Hospitality Business Strategy: Impact of Macro Environment, Internal Capabilities, and Porter's Five Forces on InterContinental Hotel Group

This report analyses the impact of macro environment, internal capabilities, and Porter's Five Forces on InterContinental Hotel Group. It includes PESTEL and SWOT analysis, McKinsey's 7S model, VRIO analysis, and application of Porter's Five Forces.

Hospitality business
strategy

Contents
INTRODUCTION...........................................................................................................................1
PART A ..........................................................................................................................................1
P1 Impact and influence of macro environment.....................................................................1
P2 Internal environment and capabilities of given hospitality organisation..........................4
P3 Application of porter's five force model ..........................................................................6
Part 2................................................................................................................................................7
P4: Application of a range of theories, models and concepts on the InterContinental hotel
group Plc : ..............................................................................................................................7
CONCLUSION................................................................................................................................9
References:.....................................................................................................................................10

INTRODUCTION
The term strategy is concerned with the appropriate plan that is made inside a business
organisation in order to achieve different objectives so that a common goal can be achieved
effectively and efficiently by the firm (Yuan and et.al., 2020). Hospitality industry is concerned
with service sector industry that deals in various sectors such as lodging, planning of events,
services related to food and drinks, tourism departments et. In order ton improve status and
profitability of an organisation making a strategic plan plays an important role for the firm and
are made by professionals of the firm with high concentration and creativity in order to survive
in a high competitive market. For a better understanding of the report a firm InterContinental
Hotels and resorts is taken under consideration which is a British luxury hotel brand founded in
1946 by Juan Trippe. The respective firm consists of a wide range of brand coverage all over the
world with 210 InterContinental hotels with more that 71,000 rooms. This report will be a brief
discussion on internal and external environment of a business which will be analysed through
appropriate models such as SWOT and PESTLE will be used. Also in this report, internal
capabilities of the business and factors affecting the business's existence will be discussed with
appropriate models and theories.
PART A
P1 Impact and influence of macro environment
Terms macro-environment is concerned with the factors and conditions that exists in a
particular economy's link with the business cycle in an individual business area. Impact of macro
environment in context to InterContinental Hotel is determined as:-
PESTEL Analysis
PESTLE analysis is a strategic framework that is utilised by managers of different organisations
to analyse different internal environments and its impact on business organisations (Matovic,
2020). Herein InterContinental Hotel, PESTEL analysis of respective firm is given below as:-
 Political factor- Political factors are the factors in external environment of a business
that covers political influence on business operations of a firm (Madsen and Grønseth,
2022). In reference with InterContinental Hotel, factors such as change in leadership of a
nation, corporate taxation, trade dispute policies are the some of the political factors that
affects the firm's working.
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 Economic factor- These factors are concerned with the factors that affects a business's
operations economically such as interest rates, inflation etc. In context to InterContinental
Hotel, factors that affects business's presence economically are nation's GDP, interest
rates, employment rates, inflation in an economy, foreign exchange rates etc.
 Social factor- These are the sociological factors of a particular sector in an economy that
enhances or affects the profitability of a business. In reference with InterContinental
Hotel factors such as buying power of its targeted customer base, lifestyle trends,
consumer beliefs, conditions in a demography affects the working of the organisation.
 Technological factor- Technological are the technical related issues or external factors
that affects a business's working and their productivity. Factors that affects a working og
InterContinental Hotel are automation technology, technological innovation in industy or
market, digital use in operation.
 Environmental factor- These are the factors that considers environmental factors such
as climatic change pollution in ecosystem etc. that affects the working of an organisation.
In reference with InterContinental Hotel, the environmental factors such as population
rate, use of plastic and climatic changes are the factors that highly affects the business's
profitability.
 Legal factor- Legal factors relates to the rules and regulations in industry and a nation
that are related to a firms activities. Factors that affects InterContinental Hotel's
operations are taxation policies, industry regulation policies, employment and consumer
rights.
SWOT Analysis
It is a framework used by managers or professionals of different companies in order to
analyse internal environment that can be used by them in order to to gain competitive advantage
and enhance better profitability by organisational operations (Benzaghta and et. al., 2021). In
reference with InterContinental Hotel, SWOT analysis is shown as:-
 Strength- Strengths are the factors in internal environment of a business that signifies
business powers or plus points that they have over other rivalry firms (Teoli, Sanvictores
and, 2019). In context to InterContinental Hotel , strengths of the firm can be identified
as:-
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1. Highly skilled workforce is one of the major strengths of the firm as their workforce is
highly specialised which are developed by them through taking various training and
development sessions conducted by them in the organisation.
2. Their adoption of automation technology in almost every department states their strength
as it increases efficiency and effectiveness in business operation which directly leads to
better profitability.
 Weakness- Weaknesses are the negative points in their internal environment or working
of an organisation. A firm needs to overcome these weaknesses so as to ensure better
stability in market.
1. The ratio of ROI and capital invested in InterContinental Hotel is less than many other of
its competitors in market and is below average in the industy.
2. InterContinental Hotel's USP is not clearly stated by the firm in their marketing and
advertisement which poses a weak point to the firm and its competitors can attack it in
order to eliminate or decrease the position of respective firm.
 Opportunities- Opportunities of a firm can be defined as the growth factors inside a
business's environment which they can avail to ensure better results and expansion of the
firm.
1. Their highly skilled workforce which has been developed by them through various trainig
and development sessions can be used by them in their expansion so that company can
earn better profits in market.
2. Investing more in research and development department so as to improve the technical
advancements in the firm can be availed by the firm to ensure better profitability, growth,
and gain competitive advantage in the market.
 Threats- Threats can be defined as the dangers a firm faces in the market and can lead to
downfall of the firm.
1. The InterContinental Hotels face threat of high competition in market as there are a
number of rivalry firms in hospitality industry and the number keeps on rising. The firm
needs to keenly overlook their market and industry and make necessary changes in order
to survive.
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2. Their less profitability and investment which leads to lacking that they needs to full fill in
order to survive in market changes must be made in their pricing methods so as to
increase their profitability.
P2 Internal environment and capabilities of given hospitality organisation.
Strategic capabilities can be defined as the processes or plans that are made in an
organisation through which they can enhance better profitability and growth of the firm. In
reference with InterContinental Hotel, internal environment and capabilities can be analysed by
using McKinsey's 7s model and VRIO analysis is given below as:-
McKinsey's 7S model
McKinsey's 7s module is a strategic framework tool that is used by management of
different organisations in order to analyse their key internal factors or capabilities that enhances a
firm's profitability. McKinsey's 7s module fror the given organisation is given below as:-
 Strategy: Strategy is a plan formulated by the managers of a company that is to be
followed by the firm in order to earn greater profits in through organisational operations.
Herein InterContinental Hotel, they need to build a strategic plan that helps them reduce
the cost in short run along with protecting their core differentiated value in order to gain
competitive advantage and attract more customers.
 Structure: Structure considers the manner or flow of information and management of
operation with their link with respective departments in order to reduce conflicts in the
firm's working and give better results. In reference with InterContinental Hotel, the firm
needs to divide their teams into smaller groups and should be leaded by their respective
department rather than top management in order to ensure smooth functioning of
operations and reduce burden on top management.
 Systems: System in concerned with the process by which daily processes of firms are
maintained in order to achieve aims of the firm and effective results of the employees. In
reference with InterContinental Hotel, the firm should follow Customer Relationship
Management (CRM) appropriately and effectively in order to ensure better customer base
and sales of the firm.
 Skills: It includes spmpetitive skills and abilities of an employees that other rival firms
lack in their business in order to gain competitive advantage in business. Hiring fresh
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talent and frequent training and development sessions will help the firm in gaining more
skilled workforce and will enhance firm's profitability.
 Style: Style in concerned with the way in which managers or professionals and top level
management operates their respective employees in order to get better results. In context
to InterContinental Hotels, leader should promote collaborative form of leadership in
order to ensure better workflow in the organisation.
 Staff: This element is related with the type and number of employees which are working
in in the organisation and the way in which employees are hired in the firm so that more
efficient workforce can be hired.
 Shared values: This segment is concerned with the core values and ethics that a firm
follows in their organisational operations and how operations are guided in the firm. In
reference with InterContinental hotel, the firm has effectively build up their values vision
and mission in order to provide better working environment to their workforce.
VRIO Analysis:-
VRIO analysis is a framework that is used by managers of the organisation in order to
identify and signify their resources that are valuable and assess them and their availability to
other rivalry firms (Nel, 2019). It is a framework that is basically related to four questions in an
organisation in reference to its resources (Geraldes and et.al., 2019). In reference with
InterContinental Hotel, VRIO analysis is as follows:-
Resource Valuable Rare Imitable Organised
Local Food
Products
Yes No No Yes
Employees Yes Yes No Yes
Patents Yes Yes No Yes
 Valuable: Resources that are valuable for respective firm are its local food products as
they are highly differentiated in nature and its employees as they have a highly skilled
labour which has been developed through various training and development sessions. On
the other hand patents acquired by the firm are highly valuable in nature to the firm.
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 Rare: These food products are not considered as rare as they are available in market
while their employees are identified as rare and due to their personal training given by the
management. Also patents of the firm are categorised as rare to the firm due to their less
availability in market.
 Imitable: Local food products of the firm are imitable due to their availability in market
and can be availed by other competitors in market. While on the other hand, their
employees are not considered as imitable due to their special training given by
organisations. Along with this their patents are identified as no imitable due to legal
boundations
 Organised: All the resources in InterContinental including local food products, their
employees and patents are organised and sorted in the firm in an effective way so that
they can be availed in the times of need.
P3 Application of porter's five force model
Porter's five forces is a framework module which is strategic and helps a firm determine
their competitive environment in market and in industry and identifies the level of threat a firm
faces by a force in order to help the signify their priorities in market so that any sort of threat can
be minimised (Bruijl and Gerard, 2018). In reference with InterContinental Hotel, this module is
given as:-
 Threat of new entrants – This is the factor that determines the chances of new business
entities that can be established in the same industry and create a competition for the
already operating company. The threat of this force is low for InterContinental as the
target customers which the company targets are high income people that needs luxury
services and for which a new entrant will need high amount of investments.
 Bargaining power of suppliers – This is the power of the suppliers that provide raw
material to a firm to make changes in the prices charged and amount of supplies. The
threat of this is also low for the company as there are many suppliers in the market to
which the company can switch if the current supplier is making any not needed changes.
 Bargaining power of buyers – This is the threat of the buyers / consumers / customers to
switch on the other related companies or influence the prices. The threat of this force is
relatively high, as there are other companies present in the market that provides similar
type of service to the customers as the InterContinental provides.
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 Threat of substitutes product / service – This is the chances of availability of a
substitute product / service that can render similar or high level of satisfaction to the
consumers at lower or same price charged. This threat has medium influence over
InterContinental as the services that it provides is luxurious and unique and can not be
easily substituted.
 Competition rivalry – This is the level of competition present in the market. Hospitality
industry is the most common sector which has high base of customers and available
companies that deal in the industry. This threat has high influence over InterContinental
as there are many established hotel companies present in the market that give competition
to the hotel group and give option to the customers.
Part 2
P4: Application of a range of theories, models and concepts on the InterContinental hotel group
Plc :
Porter's generic strategies
Porter's generic strategies is a strategic framework given by Michael Porter in the year
1980. This is about four generic strategies that helps in describing the way in which a company is
pursuing competitive advantage in the market (Islami and et.al., 2020). Two concept, cost and
differentiation are divided into further two types that are focus and leadership. These strategic in
relation of InterContinental group of hotel plc are described in the following points :
 Cost leadership: It is the strategy in which lowering of cost is focused (Ali and Anwar,
2021). The low cost leadership can help a company in two ways – one by enjoying profits
on higher margins by selling at market price and the other by increasing the market share
through selling products / services at lower prices than the market. This strategy is not
useful for InterContinental as it targets high income people with uxorious services and
have a renowned goodwill in the market that will be negatively affected if it started
serving at lower prices and its luxury services get affected.
 Cost focus – In this strategy, small niche markets are focused and the products or
services of the company are provided to that particular market on lower prices.
InterContinental can use this strategy while expanding and increasing its presence to the
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new markets to attract the new customers. This is also a way of marketing for the
company.
 Differentiation – This is the strategy of innovating and rendering some different
product / services than that of the other companies in the market that are more attractive
from the present ones and either provide more satisfaction or can be bought at lower
rates. This strategy can be useful for the related company and become an attraction point
for the customers. This can be done through good research, development, effective
marketing and innovation.
 Differentiation focus – In the differentiation focus, small niche markets are targeted by
some business entities and services provided are mould according to the needs of the
customers of that particular market. This can be used by InterContinental group of hotel
plc while diversifying into a new market. The target can be the high income base of
customers and after analysing their wants, the services of the company can mould
accordingly to serve the new base of customers and satisfy them.
Ansoff matrix :
It is a strategic management tool also known as product / market expansion grid which
was given by H. Igor Ansoff. It was firstly published in the Harvard business review in the year
1957 (Dawes, 2018). It is used for analysing the useful strategies for a business entity that can
help it in gaining market. Strategies of Ansoff Matrix are mentioned in the following points in
relation to the InterContinental group of hotel plc :
 Market penetration – This is the method in which increasing of sales is foucsed with the
existing products in the current market. For this, InterContinental can give offers to the
customers.
 Product development – This is development of the existing product or innovating a new
product / service for a company. This can help in targeting larger base of customers that
have different wants.
 Market development – This is the development of market and increasing the size of
market for a business entity. InterContinental hotels can expand its position to a newer
market or territory that provides it a larger base of customers to target.
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 Diversification – This is a bigger concept in which both, the market and the product
/services of a business entity are developed or modified. This type need highest amount
of investment and also have the potential to highly benefiting the company that is using
it. InterContinental can diversify to newer market and provide them services according to
their market.
CONCLUSION
From the above report, this can be concluded that strategy in business plays an important
role for a business to succeed and to earn profit. This report was a detailed discussion on certain
business strategies that helps a business to run its operations in market and enhancement of
profitability for the business. Later in this report, PESTLE analysis and McKinsey's 7s was
conducted in order to understand internal and external factors of a business that enhance the its
productivity and Porter's five forces analysis was also conducted in order to analyse the business
environment of a business and the degree of threat they poses to existence of a firm. Furthermore
in this report, in order to analyse proper business strategy for the firm, Porter's generic model
was also analysed so that business operations can be managed appropriately. Moreover, Ansoff's
growth matrix was also discussed with a strategic management plan was also discussed in
reference with the respective firm.
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Teoli, D., Sanvictores, T. and An, J., 2019. SWOT analysis.
Nel, J.J., 2019. VRIO for global marketing and supply chain management.
Geraldes and et.al., 2019 J., VRIO FRAMEWORK-STATIC OR DYNAMIC?. Microeconomics
for managers. Princeton University Press.
Bruijl, D. and Gerard, H.T., 2018. The relevance of Porter's five forces in today's innovative and
changing business environment. Available at SSRN 3192207.
Islami, and et.al., 2020. Linking Porter’s generic strategies to firm performance. Future Business
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Competitive Advantage. Ali, BJ, & Anwar, G.(2021). Porter’s Generic Competitive
Strategies and its influence on the Competitive Advantage. International Journal of
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