Business and Business Environment: IHG PLC and Macro Factors

This report provides a comprehensive analysis of the macro-environmental factors affecting the Intercontinental Hotel Group PLC (IHG PLC). It examines the positive and negative impacts of political, economic, social, technological, environmental, and legal (PESTLE) factors on IHG PLC's operations and profitability. The report discusses the influence of Brexit on the company, fluctuations in currency rates, socio-cultural considerations, technological advancements, environmental standards, and legal frameworks. It highlights how these factors shape IHG PLC's decision-making, market strategies, and overall business performance in various countries. The analysis includes references to relevant literature and statistical data, offering insights into how IHG PLC navigates the complexities of the global business environment. The report concludes by emphasizing the importance of understanding and adapting to these external factors for sustainable business success.

BUSINESS AND
BUSINESS
ENVIRONMENT

Table of Contents
P4 Positive and negative impact of macro environment upon business operations...............1
REFERENCES................................................................................................................................4

P4 Positive and negative impact of macro environment upon business operations
Business environment is the surroundings in which several sector organisations are
working. It is dynamic in nature and such modifications give positive as well as negative both
impact on the working of companies. Business environment involves macro and micro
environmental factors. Here micro involve internal factors related to business and these are
controlable whereas, macro involve external elements which is beyond the control
(Erasmus,Strydom and Rudansky-Kloppers, 2016). IHG- Intercontinental Hotel Group PLC
founded in 1967 and headquartered in Denham, UK either owns, manages, franchise or lease
hotels globally and deals in hotels, resorts or restaurants under the name of Intercontinental,
Crowne plaza, Holiday Inn and many more. In present the company had approximately 5400
hotels all over the world. External environment also affects company performance and
operation like supply, demand, business regulation and much more (Cantwell, Lundan, 2010).
The external business environment of any organization is divided into two segments micro
business environment and macro business environment, in which micro business environment
consists of organization structure, suppliers, customers, competitors, and intermediaries.
However the macro environment is made up of political, economical, social, technological,
environmental, and legal. As macro environment is made up of those factors which can not be
controlled by organization they largely effects the organization and their decision-making.
Intercontinental Hotel Group PLC have their operations in various countries to provide absolute
experience in travel and leisure (Montazemi, 1988). The study of macro environment can be
explained as follows:
Political Factors: They play a important role in examine factors that impact IHG PLC's
long term profitability in a specific market or country (Bah and Fang, 2015). As the company is
dealing in more than one country, it exposes to different types of political system and risk
associated with it. The political factors that impact a business mainly include taxation, trade
policies, corruption etc. and causes effects like impact on economy, changes in regulations,
political stability (Hamilton, Webster, 2015). Brexit Influence causes positive impact on IHG
PLC, as after Brexit, UK individually focused on all small and large scale industries and their
stability to analyze which industry is earning more profit and contributing more in UK economy.
By this analysis, they come to know that their tours and travels industries as well as hotel
industries are more profitable to them and they become gave more attention in their growth,
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whereas political instability of the country temporarily affected the business in a negative
manner (Political Factors Affecting Business. 2015).
Economical Factors: The economical factors are inflation rate, interest rates, foreign
rates, exchange rates etc. which determines the total demand and investment in economy. IHG
PLC has positive impact of economical factors due to increase in foreign direct investment
increases the income level of the company. According to the statistical information of UNCTAD
World Investment Report 2018, maximum share of FDI inflow of UK utilized by financial
services industry whereas around half of the investment of UK stock of almost GBP 1 trillion
came from the EU member States. The Brexit process raises concerns among certain investors
about higher trade costs with Europe. Whereas the negative impact of economical factors on IHG
PLC is due to fluctuation in currency rate, future contracts of multi-national company affects
inversely and their profitability also suffers (Kaplanand et. al., 2001).
(Source: PESTLE Analysis, 2018)
Socio- cultural Factors: Society's culture and way of performing things impact the
culture of an organization in which the business is operating. The marketers at IHF PLC
understands the customers of a specific market and their shared beliefs and attitudes to design the
promotional message for their travel industry customers. Some of the social factors that has to be
considered by IHG PLC are demographic factors like education level, income level, standard and
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Illustration 1: PESTLE Analysis

class structure, skills, culture, attitudes etc. The positive impact of socio-cultural factors is that it
allows a company to make a thorough study of their customers taste and preferences which helps
them to serve better and increases their customer satisfaction level (Kennerley and Neely, 2003).
Where as this has negative impact as it is a lengthy and costly process for the company. To make
this analysis company has to hire a extra employees or team to study the targeted customer
segment.
Technological Factors: Technological analysis of industry must analyze its speed and
innovation level at which affects the industry as well as firm (Deasy And et.al., 2016). It must
involves understanding of the factors like recent technological aspects used by competitors,
technological impact on company's services, impact on cost structures, etc. (Klapper, 2010).
Technological factors influences positively as they strengthen the company with global approach
on just one click and also promotes innovation like email marketing, managing customer
relationship marketing etc. Whereas its negative impact on the company is it requires highly
skilled employees and IT infrastructure as well as company has to provide technical training to
their employees which will become a cost to company and also time consuming process.
Environmental Factor: Before entering into any new market a company must analyze
the requirements of environmental standards and conditions of that market. Some factors that has
to be considered before setting a new business or entering into new market are weather and
climatic conditions, laws regarding environment pollution and safety, waste management, etc. In
IHG PLC environmental factors are considered before planning and implementing their business
operations which increase their contribution in environment protection (Teece, 2010). This
practice ultimately influences their goodwill in the positive manner. On the other hand it also
have negative impact that environmental factors of any country are not constant and affects the
stability of business in specific area. As this factor is unpredictable it make sudden impact on the
organization as well as customer's decision-making.
Legal Factors: In many countries, the legal framework are not capable enough to protect
the intellectual property rights of an organization (Smith, 2016). Thus a firm should evaluate
carefully before entering such markets. Otherwise this may affect organization's overall
competitive edge (Prajogo, 2016). Some of the legal aspects IHG PLC should consider are
discrimination law, copyrights and patenting, employment law, data protection and equality law
etc. For IHG PLC the positive impact of legal factors are that it minimizes the chance of
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fraudulent and unfair trade practices between the two countries and business operations. It also
empowers the customers with equality rights and protect them from unlawful prices and
processes. These factors inversely impact the new entrants in business or market as they feel
restricted or bounded with so many formalities and legal policies.
REFERENCES
Books and journals
Cantwell, J., Dunning, J. H. and Lundan, S. M., 2010. An evolutionary approach to
understanding international business activity: The co-evolution of MNEs and the
institutional environment. Journal of International Business Studies. 41(4). pp.567-586.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Kaplan, R.S. and et. al., 2001. The strategy-focused organization: How balanced scorecard
companies thrive in the new business environment. Harvard Business Press.
Kennerley, M. and Neely, A., 2003. Measuring performance in a changing business
environment. International Journal of Operations & Production Management. 23(2).
pp.213-229.
Klapper, L. and Love, I., 2010. The impact of business environment reforms on new firm
registration. The World Bank.
Montazemi, A.R., 1988. Factors affecting information satisfaction in the context of the small
business environment. MIS quarterly, pp.239-256.
Prajogo, D. I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics. 171,
pp.241-249.
Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning.
43(2-3). pp.172-194.
Deasy, S. And et.al., 2016. Controlling use of a business environment on a mobile device. U.S.
Patent 9,247,042.
Smith, B., 2016. Nature and Geography: Tragic Voids within Marketing Textbooks and the
External Business Environment. In Global Perspectives on Contemporary Marketing
Education(pp. 47-64). IGI Global.
Bah, E.H. and Fang, L., 2015. Impact of the business environment on output and productivity in
Africa. Journal of Development Economics. 114. pp,159-171.
Erasmus, B., Strydom, J. W. and Rudansky-Kloppers, S. Eds., 2016. Introduction to business
management. Oxford University Press Southern Africa.
Online
Political Factors Affecting Business. 2015. [Online]. Available
through<https://pestleanalysis.com/political-factors-affecting-business/>.
UNCTAD World Investment Report 2018. [Online]. Available
through<https://en.portal.santandertrade.com/establish-overseas/united-kingdom/
foreign-investment>.
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