Analysis of UK Restaurant Industry (Research Paper Sample)

Analysis of UK Restaurant Industry
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Abstract
The United Kingdom eatery and food industry has experienced tremendous changes over the recent past. The restaurant industry in the country has experienced a significant change in business due to the outbreak of the Corona Virus and other political factors that surrounds the country. In the recent past, the UK has experienced turbulent political, economic, social, technological, legal, and environmental issues that have also affected the restaurant industry greatly. Bryson et al., (2020) cite that the political situation in the United Kingdom became unfavorable for the restaurant business since the country confirmed its move to pull out of the European Union. Again, other factors such as the rising costs, business rivalry, bargaining powers of suppliers and buyers, new firms' entry into the market affected the hotel industry. For instance, restaurants such as Nandos, McDonald's, and KFC have struggled to balance their revenues and costs. These external forces reduced consumer purchasing powers, resulting in a saturated market that contributed to insolvencies of self-regulating eateries and the closure of renowned restaurants (Bryson et al., 2020). The uncertainty brought about by Brexit has further put the future of the restaurant industry in limbo.
The hotel industry's low profitability or rather revenue is caused by inadequate supply of food supplies, lower purchasing powers of the consumers, and availability of substitute food products in the market. Despite all the challenges the hotel industry faces, they still play a significant role in developing the UK economy (Nag, Han, & Yao,2014). various companies such as McDonald's, KFC, and Nandos have played a significant role in enhancing the lives of the UK people by giving back to society. In other words, the companies take part in active corporate social responsibility that is meant to uplift the lives of the citizens.
Table of Contents TOC \o "1-3" \h \z \u Abstract PAGEREF _Toc84869671 \h 2Introduction PAGEREF _Toc84869672 \h 4PESTLE Analysis PAGEREF _Toc84869673 \h 5Political Factors PAGEREF _Toc84869674 \h 6Economic Factors PAGEREF _Toc84869675 \h 7Social Factors PAGEREF _Toc84869676 \h 7Technological Factors PAGEREF _Toc84869677 \h 7Environmental Factors PAGEREF _Toc84869678 \h 8Legal Factors PAGEREF _Toc84869679 \h 8Porter's 5 forces Analysis of KFC and McDonald Restaurants PAGEREF _Toc84869680 \h 9The threat of New Entrants PAGEREF _Toc84869681 \h 9The Threat of Substitute Products PAGEREF _Toc84869682 \h 9Bargaining Power of Suppliers PAGEREF _Toc84869683 \h 10Bargaining Power of Buyers PAGEREF _Toc84869684 \h 10The Intensity of Competitive Rivalry PAGEREF _Toc84869685 \h 10Corporate Social Responsibilities of McDonald's and KFC's Restaurant PAGEREF _Toc84869686 \h 11Economic Corporate Social Responsibilities PAGEREF _Toc84869687 \h 11Ethical Corporate Social Responsibilities PAGEREF _Toc84869688 \h 12Conclusions PAGEREF _Toc84869689 \h 12References. PAGEREF _Toc84869690 \h 14
Introduction
The United Kingdom is a country known as the hub for tourist destinations. The hotel industry in this country used to perform well due to a huge number of tourists visiting the country annually. However, since the emergence of the Corona pandemic worldwide, many businesses across all sectors of the economy in the United Kingdom have experienced significant changes in their operations and revenue (Nag, Han, & Yao, 2014). The food and hospitality industry are some of the economic sectors that have experienced major changes with regard to COVID-19. Cessation of movements and bans on public gatherings significantly affected the revenues and operation of the eateries. Moreover, some of the eateries remained closed in various parts of the world for an extended period. This led to the low number of customers turning out to eat in the restaurants and eventually low profits; comparing the number of customers who used to visit restaurants in the UK in 2019 and 2020, there is a significant decline.
Source: Calculated using data collected by Open Table. 
The above graphs show the movement in the number of people taking their food from the restaurant before and after covid-19. The restaurant industry has experienced significant drops in operation during the Corona pandemic. Since this industry relies on both local and international customers, the ban on the movement of people from one country to another significantly affected the hotel business, especially in the United Kingdom. The PESTEL and five porter's model tend to explain some of the factors that may have resulted in such movement.
PESTLE Analysis of UK Restaurant
Since the emergence of Covid-19, various factors inherent to political, economic, social, technological, legal, and environmental issues have contributed significantly to low-performance experience in the UK restaurant industry.
source: open table data link; https://www.opentable.com/state-of-industry
The political, economic, social, technological, legal, and environmental factors have influenced the movement of the graph between the years 2019 and 2020.
Political Factors
The political decisions in the country through the government of the UK have profoundly changed the activities that take place in the restaurant industry. The pronouncement of lockdown and cessation of movement by the UK government led to the decline in the productivity of the restaurant industry (Rahimi, & Gunlu, 2016). Ban on public gatherings made many people to shy away from going to the hotels; instead, many resorted to takeaways. Brexit immigration laws also led to the unprecedented shortage in the food industry due to high restricted tariffs on imported goods. This forced many hotels and other companies offering hospitality services to close their business leading to unemployment and reduced per capita income.
Economical Factors
Covid-19 has created a harsh situation in the UK economy, resulting in the low purchasing power of the citizens. According to McDonald et al., report of 2020, the hotel industry's performance has been affected by the rigid economic state of the country. The report adds that UK restaurant sales dropped by 22 percent because of the global economic crunch. Restaurants experienced a massive drop in profit margins because of the coronavirus impacts. Many lost their jobs, leading to low income and eventually low consumption rates for the hotel products (McDonald et al., 2020).
Social Factors
Similarly, productivity in the UK restaurant industry has been significantly affected by various social factors. Consumers` negative feelings towards different restaurant products highly emerged. Since the outbreak of the Corona Virus, people tend to avoid social places and taking food that is prepared somewhere else (Ramanathan & Ramanathan, 2016). Before Corona Virus, people in the UK used to organize social events such as parties and other social activities like weddings, which depended on the hotel industry. However, these activities are no longer available or frequently carried out in the country.
Technological Factors
Technology has played a pivotal role in the hotel industry during the Corona pandemic. Most UK restaurants, for example, KFC and MacDonald, have adopted technological platforms that enhance the communication between their customers and employees. Ordering of meals has also been made easier through advanced technology through a "click and collect" feature (Genoveva & Siam, 2017). Most of the restaurants in the country have adopted the "click and collect" technology that has led to an increase in the restaurants' revenues. For example, KFC has experienced a growth of 24% in the profit margins during 2020 (Rhou, Singal, & Koh, 2016). This performance improvement came about due to an increase in the number of people who were ordering food online.
Environmental Factors
Various environmental factors such as climate change, pollution, and natural disasters have affected the supply chain or increased costs for raw materials (Wee, 2017). The increased remittance of various pollutants to the environment tends to affect the basic products used in restaurants. More so, climate change in the country sometimes tends to be abrupt, affecting the country's consumption patterns.
Legal Factors
Like any other industry, hotels in the UK must comply with rules and regulations that guide their country's operations. Laws on taxation and importation of goods from other countries must be adhered to. In the recent past, the UK passed a motion to withdraw its membership from the European Union. This led to new trade laws that every company operating locally and internationally must comply with. Failure to comply with these regulations may lead to dire consequences, including the business's closure (Yacoub, Nakhle, & Yahiaoui, 2021).
Porter's five forces analysis of KFC and McDonald Restaurants
Porter's five forces is a business model that was developed in 1979 by Michael Porter. This model helps evaluate the competitiveness of firms with considerations on five significant factors (Fitri, 2021). The five factors that constitute Porter's model include threats of new firms' entry into an industry, threats created by substitute services or products, buyers' bargaining powers, suppliers' bargaining powers, and the existing competitive business rivalry.
The threat of New Entrants
While the food industry is difficult to infiltrate due to numerous competitors, ...