Unit 1: Business and the Business Environment

NATIONAL ECONOMICS UNIVERSITY
INTERNATIONAL SCHOOL OF MANAGEMENT AND ECONOMICS
HIGHER NATIONALS
BTEC HIGHER NATIONAL DIPLOMA IN BUSINESS (RQF)
Unit Code, Number and Title L/508/0485 RQF level 5 - Unit 1: Business and the Business
Environment
Semester and Academic Year Semester 2 / Academic year 2020 - 2021
Unit Assessor(s) Daniel Vanhoutte/ Dao Minh Hoang/ Pham Thi Bich Ngoc
Assignment Number and
Title
BBE A2.1: Business Environment Analysis
(Assessment 2 of 2, Individual assignment)
Issue Date Friday, April 16th, 2021
Submission Date 10:00 am on Monday, May 24th, 2021
IV Name Nguyen Thuy Chinh
IV Date Friday, April 16th, 2021
Student name Nguyen Ngoc Quang
NEU Student ID 10200189 Pearson ID
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Table of content
s
1. Introduction.........................................................................................................3
2. Executive Summary.............................................................................................4
3. Major Findings....................................................................................................5
3.1. PESTEL.........................................................................................................5
3.1.1. Political factor............................................................................................5
3.1.2. Technological factor...................................................................................5
3.1.3. Economic factor..........................................................................................6
Market Level.....................................................................................................6
Industry level.....................................................................................................7
Country level...................................................................................................10
3.2. SWOT...........................................................................................................11
4. Conclusion..........................................................................................................14
5. Reference list......................................................................................................15
6. Appendix............................................................................................................17

1. Introduction
Located right in the middle of Hanoi, Metropole Hotel, one of nation's oldest existing operating
hotel, has long stood as one of Hanoi’s most celebrated holiday destination. Two French
businessmen, Gustave Émile Dumoutier and Andre Ducamp, opened this hotel in August 1901.
The Hotel Metropole Hanoi has had many owners over the course of its 120-year existence.
Metropole is now owned by Lodgis, a joint venture between Warburg Pincus and VinaCapital,
and Singapore's Indotel Limited, and run by Accor Group, a well-known French hospitality
corporation, which explains the hotel's preservation of the old French style. As a result,
Metropole has a luxurious beauty, splendid but not less elegant, delightfully that bridging the gap
between the past and present of Hanoi. Metrople has long become an ideal destination for
forginers to come to enjoy, relax and work in Hanoi.

2. Executive Summary
In this report I used the Porter's Five Forces framework and PESTLE analysis to define and
analyze the external factors that affecting Metropole and the hospitality industry. I also pointed
out the possible opportunities andthreats from political, economy and technological factors that
were analysed in the report. With SWOT analysis, I demonstrated the strengths and weakness of
the hotel and then assessed the interrelationships between the organization's external and internal
factors in order to develop some strategies for Metropole Hanoi to implement in order to adapt to
the impact of Covid 19.

3. Major Findings
3.1. PESTEL
A PESTEL analysis is a framework or methodology for evaluating and measuring the
macroenvironmental factors that may have an effect on Sofitel Metropole Hotel (Larsson, 2016).
3.1.1. Political factor
The CommunistoPartyoof Vietnam is in charge of controlling the whole country, for that reason,
Vietnam is considered as a politicallyostableocountry. The InstituteoofoEconomics andoPeace
(IEP) in Australia, ranked Vietnam at the position ofo60 out ofo163ocountries in the matter of
politicalostability, which requires potential of war and political dissent in 2018.. A stable
political environment is a vital component contributing to the development of any businesses,
included hotel business since tourism can flourish in an environment free of turmoil. Political
stabilitiy is an oppurtunity for Metropole. Moreover, Hanoi’s government considered hospitality
& tourism to be the spearhead economic sector of the city, especially focused on hotel & resort
with the high-quality services and excellent advertise campaigns, therefore the numberoof
domesticoandoforeignotourists were increased (Nguyen, 2020).
Vietnam is the memberoof the WorldoTourismoOrganization (WTO) and the PacificoAsia
TourismoAssociation (PATA) which leads to a new wave of foreign investment (Foreignobrands
eyeingoVietnamodue toogrowingoyoung population andoliberalisingoreforms, n.d.). Vietnam
aspires to maintain stable ties with its neighbours, regions, and strategic allies, as well as to
expand collaboration and value sharing with major countries (Côngotácođối ngoạiocủa
ViệtoNam năm 2017ođạt nhiềuothànhotựu nổiobật, 2018) . This has created a challenge for
Metropole Hanoi since there are more high-class hotels with big foreign investment capitals like
Hilton Hanoi Opera, IntercontinentaloHanoioWestlake and SheratonoHanoioHotel with lower
service prices than Metropole.
3.1.2. Technological factor
Nowadays, technology has grown gigantically into any kind of industries. As so, the hospitality
industry has long recognised the value of technology in delivering outstanding guest experiences
and streamlining operations.

Number of Internet users in Vietnam is considered to be at high levels around the world with 65
million social network users, accounting for 67% of the population in 2020 (Kemp, 2020). Social
networking has been a profound impact on the tourism industry, along with the appearance of
Digital marketing, it is now much more easier for hotels in Vietnam nowaydas to advertise their
brands and reach out to more potential customers. Due to Covid-19, Sofitel Metropole has
changed its marketing strategy to be more focus on digital marketing through social networks,
online news platforms, etc. Therefore, the development of social media is an oppurtunity for
Metropole.
Moreover, many hotels, included Metropole Hanoi, have cooperated with OTAs (Online Travel
Agent) such as Booking, Traveloka, Agoda, Avia… Through these websites, hotels can ensure
their revenues. OTAs will help the hotels attract more customers by offering reasonable prices,
putting important information of the hotel on their websites so customers can search, compare,
and choose to book hotel rooms according to their needs via these websites (12
OnlineoTraveloAgents (OTAs) to IncreaseoYouroHoteloBookings, n.d.). OTAs can undoubtedly
be very helpful for hotels, however, this regularly comes at the expense of paying a commission
fee for every single booking. For every single booking made via OTAs, Accor Group (the
operator of Metropole Hanoi) loses a comission of 30% (Easton, 2020), moreover, these
websites are likely to force Accor to reduce the prices in order to attract more users come to their
websites, therefore, OTAs can be considered as a threat to Metropole Hanoi.
3.1.3. Economic factor
There are 3 levels of economy: market level, industry level and country level. I will analysed
Metropole Hotel based on these levels.
Market Level
Sofitel Metropole Hotel has the market structure of Oligopoly, in which theoindustry of
theocompany isodominatedoby a reallyosmall number ofolargeofirms. When we look at Hanoi
hotel industry, a large porportion of market share belongs to top big hotels namely: Sofitel
Metropole, JW Marriott, Inter Continetial Westlake, etc. According to Vietnam Guide,
Metropole Hanoi holds the biggest share, followed by Lotte Hotel Hanoi (10 Best Luxury Hotels
in Hanoi - Most Popular 5-Star Hotels In Hanoi, n.d.).

In this market, Metropole could collude with other oligopolies to control prices and avoid
competition, allowing large companies such as Metropole to outrun smaller firms. Additionally,
it is difficult to enter an oligopoly, which creates an incentive for Metropole Hanoi to solidify its
position. Therefore, Metropole can be considered as a price-maker and its customers have to
accept the prices it offers to use the services. The target customer of Metropole is rich people,
businessmen and they normally do not care about the price but the unique, luxury experience that
only Metropole can provide. As a result, the demand of Metropole is inelastic. Overall, this
market is profitable for Metropole since Metropole will earn more money if they increase the
price.
Oligopoly market structure could cause the misbalance in the market share with small firms and
the lack of power of consumers, therefore, Vietnamese government has passed
Vietnam’soLawoon CompetitionoonoJulyo1, 2019, which focuses on reduce the power of the
producers.
Industry level
Porter's fiveoforcesoanalysisoisousedoinothisocase since there areomanyomarketsobut only one
sector, and managers can obtain a deeper understanding of the hotel industry's attractiveness
before designing new strategies for existing markets to help Metropole recover from the
influence of Covid-19 and improving its competitive capability.
Figure 1: Porter's 5 forces

Image source: Oxford College of Procurement and Supply
A. Threat of new entrants
According to Porter (2018), in Oligopoly market structure,othreat ofonew entrantsoin hotel
industry is low since it is determined byobarriers tooentry, whichocomprise theosize andoscope
of operationsonecessary to accomplish a competitiveocostostructure;oproductodifferentiation and
capitalorequirements, which include the amount of cashoandofinancialoresources necessaryoto
developoand operateoa company, etc (Cheng, 2013). In order to compete with such giants like
Metropole Hotel, the new comers have to have huge capital investments, good channels of
distribution and especially, good locations. Due to the exceptionally high land prices, Hanoi's
hotel industry is constrained by a scarcity of viable sites. Overall, this industry hasohigh
entryobarriers restrictingonewoentrants, owing primarily to a combinationoofoeconomies
ofoscale and aohigh entry capitalocost, as well as a limited supply of suitableolocations.
B. Buyer Power
In hotel industry, power of buyers is very high since they are those who require the facilities and
services of a hotel. With the advancement in technology, it has become very convenient for
buyers to compare hotel prices and services in order to make booking decisions without the
involvement of middlemen or travel agencies, which means that the cost of switching is
relatively low in this sector. As a consequence of Covid 19, the number of tourists visiting
Vietnam has declined dramatically. To be specific, international visitors visiting Vietnam in
2020 would total about 4 million, down 78 percent from 2019 (Nguyen, 2020) which has a
negative impact on the tourist industry as a whole, included Metropole Hotel. Metropole has to
drop the price from 5 million VND to 1,3 million VND per nice, which is never happens before,
in order to maintain business and attract more domestic customers.
C. Threat of substitution
There are many substitutes for luxury hotels such as motels, homestays, hostels, etc. locates
everywhere in Hanoi, however, the threat of substitution is still considered to be low. Such
substitutes like motels, homestays even though offer low price of accommodation, flexible
services but they focus on low low-income or cost-conscious customers, which is different from
the type of target customers of big hotels like Metropole. Metropole focuses onothe “upper”
strategic groupsoforoexample, thoseoparticularlyocatering for international customers

likeobusiness traveler, theoupperomiddle aged and oldoagedobracket. However, during the
Covid-19 pandemic, Vietnamese government has to suspend all the entry of foreigners, which is
directly related to the targeted customers of Metropole. As a consequence, the threat of
substitution is higher since recession domestic travel is replace international travel (Cheng,
2013).
D. Supplier Power
Metropole Hotel has Accor Group to be the main supplier for its products ranging from
amentities to provisions. There are no substitues in the market for the products provided by
Accor Group such as: baguette,wine, soap, perfume, coffee, etc. from France since Accor Group
is the only distributor of these products in Vietnamese hospitality industry. Metropole’s ability to
give its customers such unique experience from other hotels in the market depends heavily on the
distribution of the suppliers. Since Accor Group is in charge of operating Metropole Hotel,
Accor has enough power to have impact on the price of the output, nevertheless, the power of
supplier is still much lower than the power of buyer (Cheng, 2013).
E. Competitive Rivalry
Before Covid-19, due to the oligopoly market structure, the competitive rivalry was low because
there were few sellers and every seller supplied a sufficiently large share of the market. With the
marketing stragery focused on providing differentiation and unique experience for customers,
there were not so many hotels in the market can compete with Metropole. However, during
Covid-19 pandemic, Vietnamese government has suspended all the entry of foreigners that
reduces the market share of every hotels because domestic is now the only market. Such hotels
like JW Marriott Hotel and Intercontinetal Hanoi, which are provide the similar types of service
like Metropole as boutique, spa, swimming pool, bar, etc. with a lower price, begin to have
pressure on market share of Metropole since they are actively developing new strategies to draw
new customers. Inoorderotooretain the leading position inotheomarket, Metropole has to
innovate, modify the marketing strategy.

Country level
A. GDP
Figure 2:VIETNAM’S GDP GROWTH RATE IN THE PERIOD 2011-2020
Image source: General Statics Office Online
According to General Statics Office recent report in January 2021, there is a considerable
decrease Vietnam’s growth rate in 2020 comparedoto the sameoperiod in theopreviousoyear
(from 7,02 to 2,91) due to the outbreak of Covid-19. Service industries such as motels and hotels
were forced to leave, precipitating an economic downturn in Vietnam and around the world.
Nevertheless, according to the report of Asian Development Bank in April 2021, it seems that
the year 2021 will witness an increase in the GDP growth rate to 6,7. They believe that th eneed
for travel and relaxation is likely to increase after Covid 19, when people were almost forced to
limit their travel in 2020. This is an excellent opportunity for hotels, particularly given
Metropole's potential to improve customer-attraction strategies.
B. Inflation
Due to Vietnam's rapid economic growth, inflation or currency depreciation is inevitable. In a
oligopoly market, such hotels like Metropole considers inflation as an oppurtunity since its
demand is inelastic. Nevertheless, due to the influence of Covid-19, many companies and
consumers have been required to lower spending, leading to a decline in tourism demand.

Metropole, a five-star hotel, is having difficulty in conducting business. Therefore , if the
economy improves steadily, the hotel industry will improve; if the economy still experiences a
slow growth rate, the hotel industry will continue to be extremely difficult.
C. Unemployment
According to General statics office of Vietnam, the unemployment rate in 2020 is 2.48%, a 0.31
percentage point higher than that in 2019. As shown by this statistic, structural unemployment is
the main type of unemployment in Vietnam, which indicates that many businesses are short of
qualified employees, which poses a serious challenge to businesses in the long run. However, in
Metropole case, unemployment is not a threat since all of its employees are trained and studied
in Accor Academy, therefore, Metropole always has qualified employeees in spite of high
unemployment rate in Vietnam
3.2. SWOT
STRENGTHS
 Franchise Support Team of Accor hotel: Accor Group has been operating Metropole
Hanoi for ages. With a franchise model, Metropole is given an international management
team with a lot of experience in assisting the hotel run smoothly and minimizes risk,
moreover, Accor Group also plays the role of sole supplier of Metropole, it provides the
hotel unique products that no competitors have.
 Achieved 5-Star rating standard: Metropole Hotel, one of nation's oldest existing
operating hotel, has long stood as one of theohistorical symbolsoofoHanoi. At its core,
Metropole Hotel maintains an unmistakable, impressive design and facilities to be a
perfect combination of the past and present of Hanoi. It provides its guests with the most
luxurious facilities available today: 364ohigh-classorooms, swimmingopool,
restaurantsoand bars, boutiques, etc.
 Have a large capital investment: he two biggest shareholders of Metropole areoLodgis,
theojoint venture betweenoWarburgoPincus and VinaCapital andoSingapore’soIndotel
Limited, the total investment is up to $74.7 million (Thuy, 2020).
 Digital technology: Metropole Hotel is always strive for being at the forefront of
technology in order to make the most comfortable booking experience for customers.
Having realised the importance of online booking, along with the rapid evolution of

smart-phone, Accor Group signed a deal with First Data to develop digital technology.
To be specific, Accor puts digital technology at Metropole to help customers get easier
with checking-in, check-out, updating information process (Lemmon, 2017)
WEAKNESSES
 Concentrate mostly on foreign customers: While Metropole’s comepitors are gradually
focusing on a diverse range of consumers from both domestic and international market,
Metropole still focus mainly on foreign customers since they don’t bother the extremely
expensive price of Metropole. Metropole's dependence on foreign customers, especially
during the outbreak of Covid 19, is a weakness . As previously reported, during Covid
19, the Vietnamese government has suspended all the entry of foreigners. As a result, the
number of visitors to Metropole has decreased sharply.
 Out-dated facilities: Since Metropole has opened since the year 1901, it is inevitable
that some facilities are out-dated. Through some websites like TripAdvisor or Osyter,
there are some reviews complain about some old-time designed like walls aren’t
soundproof, much smaller boutique than other luxury hotels and no car park available.

STRENGTH WEAKNESS
- Franchise Support Team of
Accor hotel
- Achieved 5-Star rating standard
- Digital technology
- Have a large capital investment
- Out-dated facilities
- High price
- Concentrate mostly on
foreign customers
Oppurtunity
-Political stability
-The rising in GDP growth rate
after Covid 19
-The development of social
media
Threat ST strategies WT strategies
- The rapid development of
OTAs
-The luxury hotel segment is
highly competitive as a result of
Covid 19
-The demand is decrease
-The suspension of all foreign
entries due to Covid 19
- Cooperate with First Data to develop
its website, application to reduce the
influence of OTAs.
- Maintain customer relationships to
retain current customers
- Reduce the price
- Create more interesting events
suitable with domestic customers to
gain more advantages in marketing.
ST strategies
As I had mentioned before, although OTAs is undoubtedly helpful for hotels but they also charge
a comission of 30% for every single booking and they also force the hotel to reduce the price.
Since Accor Group signed a deal with First Data to develop digital technology, this is the chance
for Metropole to create its own booking online website and application in multiple platforms.
With a large investment capital, they can innovate new technology features to make the website
more friendly, interactive to domestic customers. Moreover, Metropole have finance resource to
run promotions on social medias and network to market its website and application (S3, S4- T1).

In order to maintain customer relationships, Metropole should try to utilise the membership card
Le Club Accor. To do so, all the benefits of the card like free amenitites, discount in room
services,… has to promote widely on many websites, platforms to attract more new potential
members. For customers that are members, Metropole can offer several ranks for the
membership card bases on amount of time that members spending in Metropole, each rank has
exclusive benefits such as free room upgrade, rriority check-in/out, etc. Therefore, it will
encourage customers to stick with the hotel longer and longer (S2, S3 – T2, T3, T4)
WT strategies
As a result of Covid 19, Vietnam's economy witnesses a downfall and Vietnam’s tourism is on
the decline, which is lessening the number of visitors coming to Metropole. Therefore Metropole
should create more interesting events to attract more attetion from domestic market. In the past,
such events like “Gaja: Exceptional Italian Wines” or “Korean Gastronomy Week” only focused
on attracting foreign customers. To change that, Metropole should keep up the current trend in
Vietnam to make more events focus on Vietnamese, these events could relate to Vietnam
national beauties, the prevention of Covid 19, etc. Overall, these events will be hold to establish
customer relationships, to help customers during and after the pandemic, and to attract new
customers as well (W3 – T3, T4). Furthermore, to capitalize on the national economic downturn,
the hotel should further change the price stay relevant with its competitors, improve the facilities
during the low occupancy period, and, when the outbreak is over, publicize these improvements
to attract more domestic and forgein customers (W1, W2, W3 – T2, T3).
4. Conclusion
So on a whole, in this report, I analyzed and demonstated how the macro environment affected
Metropole Hotel. WithoPESTEL andoSWOToanalysis, I have aocomprehensiveopictureoofothe
companyosuch as both positiveoand negativeofactors. Theoreport also inclusesointernal and
externalofactors of theocompany suchoas strengthsoandoweaknesses, opportunitiesoandothreats.
All thing considered, Metropole main objective is to provide unique , luxury experience for high-
class forgein customers. Nevertheless it givesothe hotel bothoadvantages andodisadvantages.

5. Reference list
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6. Appendix
1. Vietnam’soLawoon Competition
Vietnam’s Law on Competition came into effect on July 1, 2019, replacing the 2004 version of
the law. In June 2018, Vietnam passed the new regulation, which focuses on competition
restraining agreements, market dominance, economic concentration, and unfair practices (Das,
2019)
2. Theoretical framework of 5 forces analysis:
Porter's five force analysis is focused on microeconomics and has been one of the most well-
known methods and applied in a large number of big companies, up to the present day. It is
predicated on the premise that the macroenvironment has an "impact" on how strategies are
developed. The five forces of Porter’s analysis are threat of new entrants, threat of substitutes,
buyer power, supplier power and competitive rivalry:
 The threat of new entrants is depended on the barrier to entry that industry and debates
that the threat does not arise from new business entering the industry but from what
influences competition and affects the profitability of that industry (Porter, 2008).
 The threat of substitutes comes from products that provide either similar or more cost-
effective to the product (Porter, 2008).
 Buyer power is determined based on the customer’s influence on the price and
profitability of the company.
 Suppliers are the people who provide all sources of business that need to run the business.
Their power is also decided by the impact that the suppliers have on the price and profit
ability of the firm.