International Hospitality Management: SWOT Analysis, PESTEL Analysis, and Growth Strategies

This document discusses the SWOT analysis of Inter-Continental Hotels Group, conducts a PESTEL analysis of an emerging market, and explains the growth strategies used by InterContinental Hotel Group in new markets.

International Hospitality
management
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
A. SWOT analysis of Inter-Continental Hotels Group...............................................................3
B. Take one of the emerging market for the Inter-Continental Hotels and conduct its PESTEL
analysis which has direct or indirect relevance to hospitality industry.......................................5
C. Explain the Porters Generic, Ansoffs matrix and Nykiel's fourteen strategies use by Inter-
Continental Hotel group to identify the growth options in new market.....................................9
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
International hospitality management refers to the field that provides facility to students
to travel and work abroad in careers within the support of hospitality industry (Arora and
Rohmetra, 2010). International hospitality management is basically deals in attaining bachelor's
degree that concentrate in courses in both business and international hospitality. The organisation
taken for this topic is Intercontinental Hotel Group (IHG). IHG deals in hospitality industry,
established in year 2003 as a public company. The company is one of the leading hotel
companies worldwide with headquarters in Denham. The focus of company is to provide True
hospitality for everyone and specialities of this group is in the sector of hotels, resorts,
hospitality, and food & beverage. This report covers following topics that are SWOT analysis of
Intercontinental hotels Group, PESTEL analysis of emerging market with its effect on national
and international level and use of porters generic strategies, Ansoffs matrix and Nykiel's fourteen
in the growth of the company and how these strategies help the company in maintaining growth
and share position in the marketplace.
MAIN BODY
A. SWOT analysis of Inter-Continental Hotels Group
A SWOT analysis is a high level shrewd planning approach that helps organisations to
understand and identify different areas where they are performing well and where they need to
improve, both from internal and external perspective (Bojanic and Reid, 2017). Internal factors
refers to strength and weaknesses whereas external factors refers to opportunities and threats.
The use of this approach at the beginning or in-between the process helps in identifying and
analysing the needs and requirement in the strategy as SWOT analysis has a ability to look
across the business and offer insight into competitive environment and business landscape.
SWOT analysis is a systematic planning method that is used by Inter-Continental Hotel Group,
top management team to do a situational analysis of the organisation. ICH is one of the leading
organizations in hospitality industry, hence use SWOT analysis in analyzing and reviewing the
market conditions in order to maintain its prominent position in the marketplace.
Strengths
As ICH is leading company at global level, so has multiple strengths that enable it to
flourish in the market place which are as follows-
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 Workforce: The company has high skilled workforce as they invest huge resources in
training and development of its employees and also motivate them to achieve more.
 Regulation of activities: Continuous regulating of activities within the company helps in
maintaining the consistency in quality and also enabled them to scale up and scale down
the functioning of the departments according to the demand in marketplace.
 Customer satisfaction: The company has able to established its relation with customers
and has able to achieve customer satisfaction and also able to established brand equity
among the potential customers.
Weaknesses
Weaknesses are those areas where ICH group need to improve its performance by
applying SWOT analysis and focus on improving its competitive advantage and strategic
positioning (Brookes, 2011).
 New Technology: Company need to make more investment in new technologies in order
to make the functioning fast and to expand the business in other countries.
 Forecasting: Company need to focus on proper product demand forecast as improper
forecasting has lead to high rate loss of opportunities in comparison to its competitors.
 Financial Planning: Improper financial planning has lead to ineffective use of funds as
the current assets ratios suggests that company can use the cash more efficiently than the
current usage.
 Inventory management: Company's usage of day inventory is high in comparison to the
competitors which has impact the long term growth of the business.
Opportunities
Leaders and managers within the company looks toward the future and consider all the
big possibilities for the growth and development in the market (Chang, Gong and Shum, 2011).
 Competitive advantage: The development in market will focus on reducing the
competitor's advantage and enable ICH to increase its competitiveness in comparsion to
other business competitors.
 Transportation cost: The company has decrease the cost of transportation in order to
bring down the cost of company to provide opportunity either to boost its profitability or
provide benefits to the customers.
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 Use of digital channels: The company has invested its huge sum of funds in online
platform which has lead to opening of new sales channels for ICH group. This has
provided the opportunity to understand its customers better and according fulfil their
needs using data analytics.
 Market growth: The usage of new technology and free trade policies of government has
provided ICH an opportunity to enter a new marketplace.
Threats
After identifying opportunities, company need to focus on threats that has a potential to
harm the functioning of company and its market image (Cunill, 2019).
 Raw material: Rising raw material from different sources act as threat to company as it
will effect the profitability to greater extend.
 Environment regulation: The changes in environment regulation rules and policies could
be a threat to certain existing product categories of the company.
 Customer behaviour: Changing consumer behaviour from online channels could act as a
threat to the supply chain model that is physical infrastructure of the company.
 Shortage of workforce: The shortage of skilled employees in certain marketplace
represents a threat to the profit growth in those markets.
From the above mentioned swot analysis of Inter-Continental Hotel Group, it is
concluded that the company is least problematic in comparison to other hospitality groups. The
company made it possible due to its effectiveness in branding and in operational management.
Moreover, the leaders and top management team seems to be more long-lasting and permanent in
their positions.
B. Take one of the emerging market for the Inter-Continental Hotels and conduct its PESTEL
analysis which has direct or indirect relevance to hospitality industry.
In order to describe the emergence of ICH in developing countries, they can expand their
business in Bali (part of Indonesia) which covers 0.3% of this stated surface. Indonesia is a
developing country whose level of development is small in comparison to the developed nations
(Gehrels and Suleri, 2016). As country exists between India and pacific ocean, many different
cultural, religious, political and economic factors influences can be found on the islands.
Indonesia began to promote Bali as the island for international tourism, the society is penetrating
by modern influences and unfolding to a modern industrialised society.
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Analysation of Bali's external factors(PESTEL analysis) which will effect ICH existence in
the new market.
PESTEL Analysis
A PESTEL analysis is a technique used to analyse and understand the macro (external)
factors that take place in the organisation (Gursoy, 2019). PESTEL stands for Political,
Economic, Social, Technological, Environmental and Legal. In organisations, before any kind of
strategic plan is implemented, it is preferred to conduct investigation based on siuation of the
market. Organisations that monitors and implement the changes in the external environment are
able to make difference in structure and functioning from that of competitors and create a
competitive advantage. PESTEL analysis is basically a tool used by organisations to identify and
track the external environment in which they are functioning or planning to launch a new project
or service. Inter-Continental Hotel Group use this tool to analyse the macro environment that
may directly or indirectly effect the functioning of the company.
Political Factors
Political factors play a important role in identifying the factors that may effect the
company's profitability margin in certain marketplace (Harrington and Ottenbacher, 2011). The
company is dealing in Travel & leisure in many countries and has exposed itself to different
types of political environment and systems. On the basis of following factors ICH closely figure
outs the situation before entering or investing into new market-
 Political stability- Political stability of country plays important role in analysing the effect
on travel and leisure sector. The functioning of political parties in Bali is stable which has
positive influence on the company.
 Political situation- The Executives with legislatives specially with the opposition parties
functions in Bali to accelerate the development program execution. Everyone as a whole
work together for promoting tourism which is one of the most favourable situation for
ICH to enter the new market.
 Pricing regulations- Country follows strict rules regarding price regulations, so company
need to focus on pricing strategies on continuous bases in order to stick with the positive
impact of political factors on the functioning of the company.
Economic Factors
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Inter-Continental Hotel group may use countries economic factors like growth rate,
inflation rate, interest rate, and economic indicators of industry's such as travel & leisure industry
growth rate, etc to forecast the growth of the company (Hassanien, 2010).
 Economic system- The type of economic system country is operating in may has positive
or negative impact on the profit margins of the company. In year 2010 the changes in
economic growth has lead to increase in the inflation rate of country. Thus, the increase
in inflation rate will have negative impact on the growth of the company.
 Exchange Rate- The stability in exchange rate of the countries currency has a positive
impact on the company. It won't be difficult for them to determine the changes and it is
time and cost effective.
 Labour cost- The labour cost is quite low as compared to other countries which will
prove to be profitable for company as it will lead in reduction of expenses and cost and
also help in providing employment opportunities with the country. Thus, beneficial for
both that is for country and for company.
Social Factors
Society's culture and way of implementing things has impact on the culture of an
organisation in an environment (Hassi, 2019). Shared beliefs and perspective of the public has a
great role in how marketing team at ICH group will understand and serve the customers of a new
market and the way they design and develop the marketing message for travel & leisure industry
consumers.
 Culture (gender roles)- The country is among top 4 populous country with high male
population than female's and has medium human development. Bali is most famous for
tourism and the culture is suitable for the growth of the company.
 Growth- The FDI and DDI growth within the country is sustainable which is quite good
for travel & leisure industry and will lead into sustainable development of company. The
most of the people in Bali belongs to consumer class which is a favourable condition for
a company.
 Entrepreneurial Spirit- The company promotes the entrepreneurial spirit and prefer wide
nature of the society which has positive impact on the company as people there will
accept the company and will have positive viewpoint regarding existence of company.
Technological Factor
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Technology has a fast disrupting effect on almost every industries across the board
(Horner, 2017). A company should not only relay on the study of technological analysis of the
industry but also the rate at which technology disrupts that industry. ICH usually uses fast speed
technology that provides very less time to cope up and be profitable.
 Use of Digital Platform- The country uses digital mediums as it is fourth largest users of
social platforms which will lead to positive impact on the company. As company already
uses all preferable social platforms to create a large customer base aware about the
existence of company and about its facilities and services.
 Use of electronic mediums- The use of high tech in terms of e-payment use by company
is most preferred by people in Bali which will make the billing system easy and quick for
the customers and company.
 Structure- ICH group uses value chain structure which is quite preferable and easy to
understand by customers. This structure will help the company to establish its business in
new marketplace.
The hospitality industry has direct relevance and impact on the national and international
level as this sector is at growing stage and has positive impact on countries (Mok, Sparks and
Kadampully, 2013). As there are wide range of national and international instruments and
agreements that are designed to promote tourism at global level. Tourism is one of the crucial
factor for the development of hospitality industry that is hospitality sector is dependent on
tourism only. The government of Bali, promotes tourism and invites hospitality industry to
establish business there in order to help the country in fast economic growth. Promotion of
tourism and hospitality industry has clear implications in the employment sector and decent work
arena. The hospitality industry provides following benefits at both the levels (national &
international) that are-
 It enhance mutual confidence between enterprises and societies in which they function.
 It helps in increasing the development of foreign investment environments.
 They also provide recommendations on social issues such as employment & industrial
relation practices, human rights and consumer interests, etc.
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C. Explain the Porters Generic, Ansoffs matrix and Nykiel's fourteen strategies use by Inter-
Continental Hotel group to identify the growth options in new market.
It is important for ICH to evaluate its business position and find ways to grow, and for that need
to carefully build the strategy to get success (Morgan and Pritchard, 2019). The growth factor
involves risk, but the implementation of right strategy will deliver stability, security and profits
for long term. The identification of opportunities becomes priority to ensure sustainable
development and growth within the company. These are the following strategies used by ICH to
identify the growth options in new marketplace-
Porters Generic Strategy
This model is used for finding relative position of the company within hospitality
industry. Any business can sustain in market for longer period if there is presence of effective
strategies. It is a technique used to determined the profitability of a firm whether it is upto
expectation or below the expecatation of industry average. The fundamental basis of long term
profitability above the average leads to sustainable competitive advantage. Mainly there are two
factors of competitive element a firm can have are low cost or differentiation(Radzi, 2014). To
reach above average performance,three strategies of porter's generic is carried out and theses are
cost leadership, differentiation, and focus. Cost leadership:In this strategy an organisation try to appealing to cost restricted or cost
conscious customers to gain a market share. Hence the main purpose of an company is to
become low cost producer in their chosen industry. In context of hotel intercontinental
they have reduced cost of some of their services depending upon location as well as
consumers. Differentiation: To achieve a competitive advantage, all companies try to make their
product different or more attractive from other similar product within the organisation.
According to this organisation mostly targeted to big market and focus on differentiation
this strategies varies across the industries, product and services it includes several
features, functionality, durability. In context of Hotel intercontinental, they provide
service like complimentary breakfast with two night stay and it form differentiation from
other hotels
 focus: It refers to those organisation who are focusing to target a group of segment or
selected segment within the industry to provide them exclusive services (Raj and Griffin,
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2015). Focus strategy is explained in two terms which are Cost Focus and Differentiation
Focus
 Cost focus, refers to those firms who seeks to cost advantages in its selected market. In
context of hotel intercontinental, they target both high and low profile people to provide
services which depends on cost. This is a feasible way for ICH to develop brand image in
new market.
 Differentiation Focus, it tends to those firm who have more focus towards
differentiation in its selected segment. With reference to hotel intercontinental, they have
made different types of room from other hotels in order to provide better services.
For ICH, it is concluded that cost leadership strategy is the best one. This is useful for
hotel in expansing market share in Indonesia. This is helpful for Intercontinental hotel to become
low cost producer of the industry. This hotel can analyse all aspects of sources of cost advantage.
When the company is able to meet and sustain overall cost leadership , then this hotel can easily
become good performer in market.
Ansoffs Matrix Strategy
The Ansoff Matrix is a strategy used by organisations to analyze and identify their plans
for growth and development (Sisson and Adams, 2013). This matrix is commonly known as
product or market expansion grid which includes four strategies that may help a company to
grow and also analyze the level of risk with each strategy.
 Market Penetration- This method is use when focus is on increasing sales if existing
products in the existing market. To attract the customers in existing market with the
implementation of market penetration strategy, company can decrease the prices, increase
the promotional activities and distribution efforts or may acquire the business of
competitor in the same marketplace.
 Product Development- In product development strategy, the company develops and
introduce new product to cater to the existing marketplace. The main focus is on research,
development and expansion of the company's product line. This strategy is used when
company have a strong understanding of their current market conditions and has a
capability to provide solutions to meet the needs of the existing market. In order to
introduce this strategy company invest in research & development to develop new
product in the existing market, by acquiring product of competitor's and using resources
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to build a new product to attract customers or forming strategic partnership with other
companies to take competitive advantage (Zwaal and Otting, 2010).
 Market Development- In the market development strategy, company plans to enter in a
new market with its existing range of products. This strategy is most successful for
business who has its own proprietary technology that it can leverage into new markets,
the potential customers of the new market possess disposable income, and consumer
behaviour in the new market should not deviate too far from consumers of the existing
market.
 Diversification- With the use of diversification strategy, company enters a new market
with a new product. This strategy is quite risky as it involves both market and product
development and on the other hand it has greatest potential to increase the revenues.
Inter-Continental Hotel group will relay on market development strategy. In order to
enter new market company need to identify and analyse the market in terms of geographic
regions, customer segments, etc. Bali is know for tourism and it will be suitable for company to
expand its business in this part with its existence range of products and services.
Nykiel's fourteen Strategy
Nykiel's fourteen strategy is used by organisations to analyse and identify the situations
and formulate strategies accordingly before entering into new market. The factors are as follow-
1. Horizontal Expansion- ICH group is trying to expand its business in developing countries
from one line of hospitality services to another with its existing rang of product line.
2. Geographic Expansion- The company with proper strategic planning may grow from
relatively small area to a greater geographic location for entering into the new market of
Bali.
3. Product Hybridization- This strategy is currently of no use for ICH group as they don't
want to expand its range of services in the new marketplace and want to enter the market
with existing range.
4. Specialisation-specialist- ICH will require specializing in associating with upscale growth
in the services provided with moderate price for entering into the new market.
5. Product Tiering- The company in contest of Bali will be dealing with forces associated
with growth in population and economic changes as well as increased market areas.
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6. Product Re-Branding- The company will use re-branding strategy in order to introduce its
existence in the new market and to increase the customers.
7. Non-Franchising- Inter-Continental Hotel group is continuously focusing on the their
services and quality management of services for entering into the new market place.
8. Franchising- The company following and maintaing a highly established operation
strategies in business for development that is being followed inside the hospitality
industry for entering into the new market.
9. Brand collection- Inter-Continental Hotel groups is known for its five star services all
over the world and is taking benefit of limited stock for buying branded operations that
are capable to provide potential growth.
10. Management Contracts- Inter-Continental Hotels groups has long term and effective
management team. They hire people on the bases of contacts so that it won't effect its
operations and functions in long term as new staff requires time to understand the
structure of the organisation.
11. Vertical and Horizontal Integration- ICH group is one of the leading hospitality service
provider across the globe and is a part of more than one hospitality segment with the
scope of gaining competitive advantage with help of investment in industry for entering
the new market.
12. Singleness- Inter-Continental Group function as a single service provider with total
ownership as well as management control worldwide and will follow the same while
entering into new market.
13. Value Related Products and services- As per the customers requirements in new market
the company will make changes and launch new services for satisfying particular value or
trend within the customers.
14. Global Positioning- The company already has established its presence worldwide with its
good quality services and facilities and continuously considering the factors that will
impact its position in the market.
CONCLUSION
It is concluded from the above discussion that business expansion is done in
organisations for maximising profits and money. There is need to evaluate strength and
opportunities of company before initiating any market expansion. There are different models
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such as Ansoff matrix, Porters generic model, SWOT, PESTEL, etc. These have helped in
managing strength and opportunities of the organisation and how they can be managed for
entering into new markets.
REFERENCES
Books & Journals
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Arora, P. and Rohmetra, N., 2010. Cultural intelligence: Leveraging differences to bridge the gap
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human resource management practices. International Journal of Hospitality Management
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