Business Organisation and Environments

This report analyzes Marriott Hotel's decision to expand its business operations to Australia. It utilizes PESTLE analysis to assess the external business environment and Porter's Five Forces to evaluate the competitive landscape. The report examines the opportunities and threats presented by the Australian market and provides strategic recommendations for Marriott to achieve success. Desklib provides past papers and solved assignments for students.

Business Organisation
and Environments in a
Global Context

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Background to Marriott Hotel.....................................................................................................1
Background to Business Environment........................................................................................5
Application of an appropriate analytical approach.....................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business Environment comprises of influencing factors which can affect company's
functions including employees, customers, management, supply and demand as well as business
regulations. It is more complex in nature as such influencing factors keeps changing on
continuous basis due to which it brings lots of difficulties towards existing and new organisation
to run their business operations in particular country in more effective and efficient manner. The
present assignment report is based on the case study about Marriott Hotel which is one of the
largest diversified hospitality company that manages and franchises a broad portfolio of hotels
and related lodging facilities. It decided to expand its business operations through opening new
branch in Australia. This will requires to analyse business environment using PESTLE Analysis,
porter's five forces and other analytical tools are briefly described under this report.
TASK 1
Background to Marriott Hotel
Marriott Internation Hotel is an American diversified hospitality company operated at
global level managing and franchising a broad portfolio of hotels and related lodging facilities. It
is founded by J. Williard Marriott which will further headed by his son and executive chairman
Bill Marriott. It is one of the largest hotel chain in the world. It served more than 130 countries
including Australia, UK etc. with having more than 6700 properties across such number of
nations. It has attained over 1.2 million rooms and have an additional 195,000 rooms in the
development pipeline. It has generated over 22 billion US dollars as revenue in the year 2017. Its
headquartered is located in Washington DC in Bethesda, Maryland (About Marriott
International, 2018). The company came into market for the first time in the year 1957 in
Arlington, Virginia and from then to now, It was ranked 33 on Fortunes “100 Best company to
work for” list. Marriott is well known for providing copies of the Book of Momon in addition to
the Bible in their rooms so as to facilitate its customers In addition with this, other background
details are mentioned as under:
Mission: The mission statement of Marriott is “to enhance the lives of people by
establishing and enabling unsurpassed vacations and leisure experiences”.
Vision: The vision statement of Marriott is “to become the premier provider and
facilitator of leisure and vacation experiences in the world”.
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Competitors: Hyatt, Hliton and Starwood hotels and Resorts are some tough competitors
of Marriott which brings lots of challenges towards them to sustain in market for longer period
of time.
Size: In the year 2017, Marriot has employed more than 1777,000 people across
worldwide who workded to serve company's clients in more effective an efficient manner
(Number of Marriott International employees, 2018).
Types: Marriott has attained several hotel brands among which J.W. Marriott Hotels and
Resorts, Renaissance hotels and resorts, Ritz-Carlton, Courtyard and Residence Inn are some
recognised brand across worldwide.
Amenities: The Courtyard brand has attained various amenities for the business travellers
such as internet access. The Ritz-Carlton and J.W. Marriott brands are having amenities for
travellers seeking a more upscale experience including fine dining and decor.
Incentives: The Marriott has rewarded its customers by giving them an opportunity to
earn points towards hotel stays, airline miles, room upgrades, shopping and more. There are
mainly three level of services for their travellers which includes Silver, Gold and Platinum.
Considerations: The members of Marriott buying silver, gold and platinum gets special
services and benefits which includes a designated telephone number for reservations. Platinum
members gets an arrival gift and vouchers at Marriott hotels worldwide (Baker, 2012).
Ownership structure: Marriott hotel has a specific structure which gave competitive
advantage to it. It operates 3916 hotel properties which are either managed, franchised or
licensed. A few numbers of properties which are owned by the company.
Franchised – Marriott operates the vacation property such as a hotel or a resort which is
given to other hospitality company exchange of an initial application fee.
Managed properties: It includes the management fees to manage the properties under a
long term agreement which can renewed after 20 years.
Owned and Leased properties: The company only had nine owned hotels and 35 leased
properties in fiscal year 2013. The lease agreements include fixed annual rentals and additional
rentals based on a percentage of annual revenues in excess of a fixed amount.
Financial performance: Marriott has attained good financial position in market due to
generating net income which are mentioned as under:
Profit & Loss a/c (Figures in millions)
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Interpretation: Marriott has generated revenue of 1,372 million US dollar in the year
2017 which is an increment as if compared with the year 2016 and 2015 i.e. 780 and 859 million
US dollar respectively.
Balance sheet of Marriott at the end of year 2017:
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Interpretation: The balance of Marriott also clearly shows that the company has attained
good financial position in market. As the liabilities of Marriott decreases in the year 2017 as
compared with the year 2016 which is a positive sign for financial growth of company.
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Background to Business Environment
Business environment consists of influencing factors including internal as well as
external factors which can either impact negatively or positively ion the business operations of
an organisation. Internal analysis includes employees morale, management support,
technological changes etc. whereas external analysis includes political, economical, social,
technological etc. The stability of organisations operated at global level such as Marriott Hotel
are very much depends on the changes in such influencing factors. As Marriott decided to open
its new branch in Australia where business environment are may complex in nature due to which
it important for management to analyse such factors more carefully. It can be possible through
conducting PESTLE Analysis which are given as under:
Illustration 1: Scanning the Environment: PESTEL Analysis.
Source: Scanning the Environment: PESTEL Analysis. 2018
Political: It includes factors related with fluctuations in political system which causes
changes in existing government policies and regulations. It affect the decision of Marriott to
expand its business to Australia as they can face many challenges related with fluctuation in
taxation policies, import-export policies etc. Opportunities: The political situation in Australia is stable, open and progressive which
brings confidence among investors to support Marriott in further expansion. In addition
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with this, Australia has also effective, transparent legal framework due to which the
corruption level will decreased as compared with US, UK etc.
 Threats: More rules and regulations framed by government of Australia may bring
difficulties towards the Marriott to achieve high sustainability in Australian Hospitality
market.
Economical: It is related with fluctuation in economy which affects the buying power of
people living in nation. The sustainability and profitability of Marriott is very much depend on
the income levels of their customers due to which it affects them both in positive and negative
way. Opportunities: In Australia property prices are high as compared with income level of
people due to which the demand of rental properties goes high. This will provide an
opportunity to Marriott to increase their prices due to their services are high in demand.
 Threats: The income level of people are high due to which they can also prefer to buy
rivals services which brings disadvantages to Marriott.
Social: It includes factors related with fluctuations in social trends that can largely impact
on the demand for a firm's products and the availability and interest of individuals at work. Opportunities: In Australia, maximum number of people are residing on rental basis due
to high cost of residential properties. This will increases the chances of Marriott to
sustain in Australian Hospitality market for longer period of time.
 Threats: Extra usage of electricity and other resources of Australia may adversely the life
of people in Australia due to which they may can opposed towards establishment of new
branch of Marriott in their nation (Clark, 2012).
Technological – It is related with satisfying the needs of employees and customers in
hospitality industry through technology. By using it organisation can reduce their cost and
achieve efficiency in their quality which is provided to their customers. Opportunity- Marriott hotel can apply technologies in their workplace at Australia such
as Wi-Fi, ordering system and payment system which will help to increase their number
of customers. By using such type of technologies the cost of company will get reduce and
their customers will feel happy because they get value of their money.
 Threat – Marriott hotel will face challenge when they expand their business in Australia
because they have recruit new technical staff with locality which may costly to them.
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Legal- Every country has their own laws when an organisation wants to expanding their
business in other country they should follow that rules. In Australia there are various laws such
as fair trading laws, Competition laws and consumer laws which protect the interest of customers
as well as stability of organisations. Opportunity – Marriott hotel has a opportunity to achieve growth by following workplace
law. By following this law, they successfully expand its business in Australia as it gives
give surety to their employees that their workplace is free from discrimination, sexual
harassment and bullying. Privacy law will also increase their number of customers as
Australia has their own national privacy legislation that regulates every personal
information and communication.
 Threat – Marriott hotel will reduce their customers due to present situations in country
such as terrorist attacks and war conditions. Due to fair trading laws they get affected
from their local competitors like Airbnb, which will impact on future business and their
brand image (Deresky, 2017).
Environmental – Australia is one of the known country in the world as there are many beaches,
mountains and forests which attracts maximum number of tourist every years towards it. Opportunity: This will help Marriott hotel to gain maximum number of customer for
their hospitality services. It results in increasing their revenue and make their strong
presence in Australian hospitality industry.
 Threat : Marriott hotel may faces various challenges related with environment while
expanding their business to Australia as it is the driest inhabited continent on earth. Due
to climate challenge they faces various difficulties like water insecurity, infectious
diseases which restrict tourists to visit to Australia. This will affect the revenues of
Marriott.
Application of an appropriate analytical approach
Analytical approach is considered an effective approach which allows an organisation to
break down a problem into the small pieces with the purpose of solving. Marriott is expanding its
business operations to Australia where business environment is more contingent in nature due to
which it is important for management to apply analytical approach such as Porter's Five Forces
in order to understand the competitiveness of business environment. It makes easy for
management of Marriott to make an effective strategies to achieve its desired target more
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effectively. Therefore, to sustain and achieving competitive advantage the managers of Marriott
should implement such model which are further described as under:
Illustration 2: Porter's Five Forces Model.
Source': Porter's Five Forces Model. 2012
Competitive rivalry: The competition in Hospitality industry is high due to having large
number of competitors. In Australia, there are large number of hospitality companies such as
Crowne plaza, Intercontinental hotel etc. which forces Marriott to cut down the prices of their
hospitality products and services. Marriott operated its business functions in very competitive
hospitality industry due to facing tough competitions among their rivals. It affects their
profitability as well as sustainability (Falkner, 2017).
Strategies adopted by Marriott to tackle intense rivalry:
 Through building a sustainable differentiation
 By collaborating with small businesses engaged in providing hospitality services in order
to increase the market size.
Supplier power: In hospitality industry, there are limited number of suppliers who
provides raw materials and other valuable services to the hotel companies located in Australia.
Therefore, suppliers act as a dominant role which charges high prices in exchange of their
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product and services. This will affect the margins of Marriott. It can be balanced while
negotiating with suppliers on agreed amount. Thus, the bargaining power of supplier are high
which causes disadvantages to Marriott in order to open new branch in Australia (Ferraro and
Briody, 2013).
Strategies adopted by Marriott to tackle suppliers power:
 By establishing efficient supply chain with maximum number of suppliers.
 By experimental with existing product designs using different materials so that if the
prices of raw material goes up then it will easily be shifted to another.
 Developed reliability among suppliers whose business depend upon firm.
Buyer power: Due to high competition in hospitality industry, the buyer have various
options to buy the best offers available by paying minimum prices as possible. It forces
hospitality companies to offer discount, voucher etc. in order to attract maximum number of
buyers. Thus, it will bring more pressure on existence of Marriott as it affects their profitability
in the long run. In Australia, many rivals are operating its business in hospitality market such as
Crowne plaza, Australia Hotel etc. which may bring challenges towards Marriott to sustain in
market for longer period of time (Forsgren, 2017).
Strategies adopted by Marriott to tackle buyer power:
 By building huge customer base which lowering the bargaining power of buyers as well
as opportunity to streamline its sales and production process.
 By bringing innovative products which can limit the bargaining power of buyers.
Threat of substitution: It includes the availability of hospitality products in different
ways which can affect the profitability of hospitality companies. For example, Air-plane and bus
transportation are two substitute products which are purchased by customers according to their
preferences and needs. The threat of a substitute product in hospitality industry are very high as
there are number of small lodging facilities available in Australia at low price that affects the
sustainability of large hospitality companies such as Marriott.
Strategies adopted by Marriott to tackle threat of substitution:
 By being service oriented instead of just product oriented.
 By recognising the actual need and preferences of customers.
 By rising up the switching cost for the customers.
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Threat of New entrants: The threats of new entrants in hospitality industry are low as
entering into such market requires huge amount of funds, innovation ideas, skilled workforce etc.
which put more pressure for new company to enter and sustain. Marriott is expanding its
business operation in Australia where large number of rivals are already exists. Marriott is well-
established hospitality company attaining good financial position due to which found no
difficulties in establishing a new branch in Australia. For this, it requires Marriott to make some
changes in their pricing strategy, reducing costs, and providing new value propositions to the
customers (Luthans and Doh, 2012).
Strategies adopted by Marriott to tackle threats of new entrants:
 By introducing new products and services which gives a reason to buyer to buy on fixed
prices.
 By building economies of scale as it can decrease the fixed cost per unit.
 Investing money ion research and development in order to identify the actual needs and
buying behaviour of customers.
CONCLUSION
It has been concluded from the above project report that It is not easy for Marriott to
expand its business operations to Australia as it requires proper knowledge and market needs
which can be possible through adopting analytical tools such as Porter's Five Forces. It is also
required for management of Marriott to analyse business environment exist in Australia due to
having more complexities and contingents. For this, purpose, PESTLE Analysis shall be
conducted to analyse influencing factors of business environment. It makes easy for them to
make further decisions and plans for further expansion in Australia.
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REFERENCES
Books and Journals
Baker, J., 2012. The technology–organization–environment framework. In Information systems
theory (pp. 231-245). Springer, New York, NY.
Clark, P., 2012. Organizations in action: Competition between contexts. Routledge.
Deresky, H., 2017. International management: Managing across borders and cultures. Pearson
Education India.
Falkner, R., 2017. Business power and conflict in international environmental politics. Springer.
Ferraro, G. P. and Briody, E. K., 2013. The cultural dimension of global business. Upper Saddle
River: Pearson.
Forsgren, M., 2017. Theories of the multinational firm: A multidimensional creature in the
global economy. Edward Elgar Publishing.
Luthans, F. and Doh, J.P., 2012. International management: Culture, strategy, and behavior.
New York: McGraw-Hill.
Meyer, K. E., Mudambi, R. and Narula, R., 2011. Multinational enterprises and local contexts:
The opportunities and challenges of multiple embeddedness. Journal of management
studies. 48(2). pp.235-252.
Mohamed, N. and Kaur a/p Gian Singh, J., 2012. A conceptual framework for information
technology governance effectiveness in private organizations. Information Management
& Computer Security. 20(2). pp.88-106.
(Meyer, Mudambi and Narula,2011)(Mohamed and Kaur a/p Gian Singh, 2012)
Online
Scanning the Environment: PESTEL Analysis. 2018. [Online]. Available
through:<https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
>.
About Marriott International. 2018. [Online]. Available
through:<https://www.marriott.com/marriott/aboutmarriott.mi>.
Number of Marriott International employees. 2018. [Online]. Available
through:<https://www.statista.com/statistics/297269/number-of-marriott-international-
employees-worldwide/>.
Porter's Five Forces Model. 2012. [Online]. Available through:<http://crackmba.com/porters-
five-forces-model/>.
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