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Posted on April 12th, 2014, by

Political Environment

The major political factor affecting industry environment for food manufacturing deals with international and U.S. laws and regulations. Recent EU regulations in the sphere of food manufacturing create unfavorable conditions for businesses, and it is hard to bring new products to the market (Food Law, 2012). In the US, nutritional labeling questions are researched, and FDA is likely to change the regulations for nutritional labeling (GPO, 2012). The issues related to kids marketing and food certification also belong to the current issues in the political sphere affecting the industry. Another political factor influencing the industry deals are the relationships between different countries; for example, in 2011 political unrest in Egypt forced Kraft Foods to suspend operations (Food Law, 2012).

2.2. Economic Environment

The development of world economy and key economic indicators are also highly important for the industry’s development. Key economic issues nowadays are ongoing crisis in euro area and the “fiscal cliff” expected in the U.S (IMF, 2012). The increase of demand in developed economies has slowed down, while the markets in emerging economies are growing. For emerging economies, there is a trend towards policy tightening, which also slows down the speed of expansion (IMF, 2012). Overall, the situation in the emerging economies is more promising as they are expected to be more resilient to financial strains.

The growth of the U.S. economy is expected to slow down by 2-3% in 2012 compared to the previous year (U.S. Census Bureau, 2012). The changes of fuel prices have a direct effect on the industry environment: gas prices reached their minimum  in the middle of the year, but in October gas prices have soared to the spring level (IMF, 2012).

2.3. Sociocultural Environment

The changes of sociocultural environment affect the workforce employed in food manufacturing industry. U.S. workforce productivity in this industry decreased by 1.2%, and earnings remained practically the same as in the beginning of the year (Bureau of Labor Statistics, 2012). Unit labor costs in this industry increased by 3.5% (Bureau of Labor Statistics, 2012).

The demography of world population is changing, and the major trends are increasing urbanization, ageing and globalization. Food consumption patters are also changing around the whole world: food consumption increased by approximately 400 kcal per day per person. The supply of fat increased by 20 g per capita per day. There is a trend towards healthy and organic food, which should be addressed by food manufacturers. Other food consumption trends are eating alone, tendency towards immediate consumption, and interest to gluten-free products.

2.4. Technological Environment

Technology has a significant impact on the operations in food manufacturing industry. First of all, technology is used to enhance decision-making, to gain customer insight and perform effective marketing of food brands. Use of social media, SAP and CRM systems and mobile technologies makes competition more focused and more customer-oriented. The switch to cloud computing is a distinct trend for market leaders (FAO, 2012). In a survey of food manufacturers, 36% of them indicated that their major investments would be in the technology sphere (Export.gov, 2012). According to analytical research in the industry of food manufacturing, product innovation and use of technology in production, services and marketing will be the major driver of profitability and revenue (FAO, 2012).

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