HOSPITALITY BUSINESS

DEVELOPMENT
LECTURE 4

BUSINESS ENVIRONMENTS
 LEARNING OUTCOMES
• By the end of this Lecture, you should be able
to:
– Describe the various layers of the business environment
– Relate the nature and significance of common frameworks
and methodologies employed when analysing business
environments
– Identify examples of macro- and micro-environmental
influences on hospitality organisations
 THE BUSINESS ENVIRONMENT (1)
• Every organisation finds itself developing and
operating within a given business
environment, each of which has different
layers:
– Macro-environment
• Broad factors likely to impact on most or all
organisations
– Industry (or sector)
• Group of organisations producing the same principal
product and/or service
 THE BUSINESS ENVIRONMENT (2)
• Competitors
– Different organisations with different
characteristics competing on different bases
• Markets
– Customers and consumers of one or more
organisations’ products and/or services
• The organisation
– Networked with, and economically tied to, other
organisations
(Johnson, Scholes & Whittington, 2005)
 THE MACRO-ENVIRONMENT

• Macro-environmental influences are commonly

analysed using the PESTEL Framework
– categorises such influences into six main types

• Considers key factors at work in the macro-

environment
– in particular, their potential impacts in the medium and
longer terms
Acronym Explanation
PEST Political, Economic, Social, Technological
PESTEL Political, Economic, Social, Technological,
Environmental, Legal
STEEP Social, Technological, Economic, Environmental,
Political
SPECTACLES Social, Political, Economic, Cultural,
(Cartwright 2002) Technological, Aesthetic, Customer, Legal,
Environmental and Sectoral

SCEPTICAL Social, Cultural, Economic, Physical, Technical,

(Peattie and International, Communications, Administrative,
Moutinho 2000) Legal
 REPRESENTATION OF ISSUES IN
THE BUSINESS ENVIRONMENT

Source: Davis, Lockwood, Pantelidis & Alcott, 2008, p. 23

 THE PESTEL FRAMEWORK

Source: Johnson, Scholes & Whittington, 2005, p.68

 COMPETITION
• Competitiveness is, obviously, inherent within
the notion of strategy, the aim being to gain
advantage over competitors

• Sources of existing and anticipated

competition within an industry or sector are
most readily identified, and commonly
analysed, using the Five Forces Framework (Porter,
1980)
 THE FIVE FORCES FRAMEWORK (1)

Source: Johnson, Scholes & Whittington, 2005, p.80

 THE FIVE FORCES FRAMEWORK (2)

• Barriers to entry
– Factors that need to be overcome by new entrants if they
are to compete successfully e.g. capital costs; economies
of scale; access to distribution channels; experience

• Substitution
– Reduces demand for a particular “class” of products as
customers switch to alternatives e.g. impact of ICTs
 THE FIVE FORCES FRAMEWORK (3)

• Power of buyers and suppliers

– i.e. the relative power of buyer and supplier in a given
competitive context, e.g.:
• buyer power is high when there are many alternative sources of
supply
• supplier power is high in the case of a powerful brand
• Competitive rivalry
– Wider competitive forces at play in competition between
rivals i.e. organisations with similar products and services
aimed at the same customer group; e.g. size and balance;
market growth rates; life-cycle analysis; differentiation
 LIFE-CYCLE MODELLING
• Life-cycle analysis helps determine the relative
positions, and thus competitive conditions,
between rivals

• In practice, hospitality and tourism product

life-cycles tend to be cyclical e.g. destinations
inevitably stagnate over time and either have
to keep rejuvenating themselves, or face
decline
 TYPICAL INDUSTRY CYCLE

Source: Bowie & Buttle, 2004, p. 18

 MARKETS
• Within most markets there is a wide diversity
of consumer needs, wants and expectations

• A market segment is “a group of customers

who have similar needs that are different
from customer needs in other parts of the
market” (Johnson, Scholes & Whittington, 2005, p. 91)
 SOME BASES OF MARKET
SEGMENTATION

Source: Johnson, Scholes & Whittington, 2005, p94

 THE MICRO-ENVIRONMENT
• “Consists of forces close to the organisation that can affect its
ability to serve its customers” (Hudson, 2008, p. 23)

• Organisations have more influence and control over their

micro- than their macro-environments

• SWOT analysis “summarises the key issues from the business

environment, and the strategic capability of an organisation,
that are most likely to impact on strategy development” (Johnson,
Scholes & Whittington, 2005, p. 102)
 EXAMPLE OF A RESTAURANT SWOT ANALYSIS

Source: Davis, Lockwood, Pantelidis & Alcott, 2008, p. 124

 MACRO- AND MICRO-ENVIRONMENTAL INFLUENCES ON
HOSPITALITY ORGANISATIONS

Source: Bowie and Buttle, 2004, p. 16

 REFERENCES
• Bowie, D. & Buttle, F., (2004), Hospitality Marketing – An Introduction.
Oxford: Elsevier Butterworth-Heinemann. Part A.
• Cousins, J., Foskett, D. & Gillespie, C., (2002), Food and Beverage
Management, (2nd Ed). Harlow: Pearson. Ch 1.
• Hassanien, A., Dale, C. & Clarke, A. (2010), Hospitality Business Development
, Oxford: Elsevier.
• Davis, B., Lockwood, A., Pantelidis, I. & Alcott, P. (2008), Food and Beverage
Management (4th Ed). Oxford: Elsevier Butterworth-Heinemann. Ch 1 & 4.
• Hudson, S., (2008), Tourism and Hospitality Marketing. London: Sage. Ch 1.
• Johnson, G., Scholes, K. & Whittington, R., (2005), Exploring Corporate
Strategy, (7th Ed). Harlow: Pearson. Part 1.
• Knowles, T., (1996), Corporate Strategy for Hospitality. Harlow: Longman.
Chs 1, 2 & 3.