Unit 41 - Hospitality Business Strategy

Hospitality Business
Strategy

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
P1: Applying appropriate frameworks, analyse the impact and influence of the macro environment on a
given hospitality organization and its strategies......................................................................................3
M1: Critically analyse the hospitality macro environment to determine and inform strategic
management decisions.............................................................................................................................5
TASK 2.......................................................................................................................................................5
P2: Analyse the internal environment and capabilities of a given hospitality organization using
appropriate frameworks...........................................................................................................................5
M2: Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set.......................................................................7
TASK 3.......................................................................................................................................................7
P3. Applying Porter’s Five Forces model and evaluate the competitive forces.......................................7
M3. Devise appropriate strategies to develop competitive edge and market position..............................9
TASK 4.......................................................................................................................................................9
P4. Applying a range f theories, concepts and models, interpret and devise strategic planning...............9
CONCLUSION.........................................................................................................................................11
REFERENCES..............................................................................................................................................12

INTRODUCTION
Business strategy encompasses particular set of actions as well as decision that are made
by an entrepreneur in order to achieve the predetermined objective successfully. This led the
management of company to secure competitive position within the market in order to appeal the
interest of both internal as well as external stakeholders. Hospitality industry is one of the most
emerging sectors that accommodate the requirement of global customers (Charter, 2017). So
equipment of better strategy by top level management helps to discover, analyse as well as
exploit the opportunity by making effective use of the resources. For the better understanding of
report InterContinental Hotel group has been selected which is the multinational hospitality
company whose headquarter is in England UK. The company comprises of various hotel,
restaurant and resorts to make pleasant trip of the customer. This report cover topics like impact
and influence of macro environment within hospitality business. Demonstrate the internal
environment as well as capabilities of the hospitality sector. Apply Porter’s five force model in
order to evaluate the competitive forces and devise strategic planning for hospitality
organization.
TASK 1
P1: Applying appropriate frameworks, analyse the impact and influence of the macro
environment on a given hospitality organization and its strategies
Macro environment refers to the external factors which affects the operation of
company under this the company has done PESTLE analysis which can help to identify the
challenges and opportunities going in the external environment. There are six factors which are
analyzed by the company under Pestle which are as follows.
Political factor: It plays a significant role in determining the factors that can impact IHG
hotel. It can affect its profitability in certain markets. It is essential to have political stability in a
country in which companies operate in and IHG hotel business is travel and leisure industry
which needs political stability. The taxation rates fluctuation can work in favor or against the
company (Grant, 2016). If the rates are going down company will get benefited but in most of

the cases government increases tax rates which is a challenge for a company. As it results in
increase cost and decrease in margin.
Economic factor: There are lots of economic factors such as inflation rate, interest rate,
foreign exchange rate tax etc. which affect the company directly. Intercontinental hotel group
can use countries economic factor such as growth rate an inflation to forecast the growth in the
upcoming years. The company needs to take care of cost of borrowing as the higher the cost of
borrowing the company has to settle with lower margin and vice versa. Inflation rates can result
in increase in the prices of packages offered by the company and it need to figure out from which
country they want to do business as foreign exchange rate also plays an important role in
determining the profits of entity.
Social factor: The company need to take care of society in which they are operating
shared beliefs and attitude of the public plays an important role in framing a decision. The IHG
design their marketing message according to the needs of the customer of given marketplace.
The company analyse demographics and skill level of the population which is close to them.
Herein, hotel plays special attention towards the culture of the society as it includes gender roles
and social conventions and so on. The manger of hotel all focuses on the statute and interest of
public so that they can design a package accordingly (PESTEL Analysis of IHG, 2018).
Technology factor: If the company wants to do well globally they should use updated
technology. A firm should do a complete analysis of the speed at which technology disturbs the
industry. Herein, OHG focuses on recent technological development by the competitors. At the
same time using updated technology affects on cost structure of the company.
Environment factor: Environment norms keep on changing depending upon markets and
the country in which they are operating. Herein, Intercontinental hotels do complete analysis of
environment factors before entering into new markets. This includes climate, weather and
recycling of the product, attitude towards use of renewable energy and law regulating
environment pollution in the given country. Using renewable resources may work in the favor of
company as it reduces the cost and public also get attracted towards the hotels who are
promoting environment friendly techniques.

Legal factor: It is necessary that a firm need to carefully evaluate laws and regulation in a
country before doing business there. Some of the legal factors that can affect IHG are antitrust
law in travel and tourism industry, discrimination law towards a foreign company, intellectual
property law, employment law, consumer protection and e-commerce law. It is obvious that
country may be having minimum wage law which the company have to adopt and the employees
of company should be paid reasonably so that their is no problem from the legal side.
M1: Critically analyse the hospitality macro environment to determine and inform strategic
management decisions
IHG company is the well-known hospitality company that cater the requirement of
national and international customers in the worldwide region. So to effectively incorporate the
business worldwide it is vital for company to extensively focus on external environment and
devise better strategy for the appropriate functioning of firm (Hill, 2017). The manager of
company evaluates the political factor like stability within marketplace to devise strategy in
order to incorporate better strategy. Along with that focus is given to adopt latest technology or
innovation in order to remain ahead of competitors and gain advantage of core competencies.
TASK 2
P2: Analyse the internal environment and capabilities of a given hospitality organization using
appropriate frameworks
Internal environment involves the culture, work process and working climate that
determine the circumstances of an organization at significant level. Herein, SWOT Analysis is
used by IHG hotel to overview strength as well as weakness of company in order to maintain
desirable position.
Strength
 IHG Hotel focuses on the training and
development of employees due to which it
comprises of skilled workforce that
constantly update their knowledge and
effectively work on the innovative
Opportunity
 Online channels need to be extensively
used to reach out to the potential
customers. Effective utilization helps to
leverage the opportunity in terms to serve
wide market and generate data at real time

technology. Competitive workforce
remains motivated to successfully adopt the
changes.
 The economies of scale are well utilized by
entering into new market. This has
promoted expertise in successfully
incorporating the portfolio investment
within different geographical regions.
(Trevisan, 2016).
 Expansion in the emerging market acts as
an opportunity for company due to low
percentage of competition that helps in
developing unique image.
Weakness
 As the company is carrying out operations
in diverse geographic market so to carry
out expansion more and more investment
needs to be done on innovation leading to
consuming process in terms of funds, time
and energy (SWOT Analysis of IHG,
2018).
 The company likely lacks in the demand
forecasting due to which it miss out to
build the desirable strategy.
Threat
 Increase in competition and availability of
supplier acts as a threat to company in
terms to raise the prices of raw material
which can decline the profitability of
Intercontinental hotel group.
 Globalization led to the increase in the
volume of competition which is considered
as a thread in terms to secure the market
position and trust of existing customers
VRIO Analysis assist an organization to examine the resources and capabilities that can
be utilized in order to gain the long-term competitive advantage that finally helps in the growth
of sustainable platform. Explanation of the drive analysis in context to IHG company is listed
down below:
Capabilities Valuable Rare Inimitable Organised

Global
presence
✔ ✔ ✔ ✔
Brand image ✔ ✘ ✔ ✘
Financial
resources
✔ ✘ ✔ ✔
Valuable: From the above table it has been determined that IHG company has global
presence, renowned brand image and availability of finance which makes it a valuable resource.
All the factors protect company from the dynamic external factor as it can incorporate better
criteria in order to maintain unique functioning effectively.
Rare: The resources which are unique for IHG hotel comprises of global presence of
entity that helps to wipe out the competition and built global presence. It more likely helps to
appeal the interest of wider group successfully (Müller, Buliga and Voigt, 2018).
Inimitable: The resource which cannot be duplicated by the rivalries of IHG company
includes its global presence, goodwill development after various course of duration and capital
investment. It helps in moving the business in various territories and gain huge attention from
target market.
Organized: The organizational resources and capabilities like operation in worldwide
area and availability of finance are effectively organized. This prominently helps to grab the
opportunity exist in external market and gain the advantage of long term sustainable
development.
M2: Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set
With the help of SWOT analysis together with VRIO analysis, it is assessed that the
strengths of a good brand identity are present in the product. Simultaneously it is determined that
IHG hotel vulnerability is restricted technology investment (Wood and Logsdon, 2017). By
applying VRIO review, the company's resources and capabilities of company with remain
indifferent and help to successfully gain the position of sustainable development.

TASK 3
P3. Applying Porter’s Five Forces model and evaluate the competitive forces
Porter’s five forces analysis
This concept is implemented by an organization to analyze the rivalry in particular
industry in which the firm is operating its business. The brief description of this framework is
defined as under in context of IHG hotel:
Threats of new entrants- The hospitality sector globally classified by high capital costs i.e.
the total cost that is required to project a commercially operable position (Han, Lee and Kim,
2018). To incorporate a business in hotel industry, there are need of large capital and there are
numerous laws and regulation that are framed by national authority and are required to follow.
So it is not easy to set up a business in this sector and gaining trust of customers. Due to this, the
risk of new entrants is low in context of IHG hotel.
Bargaining power of suppliers- The power of suppliers over hospitality industry is
comparatively low. The respective sector is only subjected to the power of the labor, trained staff
or workforce and the sector has a huge requirement of them. Hotels such as IHG Hotel are not
subjected to the bargaining power of suppliers and it has low and instant force of their
competition. For a sustainable business plan of action over the long duration a hotel will have to
maintain a permanent cost advantageous over potential competition is higher strategic groups.
Bargaining power of buyers- When the concentration of the buyers is high than the market
players then the business industry is subjected to the high power of purchasers. In Hospitality
industry, convinced groups of buyers exercise power over the business when the purchasing of
hotel rooms in bulk is required. These teams include domestic and global airlines, tour operator
and convention organizers and participants. When business travelers are concerned the
segregation becomes important and the hotels and under pressure to keep their brand uniqueness.
Threats of substitutes- This effect the business of hospitality sector, companies like IHG
less and the threat of the substitutes is relatively low. Individual appearing for cheap lodging that
can easily opt to live in hotels, motels and with relatives and IHG Hotel use low pricing plan of
action cause of which this threat less influence the business of company (Chen, 2019). This

market is price sensitive and the hotel’s consumers become the cost conscious people. However,
in case of loading, large unit of individual like travelling groups and business travelers. The hotel
does not suffer a threat of substitute however it faces competition of separation.
Rivalry among existing competitors- The competition in hospitality sector is strong as the
cost of products segregate and switching costs is low. The business expansion required is greater
than the rate at which the business is improving (Kasemsap, 2018). IHG hotel is company where
there are high financial costs, the pressure to sell the capacity by price cutting is high and the
competition becomes strong. There are number of hotels such as Holiday Inn, Marriott,
InterContinental and many more that are generating high extent of competition regarding
respective firm.
M3. Devise appropriate strategies to develop competitive edge and market position
By adopting Porter’s five force analysis model and strategy, the business venture can
determine the level of competition and market position of the company. Different strategies of
this concept assist in offering information about competitive edge that from where the risk of
rivalry is low and venture can gain rivalry benefits.
TASK 4
P4. Applying a range f theories, concepts and models, interpret and devise strategic planning
There are several methods and concepts that can be used by a business venture to
interpret and devise strategic planning. In context of IHG Hotel, the administration can use
Ansoff Matrix which is a planning tool that is used by organizations to provide directions in
context to support senior, executives and other for future growth.
Market penetration- It is the first strategic option of this framework and this option can be adopt
by the respective firm in term of maximizing sales and customers base by making innovation in
marketing and promotional tools and using different pricing strategies (Chung and Chung, 2018).
There is no risk as the existing products and services are launched in to existing market, so
customers are well aware with them.
Product development- It is another growth strategy that can be adopt by the management f IHG
hotel in term of making development in its business in term of enhancing productivity and

increasing profit margins. By adopting this option, the administration can launch new products
and services in existing market with the motive of business progress. This strategy is risky more
than market penetration as the new commodities and services are launched in existing market so
it is not sure that they are able to fulfill customer’s needs.
Market development- By adopting this growth option, the respective company cal also
make growth in its business in term of capturing large market size and share. By adopting this
option, the firm can make expansion in its business by operating its in different nations where it
is not running (Sun and Lee, 2018). This strategy is risky in comparison to product development
because company launch its current products and services into new market so it is not clear that
people will like them or not.
Diversification- By adopting this strategy the business venture like IHG hotel can make growth
in its business. With the help of this option, the firm can launch its new commodities and
services in to new market to make development in its profits, market share and customer base
etc. It is highly risky as product and market both are new so it not clear that customer of new
market will like them.
The above mentioned strategies, it can be justified that the organization can adopt
Product development option and can offer seasonal and discount tour package and offer private
vehicles services. This will assist in maximizing customer base and sales of the company as with
the help of this product, the firm can target lower income group and working people.
M4. Produce a strategic management plan that has tangible and tactical strategic priorities and
objectives
Strategic management plan
It mentions to a written document that can be implement and used by the venture for
conversing and it help in setting objective, focus energy and priorities etc. It is useful for
ensuring that staff is performing appropriately to attain the goals and aims (Lordkipanidze,
2018). This document considers strategy, objectives, mission and vision etc.
Strategy- It refers to that plan of action that are framed and developed by a business venture for
the effective running and accomplishment of aims, objectives of the firm.

STP- It refers to a broad framework that monitors the act of market segmentation. this plan of
action is useful for IHG hotel as each factor of STP help the company in explaining the profit
measures can be adopted by respective ventures (Han and Hyun, 2019). This strategy can be
adopt by the respective venture in term of adapting option of product development.
Segmentation- In it, the firm can segregate the market as per demographics like age,
gender, income, profession and living standards. in term of new tour package, the administration
can target professionals, al income group and both male as well as female. By making psycho-
graphic segmentation regarding private vehicle by considering risk and attitude as currently
entire world is facing pandemic of COVID19 so during travelling people prefer private vehicles
currently and also in future.
Targeting- The company can target people of all income group and both male and female
when it will offer its new tour package and transportation services. It can target working people
as this group of people highly willing to visit in seasonal time in comparison to other cause of
their job.
Positioning- The respective company is already well positioned in hospitality industry.
But in term of new product and services, the firm can use effective marketing tools to promote
them and awaring people to take the advantages of them. When customer base will increase the
position of the firm will also develop.
Objective- The SMART objective of IHG Hotel is defined as under:
 To enhance the customer base of the firm by 6% within 7months by offering new tour
package.
 To maximize the profitability margins by 8% within upcoming 10% by offering private
vehicle facility to guest.
Tactics- It refers to that plans and actions that are framed by the administration to deal with short
term complexities. In IHG hotel, the management can implement tactics of use of technology in
term of offering self check-in and check-out service to customers (Charter, 2017). By using cash
management tactics that help in framing good budge when the firm will adopting product
development option to launch new product and service.

CONCLUSION
It has been concluded from the preceding defined data that business plan of action are those
activities that are performed by company to effective business operations of the firm and make
growth in the business. To survive and sustain in marketplace till long duration, the firm should
implement different framework an concepts like PESTEL, SWOT , VRIO and Porter’s five
forces analysis. These all models will assist in offering information about external environment,
capability and threat of the venture and also enable in determining competition in specific
business industry. By using strategic planning document, the firm can make planning for the
growth of the by adopting strategic development option of Ansoff Matrix.
REFERENCES
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Online
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analysis-intercontinental-hotels-group-plc/.
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Ansoff Matrix. 2020. [Online]. Available Through: <
https://www.tutor2u.net/business/reference/ansoffs-matrix>.