Today, hospitality industry is among the sectors that have a greater opportunity to grow and expand due to the changing consumer needs. However, no matter the opportunity it has, there are also challenges accompanied to it in that it has to keep on changing its products and services as well. It is arguably so that meeting the changing consumer needs is not an easy task at all. It is a situation that challenges the entire functions of the hospitality industry, think of its human resources, finance department, marketing and advertising, legal function and even its board of directors.
The mention of these departmental functions is not in vain since it will help this study develop a comprehensive management control plan later on. Moreover, this study will aim to discuss the current trends within the UK food and beverage sector and analyse the contemporary management control techniques deployed in a chosen branded hospitality company. Food and Beverage Operations This section will offer an overview on food and beverage operations. As such, it will present to the reader certain elements of food and beverage operations that any hospitality industry should take into consideration and more so, the ethical considerations therein.
Whenever one thinks of food and beverage what comes into mind are the physiological needs of the population. In fact, hospitality industry is among those sectors that directly affect the fundamental needs of the consumers. From this assertion it can be argued further that failure to produce quality and standard products in this area affects the fundamental needs of the consumers. This is very important to note especially when considering the best management control technique to be applied. It is clear that such controls must safeguard the consumers’ interests not only economically but also health wise.
This will be elaborated further in the subsequent sections. As mentioned, most hospitality industry have either lost good clients or even closed down their business due to the fact that they failed to safeguard the consumers against certain health issues and standards. Obesity as a disease has been attributed to the operations of the hospitality industry and this has yielded a lot of controversies in the sector. This is what this study means by ethical considerations. Yes, an argument that a hospitality ndustry has failed to mitigate obesity through its products is not a financial issue or marketing issue or human resource issue; although it affects them in a one way or another it is essentially an ethical viewpoint. It touches on the ethical sphere of the industry so to speak. In the global context, obesity continues to pose great health problems to many people, there is growing number of patients and its severity is also spreading rapidly (WHO 2009). The report released by WHO (2009) further indicates that people who die due to overweight or obesity are estimated to be three million.
In this regard, most legal practitioners and other health groups attribute the problem to the consumption of certain products in the hospitality industry (EIRiS 2006). It is also believed that this issue has turned into a serious business concern due to the fact that the problem has been attributed to the use of various food and beverage products with obesity (EIRiS 2006). The major risks identified have been attributed to the changing regulatory environment, litigation and resistance exhibited by the consumers.
It is also very important to note that industries dealing with food and beverages risk jeopardizing their sales everyday. This reminds the reader of what was mentioned earlier in that ethical considerations may not be a financial issue or marketing and advertising issue but somewhere a long the way it will impact on each of these departments very badly. Once the consumers lose loyalty with a certain product the chances are that they will move away from it. In this case how will the industry make sales? According to surveys, Britain has recorded so many cases of obesity in the last twenty years (EIRiS 2006).
It is also believed that in UK, 14% of the population suffers from obese-related health complications and that the figure has increased to 22%; 50% of women and two-thirds of men have been regarded as overweight or obese. Moreover, among six British children one of them is believed to be obese (EIRiS 2006). It is arguably so that obesity is largely caused by lack of physical exercise and a persistent orientation to sedentary life. According to surveys by British Medical Association (2008) eating habits associated with obesity consist of snacks’ consumption and frequent binge-eating and eat outs.
The report by BMA further indicated that apart from the influence of parental diet and behaviour, marketing also plays a major role in creating obese culture. It argues that the modern economic trends catalyse the consumption of foods high in fat, sugars and salts. It is believed that manufactures have intensified their advertising and for that matter has lured many people towards the consumption of their unhealthy foods (British Medical Association 2008). This study believes that most food industries have potential risks associated with obesity and for that matter need to develop strategic control measures that can help mitigate the risk.
It is without doubt that food and beverage producers have no intention whatsoever to expose their consumers to obesity and other risks but there is a lot that still needs to be done yet. It is also evident that most food and beverage producers do not want to face the fact, as in, they contribute to obesity risks; they want to argue that their products are standard and friendly to the consumer. Of course this is expected of them since no one can be against his business but ethical matters should never be taken for granted.
Looking at what has been discussed so far the reader can anticipate the possible management techniques that will be discussed later in this study. It is worth pointing out that a greater part of the control systems in hospitality industry projects themselves within an ethical framework. What is at stake at that point is the consumer and his health. Again and again, food and beverage consumption is a serious issue so, one does not expect the control systems of a chosen branded company to be like that of a bank or an Insurance company or a Publishing company.
It is also worth noting that the issue of obesity is not the only risk in the beverage sector. There are so many other risks that this study challenges the reader to research more about; however, it uses obesity as an example whatever has been mentioned regarding obesity applies to all other risks as well. On this background, the study will refer to this section when it shall be analysing the contemporary management control techniques applicable to a chosen branded company. Current Trends within the UK Food and Beverage Sector This section will discuss the current trends on food and beverage sector in UK.
It will not limit itself to any particular product so it aims to give a more detailed and comprehensive explanation of these trends. It is believed that UK leads in producing the best possible food and beverage products in the world over (Jones 2010). The fact that it offers a sophisticated and demand-led market makes its consumers access the best hospitality products there can be. According to recent surveys, the value of the entire UK retail grocery market was approximated at 128. 2 billion pounds which is equivalent to US $266. 6 billion.
This recorded a growth rate of four percent from 2006 although it decreased by 11. 9 percent in 2008 due to inflation that hit food prices (Garnett 2009). Additionally, the consumption of food and other non-alcoholic drinks generated an expenditure of up to 9. 7 percent per the total household spending in UK (Garnett 2009). Actually, expenditure on household constitutes the largest mode of household spending as compared to housing and transport (Wells 2009). Notably, there have been some instances where supermarkets have succumbed to pricing pressure.
This is because the UK food industry has succumbed to an enormous amount of consolidation as far as structure of the industry and the inclinations of major consumers are concerned (Potter 2008). It is also worth mentioning that the increased supply in the supermarkets did strengthen their supply chain (Shields 2008). Leaders of supermarkets, for instance, Tesco and Sainsbury resorted to ‘factory gate pricing’ which serve as means to shorten the distribution system in the case of high volume products (Otley 2005).
In the same line, Tesco’s Lorries direct collection from the manufacturers hence eliminating the need for the wholesaler. This study believes that the reader is conversant with the famous chain of distribution where the wholesaler picks from the producer and extends the goods or services to the retailer and then finally they get to the consumer. Now, as of the case in UK, most retailers focus on frozen food and fresh produce although there are still high chances that the need will grow in all other products in the future days (Young 2008).
There has been a decline in the number of participating companies due to overcapacity in many industries. This participation has been attributed to mergers and exit of industry (Kirby 2007). In this trend, companies that did not succumb to this decline opted for a more vertical integration, for instance, getting involved in “whole growing, manufacturing and marketing process” (Chenhall 2005). This trend occurred mainly in the meat and dairy industry (Chenhall 2005). Consumer Trends This study believes the trends in food and beverage industry is also dependent on the behaviour of the consumers.
Today, they will want to but this and tomorrow they will want to buy that. This leaves the manufacturers deliberating on whether to produce this or that product. This is the point, as in, the trends in food and beverage industry cannot disregard the interests of the consumers. It is believed that in 2007 and 2008, UK consumers paid higher for products such as petrol, food and other utilities (BHA 2005). Again, the overall consumption of the UK consumers declined due to the fact that most consumers became more-value conscious whenever they purchased food, drinks both alcoholic and non-alcoholic (BHA 2005).
Given that most consumers in the UK prefer to go for those products that offer value for their money then premiumisation may occur in the packaged food market hence increasing demand for the private label products (Neirburg 2010). This in turn may damage the consumer’s demand for organic and fair trade products. This trend also affects the consumption of meal solution products, for instance, ready-made meals which many consumers regard as poor value. This may also increase the demand for ingredients since most consumers may prefer to consume foods cooked by themselves in a bid to save money.
It actually revives the consumption of dessert and cake mix products (Neiburg 2010). Earlier in this study it was pointed out that obesity is a serious issue in UK and has continued to affect many food and beverage sectors. Needless to say, the UK market is likely to be affected due to the growing health consciousness in household products, say; foods. Automatically, consumers will avoid consuming foods and beverages that have high fat, and salt and sugar content.
UK government has not been left out in ensuring that such industry comply to health standards a thing that has left many industries re-evaluate their production processes especially on eatables like crisps and other ready-made meals. This has mainly focused on reduction of fats; salt and sugar content (British Medical Association 2008). It is however important to note that inasmuch as health policies have affected many industries, food and beverage manufactures have utilised the situation in creating new opportunities for themselves.
Products such as probiotic drinking yoghurts and bread as well as mixture of milk and omega oils have been introduced as a substitute for products that are high in fats or sugars or salts. Inversely, the manufacturers have produced low-fat products, low-sugars and low salts as a counter product to the already existing products which can be said to be “obese-vulnerable” (EIRis 2006). This is important to understand the trend in food and beverage sectors and how new products came into market. This study cannot leave out the trends in organic foods which is a very important issue in the hospitality industry.
It was believed that at least one-third of British population claimed to eat organic foods although after a slowdown in the organic food consumption and discount shopping led to the decreased consumption in organic food (EIRiS 2006). In the period 2007, UK’s consumption of packaged foods grew in almost the same rate as that of 2006 (Parker 2009). The demand for sweets, and snack food, for instance, grew moderately higher compared to the recent periods. Moreover, in 2008, UK experienced recession which led to higher interest rates, council tax and transport costs.
This fact affected the income of many consumers leading to other consequences like consumption of occasional premium food products. As such, consumers preferred to treat themselves to dining out to avoid spending much (Parker 2009). According to surveys UK has over 26, 416 restaurants and it is also approximated that in 2005 it served approximately 734 million meals while in 2004 it served 721 million meals (Foodservice Intelligence 2007). The value of these meals has been approximated to be 7. 61 billion pounds including the drinks (Foodservice Intelligence 2007).
Additionally, it has been approximated that consumers spend 12 billion pounds on eating out in restaurants, pubs and cafes (Keynote 2006). Overall, British populace often dine out more compared to their European and American counterparts (Datamonitor 2009). Furthermore, the Britons averagely consume 633 meals outside their homes compared to US who consume 614. In value the Britons spent 1,224 pounds more than USA consumers (Datamonitor 2009). Table one below represents some of the major trends in the restaurant sector in the period 2002-2005. PeriodOutletsMeals (millions)Food purchasesFood sales million pounds)Food and Drink sales (million pounds) 200225,9516961,4424,9427,134 200325,9647021,4474,9657,170 200426,2087211,5015,1447,429 200526,4167341,5375,2707,612 Source: (Horizons 2010) EMCC Dossier This section will give an overview of the EMCC Dossier and its repercussions on the European food and beverage sector. This sector cannot be exempted from unprecedented challenges which necessitate a restructuring of the entire sector. This study believes that by carrying out an analysis of the dossier it will provide the reader with another in-depth analysis of the trends shaping the sector.
It is believed that food and beverage sector generates about two percent to the EU gross domestic product and that it contributed 19. 1% of the total share of the EU manufacturing gross domestic product in 2004 (Neil 2009). Additionally, it is arguably said that the food industry attained a turnover of 815 billion euros and also provide employment opportunities for over four million workers (Neil 2009). It is for this reason that food industry has been considered to be the largest employer in the manufacturing sector (Fay 2008).
It is also believed that majority of SMEs play a significant role in the food industry. Moreover, about 99% of the enterprises constitute of the SMEs where these firms recruit 61% of employees and also contribute to the industry’s total turnover with 49%. The micro-enterprises which constitute of one to nine employees make up the greatest segment which represents 79% of all companies. However, small companies with 10-49 employees account for 17% and medium sized companies with 50-249 employees account for four percent.
The large companies which consist of over 250 employees account for at most one percent of all the European food industry companies (Fay 2008). The major trends affecting food and beverage industry revolve around the following factors (Garrison 2008): a)Developments in the political and regulatory sector, for instance, CAP reform and food safety policies. b)Changes in technology, for instance, robotics, sensor technology, ICTs and biotechnology just to mention a few. c)Globalisation and growing competition in the international market, for instance, liberalisation of trade. )Consumer trends and changes in social values, for instance, demographics, lifestyle changes, family patterns and consumer skepticism just to mention a few. Contemporary Management Control Techniques This section will provide a detailed analysis of the contemporary management control techniques deployed in a chosen branded hospitality company. It would be worthwhile to raise the following question: why would any branded hospitality company require solid contemporary management control techniques? All these will be discussed in this section.
It would be worthwhile to begin by looking into some of the contemporary management control techniques in accounting function. This is because hospitality companies as profit making enterprises need to ensure that they do not misuse their resources financially. Whenever a hospitality company adopts effective management accounting processes it will stand a better chance to pinpoint, gather, measure and report information that can help the managers make fruitful decisions. Apart from decision making the same information can be useful in planning and controlling all operations in the company (Liacat 2008).
Some of the newly management accounting techniques that a hospitality company can adopt include “activity-based costing, strategic performance measurement system, target costing, benchmarking and value chain analysis” (Liacat 2008). This study believes that a hospitality company strives to refine its entire profitability disposition and also cutting its costs to the minimum. Budgeting can be very useful to this end. Additionally, activity-base costing enables the management to determine reliable cost information for product pricing. As can be seen, new control techniques can be very important in mitigating financial risks.
Essentially, they can help to seal all opportunities for fraudulent practices. New techniques will give strong accounting systems that will record every transaction that takes place in the company. It has also been mentioned that it helps to regulate costs and even detect unnecessary expenditure. If this study considered the case of Cadbury Schweppes which is a major producer of the Dairy Milk chocolate it would be argued that risk assessment processes extends to matters related to health of the consumers. Earlier in this study a reflection was given on obesity as a major health issue in the food and beverage sector.
So, it is high time this study looks into some of the risk mitigation processes that can be used. Definitely, chocolates are high sugar products and if not well controlled they can enhance opportunities of obesity. This is a managerial issue and it requires serious and consistent modern management control techniques. This study believes that any management control techniques should not contradict the standards put in place by the government. Therefore, this is the first thing to be considered even before delving to other control techniques no matter how modern they are.
In this regard, Cadbury Schweppes should audit its product as per the legal policies in place. This will reduce arbitrary legal conflicts here and there. However, in order for Cadbury Schweppes to operate in a fairly free market without obliterating the food safety regulations enacted by legislators it can develop its own voluntary codes on marketing practices. It can establish a feedback system where consumers react to the product. This technique helps the management to improve its products and ensure that they meet every detail expressed by the customers (Brooks 2007).
It can be argued and justifiably so that the goal of the public is to consume healthy diet and so chocolate and other milk related products must contribute to this goal. A technique that the management can consider adopting is that of “product labelling”. Nutritional labelling helps the consumers identify healthier foods (Brooks 2007). Additionally, nutritional labelling captures all information regarding food labels. This technique helps to deal with nutritional claims that can arise once the product is launched in the market.
In order to make it more effective, another technique would be designing health warnings indicating how the product can be harmful and at the same time how the harm can be dealt with (Brooks 2007). This as a control technique enables the management to safeguard its product against unprecedented health claims. Cadbury Schweppes, for instance, can include in its warning the dangers of consuming calories as well as the need to do bodily exercises to burn off the calories. It is also important to note that any management control technique adopted should not be concentrated to the product only but also to the employees.
Management control system should be an integrated technique mainly in motivating employees’ behaviour and evaluating their performance as well (Horngren et al. 2005). Management control techniques help the managers maintain and create new patterns suitable for the organizational activities (Simons 2008). It was mentioned earlier in this study that the new management techniques revolve around all the departments in the company. It would be worthwhile if the company would utilize an organizational structure that involves the employees fully.
The new technique can be achieved through adopting a matrix model where the management and the juniour staff take part in the decision-making process of the company. Therefore, the program or the new technique that the managers would consider going for should not create a barrier between them and the employees but rather involve them in policy-making. Looking at what has been established above it can be seen that control techniques focus on three fundamental objects namely the product, the relationship between the employees and the management and the financial function.
These are key pillars for the well-being of the hospitality company due to their symbiotic relationship. So, how would the management of Cadbury Schweppes benefit from the management techniques aimed at reducing health claims? How does that relate to the human resource function or financial function? It was demonstrated how the management can initiate certain risk controls techniques in the product itself. Therefore the next thing to consider is how that gets implemented. It can be argued and justifiably so that the implementation of the greater part of the control techniques derives from the contribution of the employees.
In this regard, the management needs to develop guidelines for the employees concerned so that they may implement every detail of the technique. It is important to note that employee involvement in the would-be control management techniques intended by the management is very important otherwise it would be very difficult to have it in place. Moreover, there are some techniques that the management can adopt and yet may create a barrier between the employees and the management. Take the case of the finance department where the management cuts costs denying employees certain privileges that they enjoyed before.
The management upon adopting such control techniques should involve the employees fully in the implementation of this policy. This will make them feel that the implementation of such control is not to suppress them but for the well being of the company. It was also established that product labelling can be one of the control techniques that can be adopted by the management. There are some intricacies that accompany the process, as in, the employees involved in the product labelling may find it very tiresome or involving especially if they did not do it before.
Now, no matter how the management wishes to implement the new technique it has to motivate the employees in implementing it. This again means that they have to involve the employees in the implementation process so that they may find it enjoyable to carry out the labelling process with precision and accuracy. So, one thing must be very clear to the reader in that the overall management control technique should be that which incorporates the entire processes of the company. In other words, it should be very comprehensive and self-participatory.
This study believes that the control technique rests on the vision of the hospitality company. This is one of the surest ways to ensure that all other control techniques extend to other functions of the department. As such, the control systems in place should not be inductive in nature but deductive so to speak. To shed more light to this argument, it is from the vision of the hospitality company that the management can develop control techniques and not the other way round. For instance, product labelling is a way to ensure that only quality products get to the consumers which can be expressed in the vision.
It can be that the vision of Cadbury Schweppes is to be a leading hospitality company in the world in delivering quality products. This vision will be best implemented in how each product meets health standards. Quality Management Systems (QMS) “By definition, quality management system is a set of co-ordinate activities geared towards directing and controlling an organization in order to continually improve the effectiveness and efficiency of its performance” (Department of Trade and Industry n. d. ).
It is worth noting that the QMS focuses on production of quality products rather than the products themselves and so it does not detect defective products as such (Department of Trade and Industry n. d. ). All said and done, hospitality companies need an achievable strategy to beat the odds during stiff competitions. The implementation of ISO 9000 is a prerequisite for the hospitality industry to be effective competitors. Furthermore, the implementation of the ISO 9000 provides “a set of quality standards which help organisations to be effective competitors” (Raisinghani et al. 005). These set of quality standards assists the management to enhance performance and higher quality output. Besides, the organisation’s quest to become a sufficient competitor rests on eight-principal model as follows: “customer focus, leadership, self-managing teams and self-involved employees strategy, process approach to activities and resources, system approach to management, on-going improvement and strategic supplier and customer partnerships” (ISO 9001:2000). It is however important to note that among the eight systems mentioned above, customer focus is of great importance.
It entails the perception of customers regarding quality and their quality expectations (Piscar 2007). Conclusion As can be seen food and beverage sector touches on key fundamental needs of the consumers. These needs constitute the physiological needs so to speak. It has been noted that the major factors that a would-be management control technique in a food and beverage industry would incorporate are quality products, health and finance. Additionally, a greater part of the management control techniques would be ethical in nature.
This was linked to the issue of obesity that continues to affect food and beverage operations in UK. It was also indicated that UK leads in food and beverage industry globally. This industry is the largest employer in the manufacturing sector. The study has also discussed some of the trends in this industry and it has shown that they revolve around political factors, regulatory standards, food safety policies, changes in technology, globalisation, changes in competition, consumer trends and social values just to mention a few.
Control techniques in the accounting function help to mitigate fraudulent behaviour and eliminating arbitrary spending. Among the control techniques that were discussed include nutritional labelling and warning designs. It was also mentioned tat control techniques focus on product safety, employee involvement in policy making and finance.