Hospitality Business Strategy: Analysing Macro-Environment, SWOT Analysis, and Porter's Five Forces Model

This report analyses the impact of macro-environment on Savoy hotel, critically analyses its internal environment, and evaluates its competitive forces using Porter's Five Forces model. It also applies SWOT framework to identify strengths, weaknesses, opportunities, and threats. The report suggests appropriate strategies to improve competitive edge and market position based on the outcomes.

Hospitality Business Strategy

CONTENTS
INTRODUCTION......................................................................................................................1
PART – A...................................................................................................................................1
Analysing the impact of macro-environment of Savoy hotel by applying Pestle analysis:...1
Critically analysing macro-environment of Savoy hotel to inform strategic management
decisions:................................................................................................................................2
Analysing the internal environment and capabilities of the chosen organization by applying
Swot framework:....................................................................................................................3
Evaluating the internal environment:.....................................................................................4
Applying Porter's Five Forces model, to evaluate the competitive forces of Savoy hotel
chain:......................................................................................................................................5
Devising appropriate strategies to improve competitive edge and market position based on
the outcomes:..........................................................................................................................5
PART – B...................................................................................................................................6
Varied types of strategic directions available to the organisation..........................................6
Justifying and recommending suitable growth platform and strategies by applying Ansoff
growth matrix.........................................................................................................................7
Explanation of the corporate, business and tactical strategic priorities and objectives..........8
Strategic management plan.....................................................................................................8
CONCLUSION........................................................................................................................10
REFERENCES.........................................................................................................................11

INTRODUCTION
Business strategy in every industry is a must because of the operational activities all
the firms follow that need to be unique to attain the desired competitive advantage.
Hospitality business strategy refers to the direction in which the business should work in
order to rank at the top of the customers' list. Business strategies are important in the
hospitality sector as it provides strategic directions to the business firms to analyse its
activities and outcomes thus formed. In this particular report about Savoy hotel, that is
considered to be a luxury franchise in the UK for its hospitality towards its customers,
different analysation will be done in the form of Part A & B. In part A, the internal and
external environment of the business will be depicted as to show how the competitors affect
the day-to-day activities of the firm. In part B, a strategic plan will be devised by applying
various theories and models to interpret different strategic options available to the hotel
chain.
PART – A
Analysing the impact of macro-environment of Savoy hotel by applying Pestle analysis:
1. Political factors:
As an important luxury hotel chain, the hospitality sector and its services highly
depend and operates as per the political influences because the services deal with the society
and its constituents. For the hotel chain it is necessary to get financial and stability support
from the legal bodies to operate smoothly in the industry. It encourages the firm to motivate
more people to connect with their services for better profitability rates.
2. Economic factors:
The hospitality sector greatly benefits the economies and its locals by attracting
national as well as international tourists from across the globe. It increases the sustainability
of the hospitality sector by engaging more visitors through their extraordinary services that
easily attract numerous publics. Apart from this, proper financial measures are required to
remain running in the industry with the advanced resources and techniques.
3. Social factors:
Social environment should be very strong in relation to the people and their behaviour
about certain matters. In case of the hotel chain, consumer preference is the key to success
and has to be developed in accordance to the recent consumer trends. The firm is required to
stimulate and motivate the customers to engage with them by providing them with high
quality customer satisfaction rates.
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4. Technological factors:
The tech world has a great part to contribute towards the attainment of business goals.
It is because the advancement made by the technical environment and equipment has an
influence on the society. Therefore, to be able to attract and serve the consumers better,
technology plays a role in the development of the hospitality industry. Even if technology
positively impact the business operations, the deviations must not be ignored.
5. Legal factors:
The hotel chain has to abide by the legalities and various rules and regulations to
operate freely in the hospitality industry. In order to properly manage the standards such as
hygiene, health and safety of the consumers, etc. the firm can easily interact with the laws set
and the assigned officials to boost their economy and prove themselves in the global market
with reputed brand image.
6. Environmental factors:
The environmental factors are related with various regions in which people reside.
Due to the lack of demand and hospitable etiquettes, the hotel industries find it difficult to
operate in such environment. That is why the hotel chain is putting great efforts to ensure a
relevant and suitable environment friendly procedure in concern with the environmental
issues to attract a greater number of visitors.
From the above analyses, it can be seen that the external environment of Savoy hotel
is expected to grow in the future due to its smooth operations that are in favour of all the
macro-environment essentials. This can prove they are suitable for the sustainable business
growth in the hospitality sector.
Critically analysing macro-environment of Savoy hotel to inform strategic management
decisions:
The Savoy hotel is successfully operating in the different parts of the world in order to
achieve its competitive business environment. With the help of the above pestle analysis, the
strengths and weaknesses of the external environment was mentioned (Fiske. and Bai. 2020).
It is an advantage for the hotel chain to have such a strong and competitive external
environment and its related sources that can help them in forming stronger strategies and to
plan for the overall growth of the organization. The firm will be able to accomplish various
benefits from the external sources as well by complying to all the rules and regulations in the
form of providing the customers with advanced and high-tech facilities during their stay in
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the hotel. Political environment should always be focused on diversity and brand
management to encompass a different strategic plan that can assure high success rates.
With the view of external environment, it is very clear that there should be clear
mission and specific goals set in order to provide the best hospitality services that can satisfy
as well as stimulates the customers. In the era of changing and dynamic business
environment, harmony and peace have to be ensured between service providers as well as
their customers. There are various stages under which the external environment should be
analysed for a strong strategic planning (Mudany. Letting. and Gituro. 2020). All these stages
have their own identification and tracking system that leads to the appropriate hospitable
environment. For success in every management planning, essential management tools and
scanning procedures can be identified to effectively utilize the opportunities and threats in
order to conduct proper research.
The technical environment does not only focus on the technical and innovational
activities but also supports tourists, rivalry as well as uniqueness of the hospitable services
(Iyer. and et.al., 2019). The economical and social environment require the most number of
strong strategic management plan as these two are directly related to the consumers and
society. For all such factors, it is essential for the firm to build the brand, increase its
customer value along with the achievement of operational excellence by being a
sustainable corporation across the globe.
Analysing the internal environment and capabilities of the chosen organization by applying
Swot framework:
1. Strengths:
The hospitality industries provide safe and secure accommodation facilities in
comparison to the other industries. With a variety of hotel rooms and numerous facilities
embarked in them, these have everything a hospitality sector's customers can want. Not only
the accommodation facilities, these also provide them with the buzz of everyday and
commercial lives as well (SWOT ANALYSIS. 2022). They are the providers of all amenities in
one. By providing such hospitality services, the operators are able to contribute towards the
local and international economies.
2. Weaknesses:
Being a luxurious hotel chain and the hospitable service provider, the rates and
pricing policies can set up a huge difference between the visitors and the operators. Because
of such unfavourable differences, the taxation policies also take a high turn in offering the
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hospitality services. By these affecting factors, the industry becomes vulnerable and starts to
get dependent on the tourism and other customer related sectors to avoid the difficulty in the
services. There comes many perspectives over which the industry has to face great losses.
3. Opportunities:
As per the performance rate of the hotel, there is a huge hope and scope for technical
as well as innovational activities to take placed in order to advance the level of hospitality
and travelling. Using various technological advances, the new target segment can be created
for huge crowd of sustainability and integrity. Catering to such a crowded marketing
industry, the interests, preferences and trends vary from one person to the other. Millennials
are the most focused and targeted group in the industry that can further create more demand
for such activities.
4. Threats:
There are many alternatives to the hotel industry that is mostly suitable for many
people in terms of budget, customer loyalty, etc. Civil unrest that is mostly connected with
the citizens and netizens of a nation can also be a threat to the hospitality sector because the
demand for such facilities can go down in the form of shutting down of the hotel industry.
This may be done due to the safety and security of people. By this the travel pattern can
change according to the consumer behaviour towards the hospitality services.
The internal environment of the hospitality industry is quite favourable but not as
good as it should have been because of the challenges and competition faced by them (dos
Santos. and et.al., 2020). For such problems, modern and innovational solutions are required
to be followed that will have huge impact on the targeted as well as potential customers to
ensure their loyalty towards the firm.
Evaluating the internal environment:
The internal analysis is required to be done for a proper examination of a company's
internal strengths and capabilities (Faisal. and Shelaby. 2022). These make the decision-
making accurate and future forecasting necessary to operate in the competitive business
environment. The business strategies of the hospitality industry is something which creates
either opportunities or threats for the overall operational activities. The evaluation of all these
activities creates a full picture of how a hospitable service be carried out in the external as
well as internal environment. The hospitable industry brings about many challenges that are
vigilant and require immediate amendments for their smooth operations. The challenges and
threats of boundaries, financially, etc. never come to an end and thus have to compile with
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the information regarding technical, and behavioural aspects of the culture. This cam helps
the organization in delivering their true and authentic values to their customers.
Applying Porter's Five Forces model, to evaluate the competitive forces of Savoy hotel chain:
1. Competition:
The hotel industry has to face much rivalry and competition in the industry because of
variance in the pricing and financial policies. The main motive is to increase the business
opportunities and growth areas to obtain high competitive advantage in the industry.
2. Threats of new entrants:
As a constituent of the global market and environment, there are possibilities of new
entrants in the industry (PORTER'S FIVE FORCES MODEL. 2022). The output produced by
the hotel chain should be in accordance with the resources that have been optimized in order
to satisfy the customers. There has to be high customer loyalty to reach the desired marketing
share without being hindered by the new substitutes.
3. Power of suppliers:
There has been low power of suppliers denoted in the hotel industry because of the
huge hospitality industry. This is because they already have high competition in the industry
and the suppliers do not have many options to deal and adjust with all of them altogether.
Every hotel has its own way of strategic management and operational ways.
4. Power of buyers:
The buyers have more concentration levels than the suppliers and operators, that is
why the hotel chains have a very tough time satisfying them. Their needs and preferences are
to be given utmost care and sincerity as they are the key to success and an effective brand
reputation.
5. Threat of substitutes:
This is relatively low than the other elements because of the pricing policies that
usually prevails in the hospitality sector. This is a great advantage for the firm in order to
attract more people to opt for their hotel chain.
Devising appropriate strategies to improve competitive edge and market position based on the
outcomes:
Proper strategies and advanced planning are required to be a better part of the
industry. Therefore, formed objectives and missions is required as an essential part to achieve
the overall business goals. All of it begins with the management of techniques and
innovation across the activities in order to devise appropriate problem-solving strategies that
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can be visible to the targeted market (Hagiu. and Wright. 2020). The execution of such
activities is the main thing as it involves proper decision-making and interpretation of all the
facts and figures that have more sustainability and integration rates to ensure success. In the
hospitality industry, strategic approaches make a big difference because they provide more
effective planning for growth experiences.
PART – B
Varied types of strategic directions available to the organisation
Porter’s generic strategies
On the basis of the above evaluation and the present condition of Savoy hotel of UK,
there is a requirement of comprehensive review for determining the needed adjustments in
their strategic management for attaining target growth rate (Porter's Generic Strategies,
2022). Porter’s generic strategic model can be utilized for identifying varied kinds of strategic
direction available to the hotel and these are as follows:
 Cost Leadership – This strategy is being defined as competing on the base of price
being provided to the clients through providing discounts and promotional schemes.
Margins are quite narrow and price is the major differentiating aspects of the product.
Figure 1: Porter’s generic strategies
(Porter's Generic Strategies, 2022).
 Differentiation – This signifies competition based on the distinguishing element that
leads to competitive edge in the market. this is quite appropriate where the clients are
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loyal to the brand and are not willing to move from their brand because of the
variation in price.
 Cost Focus – This is the approach wherein the firm can lead in the market based on
the cost and small niche segment. Limited population is being targeted with specified
purchasing pattern and habit.
 Differentiation Focus – This is the approach of leading based on differentiation in a
specified niche market.
On the basis of the evaluation, it can be said that the most suitable strategy for the
hotel is dependent on purchasing patterns, habits, customer loyalty and purchasing power of
the targeted audience. The hotel functions in different markets with different purchasing
patterns as well as trends and thus, it is suggested that the Savoy hotel can make use of cost
leadership strategy (Hao and Song, 2016). As with this strategy in place, the hotel can
develop new markets and penetrate into the existing markets.
Justifying and recommending suitable growth platform and strategies by applying Ansoff
growth matrix
Talking in relation with the Ansoff growth matrix, it lays down four important
dimensions of growth which can be utilized by Savoy hotel and these are:
Figure 2: Ansoff Growth Matrix
(Hanlon, 2021).
 Market penetration – This is being referred as the strategy in which the main goal is
to augment the sales of the existing product in the existing markets by adoption of
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aggressive marketing strategies. This strategy is more suitable in case of unsaturated
market.
 Market development – This is the strategy, in which the firm launches the existing
product in the new markets. The main goal to enter the new market and enjoy the
advantages.
 Product development – This is defined as the approach wherein new products are sold
in the existing marketplace. This involves providing new choices to the clients.
 Diversification – he main goal to spread the risk through introducing new products in
the new markets (Hanlon, 2021).
As being elaborated above, there are some underpenetrated markets for which the
Savoy hotel can make use of market penetration strategy. Thus, this kind of measure will help
the hotel in boosting the sales in of unsaturated market.
Explanation of the corporate, business and tactical strategic priorities and objectives
Strategic objective is being referred as the plan of the firm for attaining their mission.
They provide a metrics against which the actual performance is being monitored for
evaluating whether the firm has attained the objectives or not. tactical priorities on the other
hand are day to day operations of the business which emphasize on the ways business carried
out their operations. Some of the strategic objectives are as follows:
 Augmenting the sales of their existing products by 20 percent within the next one year
 Increasing the promotion of their products by 35 percent within next two years
 Increasing the awareness of the product by 25 percent in every six months
Strategic management plan
After the application of different models, their evaluation and discussion, the situation
of the Savoy hotel above, on the basis of the above evaluation, a strategic management plan
for the hotel is being formulated in the below section:
Executive summary
This strategic management plan is being prepared for offering a valid strategic
direction to the Savoy hotel. The plan will include details in regards with the organization
structure, mission, vision, market evaluation, competitor, SWOT evaluation along with the
monitoring and evaluation plan.
Background
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Savoy hotel is one of the leading luxury hotels in the heart of London. The hotel has
employed different strategies and attained a lot of success. Now, they are planning to have
higher growth and thus, require an effective business strategy for the same (Barr, 2018).
Organization structure
The hotel takes into account functional organizational structure. The structure of the
organization is as follows:
Figure 3: Organization structure of Savoy hotel
Mission and vision
The main mission of the company is to become one of the leading hotels in the market
and vision is to have sustainable initiatives and placing extra-ordinary people at the heart of
memories being made.
Market evaluation
 Product – The product of the hotel should be innovative and creative as per the
environmental analysis being performed.
 Place – The hotel will make sure that their hotels will be located at attractive location.
Further, a mixed and multichannel strategy will be used
 Price – Prices will be kept lower for attaining an edge over others (Rehman and
Anwar, 2019).
 Promotion – Different promotional strategies will be used such as advertisement,
digital promotion, videos and campaigns on social media sites.
SWOT analysis
Strengths
 Excellent and long-term relationship
Weaknesses
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with the clients
 Strong brand image
 Good quality products and services
 Limited base of clients
 Highly diversified
Opportunities
 International expansion
 Tapping unsaturated market (Gürel
and Tat, 2017)
Threats
 High level of competition in the
market
 Altering needs and preferences of
the people
Monitoring and evaluation plan
It is important on the part of the Savoy hotel to make sure that the execution of the
strategies and other processes should be analysed and on the basis of that work can be
improved. Monitoring is quite crucial for making sure good teach working and having correct
decision. This can be performed though having effective key performance indicators,
feedbacks and surveys at a regular interval.
CONCLUSION
The above report helped in the understanding of hotel sectors that have to gain
important yet competitive information from the external and internal factors in order to raise
their purchasing power in the global market. The most important source are the customers,
who indeed are the ultimate goal of any business firm in any of the operating industry. It is
because the hospitality sector requires a firm and flexible strategic management plan to match
the frequency of integrity and sustainability of the competitive environment. All the factors
are closely related to the conditions that the hotel managers have to analyse in order to work
in a systematic way.
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REFERENCES
Books and journals
Barr, L., 2018. Ritz and Escoffier: The Hotelier, the Chef, and the Rise of the Leisure Class.
New York: Clarkson Potter.
dos Santos, R. A., and et.al., 2020. Criteria for assessing a sustainable hotel business. Journal
of Cleaner Production. 262. p.121347.
Faisal, E. N. and Shelaby, A. A., 2022. From SWOT Analysis to Strategic Options: Potential
Development of Qaroun Lake in Fayoum Governorate, Egypt. South Asian Res J Agri
Fish. 4(4). pp.60-68.
Fiske, S. T. and Bai, X., 2020. Vertical and horizontal inequality are status and power
differences: Applications to stereotyping by competence and warmth. Current opinion
in psychology. 33. pp.216-221.
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International
Social Research. 10(51).
Hagiu, A. and Wright, J., 2020. When data creates competitive advantage. Harvard business
review. 98(1). pp.94-101.
Hao, S. and Song, M., 2016. Technology-driven strategy and firm performance: Are strategic
capabilities missing links? Journal of Business Research. 69(2). pp.751-759.
Iyer, P., and et.al., 2019. Market orientation, positioning strategy and brand
performance. Industrial Marketing Management. 81. pp.16-29.
Mudany, J. O., Letting, N. and Gituro, W., 2020. Moderating Effects of Macro Environment
on Strategy Implementation and Performance in Energy Sector Institutions in
Kenya. Journal of Human Resource & Leadership. 4(5).
Rehman, A.U. and Anwar, M., 2019. Mediating role of enterprise risk management practices
between business strategy and SME performance. Small Enterprise Research. 26(2).
pp.207-227.
Online references
Hanlon, A., 2021. The Ansoff Model. [Online]. Available through:
<https://www.smartinsights.com/marketing-planning/create-a-marketing-plan/ansoff-
model/>. [Accessed on 5thSeptember 2022].
PORTER'S FIVE FORCES MODEL. 2022. [Online]. Available through:
<https://www.linkedin.com/pulse/hotel-industry-porters-5-forces-harish-gupta>.
[Accessed on 5thSeptember 2022].
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Porter's Generic Strategies. 2022. [Online]. Available through:
<https://www.mindtools.com/pages/article/newSTR_82.htm>. [Accessed on
5thSeptember 2022].
SWOT ANALYSIS. 2022. [Online]. Available through: <https://www.xotels.com/en/revenue-
management/revenue-management-book/competitor-analysis>. [Accessed on
5thSeptember 2022].
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