non- food retailers (Hilton Food Group 2020 para 6). Christine has also served as a non-executive director at Coca Cola Company. John Worby is another non-executive director appointed to head Hilton in 2016. He has a wealth of knowledge and experience in accounting and managing the food sector. The other two non-executive directors include Rebecca Shelly and Angus porter, appointed in 2020 and 2018. They both have extensive experience and knowledge in managing retail and food sectors
The CEO also manages the resources of the organisation on behalf of the board and the shareholders. He executes the policies and the strategic goals as agreed at the board level by designing business strategies. The CEO also acts as the point of communication between the board, shareholders, public and the corporate. He implements visions and goals of the organisation with the help of other human resource members of the organisation.
The organisational structure is categorized as tall with vertical hierarchical span of control. Thus the management is directly responsible for the performance of the employees.

4.0 Importance of PESTEL analysis

4.1Better Market planning

By observing such market characteristics, the marketers will plan appropriately for marketing messages to put in the advertisement for their products and brand popularization (Shatskaya, Samarina, and Nekhorosheva, K., 2016 p 45). The marketing team will plan the marketing messages and products that suit specific environmental characteristics. For example, the Hilton food group can use the PESTEL analysis to plan for the marketing strategy to apply to its various geographical locations. Each segment has its unique socio-political and economic characteristics that can assure good planning in marketing strategies and therefore achieve a greater impact. Furthermore in the current situation, where many countries are in lockdown the Hilton Food group management should pay attention on daily basis of the political agenda and what would be the next step of the government of each of the countries where the organisation is based or have business partners.
4.2Cost-effectiveness

Managing the costs in business is very important since it makes it more efficient and increases profit margins. PESTEL analysis helps the organisation to understand better the law and other important information involved in starting a business in a specific country or region and comply with taxation policies. The environmental scan helps the planners understand the cost of labor, ease of doing business, political environment, and legal and environmental compliance (Bronskaia, 2018 p17). For example, investing in a country with heavy taxation, bureaucracies and corruption increases cost and may reduce profit margins. Other costs may include the need to comply with environmental tax, minimum wage laws, and business registration costs.

4.3Reduce risk

A good investment decision must rely on the reports from an external environmental scan to assess the level of risks before investing. For instance, a country characterized by frequent elections and the political environment is very risky. Political factors such as good policies and laws that improve the ease of doing business can help assess risk levels. The people’s economic situation also helps the organisation to decide whether investment in the country is risky or not. The country’s legal environment also determines the level of risk involved in making an investment decision (Shatskaya, Samarina, and Nekhorosheva 2016, p 48). For example, it is very risky to invest in a country with a weak criminal justice system and high levels of corruption. Nowadays is important to be considered how the country is dealing with the Covid-19 situation and so what would be the implication for the economy.
4.4 Business and product development

An external business environmental scan helps observe the macro factors such as the people’s preferences and so to develop such product that may satisfy this preferences. Each market region has unique needs. Business uses socio-characteristics such as safety attitudes, demographic characteristics, people’s cultures, eating habits, and safety emphasis and income distribution (Bronskaia 2018 p 32). Such characteristics help create business opportunities for product diversification and business growth. For instance, a growing meat-eating culture can provide an opportunity for the Hilton food group to think of expanding into such markets. In another example the Hilton food group may create a different size of packages depending of the market and its specifics. In another example the company may consider collaboration with other established organisations specialized in making burgers or nachos.

5.0 PESTEL analysis

5.1 Political factors

The political environment in most countries where Hilton Group operates is relatively stable. A stable political environment is critical since it reduces the risks of business investment. For instance, countries with political unrest, civil wars, or attempted coups expose the business to massive losses by looting or disrupting business through closure (Bronskaia, 2018 p 22). Hilton so far operates in stable democracies in Europe, such as Sweden, Denmark, and Ireland. Established democracies in Europe and other regions ensure strong institutions that support the rule of law and peace. A stable political climate with peaceful transitions of different administrative regimes provides environment for businesses to thrive. An expansion of Hilton group operations into countries with a history of a stable political climate will reduce risks and enable business growth sustainability.
Foreign trade policies
Some countries have strict foreign trade policies that discourage foreign direct investment and apply protectionism policies. Hilton food group has focused on European markets with countries initially under the single trading unit commonly referred to as the European Union. The European Union encouraged the free flow of trade to member countries in which the United Kingdom was a member before its recent exit (Perera, 2017 p 53). Most of the member countries enjoy a free trading environment without the imposition of international trade tariffs. A friendly international trading policy will reduce the cost of doing business will positively impact the Hilton food group business by reducing the cost of doing and encouraging fair competition. “Brexit” might negatively affect the Hilton group as the countries from the European union will need to introduce international tariffs to the Hilton business. The management should make sure that all information regarding the new rules is up to date.
5.2 Economic Factors

Most European countries have registered economic growth since the economic recession of 2008, resulting in increased employment (Lynch 2018 p76). The level of disposable income has increased for most of the citizens who can secure employment. Countries registering stable economic growth become a suitable destination for business investment. However Covid-19 may cause another economic recession, that might negatively impact the Hilton food group’s revenue. The closure of businesses, loss of jobs, and slow economic growth for the countries may negatively impact the company. For example the lockdown measures implemented in United Kingdom for months resulted into increase of over 1.5 million job losses. More than 2.7 million united citizen enrolled for out of work benefits giving the bigger picture of lost income due to coronavirus (Adams, Boneva, Golin and Rauh 2020 p 26). Lack of income or an income shortfall negatively affected the food sector where Hilton group operates.
Inflation
High levels of inflation would negatively impact the Hilton food group through increased cost of doing business. Uncontrolled inflation increases the prices of commodities and weakens the currency (Bronskaia 2018 p 25). Most of the European markets where the Hilton food company operates have registered low levels of inflation. Most countries such as Sweden, Denmark, and the United Kingdom have low inflation levels in the past, characterized by strong currency like the euro and sterling pound. Low levels of inflation have continued to favor the Hilton food business by managing costs and making their products affordable to many customers.
5.3 Environmental factors

The climate change caused by greenhouse gas emissions has resulted in environmental policies at regional, national, and global levels. The need for compliance with reducing greenhouse gas emissions and environmentally friendly packaging is likely to affect the Hilton food group business. The business is a global citizen and must conform to the policies and regulations set by the governments (Boddy, 2016 p 19). Environmental compliance, such as the need to package food products in renewable and green packets, might increase the costs. Some governments in Europe have introduced an environmental tax, which may increase the business (Shtal and et al. 2018, p 56). The need for compliance with various environmental conservation layers may increase costs to the Hilton food company business model.
Carbon footprint targets
The European Union has set targets for reducing carbon footprint by 20 percent by the year 2020. The countries also need to achieve a 20 percent increase in renewable energy and improvement in energy efficiency. The Hilton food group needs to comply with the policies and legislation put in place by the European Union members, most of which have established subsidiaries. The need for environmental compliance may positively impact the company through increased technological innovation and improved efficiency (Morrison 2016). For example, improving energy efficiency may reduce energy costs for the Hilton food group production plants (Perera 2017 p 59). Technology compliance may benefit the business if they employ the right strategies and cost-effective technologies.
5.4 Technological factors

Improved information communication technologies create more marketing platforms and facilitate e-commerce. The cost of advertising will reduce through increased online marketing platforms. Hilton Food group’s business environment will need to adopt the most updated technologies to remain relevant in the market (Lynch 2018, p 38). Competition in business has shifted to technological applications to reduce costs and increase efficiency. Hilton food group is likely to improve sales and brand reputation by taking advantage of improved communication technologies to popularize its products into new markets. Through the power of the social media and channels such as Facebook and Instagram the company can interact with the customers, understand their needs, read feedbacks, and establish a personalized relationship to improve brand loyalty. Robotic innovation is a new field that can help improve the output in labor-intensive industries such as food packaging. The new artificial intelligence technologies and the internet of things continue to transform the business and improve efficiency. Hilton food groups can take advantage of such technologies to increase efficiency and cut down costs to raise the profit margins (Lynch 2018, p 38).

5.5 Social factors

Lifestyle changes continue to impact the changing business models to adapt to the new changes. For instance, the current social distance measures and health consciousness mean businesses must rethink their business models to adapt to the changing lifestyles (Morrison 2016). More people continue to order their deliveries to the doorstep, and fewer people have the incentives to shop in crowded shopping malls. The Hilton food group must rethink its product delivery model and marketing strategies to align with the new developments (Bronskaia, 2018, p 36). The business can invest more in their internet marketing, purchase, and delivery models as more businesses shift their shops to online platforms to take advantage of the growing market. The growth in the young generation in emerging economies such as china provide new marketing opportunities for the company. Changes in lifestyle, such as increased chronic illness, may reduce meat consumption patterns resulting in reduced sales and revenue, however the company may offer a highly reduced fat products to different markets.
5.6 Legal factors

Governments continue to adjust labor laws and increasing minimum wages for its people. Increased labor costs may increase the cost of doing business and reduce profit margins. For instance, some countries like Sweden have increased the minimum wage to reflect the prevailing economic realities. Changes in labor practices, such as increased labor costs, may negatively impact the business.
Environmental legislation that banns certain packaging materials such as plastics and polythene bags. The governments in the European Union have established a taxation tax that may negatively impact a business by increased taxation. The strict adherence to the increased layer of environmental laws may increase the cost of doing business and require massive investment in new technologies.

6.0 Conclusion

Using the PESTEL environmental may help the organisation to predict negative events or put a base for growth. These factors are out of control by the business, but they can navigate them by aligning their strategies to macro factors’ changing landscape. Hilton food group Company stands a better chance to continue with its growth strategies by employing the right technologies and market intelligence to conquer new territory. The company can exploit new emerging markets and invest in politically stable economies with excellent economic growth prospects. Taking advantage of economically and politically sound needs and employing innovative technologies to comply with the changing legal environment can guarantee its success against Covid 19 economic and health challenges.

7.0 References

Boddy, D. (2016) Management an Introduction, (7th edition), Pearson Press
Bronskaia, T.A., 2018. Marketing environment analysis as the key component of the company’s competitiveness evaluation.
Hilton food group 2019. About Our History. Retrieved from http://www.hiltonfoodgroupplc.com/about-us/history
Hilton Food Group 2020. Board of directors. Retrieved from http://www.hiltonfoodgroupplc.com/about-us/board-directors
Lynch, R. L. 2018. Strategic management. Harlow, England London New York Pearson
Morrison, M.J., 2016. The global business environment: Challenges and responsibilities. Red Globe Press.
Needle, D., 2010. Business in context: An introduction to business and its environment. Cengage Learning EMEA.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Shatskaya, E., Samarina, M. and Nekhorosheva, K., 2016. PESTEL analysis as a tool of strategic analysis in international markets. SCOPE ACADEMIC HOUSE B&M PUBLISHING, p.47.
Shtal, T., Buriak, M., Ukubassova, G., Amirbekuly, Y., Toiboldinova, Z. and Tlegen, T., 2018. Methods of analysis of the external environment of business activities.