Management Economics: Market Structure and Optimal Strategies for IHG

Management
Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Company Overview, its key products/services as well as historical background:.............3
2. Market Structure of Company:...........................................................................................4
3. Analysis of historic market structure of IHG:....................................................................6
4 (a). Operating in different market structure is more optimal for IHG:................................7
4 (a). major suggestions on interferences of government on operational activities of IHG in
terms of societal benefits:.......................................................................................................9
CONCLUSION.............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management economics relates to science that helps understand how to effectively
distribute resources like manpower, technologies, assets, and capital. Comprehending
managerial economics is enabling people to consistently make rational choices and decisions.
Management economics is associated with identifying alternatives for the various management
problems within a specific business. Therefore it's closer to microeconomics (Athey and Luca,
2019). The study Evaluate economic statistics and information critically as framework for policy
making in organisational context. For study purpose InterContinental Hotels Group plc has been
selected which is UK based multinational hospitality corporation headquartered in
Buckinghamshire, England. Study covers detailed discussion about selected company's
products/services and historical background as well as analysis of its market structure to
recognise most optimal structure for corporation.
MAIN BODY
1. Company Overview, its key products/services as well as historical background:
The InterContinental Hotels Group or IHG is a global hotel corporation headquartered in
the UK, with many hotel chains located there. Its main office is situated near London, Denham,
Buckinghamshire. IHG had also kept UK soft drink firm Britvic within its business portfolio till
year 2005. As on first January 2016, IHG group was world's third largest leading hotel group in
respect of room numbers, with portfolio of 5,032 hotels totalling almost 744,368 rooms.
In Jul. 2015, IHG sales one of its biggest hotels, InterContinental Hong Kong, to investor group
for around $938 million. IHG declares in Feb 2019 that it will buy Six Senses Hotels for
around $300 million. The group runs 883,563 rooms globally, almost 60% in Americas, 25% in
Africa, Europe, Asia and Middle-East, as well as remaining 15% in China, as per company's
2019 annual-report data. Hotels and resorts are owned , operated, rented, and franchised by the
IHG. It runs standard, premium and luxury hotel-chain under different brands, including, Hotel
Indigo, Regent, EVEN Hotels, InterContinental, HUALUXE, Holiday Inn Resort, Crowne Plaza,
VOCO, Holiday Inn, Holiday Inn Express, Candlewood Suites, avid, Kimpton, Staybridge
Suites and, Holiday-Inn Club-Vacations among others. Its hotels provide accommodations,
dining, business facilities, spa facilities, lounge area, pool facilities, conference and event rooms.

It also runs IHG Rewards Group, hotel reward scheme (About us: InterContinental Hotels
Group plc. 2020).
2. Market Structure of Company:
The market structure corresponds to interconnected features of market, including the
number and comparative intensity of producers and consumers and the magnitude of collusion
between them, the intensity and types of competitiveness, the degree of the product-
differentiation as well as ease of entrance and exit from market. Four fundamental forms of
the market structure. First one is Perfect competition where multiple sellers and buyers
but none of whom are capable to control prices. Second Oligopoly, where a few big sellers who
retain some influence over prices. Third Monopoly where single-seller with substantial power
over supply chain and prices; and last one is Monopsony where single seller with significant
influence over demands and prices (Thampapillai and Ruth, 2019).
Amid a more competitive global economic context contributing to moderate growth ,
increased room supply reflects the sector 's overall favourable trends, like rising disposable
incomes and growing demand for known brands hotels. Around $535 billion hotel market
remains segregated, with a multinational or local chain associated with 54 per cent of rooms.
Competitive rivalry among developed players tends to rise as corporations pursue growth in their
offerings in acquisitions/mergers, organic-expansion as well as diversification.
IHG adopts an asset-light strategy, franchising or third-party management of hotels. Its
primary chain named Holiday Inn, provides mid-market accommodations, whereas Holiday Inn
Express brand provides limited-service places. IHG also targets upscale market with
company's Crowne Plaza and InterContinental brands, and provides extended stay
accommodation in thier Staybridge and Candlewood Suites. With such a presence in about 100
nations in the US, Europe region and Asia, most revenues comes from outside United Kingdom.
As this industry is expanding rapidly, IHG faced monopolistic competition but the
market structure of IHG has been transformed into oligopoly. A monopolistic competitive firm
encounters a market for its products that lies among perfect competition and monopoly.
A demand curve faced by perfectly competitive company is perfectly-elastic or flat, since a
perfectly competitive company sells whatever quantity it desires at prevailing market price.
While, at other hand, demand curve, as experienced by monopolist, is market demand curve,
because monopolist is only corporation within market and is thus downward sloping (Teleaba,