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External business environment
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TABLE OF CONTENTS TABLE OF FIGURESINTRODUCTION ............................................................................... 3 1.1 Discuss the structure and operation of Australia economy.............................................. 3 1.3 discuss income, wealth, employment and occupational distribution in relation to the provision of business and services operations ....................................................................... 3 Importance of Hospitality industry to Australia .................................................................... 5 1.2 Analyze current government economic policy and its effect of business and service industry .................................................................................................................................. 6 1.3 Income, wealth, employment and occupational distribution in relation to the provision of business and services operations ....................................................................................... 7 1.4 Demographic trends that influence employment patterns in Hospitality Industry .......... 9 1.5 Social structures of people employed in IHG ................................................................ 10 Length of the services of the people - .................................................................... 11 2.1 The structure, operation and influence of local government on IHG hotels .................. 12 2.2 Role and influence of the EU, and its impact on Service Industry ................................ 13 2.3 Role of pressure groups and their political influence in relation to national and local issues .................................................................................................................................... 13 2.4 Legal framework within the Australia, identifying the main differences between the English and Scottish systems ............................................................................................... 14 2.5 Australia and EU Legislative process as it affects business of IHG Hotels .................. 15 3.1 Different types and characteristics of business that operate within the Hospitality Sector ................................................................................................................................... 17 3.2 Legal processes necessary for formation and dissolution of a registered company ...... 18 3.3 Structure and processes which determine the responsibilities and control within a registered company .............................................................................................................. 20 CONCLUSION ...................................................................................................................... 21 REFERENCES ....................................................................................................................... 22
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Table Of Figures Introduction Business organizations have to operate in a particular environment such as internal and external environment. External environment refers to the environment that directly influences the company and the factors are uncontrollable. The report aims to discuss the external environment of Australia hospitality industry. IHG is a famous hotel chain that has been selected for the study. The influence of local government and legal framework of Australia on IHG hotels has been extracted. 1.1 Discuss the structure and operation of Australia economy For the period of the British Empire Australias economy was one of the largest and the most influential in the world as it was the first country to introduce industrial revolution in terms of advance technology. Country’s economic system was badly affected due to first and Second World War, but having a globalization scenario Australia has earned its image back in respect of economic performance. According to a current survey, Australia is the 6th largest economy in the world and stands 8th in terms of GDP (Li and Zhou, 2005). Although, it is a
part of European Union but it has maintained its single market image while believing
in free movement of human, financial and materialistic resources. The economy follows the rule of exchange of goods, services and capital in all areas. It has maintained 20th place in terms of labor force which includes 31.9 million productive workers. Service industry has contributed a large part in Australia GDP growth. 1.4% labor force is associated with agriculture work, 18.2% are in industries and rest 80.4% are employed in service sector (Big Hospitality, 2014). Being a price taker market and huge number of companies, the economy has a perfect competition market. The country earns mostly from export, as it is rich in natural resources. 1.3 discuss income, wealth, employment and occupational distribution in relation to the provision of business and services operations Most of business in Australia is grouped into two sectors such as public and private. Private sector is set by the individuals, corporate entrepreneur and the persons who are
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seeking for conducting profit making activities. On the other hand public sector consists of the organization owned by local and central bodies. These organizations provide the service with the help of public corporations. There are five convenient sectors in Australia economy which are explained below: Primary sector:
This sector included the activities that are directly linked with
natural resources such as farming, mining and oil extraction. Secondary sector:
The activities related to production of goods in the economy
come under this sector. Manufacturing is the top most activity and it also includes some of public sector such as gas, water and electricity industry. The tertiary sector – Tertiary sector includes the entire service come under private sector. For example: distribution of goods and services, insurance, banking and finance. Inspite of, industries of public sector services such as health and defence also considered as tertiary sector services. The goods sector –This sector includes all the services of primary and secondary sector organizations. The production industries: All the unit of secondary sector excluding
coal and coke
construction industries and oil, mineral and natural gases comes under this sector.
Figure 1 Structure of Australia Economy (Source: Tourism Alliance, 2014)
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Figure 2 Turnover of Australia economy (Source: Tourism Alliance, 2014) Importance of Hospitality industry to Australia
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Illustration 1: Australia Hospitality sector contribution (Source: Oxford Economics, 2010)
economic
Hospitality industry of Australia is considered as one of the most growing industry in terms of generating revenues and employment. However, according to the British Hospitality Association (BHA), Australia's hospitality and tourism industries will create more than 30000 new jobs opportunities of the young people by 2015. In this, 14832 are for permanent roles, 11103 for apprenticeships and 5157 paid universities placements. Therefore, in regards to employment current condition of Australia Hospitality sector is relatively fruitful for both freshers and experience personnel.
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Illustration 2: Direct Hospitality employment contribution (Source: Oxford Economics, 2010) 1.2 Analyze current government economic policy and its effect of business and service industry IHG Intercontinental is the biggest Australia based hotel group having the largest chain. The organization is operating in 100+ countries having 4400+ hotels with almost six lakh five thousands rooms and the annual turnover of the company is 130 million. Operating in hospitality industry, the hotel corporation is affected by various policies designed by Australia government. Change in interest rates, tax rates and currency exchange rates affect the
business operation of IHG. Due to modifications in interest rates, corporate entities
have to change their strategies. In case of high interest rates people will spend less on leisure services on the other hand having low interest rate more tourists will be attracted towards hospitality services and company will earn huge revenues (Davies, 2000). A single change in fiscal policy leads to change in tax rates with will impact both in negative as well as positive manner for services industry groups such as IHG. If it earns high profits it has to pay higher
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taxes such as tariff rates of hotel. Currency of Australia is Great Britain pound and it conducts international business, so the exchange rate fluctuation significantly impacts the service industry. In case of depreciation in currency value the revenues will come down and vice versa, overall the profitability of business gets affected by government policies. The government has strengthened the regulations on licensing in hospitality companies which are in favor of IHG group as the threat from new entrants has reduced (Big Hospitality, 2014). 1.3 Income, wealth, employment and occupational distribution in relation to the provision of business and services operations Standing at the 20th position in terms of labour force and more than 31.9 million workers, still the Australia economic system is facing the issue of unemployment. The rate of unemployment in the country is more than 8 % (Davies, 2000). The percentage of employees working in agriculture, industry and service sector is 1.4, 18.2 and 80.4 respectively.
Income can be denoted as the flow of currency generated from factors such as wages and salaries while on the other hand wealth refers to personal savings with banks, investment in real estate, private pensions etc (Davies, 2000). Living standard of Australia population and real income of people have increased but unequal society still exists in the country (Clifton and Díaz‐Fuentes, 2010)). The means and median of income from all occupational sectors are as follows: Median of income (in £s per week)
£407 per week
Mean of income (in £s per week) Official poverty line (in £s per week)
£507 per week £244 per week
As per a survey of 2013 more than 6 % people have higher disposal income of £1000 per week and they were living in households. The major cause of poverty has emerged to be the big recession in 2008 when many people have lost their jobs (O’Connor, 2011). Following graph depicts the poverty ratio in Australia from 1979 to 2010.
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Illustration 3: Income and wealth ratio (Conversion, 2012.) Most of the people who were below poverty line were earning income of 54 pounds per week. The ratio of inequality is increasing from last 15 years as rich people are becoming richer whereas poor people are going down towards higher level of poverty. After the rescission period income for rich sector has increased from 7% to 10% but income of poor sector has decreased from 19% to 18% (Egan, 2001). Other than this, it has also been spotted that the hospitality industry is demanding high ratio of employment and income level. These kinds of industrial demand also impacts the economic system of Australia. In the support of this, it can also be said that the hospitality industry provides services to wide range of customers so it requires high ratio of workforce in order to meet the standards and accomplish goals in better way. Moreover, the working hours and burden also increases the demand of income. It has been spotted that the
80.4
percentage of employees belongs from service industry out of which 40 percent belongs to hospitality sector. This also indicates that the demand and supply of industry plays key role in Australia economic system. It has also been identified that more than 10 % people have higher disposal income in the industry that means economical status of sector is also having various advancement. Number of experts are expecting that the income level of hospitality sector is also going to increase by 10 % in next 10 years.
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1.4 Demographic trends that influence employment patterns in Hospitality Industry From last 40 years, it has been seen that in Australia the ratio of female employees have been increased than male employees. In 2003 the percentage of male and female employees was 85 % and 15% from which the number of male worker have been reduced to 76% on the other hand the ratio of female labour have been increased by 9% in 2010. Out of 13.4 billion workforce 42% employees were doing part time job in which the percentage of women and men were 15 and 25 respectively (O’Connor, 2011). As a full time worker, women have worked for 40 hours in a week contrary to men who have worked for 44 hours per week. The following statistics show the demographics of employees in hospitality sector for 2013. AGE 16-24 25-49 50-State Pension Age SPA
PERCENTAGE (%) 33.5 49.4 13.0 4.1
MALE
FEMALE
45.7
54.3
Out of total employees 15.7% were male and rest were females and all are involved in various kinds of hospitality services. All were between the age of 16 and above. The people in the age of 16-24 have a percentage of 33.5, 49.4% employees were in the age of 25-49. The age of 50 is the state pension age in Australia in which 13% employees were involved in services. Rest of the people which are 4.1% of total employees are above the age of 50 years and are employed at managerial level
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(Hsieh, 2012).
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1.5 Social structures of people employed in IHG IHG is a well known and the biggest hotel chain in Australia, the working environment of organization attracts huge talent pool. According to recent survey, the statistics in 2013 annual report of IHG shows that more than 8197 people are directly employed by the company around the globe. In the organization the percentage of female and male employees is 41% and 59% respectively (Clifton and DĂazâ€?Fuentes, 2010). The following table indicates the managerial diversity in the company
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Category Manager Non Manager
Male (%) 49 51
Female (%) 36 64
In the company female employees get salary between £18,000 and £64,257 and males earn between £18,000 and £42,500. It has been seen that the jobs in hospitality sector are stable in the Australia but the salary of employees has not increased. At the time of recession, company has reduced its employment rate by 7.1. The following pictures depict the current job status in IHG.
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2.1 The structure, operation and influence of local government on IHG hotels IHG operates in the Australia economy which is a free market economy and it has to experience various restrictions from local governments. Political stability is the foremost reason which influences the number of visitors and tourists. Political situation in Northern Ireland is not stable, so most of the tourists are reluctant to visit such places (Stratigaki, 2004). Due to less number of visitors and skilled workforce, the hotel units operating in such places are not able to earn good revenues. Local government has developed number of laws such as employment law, competition law, consumer protection act etc. that impact business of hotels. In a competitive scenario, having competition laws, organization cannot develop aggressive pricing strategies. The organization has to follow all the regulations designed by government bodies. In addition to this, some rules and regulations benefit the hotel group for example local bodies have initiated to host London Olympics, which have given an opportunity for company to earn huge revenues while serving more number of tourists (Ekins and Lees, 2008). Government also gives various benefits in terms of giving rebates which increases firm’s profitability. IHG has to conduct role analysis of local government and should make their strategies according to them. 2.2 Role and influence of the EU, and its impact on Service Industry The corporate entities of Australia are highly impacted with the regulation of European Union which is a political economic union and includes 28 states as its members. This union was established to benefit the companies’ operations in EU countries but some of its policies have turned into challenges as many companies have lost their flexibility in operation. There is a policy named EMU policy that has impacted a lot to service sector in Australia such as IHG group (European Union Committee, 2005). According to this policy, company has to deal in Euro rather than trading in home currency, as a result of this, companies have to monitor every change in Euro rates. The rules of anti discrimination and
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providing equal opportunities to every employee have benefited the people of service industry and helps in creating a quality work culture. EU is accountable to design and monitor competitive polices that has benefits the organizations in developing harmony and peaceful environment. Regulation developed by EU includes the policies of fair remuneration, workplace health and safety and so on. Service industry should follow the rules designed by the European Union otherwise it will not operate in external business environment. 2.3 Role of pressure groups and their political influence in relation to national and local issues The other name of pressure groups is interest group or protest group, these are the unions which influence the government to change and modify the rules and policies. Such groups have the ability to change the mindset of decision maker with their actions. These groups also fight against the companies who do not follow the regulations developed by government. They can pressurize the authorities to take actions that can
influence the
reputation of companies (Grant, 2005). Pressure groups and their activities have an influential role in hospitality industry as they can fight against the companies who do not follow the policies such as environmental law, discrimination law, fare wages law, etc. the action taken by such groups can harm the image of companies. The aim of interest group is to focus on the activities of organizations and to make sure that they are practiced in the favour of society and environment. If they find any company practicing unethical operations, they can file a case against it in consumer court and can influence the government to punish such organization. There are various committees designed by interest groups to keep an eye on every movement and take quick actions against unlawful behaviours in the society. The reasons for these pressure groups are criticised by companies –
They appear too powerful
–
They are powerful enough to represent minority interests at the expense of the majority
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They focus on their own agenda at the expense of wider issues
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–
They take direct action that breaks the law(Fey and Birkinshaw, 2005)
Influence of pressure group •
The success of a business entity is determined by the extent to which the group are capable of capturing the popular imagination as keep the industrial issue alive
•
They contact with media, politicians, etc. are crucial to get the issue into the public domain. They can aware public with the illegal are unlawful activities of companies that can harm their image.
•
In the success of pressure group its reputation plays an important role group (Fey and Birkinshaw, 2005).
Result of protest •
Can create legal and ethical changes in business practice
•
It increasing the practice of environmental audits by businesses
•
The decrease in the use of CFCs
•
Reputation of companies can be increased and decreased
•
It ensure for ethical and honest corporate environment
2.4 Legal framework within the Australia, identifying the main differences between the English and Scottish systems United Kingdom has four major countries and most of the multinational organizations are conducting their business in these countries. These are England, Wales, Scotland and the Northern Ireland. Excluding Scotland, three major legal frameworks have been designed to regulate the marketplace such as Common law, European Union and the European
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Convention on the Human Rights (Li and Zhou, 2005). The description of all the three is explained in underneath points: Common Law- As per the common law legal courts have been designed where different judges take the decision based on situations. Every judge sitting in the court has special knowledge on legal procedures. In case of repeated and similar issues decision makers have to take same actions against complaints (Fey and Birkinshaw, 2005). European Law- All the rules and regulations developed by European unions have included the characteristics of English law. These laws are made to serve the rights of community and environment with the illegal practices of organizations. European Convention of Human Rights- Government of Australia is involved in communities who have designed the ECHR laws and have enabled such rules at local and national level. It is similar as the consumer court protects the rights of common people who are hurt or injured in any manner by the practices of business entities (Johnson, Lenartowicz and Apud, 2006). Legal system followed by Scotland is considered as mixed and hybrid legal system which includes all the elements of common and civil laws. It has some features of English laws and other unique and specific laws. The difference between English and Scottish systems is: SCOTTISH LAW
ENGLISH LAW
Only hotels can serve alcohol 24 hours a day
It is legal to serve alcohol in bars and hotels 24 hours a day.
People cannot smoke in any public place including bars and restaurants Person in the age of 16 can marry without any consent and take part in political decisions There are 15 people in the jury when trying serious crimes in the High Court. Any person aged 12 and above can make a will.
People can smoke in many public places, such as stations, bars and restaurants. After the age of 16 anybody can marry or take part in legal decisions
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There are 12 people on the jury when trying serious crimes in the Crown Court. People must be 18 to make a will (Ĺ kerlavaj, Ĺ temberger and Dimovski, 2007).
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2.5 Australia and EU Legislative process as it affects business of IHG Hotels IHG is following many laws and regulations which are incorporated in the business environment of Australia. Major rules which the organization is following are licensing rules, food hygiene and fire regulations. If company fails to follow all the legal rules, it has to bear the punishment given by government bodies (Knowles, 2012). IHG hotel is located in Australia which as become a part of Economic and Monetary Union (EMU). The purpose of EMU is to allow business entities to adopt single currency. It will impact the operation of bunnies entity. In addition to that business entity is affected by the anti discrimination policies introduced by Australia government. It will affect the pricing policies of business entity. Following points show the Australia and EU legislative process and their effect on IHG Hotels:
Organization has to conduct business under a specific name and minimum capital requirement should be met to open a hotel chain. In case of any fraud, licence can be cancelled.
It is mandatory to make licence for business in hospitality sector
The information related to customers and guests has to be kept confidential
Company should have safety measures in each and every unit in order to avoid any injury to anybody (Koutrakos, 2006).
Business needs to conduct ethical practices with various stakeholders, otherwise it has to face strict actions from government.
Any kind of illegal action against Australia and EU law, taken by company will result in cancellation of licence or financial punishment
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
If company does not follow the rules and regulation its reputation in public can come down in the eye of its customers which will harm its goodwill and profitability and wealth of business will become down.

As per rules of EU laws, it has to maintain price level or not reduce the prices to the lowest, so the business of others will get hampered (Atkinson, 2009).

Minimum wage policy clearly depicts that, there will be rise in hourly minimum wage for worker for the age of 25 and over to 7.20 from April 2016. The policy is expected to push up the total wage bill by 1.5bn next year, improving to 4.5bn till 2020. While the research clearly illustrates that increase as modest and hospitality sector of Australia will have better increase up to 3.4%.
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Illustration 4: Percentage imporvement in minimum wage rate in Hospitality sector of Australia (Source: Chan, P. S., 2015) 
Along with this, the legal age of buying alcohol and cigarettes in Australia is above 18. However, it is important for each hotel operating in Australia to follow the guidelines and does not allow any individual below 18 to buy the alcohol and cigarettes (Wintour, 2007).

The main purpose of Sunbeds (Regulation) Act 2010, is to prevent the use of sunbeds on commercial business premises by children and young people under 18 years. Hence, it can be said that EU and Australia legal system affect the business operations
of IHG Hotels and the organization should follow the rules and regulation to maintain a good image in market.
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3.1 Different types and characteristics of business that operate within the Hospitality Sector Hospitality sector includes all the business that provides leisure services to the customer. This is the fasted growing sector in the world. The income of this sector mostly depends on the number of visitors. List of businesses included in Hospitality sector of Australia Hotels: Hotel business is the famous in hospitality industry as it is the major source of earning in this sector. In Australia there are more than 50-60,000 hotels and the average room rate for the chain hotels is around 70.87 Euros. The occupancy rate in hostel business is more than 73.5% which represents the future opportunities for growth. There are more than 24, 0000 people working in this field. It is that field of the hospitality industry which generates the highest revenues.
It include buts sector private as well as public (Cherbakov and
Galambos, 2005). Restaurants: After hotel, restaurant is the most popular business in hospitality industry which generates second largest revenue for the industry. There are almost 56,000 restaurants in Australia and this sector employs almost 500,000 full time and the part time employees. In this sector part time and full time worker can be found in. These generally come in the private, partnership sector. Most of restaurant in Australia are operating in private sector. Pubs: Pubs are generally made to attract the youth and teenagers. This is considered as enjoyable place for conducting parties and other events.In Australia, there are almost 88,098 premises with full license including 59,000 pubs. These generally operate in the night and it is completely related with the entertainment factor. To operate a pub business
huge
capital is required to be invested. Mostly, private parties are operating in this sector and the partnership in private parties is famous in this hospitality sector. This business requires huge legal formalities to be done as they serve alcohol. (Richardson, 2006). Contract Catering: In this business, companies provide food offering for number of events and occasions. There are almost 20,000 contract catering outlets in Australia and the turnover in this business is almost 5 billion pounds and they serve almost 3 billion meals.
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This sector employee more than 220,000 workers in the catering sector, which is almost 11% of the total hospitality sector. The company operates business in partnership or private regulation. 3.2 Legal processes necessary for formation and dissolution of a registered company At the time of formation of company in Australia market, organizations have to follow a legal process which is as follows: Company have to pay registration fee and has to provide legal documents – as per Section 9 of 2006 companies act Organization’s registration office has be in England and Wales It has to design article of association in which information related to manages and their responsibilities should explained. Have to fill an IN01 form in which the information related to invested share capital is to be given (Jordan, 2005) Memorandum of Association needs to be prepared
to pass the information of
shareholders consent on subscription of shares Dissolution process has to go through a legal way and a specific process is as follows:
File with the state: The first step of dissolution in any company is of filing
state fir no due.
Company has to place creditors on notice that business cannot incur
any further debt which helps to relieve them from the future tax burdens (Cherbakov and Galambos, 2005). Notify the IRS and State and Local Tax Agencies: Firm has to pay all the taxes that are needed to be filled. Proper notifications are made to both the parties in case of acquisitions. Cancel Business Licenses: In addition with the local, state and the federal tax agencies it is needed to file the other paperwork for termination of licenses. This is 22
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very important for companies to cancel the license for passing or cancelling all monetary burdens(O’Connor, 2011). Settling Creditors Claims: All the claims from the creditors are inspected and have to pay the liable amount. This is important to pay all the liabilities of business as only after this dissolution process can be gone in next stage. Collecting Money Owed to Business: All the money that is owed to the business is to be collected by respective parties. The debtors of company are to be approached for taking all the money given to them. Selling and Distribution of Assets: After settling the claims of the business all the assets that are left are either distributed or sold in the proportion of stake of each owner in business. The funds can be used to pay off all the liabilities of company and to pay shareholders invested capital.
3.3 Structure and processes which determine the responsibilities and control within a registered company There are various people involved in the business environment of registered company such as shareholders, non – executive directors, financial reports, auditors and so on and each and every member has different roles and responsibilities. The information related to organizational structure is given in the memorandum of companies (Cherbakov and Galambos, 2005). Organization needs to maintain memorandum of association and article of association. The responsibilities and controls of various structural bodies are explained with the help of following diagram. •
Board of Directors: Board of directors have to meet regularly in order to monitor full and the effective control of company (Australia Government, 2014). For this purpose general meeting are to be arranged in a particular point of time. This is the top management who is also responsible for making strategic decisions. Company’s
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Secretary is appointed who will ensure that all the responsibilities are being followed by all member of Board in a proper manner. •
Non-Executive Directors: After directors there are non – executive directors who are responsible for sharing all the essential information with the board member in order to make decision effective and worth full. Directors have to bring their independent judgment in order to solve various issues related to the strategy, performance, resources etc (Jordan, 2005)
•
Executive Directors:
In a corporate hierarchy then comes the role of Executive
directors, who are accountable for checking all the financial expenditure done on companies operations. They require to proper disclose, the entire amount paid to the chairman, directors, pensioners and stock options at the time of making the company’s annual report should be mentioned •
Financial Reporting and the Controls: Financial reporting and control are the functions of financial reporters. They evaluate the options available for business to invest in profitable funds. They are responsible for given suggestion for making things clear with financial perspective. The accountability of presenting a perfect and well-balanced assessment of the company’s position lies with financial reporters.
•
Role of Auditors: Annual audit of the organization is presented by the board of directors. There is professional relationship between the auditors and the board of directors. All the auditors should have direct access to the non-executive directors. They are accountable for conducting proper auditing for companies financial performance
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Conclusion The report explains the legal frame work of Australia economy and its impact on business operations. The nature, element, structure and regulatory of Australia economy have been discussed in above report. It can be concluded the Economy of the Australia is encouraging as well as disappointing for companies of hospitality sector. In order to make a good image in market IHG hotels have to follow the rules and regulation developed by local government and European Union.
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References Atkinson, A. B., 2009. The EU and social inclusion: Facing the challenges. Policy Press. European Union Committee, 2005. Economic Migration to the EU: Report with Evidence. The Stationery Office. Grant, W., 2005. Pressure groups, politics and democracy in Britain. Harvester Wheat sheaf. Jordan, A., 2005. Environmental Policy in the European Union: Actors, Institutions, and Processes. Earthscan. Knowles, T., 2012. Food Safety in the Hospitality Industry. Routledge.
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