Hospitality Business Strategy

This report analyses the macro environment of IHG Hotels & Resorts with the application of SWOT and PESTLE analysis. It evaluates different types of strategic directions available to IHG Hotels & Resorts using Bowman’s Strategy Clock and Ansoff’s market growth strategy.

Hospitality Business Strategy

Table of Contents
.........................................................................................................................................................1
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
PART – A....................................................................................................................................3
PESTLE analysis of Inter-Continental Hotels Group Plc. (IHG) Hotels & Resorts:..................3
SWOT analysis of Inter-Continental Hotels Group Plc. (IHG) Hotels & Resorts:.....................4
Analysis of hospitality macro environment:................................................................................5
PART – B.....................................................................................................................................8
Evaluating different types of strategic directions available to IHG Hotels & Resorts................8
Using Ansoff’s Market Growth Matrix to recommend most appropriate growth platform......10
Applying theories, concepts and models for interpreting and devising strategic planning.......11
Producing Strategic Management Plan Strategic Directions, Objectives and tactical actions. .11
Environmental and Competitive analysis to produce valid Strategic Directions......................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Hospitality sector is defined as a part of service industry dealing in providing services like
food and beverages, managing events, tourism and travel. The plans that are devised by the top
management following which the concerned business assures its competitive stand among the
competitors that competes in the industry are collectively known as business strategy of the
company. InterContinental Hotels Group Plc (IHG) Hotels & Resorts is a Britain based MNC
having its headquarters in Denham, Buckinghamshire. The company is a listed company on The
London Stock Exchange.
The following report will analyse the macro environment of IHG Hotels & Resorts with the
application of swot and pestle analysis. On the basis of this analysis the report will determine the
strategic management decisions. Further – framework will be used for evaluation of internal
environment of company. The report will use Porter’s Five Forces Model for discussing the
competitive forces on the basis of which appropriate strategies will be formulated.
In addition to these the report will use Bowman’s Strategy Clock, Ansoff’s market growth
strategy to justify and recommend for the concerned organization. Strategic plans will be devised
by analysing range of theories. Lastly a strategic management plan will be made.
MAIN BODY
PART – A
PESTLE analysis of Inter-Continental Hotels Group Plc. (IHG) Hotels & Resorts:
POLITICAL ECONOMICAL
 Government intervention in the Leisure,
Travel and Hospitality Industry and the
resulting bureaucracy.
 Legislations by the government relating to
wages i.e., minimum wages to be paid to
the employees and workers and payment
for overtime done by such workers and
employees.
 Economic set up in the country and how
stable it is i.e., immune to not so significant
issues and concerns.
 Financial markets and their efficiency i.e.,
the situation when Intercontinental Hotels
Group Plc needs financing or need to raise
funding from the markets.
 Level of skill and competence in such
hospitality industry or travel industry.
SOCIAL TECHNOLOGICAL
 Impacts on the travel and hospitality  Technological advancements and
upgradations by the competitors of

industry due to varied cultural differences.
 Impacts of situations involving spread of
covid – 19, zika virus, etc. on the industry
by the society.
 Level of skills of the population of the area
in which it is operating and demographics.
 Level of education in hotel industry.
Intercontinental Hotels Group Plc.
 Impact of trends in bookings of hotels
digitally and trends on social media on its
operations.
LEGAL ENVIRONMENTAL
 Impact of various laws and legislations
relating to protection of consumer,
employment, health and safety, copyright,
patents, intellectual properties, protection
of data, etc.
 Impact of law suits pending against the
entity and by the company on its operations
and goodwill.
 Impact of laws regarding pollution of
environment through air and water,
management of waste, etc.
 Support towards utilization of renewable
sources of energy and implementing
sustainable business practices.
 Risk assessment of water by
Intercontinental Hotels Group Plc.
SWOT analysis of Inter-Continental Hotels Group Plc. (IHG) Hotels & Resorts:
STRENGTHS WEAKNESSES
 IHG hotels and resorts shows an excellence
global presence with its operations in 100
countries and has 886,000 rooms globally.
 A large and diversified brand portfolio
which can also be categorised as occasion
wise.
 Main focus on priority markets with large
geographical presence
 Points system employed by IHG rewards
club has received negative review from the
customers as to their utilization and expiry.
 No economic hotel brand.
 IHG hotels and resorts slipped to the 3rd
place globally depicting inefficiency in its
current operations.
OPPORTUNITIES THREATS
 Sudden surge in international travel by the
tourists will provide opportunity to grow
and earn more.
 Hotel industry is growing rapidly thus
exposing lot of competition in the market
and also sharing of economy by more

 Usage of technology to facilitate bookings
of the hotel and other services will make it
easy for the customers.
rivals.
 Not enough competent workforce in China
where it expanding enormously.
Analysis of hospitality macro environment:
It can be analysed that the industry can be affected by intervention and interference of
government in the operations of the organisations which can be tackled by strategically making
decisions on the basis of any prior information on such issues available (George, 2021). The
issues in the economic environment can be addressed by strategically focussing on the economic
stability, financial markets, etc. of the economy.
The issues in the social environment can be addressed by strategically focussing on
managing cultural differences, imparting skills and education to the workforce and the people
around it (Dean, 2022). The services shall be technology friendly perform efficiently in the
advanced technological environment.
VRIO stands for value, rarity, imitability and organization and it evaluates organization’s
internal environment (What is a VRIO Analysis? 2022). Internal environment of any organisation
includes its strengths and weaknesses therefore, VRIO will help the organization understand its
strengths and weaknesses and set priorities over its limited resources in the organization.
VRIO
FRAMEWORK
VALUE RARE IMITATION ORGANIZATION
Customer loyalty
and base
Yes, as
customers are
the top most
priority of the
travel & leisure
industry.
Yes, as the
entity is creating
a healthy bond
with its
customers.
No, as the
practices of the
entity cannot be
easily imitated
by others.
Yes, being an
experienced entity.
Cost efficiency
of distribution
and logistics
Yes, it results in
reduction of
costs of the
services it is
providing.
No, as there are
various rivals
following such
practices.
It’s complicated
but can be
copied.
Yes it can achieve
it.

Brand awareness Yes, as it is very
crucial to grow.
Yes, as it has an
excellent global
presence and
market share.
No. Yes, as brand image
is how the
customers
remember the
organisation.
Relationship
with vendors
(wholesalers as
well as retailers)
Yes, it has good
relations with
the vendors.
Yes, as it has its
own
personalized
methods and
channels.
Very
complicated to
imitate but can
be done.
Yes, as this is the
base for efficient
service providing
by the organisation.
Strengths and weaknesses are the part of internal environment of any organization and
shall be evaluated in depth so that the internal environment of the organization is in control
because no organization can control its external environment (de Haast, Busquet and Cescau).
The strengths of IHG hotels and resorts includes its global presence in more than 100 countries
with very large and well diversified brand portfolio globally and policies with focus on priority
markets to enhance its global presence (Kang and Hwang, 2018). But the weaknesses of IHG
hotels and resorts includes it’s no economic hotel brand and it also slipped to 3rd place in the
current year which shows that some other rival performed better than it and it was not able to
compete effectively and efficiently as it should have. Also, there is discrepancies in its rewards
system as complained by the customers.
Therefore, it can be assessed that the organisation shall use its strength efficiently to
overcome its weaknesses so as to react strategically in case of any threats which it may face as
strengths are the most important aspect of any organisation to improve and grow out of its
weaknesses and face the threats by utilizing the available opportunities (Essential hotel sales
strategies to increase occupancy and revenue. 2022).
Porter’s Five Forces Model is a model used to ascertain the competitive intensity in the
market for a particular organisation or industry (Gong, 2020). It includes five forces which
majorly affects the competition a business faces in the environment and more the intensity of the
competition less will be the attractiveness of the industry and vice-versa (Porter's Five Forces -

The Framework Explained. 2022). Porter’s Five Force Model for the IHG hotels and resorts can
be formed as follows:
COMPETITIVE RIVALRY
 Few competitors in the market.
 Leaving the industry will require huge costs to be incurred.
 Being an established brand, it enjoys very high customer loyalty.
THREAT OF NEW ENTRANTS
 Entering the industry will require a huge capital to be invested.
 Operating and competing in such an industry will require a good experience and large
quantum of employees.
 Technology used by other rivals may be common to all the players therefore, the technology
needs to be protected.
 Apart from high cost there are various barriers to enter the industry.
BARGAINING POWER OF SUPPLIER
 There are fairly moderate or lesser number of vendors or suppliers in the market.
 And those vendors can be substituted with other vendor or supplier.
 Also there is facility of online supply of goods and services which are sometimes cheaper
than the offline purchases.
BARGAINING POWER OF BUYER
 Being a luxurious brand the customer here is low price sensitive and just needs high quality
services.
 Customer has numerous choices to choose from.
 Customer has relatively lower bargaining power as he is low price sensitive.
SUBSTITUTES
 There is easy availability of other substitutes.
 Availability of apartments and that too fully furnished on rent.
 Economic crisis has led to customer opting for substitute products at relatively lower prices.
Now here, the organisation needs to improve its competitive edge and its market position
which requires devising appropriate strategies which are as follows:

 Become aware of the competitor’s advantages and then forming own advantages over it.
 Most important is to create healthy relationships with the customers or guests by taking
feedbacks and working on improving them.
 Value additions in the services shall be compulsorily meaningful and not anything. Providing
meaningful perks and extra services shall be concentrated on.
 Providing extra perks, upgrades and discounts over the direct bookings of the hotel will allow
the organisation to earn extra revenues.
 Implementing latest and high tech technologies can make the organisation stay ahead in
competition.
PART – B
Evaluating different types of strategic directions available to IHG Hotels & Resorts
Bowman’s Strategy Clock
The model named as Bowman’s Strategy Clock is used by IHG Hotels & Resorts to
position the products and services it offers to the market. As per this model there exist eight
positions where a company can strategically place its offerings based on two vital factors that are
price of the product and the value perceived by it. Below are the eight strategic positions:
Low Price and Low Value Added – A company may position its products or services at
this stage when the aim of company is to sell in bulk. Quantity selling is preferred over quality
selling (Weston and Nnadi, 2021). The goal of the company is to make its products available at
lower prices which is achieved by adding low value to the product.
Low Price – The companies positioning their products at this particular stages strives to
make their product available in the market at the lowest possible prices. For doing this the
company make its processes utmost efficient by reducing the costs at all possible levels.
Production is done at large scale to achieve this. Low price enables company to get its products
easily absorbed in the market.
Hybrid – This position of Bowman’s Strategy Clock is a combination of two other
positions namely low price and Differentiation. Products or services that are available at low
price and also different from what competitive firms offers are said to be positioned at this stage.
Differentiation – In this the aim of the company is to make its offerings different from the
other firms. This is done by adding value to firm’s products and services. The main idea is to
bring quality to the sales.

Focused differentiation – Firms willing to position their product at this particular position
aims at presenting their products and services to market’s audience at high price and high
quality. Consumers pay high prices to experience the quality in services and products. Perceived
value to product is high. IHG Hotels & Resorts use this position.
Risky High Margins – The company that wants to earn higher profits as the demand of
their product is high often position their products or services at this level (Kim, 2020). The name
is risky high margins because firm increase its selling price without adding to the quality of the
product. There exists the risk of customer to stop buying the products by company because of
high value charged by the company.
Monopoly pricing – This stage is preferred by the firms when it is the sole manufacturer
and provider of the product or service (Introduction to Bowman’s Strategy Clock, 2022). There is
complete control of the firm over the price and quality of product. A close track over the
business environment is kept by such companies to ensure that there are no new entrants
becoming successful in entering the market.

Loss of Market Share – This position is the worst for the perspective of growth of the
company. A company willingly positions its products or services at this stage only in the
scenario when the company is opting out of the market, disconnecting its operations for a
particular product line. This is done normally when company is entering into new market or
product line by discontinuing previous one. Sometimes a firm is forced to do so.
Using Ansoff’s Market Growth Matrix to recommend most appropriate growth platform
Market Penetration – The most commonly used strategy by businesses is market
penetration. The focus of the company following this strategy is over the increasing its share in
the existing market with existing products. To sell more number of units to current consumers
and among potential consumers the company starts selling at low prices. The risk involved here
is low and also the growth opportunities are less.
Market Development – In this strategy the company tries to explore new markets but with
its existing products. Selling of existing products in new markets is known as market
development. Even if changes are made into the existing products these are minimal.
Product Development – Under this strategy company make changes to the products that it
offers to the market. Changes can be made to the existing products or new products can be
launched in place of the current ones.

Diversification – The level of risk is most under this strategy and the returns are
maximum. Following this strategy company make a launch into new market with new products.
So both the market and product are new for the company (Jelonek, 2022). This is the reason of
this being the riskiest strategy. But if the market accepts the innovation made by the company the
returns generated are very high.
The best suited strategy for the IHG Hotels & Resorts is market development. The
products and services of the company are of high quality making few changes to further enhance
this quality and offering them by exploring new markets will help the company to grow.
Applying theories, concepts and models for interpreting and devising strategic planning
Blue Ocean Strategy
The blue ocean strategy is a concept used by firms to increase the demand. The increase
in demand is experienced by a company under this strategy by creating the market rather than
increase the market share in existing market. For the creation of new market value is created by
the firm by making new products, bringing innovations and providing it at lower prices.
McKinsey 7s Model
McKinsey 7s Model mainly focusses on the organizational design and analyses it. The
ultimate motive is to ascertain the effectiveness that can be achieved in the organisation by the
combined play of seven elements namely – structure, strategy, skill, system, shared values, style
and staff (Aladag and et.al., 2020). The seven elements of the organization are connected to each
other and are divided among soft S and hard S. It means that the change in one element will lead
to change in another elements and therefore, the organization needs to be at a balance between
all the elements. Hard S includes structure, strategy and systems and remaining elements comes
under soft S.
IHG hotels and resorts thus can either concentrate on increasing the demand for its
products and services by incorporating innovations, launching new services and then providing
them at reasonable prices or focus on the 7s or 7 elements of the organization namely structure,
strategy, skill, system, shared values, style and staff and keep a strategic balance between all to
run the business efficiently and smoothly.
Producing Strategic Management Plan Strategic Directions, Objectives and tactical actions
Strategic management plan is to be produced and such plan will result into achievement
of priorities and objectives. Such planning will include the practices to increase the demand for

the services of the organization in the market (Köseoglu and et.al., 2020). This can be done
through creating market demand rather than creating further market share by producing new
innovative products and services, being creative in the approach to attract more and more
customers and to keep them at reasonable prices so that the customer will be willing to pay for
such products and services. The planning also shall focus on the seven elements of the
organisation i.e., structure, strategy, skill, system, shared values, style and staff and to keep a
balance between them.
Environmental and Competitive analysis to produce valid Strategic Directions
Various environmental and competitive analysis has been carried out of the IHG hotels
and resorts including PESTLE analysis to ascertain macro external factors affecting the
organisation, SWOT analysis to ascertain internal and external factors, VRIO analysis to
ascertain internal factors affecting the organisation, Porter’s Five Forces Model to ascertain
intensity of competition in the industry, Bowman’s Strategy Clock to ascertain strategic
directions available, Ansoff’s Growth Matrix to ascertain growth factors, Blue ocean strategy
and McKinsey 7s Model to allow the organisation to make valid strategic decisions in right
directions depending upon the objectives and tactical actions in the hospitality industry.
CONCLUSION
The above report discusses about the macro environment of the hospitality industry with
appropriate analysis in the form of PESTLE and SWOT analysis and thereafter, devise strategic
management decisions based on such analysis of macro environment. Also, the internal
environment has been analysed through VRIO framework and then evaluated for the strengths
and weaknesses in the internal environment. Then competitive forces are evaluated by applying
Porter’s Five Forces Model in the given hospitality industry and thereafter, appropriate strategies
are formed to attain competitive edge and improve market position.
Then the Bowman’s Strategy clock is done to evaluate various strategic directions with
the organisation available. Thereafter, Ansoff’s Product/Market Growth Matrix is applied to give
recommendations on most viable growth strategies and platforms. Then a management plan is
strategically produced keeping in mind the strategic objectives and priorities both tangible as
well as tactical. Also it contains range of theories for strategic decision making.

REFERENCES
Books and Journals
Aladag, O. F. and et.al., 2020. Strategy implementation research in hospitality and tourism:
Current status and future potential. International Journal of Hospitality
Management. 88. p.102556.
de Haast, A., Busquet, A. and Cescau, P., INTERCONTINENTAL HOTELS GROUP
PLC. Policy. 112. pp.77-14.
Dean, C., 2022. Character Development in Hospitality and Tourism. In Humanistic Perspectives
in Hospitality and Tourism, Volume 1 (pp. 179-202). Palgrave Macmillan, Cham.
George, R., 2021. Tourism and Hospitality Marketing Planning. In Marketing Tourism and
Hospitality (pp. 149-182). Palgrave Macmillan, Cham.
Gong, J., 2020, November. The Enterprise in the Emerging Market Influenced by Coronavirus:
Experience from IHG. In 2020 2nd International Conference on Economic
Management and Cultural Industry (ICEMCI 2020) (pp. 157-160). Atlantis Press.
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Kang, E. and Hwang, H. J., 2018. Strategic management plan for transnational organizations. The
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Kim, S.K., 2020. Advanced Mathematical Business Strategy Formulation
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Köseoglu, M. A. and et.al., 2020. What are the key success factors for strategy formulation and
implementation? Perspectives of managers in the hotel industry. International Journal
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Weston, P. and Nnadi, M., 2021. Evaluation of strategic and financial variables of corporate
sustainability and ESG policies on corporate finance performance. Journal of
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Online
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https://www.mindtools.com/pages/article/newTMC_08.htm >
What is a VRIO Analysis? 2022. [Online]. Available through: <
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