IHG Group: SWOT Analysis and Strategies for Expansion in South Africa

This report provides a SWOT analysis of IHG Group, a leading British hospitality company, and explores strategies for its expansion in the emerging market of South Africa. It discusses the background of the hospitality industry, IHG's global presence and marketing strategies, and the opportunities and challenges of emerging markets. The report also includes a PESTEL analysis of South Africa and suggests the adoption of Porter's Generic Strategies for IHG's growth in the country.

International
Hospitality
Management
Assessment

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
Background of Hospitality Industry.........................................................................................................3
Background of IHG...................................................................................................................................3
SWOT Analysis of IHG..............................................................................................................................4
Background of emerging markets............................................................................................................6
PESTEL analysis of emerging markets......................................................................................................6
Strategies to be adopted.........................................................................................................................7
Justification of strategy..........................................................................................................................10
Practical application of strategy............................................................................................................11
CONCLUSION.............................................................................................................................................11
REFERENCES..............................................................................................................................................13

INTRODUCTION
Hospitality refers to the relationship which is shared between a guest and a host.
Hospitality Management refers to the study and analysis of hospitality and the way it can be
effectively managed within the context of a particular hospitality organization (Baker and
Magnini, 2016). It s used in order to provide the desired services to the customers and clients so
as to ensure that they remain satisfied and give positive reviews about the organization. This
report is based on IHG Group. It is a British Company which has a presence of different hotels
all around the world. It wants to expand in South Africa. South Africa is a developing country
and an emerging market which offers plenty of opportunities to the company to be able to
effectively and efficiently mark its presence in the market and to earn higher level of profits in
the future time period. In this report, focus will be made on SWOT analysis of IHG, PESTEL
analysis of the emerging market. Additionally, analysis of different frameworks to determine
strategic growth options will be discussed as a part of this assignment.
MAIN BODY
Background of Hospitality Industry
The Hospitality Industry is an industry which offers different types of services to the
customers and clients. This industry excels in providing the right services to them so that they
can receive value for the payment made by them to avail them. It includes hotels, resorts, leisure
centers etc. It is a service industry and is witnessing a higher growth rate in the recent time due to
the increase in demand of the customers for the services provided by the different companies in
the hospitality sector. It has the potential to achieve sustainable growth rate in the future time
period. Thus the companies under this sector can expand their range, products as well as services
in a highly effective manner.
Background of IHG
IHG is a British Hospitality which owns several hotel brands and has presence in
different countries of the world. It is one of the leading hospitality chains in the world. Some of
the brands which it owns are Kimpton, Regent, Holiday Inn, Holiday Inn Express etc. It is a
group which believes in providing good services to the customers and clients and ensures that
they remain satisfied with the service which it is providing to them. Therefore the group earns
higher level of profits every year and has a market share which is decent enough to sustain
effectively in the market.
IHG has directly owned hotels as well as franchise-operated hotels also which it operates
in the market. It has a good presence in the markets where it is present. The group seeks to
capitalize on the opportunities which are available for it in the market for the purpose of
expansion and make sure that it is able to use them effectively. The marketing strategies which

are adopted by the group are quite good and can ensure that the company is able to market its
products and services in an effective manner without facing problems and issues. It makes the
use of traditional as well as modern marketing strategies so that it can ensure that it reaches the
different customers in the market.
For its loyal customers and clients, IHG also operates Rewards Scheme as it offers points
to those customers and clients which are loyal towards it. It helps in ensuring that they avail the
services provided by the group again and again and thus are able to use the benefits available to
them. This makes sure that the customer’s satisfaction level of the group remains on the higher
side.
On the staffing side, IHG has different workers belonging from various countries
working under its hotels in different positions. This ensures that the group is able to maintain an
inclusive culture and thereby ensure that a good working culture is maintained. It offers
opportunities to people who are talented and can use their skills efficiently and effectively in the
hospitality sector without problems and issues. Therefore in this manner it can make sure that the
right opportunities are provided to those workers who truly deserve it and in this way the group
is able to realize its distinct goals and objectives in the future time period. It offers a platform to
the workers where they can make the maximum use of their potential.
SWOT Analysis of IHG
Strengths Weaknesses
 Global Presence- IHG is a brand
which is present in different countries
around the world. Therefore global
presence is helpful in ensuring that
mass customers can be targeted.
 Broad range of customers- IHG has
broad range of customers and therefore
this ensures that the company is able to
enhance the level of profits effectively
and efficiently.
 Highly skilled workforce- IHG has
highly skilled workforce available with
it. This ensures that the workers are
able to work in an efficient and
 Low investment in technology- IHG
invests a low amount in its technology.
This therefore creates problems and
issues for it and can lead to it getting
behind its competitors.
 Marketing strategies- The marketing
strategies of IHG leave a lot to be
desired and this can lead to competitors
getting ahead of the company.
 Demand forecasting- IHG is not good
at demand forecasting and thus it does
not forecasts demand of its services in a
proper manner.
 Financial planning- IHG is not very

effective manner and thus make sure
that they can achieve the goals and
objectives without any problems and
issues.
 Customer satisfaction- The customers
of IHG are highly satisfied with the
services which the company has been
offering to them and thus this ensures
that the company is able to make them
satisfied and happy.
good at financial planning and this can
crate issues related with financial
management.
 Lack of capitalisation of
opportunities- IHG is not good at
capitalising the available opportunities
and this creates issues for it in making
use of them in earning profits.
Opportunities Threats
 Expansion- IHG can expand to those
countries where it is not present
currently and this will ensure that it
makes the appropriate use of the
available opportunity.
 Innovation- By bringing innovation in
its services and processes IHG can
target more clients so that it is able to
earn higher level of profits.
 Technology- Using new technology in
its processes provides an opportunity to
IHG to be able to identify sources of
maximizing their income.
 Low inflation rate- Low inflation rate
in the market ensures that IHG is able
to make sure that its level of profits can
be effectively enhanced in a proper
manner so that it is able to get ahead of
its competitors without any problems
 Increasing tax rates- The government
is constantly increasing the tax rates
and thus this creates a threat for the
managers of IHG.
 Competition- Rising competition level
is an increasing threat for IHG as it can
threaten to lower its level of profits in
the long-run in the market.
 Shortage of skilled workers- Shortage
of skilled workers in the market acts
like a threat for IHG because it can lead
towards problems in its functions and
processes.
 Change in laws- Change in laws in
certain countries can affect the
operations of IHG and can also lead
towards a reduction in its level of
profits.

and issues.
Background of emerging markets
An emerging market economy is the economy of a developing nation which engages with
the global markets with its growth (Emerging Market Economy, 2020). Emerging markets are
those markets which provide good opportunities to the companies due to various reasons. These
markets have developing economies and thus present the firms attractive options to invest in
them.
There are multiple reasons which the organizations have to invest and expand in the
emerging markets. These are explained as follows-
 Opportunities- There are plenty of opportunities which are available within the context
of emerging markets (Chathoth and etl.al., 2016). These can be used properly by the
organizations which will ensure that they are able to earn a higher level of profit in the
future time period within the context of these markets. For IHG, the market of South
Africa offers plenty of opportunities which if used appropriately can ensure that it
achieves higher growth.
 Labor market- In the emerging markets, the labor market offers the availability of
workers at lower rates and wages (Delval and Bühlmann, 2020). Thus for different
companies it offers a chance to make use of it in the emerging markets and to ensure that
they are able to provide the good opportunities to the people and can ensure the reduction
in their overall costs. In the market of South Africa, the labor is available at lower rates
and thus this offers an opportunity to the managers of IHG to be able to ensure that they
can reduce the costs which they incur on labor in an effective manner to raise profits.
 Lower investment costs- In the emerging markets, the investment costs for the
organization are quite lower and thus for the companies it offers an attractive opportunity
which can be used effectively (Gannon, Rodrigo and Santomà, 2016). In the context of
IHG, it offers an opportunity to be able to invest in an effective manner in the market of
South Africa due to the lower cost which the market has.
 Tax rates- The tax rates in the emerging markets is quite low and thus this offers the
organizations a chance to make sure that they pay lower taxes and can decrease their
level of costs in an effective manner (Hofmann and Stokburger-Sauer, 2017). For IHG, it
is quite important that it makes the use of lower tax rates in the market of South Africa
and thus ensure that it is able to decrease its level of costs in a highly effective manner. In
this way it will be able to achieve its goals and objectives without problems and issues.
PESTEL analysis of emerging markets
PESTEL analysis is a management tool which is used in an effective manner so that the
overall analysis of different types of macro factors can be made by an organization. For IHG it is

important to use it before it can expand in the market of South Africa. In the context of IHG, the
analysis is as follows-
Political factors- These factors are important for being considered by an organization
because it has to ensure that the political situations are in its favor (Hwang and Seo, 2016). The
political situations in South Africa are stable and there is democracy within the country.
Therefore for IHG it is good if it wants to expand its business in the country.
Economic factors- These factors are crucial for a company because the economic
situations can change very quickly leading towards either an increase in the profits or a decrease
(Kuo, Chen and Tseng, 2017). In South Africa, the economy is a developing one and therefore
for IHG it offers an advantage because it can ensure that it can expand without increasing its
overall expenditure in the country.
Social factors- For organizations, it is very important to consider these factors because in
a society there are various factors which can influence the profits earned by them (Lee, Lee and
Dopson, 2019). In the context of IHG, these factors can create an influence on the level of profits
which it earns in South Africa because there certain sections of the society are quite
conservative.
Technological factors- For the companies, it is crucial that they are able to adjust their
working pattern according to the technological changes in the market. This is important because
it ensures that they are able to adjust effectively according to them. In South Africa, IHG is
required to keep a watch on its competitors and the strategy which they are using. This will make
sure that the company is able to get a strategic advantage over them.
Environmental factors- Nowadays, the customers are becoming very conscious towards
the environment and therefore require from the companies that they are able to provide them
eco-friendly products and services (Litvin, Goldsmith and Pan, 2018). In South Africa, the
customers and clients are quite conscious towards the environment and it is an important factor
to be considered by the businesses. In the context of IHG, it is important that it considers these
factors and uses eco-friendly processes for providing its services to the customers and clients in
South Africa.
Legal factors- A company needs to abide by the legal rules and regulations of the
country where it is conducting its business operations. For IHG, it is highly important that it is
able to consider the different types of legal rules and regulations in South Africa and thus ensure
that it conducts its operations smoothly. South Africa has lenient legal rules and regulations
towards new companies which want to set their operations in the country and this should be able
to help IHG.

Strategies to be adopted
Porter’s Generic Strategies- It is a framework which is used by the organizations to
determine a particular strategy which will ensure growth for them in the future time period
(Madera and et.al., 2017). The use of one of these strategies can be made by IHG to identify the
opportunity through which they can ensure their growth in the future time period. For IHG, the
strategies which are available under this framework are as follows-
 Cost Leadership- Under this strategy, an organization can focus on the reduction of its
overall costs (Mariani, Styven and Ayeh, 2019). This is needed if it has to obtain a
strategic advantage over its competitors in the market. In the market of South Africa,
there are various competitors of IHG which are present. Therefore if it uses this strategy
then it can attract the customers and clients towards it and can ensure that a competitive
advantage is obtained over the competitors.
 Differentiation- In this strategy, a company can put its focus on ensuring that it
differentiates its products and services from the competitors. In South Africa, the players
in the hospitality industry offer plenty of options to the customers and clients. Thus IHG
needs to make sure that it can differentiate its products and services from them thereby
attracting the customers.
 Cost Focus Strategy- Under this strategy, the companies are required to target a
particular segment in the market by reducing the costs. In the market of South Africa, it is
needed that IHG is able to target certain segments of customers by reducing its costs
which will ensure that it will be able to lead in the market of the country.
 Differentiation Focus Strategy- In it, the firms should make sure that they are able to
target segments of customers by differentiating its products and services. In the market of
South Africa, IHG needs to make sure that it does just that which will enable it to earn
higher-level of profits.
Justification- IHG needs to make the use of Cost Leadership Strategy in South Africa
because by making its use it will be able to make sure that it can reduce its prices and
attract the customers and clients towards it which will ensure its long-term strategic
growth in the country.
Ansoff Matrix- It is a strategical framework which is used by the organizations to
determine the strategy which is most suitable for them to be able to achieve higher
growth in the market in the future time period (Min, Park and Kim, 2016). In the context
of IHG, the following strategies are available for it to target growth-
 Market Development- Under this strategy, the firms are required to enter into a market
where they can provide their products and services. For IHG, it is needed that it uses it to
enter into the market of South Africa which will ensure its growth and development in
the country in a highly effective manner without any problems and issues.

 Market Penetration- In this strategy, the organizations are required to penetrate the
market. Thus in this way they can make sure that they are able to provide more of their
existing products and services to their customers in the market. For IHG, it is crucial that
it is able to penetrate the market of South Africa through this strategy and make sure that
it provides more of its products and services to the customers and clients there for future
growth.
 Product Development- By making the use of this strategy, a company can innovate in its
products and services in the market. In the context of IHG, it is highly important that it
makes the use of this strategy in South Africa so as to ensure that strategic edge is
obtained over the competitors.
 Diversification- While using this strategy, the companies ensure that they move into
entirely new markets with new products and services (Okumus and et.al., 2019). IHG is
required to make sure that it can diversify into the market of South Africa with the
products and services which it offers.
Justification- For the managers of IHG, it is recommended that they make use of Market
Penetration Strategy. Using this strategy will ensure that the company is able to penetrate
the market in South Africa in a highly effective manner so that it can achieve its goals
and objectives.
Nykiel’s hotel strategic growth options- These options are quite crucial to be
considered by the organizations in the hospitality industry as by making their use they
can ensure their higher growth in the future time period (Rahimi and et.al., 2018). The
options for growth under this framework are as follows-
 Horizontal expansion- It refers to expansion within the line of hospitality. It can be
useful for IHG in South Africa to keep multiple options for the purpose of expansion.
 Geographic expansion- It means growth from a small radius into a big geographical
area. For IHG this strategy can be very useful in South Africa to set a footprint in the
country.
 Product Hybridization- It means expanding the products and services across a broad
range. IHG can use it in South Africa so that it is able to ensure that it is successful in the
market of South Africa.
 Specialization- It refers to being specialized in something. For IHG it can mean
specializing in a particular product or service related to hospitality so that it is able to
ensure that it targets the right customers and clients in South Africa.
 Product Tiering- This strategy ensures that hospitality industry is able to deal with
various types of forces which exist within the market. For IHG, the use of this strategy is
quite important to ensure that the right growth can be achieved in the market of South
Africa.
 Product Rebranding- With the use of this strategy, the organizations in the hospitality
sector ensure that they are able to rebrand their products in an effective manner which

will ensure they can meet the expectations of the customers and clients. For IHG this
strategy can be very useful in the market of South Africa.
 Non-Franchising- This strategy is used by those hospitality firms who seek to have no
compromise on their overall quality and products and services offered. In the context of
IHG, this is a useful strategy which can be used in the market of South Africa.
 Franchising- By using this strategy, the hospitality companies expand in a particular
country by offering franchises under their brand name (Sabuncu and Karacay, 2016).
This is a good strategy which can be used by the managers of IHG in South Africa.
 Brand Collection- This strategy is used primarily by those companies who seek to invest
in chains which have a brand image within the market. IHG can use this strategy in South
Africa by investing in an existing brand there.
 Management Contracts- These contracts are done in order to ensure the management of
a particular hotel through an agency (Sahin, Gulmez and Kitapci, 2017). IHG can make
use of this strategy in the market of South Africa which will help it in managing its
operations in a smooth manner.
 Vertical and Horizontal Integration- This strategy is used by the hospitality firms to
ensure that they can grow in the market of the country in an effective manner. It is a
strategy which can be used by IHG to grow in the market of South Africa.
 Singleness- In this strategy, the hospitality firms offer just one product or service without
entering into product expansion (Tung and Au, 2018). For IHG, it is important that it is
able to make the use of this strategy in the right manner in the market of South Africa.
 Value-related products and services- By using this strategy, the hospitality firms target
the attracting of customers and clients by offering them products and services which seek
to create value for them. This can be a useful strategy for IHG in the market of South
Africa.
 Global Positioning- This strategy is helpful for the hospitality firms to position their
products and services for global markets (Wang, 2016). Thus for IHG this is an
appropriate strategy which can be applied in the market of South Africa.
Justification- IHG must make the use of the Product Hybridization strategy in the market
of South Africa. Using it will ensure that it expands its products and services in an
effective manner in the market of the country.
Justification of strategy
IHG needs to make the use of Ansoff Matrix for the purpose of analyzing the options
which are available for its future growth in the market. When the company makes the use of it
can evaluate the various options which it has in the market of South Africa to be able to expand
its operations and attain sustainable growth in the market.
In the matrix there are various options for future growth. Among them the option which
is the most suitable for IHG in South Africa is Market Penetration. With its use it will be able to

penetrate the market of South Africa in a highly effective manner to ensure that it can acquire a
much-desired competitive edge over the competitors in the country.
Practical application of strategy
After selecting a particular strategy for growth purposes it is required from the
organizations that they are able to make its use in a practical manner. IHG will ensure the
practical application of the strategies as follows-
Porter’s generic forces-
 5 years ahead- IHG will ensure that it makes use of Cost Leadership Strategy and is able
to set its mark in the market of South Africa with the use of it. This can be done by
reducing the overall prices in the market.
 10 years ahead- Here, IHG will put focus on using Cost Leadership Strategy to acquire a
competitive edge in the market of South Africa. The company will look to target high
growth rate here.
Ansoff Matrix-
 5 years ahead- IHG will make sure that it uses its Market Penetration Strategy to
effectively settle in its operations in the market of South Africa.
 10 years ahead- Here, IHG will ensure that it can use the Market Penetration Strategy so
that it is able to acquire a mass customer base in South Africa.
Nykiel Fourteen Strategic Options-
 5 years ahead- IHG will make the use of Product Hybridization Strategy and will ensure
that it is able to ensure that a proper mix of products and services is offered to the
customers and clients in South Africa.
 10 years ahead- IHG will ensure that it uses Product Hybridization Strategy and manages
higher growth rate in the market of South Africa in a highly effective manner over the
competitors.
CONCLUSION
From the above report, it can be concluded that hospitality management is required from
the point of view of the organizations in the hospitality sector to ensure that they provide the
right services to the customers and clients leading to their satisfaction level. SWOT analysis is a
highly useful tool for the companies to assess their internal position, PESTEL analysis can be
performed by them to identify the factors affecting the company in an emerging market if it
expands its operations there. Tools like Porter’s Strategic Forces, Ansoff Matrix and Nykiel’s
fourteen hotel strategic growth options are quite useful for the organization to assess its growth
options in the future time period. By making their use in an appropriate manner the firm can be
able to become successful in the market without problems and issues and will acquire a strategic

and competitive edge over the competitors in the market of the country where it is considering
the expansion of its business operations.

REFERENCES
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Emerging Market Economy. 2020. [Online]. Available through:
<https://www.investopedia.com/terms/e/emergingmarketeconomy.asp>