School of Hospitality

BSc (Hons) Conventions and Events Management BUS1014

Business Environment August – December 2020 Semester

PESTLE Analysis

<Tan Wei Hang, 20035101>

24 November 2020

I hereby state that this material is original and a result of my own effort. Any material
copied from other sources will be given the due respect in the form of referencing and
bibliography.
Table of Content

Chapter 1: Overview of Chosen Business

Chapter 2: PESTLE Analysis

2.1 Political Factor

2.2 Economical Factor

2.3 Social Factor

2.4 Technological Factor

2.5 Legal Factor

2.6 Environmental Factor

Chapter 3: Conclusion

Chapter 4: References
Chapter 1: Overview of Chosen Business

In Malaysia, tourism industry is a fast-growing industry that could contribute the

development of Malaysia’s economy positively. Hotel industry is one of the forefront
industries that responsible for publishing Malaysia as the destination to visit (Azureen &
Nordin, 2018). The Department of Statistics Malaysia (2020) had stated that the tourism
industry sustained an acceptable impetus in 2019 which the Gross Value-Added
Tourism Industries (GCATI) contributed 15.9% to Gross Domestic Product (GDP) with
amount of RM240.2 billion. The Tourism Direct Gross Domestic Product (TDGDP)
contributed 6.8% to the share of GDP that amounted RM102 billion which was better
than previous few years (Department of Statistics Malaysia, 2020). According to Emmy
(2018), budget hotel is the segment that keep growing in bounds & the revenue of
budget hotel segment construct the major segment for the tourism industry.

Budget hotel, hotel that usually provide the basic accommodation needs and best
limited services for budget-minded visitors with lower prices (Setupmyhotel, n.d.).
According to New Town Hotel (2017), although the designations in Malaysia’s budget
hotels are simple, the facilities included in budget hotels are sufficient for the visitors’
stay. The services provided in budget hotels might not be as professional as those well-
innovated hotels, but the services provided are with full effort on satisfying the guests
(New Town Hotel, 2017). Budget hotel, one of the subdivisions in tourism industry has
expanded widely in Malaysia and other countries as well in order to gain various
numbers of market share The expand of budget hotels have created high level of
competition & increased the pressure for well-innovated hotels which could bring more
choices for the travelers to select. (Almeida, 2017).

Chapter 2: PESTLE Analysis

Businesses use PESTLE analysis as a framework to identify & analyze the

macroenvironment factors that could affect the businesses (Professional Academy,
n.d.). Systematic usage of PESTLE analysis could help businesses analyze the latest
trends earlier in order to provide competitive advantage (Chartered Institute of
Personnel and Development (CIPD), 2020). WPEngine Inc. (n.d.) stated that PESTLE
analysis is a mnemonic that expanded into 6 elements which included Political factor,
Economic factor, Social factor, Technological factor, Legal factor & Environmental factor
that monitor & keep tracks on certain product or marketing developments.

2.1 Political Factor

This type of factor consists of government intervention in economy activities which could
directly influence the industries. Factors included are government policy, tax policy,
environmental law, trade restrictions and others (Chartered Institute of Personnel and
Development (CIPD), 2020).

Budget hotels might not be attractive & luxurious compared to the high star rated hotels
which made the government might not have noticed much on the budget hotels.
According to Musa & Arif (2017), Malaysian governments did not provide sufficient
helps in supporting, training & marketing the budget hotels. For example, Budget 2021
that is still preparing for release do not help much for budget hotel industry.
2.2 Economical Factor

Economical factor in PESTLE analysis could be considered as the determination of

economy’s performance in certain organizations, industries, nations, and others (n.a.,
2016). This factor majorly focused on money which included exchange rates, profits,
interest rates, expenses, inflation, taxes, and more related factors (Frue, 2019).

Covid-19 pandemic in Malaysia is getting worse from March. As there are no revenue
gained and variables that have not paid are the concerns which made the budget hotel
entrepreneurs are getting critical hits. Hassan (2020) stated that 20% budget hotels in
Malaysia are in a danger status due to the Covid-19 pandemic which made the
entrepreneurs are lack of ability to pay the rent.

2.3 Social Factor

Social factor is the segment that involves the attitude & belief of the population towards
different types of industries. Businesses could know their target markets based on the
related factors which included age distribution, culture trends, population growth, health
consciousness and more (WPEngine Inc., n.d.).

In Malaysia market, consumers would seek for excellent experiences on looking stay in
hotel with the lower price which is considered as fastidious. Based on the experiences,
the most important elements needed include customer loyalty & customer satisfaction
(Lean, 2017). Well-communication & pleasing services for customers could improve the
customer loyalty so that the customers would return for another stay in the future
(Chong et al., 2016). Based on the research by Haini et al. (2015), customer loyalty in
budget hotel business could increase based on the satisfaction needed by improving
the hotels’ facilities & services in order to gain revenue & more customers at the same
time.
2.4 Technological Factor

Technology is the mixture of equipment, knowledge & skills information which has the
usage of designing, producing & distributing goods & services (WPEngine Inc., n.d.). As
the high-speed development of technology in current era, technological factor had
become one of the macroenvironment factors that could directly affect business
activities. Technological development had brought changes in bringing more quality
certified products & services. Besides, introduction of new production, latest methods of
distributing products and various chances in communicating with target markets are the
changes that technological factors brought (Professional Academy, n.d.).

As the technology in Malaysia is evolving, usage for technological tools will be needed
for creating brand awareness in order to get attention from Malaysian markets (Lean,
2017). Social media pages & websites could be the tools for entrepreneurs to promote
& publish their new set up budget hotel as the Malaysian residents could pre-book
rooms for stay. According to Lean (2017), the information of the budget hotel is
essential as the customers could get detailed information immediately in the websites or
social media pages.

On the contrary, technology could be time & cost consuming for budget hotel
entrepreneurs. Based on the research from Azureen & Nordin (2018), Salina as the
research target of the budget hotel entrepreneur had spent long time & huge cost on
learning, creating & designing the content for publishing her budget hotel. Furthermore,
Kasim & Dzakiria (2016) clarified that sending employees for training in technological
industries would have high-cost spending which could be turnover for budget hotel
business.
2.5 Legal Factor

Legal factor might have some similar consideration with political factor, but it will be
more focused on the detailed laws that would logically affect the business activities or
operations (n.a., 2016). Professional Academy (n.d.) mentioned that consumer rights &
laws, product safety, product labelling, advertising standards, equal employment
opportunities & health & safety of the whole business are the considerations in legal
factor.

Founder of a company would need to register for license for their brand, as well for the
budget hotel business. According to L & Co Accountants et al. (2020), entrepreneurs
that would like to legally setting up the budget hotel business in Malaysia need to apply
at least a minimum of 12 approvals or with a maximum of 22 approvals which divided
into 4 stages that begin with company incorporation for Stage 1, registration for
employer & employee at Stage 2, pre-operational approvals in Stage 3 and additional
approvals in Stage 4. For the minimum till the maximum of approvals on starting up the
budget hotel business is based on the intention of the business activities provided in the
new setup budget hotel.

Malaysia as a multi-culture country that has different races which included Malay,
Chinese, Indian and more could be the target market in the budget hotel business.
According to Paul Hype Page & Co (2019), budget hotels in Malaysia would need to
apply a Halal License & alcoholic beverage selling license as pork & alcoholic items are
considered as ‘haram’ item to the Muslims in Malaysia.

2.6 Environmental Factor

As the environment are changing all the time, business would need to concern on what
would happen to their operations based on the changes (WPEngine Inc., n.d.). Frue
(2019) mentioned that business should always consider of their caring to the
environment based on the operations that done by the companies or industries.
Environmental factor is getting more notice due to the operations of business & the
global changes of environment are two-way influenced. Moreover, industries would
have to find substitute of the resources due to the needs of sustainable resources for
the business’ operations.

Chapter 3: Conclusion

Chapter 4: References

Azureen A.R. & Nordin, N. (2018), Challenges and Potential of a Budget Hotel: A Case
Study of Mesra Hotel. Retrieved from https://ijbt.unimap.edu.my/images/stories/Volume
%208,%20No.%203,%20Oct%202018/IJBT_Vol_8_Oct_2018_1_339-346.pdf

Department of Statistics Malaysia (2020), Tourism Satellite Account 2019. Retrieved

from https://www.dosm.gov.my/v1/index.php?
r=column/cthemeByCat&cat=111&bul_id=dEZ6N0dYUDJEWkVxMzdOalY3UUJSdz09&
menu_id=TE5CRUZCblh4ZTZMODZIbmk2aWRRQT09

Setupmyhotel (n.d.), Types of Hotels/ Classification of hotels by their type. Retrieved

from https://setupmyhotel.com/train-my-hotel-staff/front-office-training/76-classification-
of-hotels.html

New Town Hotel (2017), Why Stay in Budget Hotel? Retrieved from
http://newtown.com.my/blog/2017/7/14/why-stay-in-budget-hotel

Almeida, A (2017), Budget hotels in Madeira: prospects and market trends. Retrieved
from https://nidisag.isag.pt/index.php/IJAM/article/view/197/197-SI-ICABM

Emmy Suraya Hussein (2018), National President Message, mybha. Retrieved from
http://mybha.org/national-president-message/

Professional Academy (n.d.), Marketing Theories – PESTEL Analysis. Retrieved from

https://www.professionalacademy.com/blogs-and-advice/marketing-theories---pestel-
analysis

WPEngine Inc. (n.d.), What is PESTLE Analysis? An Important Business Analysis Tool.
Retrieved from https://pestleanalysis.com/what-is-pestle-analysis/
Frue, K. (2019), Is It PESTLE or PESTEL Analysis and What It Means. Retrieved from
https://pestleanalysis.com/pestle-or-pestel-analysis/

Chartered Institute of Personnel and Development (2020), PESTLE analysis. Retrieved

from https://www.cipd.co.uk/knowledge/strategy/organisational-development/pestle-
analysis-factsheet

n.a. (2016), Scanning the environment: PESTLE Analysis. Retrieved from

https://www.business-to-you.com/scanning-the-environment-pestel-analysis/

Hassan, H. (2020), 20% out of 2,300 Budget Hotels Could Close Down Due to Covid-
19. Retrieved from https://www.therakyatpost.com/2020/06/23/20-out-of-2300-budget-
hotels-could-close-down-due-to-covid-19/

Haini, F, Norsidah, A, Suzila, M.S, Adilla, Z, A. (2015), Critical Success Factors of

Budget Hotels. Retrieved from
https://www.researchgate.net/publication/305637661_Critical_Success_Factors_Of_Bu
dget_Hotels

Musa, C.O. & Arif, M. (2017), Prospects and Challenges of Budget Hotels in Malaysia.
Retrieved from
https://www.researchgate.net/publication/321156576_Prospects_and_Challenges_of_B
udget_Hotels_in_Malaysia

Kasim, A. & Dzakiria, H. (2016), Exploring the Effects of Macro-Environment on the

Predisposition to Adopt Strategic Orientation among Small Medium Size Hotel
Entrepreneurs. Retrieved from
http://www.econjournals.com/index.php/ijefi/article/view/3580/pdf

Lean, T.M. (2017), Factors Affecting Corporate Image of the Hotel Industry in Malaysia.
Retrieved from http://eprints.utar.edu.my/3164/1/Research_Project.pdf

Chong Y.T., Lim E.M., Ng C.Y., Wong C.S. (2016), Factors that Affecting Customer
Satisfaction Among Local Tourists Toward Budget Hotels in Malaysia. Retrieved from
http://eprints.utar.edu.my/2017/1/MK-2016-1201475.pdf
Paul Hype Page & Co. (2019), Hotel License in Malaysia. Retrieved from
https://www.paulhypepage.my/hotel-license-in-malaysia/#respond

L & Co Accountants (2020), Our Services. Retrieved from https://www.liew.my/how-to-

setup-a-hotel-company-in-malaysia/