INSTRUCTIONS: Please RESPOND to this answer from the Point of view as a student. Use credible sources and respond as if you are a manager of a marketing agency. Tell this student what your marketing agency would think of each of these answers from a Management perspective:
This chapter illustrates the importance of external analysis, and acts as a necessary complement to the last chapter on internal analysis. External analysis is critical as it is central to understanding a firm’s competitive position and which strategies to pursue. To analyze the external environment, a firm should look at the fundamental characteristics of the external context. Industries vary widely in elements and profitability, and firms should therefore analyze the fundamental characteristics of an industry, which includes any factors relevant to a firm’s performance at any time (Carpenter & Sanders, 2008).
To analyze the external context, firms should ask a series of important questions:
1.What macro environmental conditions will have an effect on the ability to implement strategy?
2.What is the industry the firm will operate in like?
3.What are the characteristics of the industry?
4.How stable are these characteristics?
The external environment is made up of two components, the macro environment and the industry analysis. As it is named, the macro environment analyzes the larger issues that confront the firm. This includes the PESTEL analysis. This tool is a simple way to concentrate on the environment at large, analyzing the political, economic, sociocultural, technological, environmental, and legal factors affecting an industry and firm (Carpenter & Sanders, 2008).
Political- The political factors affect both the business, as well as consumer confidence and spending. Political factors that must be considered include, but are not limited to stability, government policies, taxation, and trade treaties. For example, as my ownership expands into other countries and regions, they must consider hospitality laws, political stability, and navigating laws around ownership, construction, and hiring.
Economic- Macroeconomic factors that may affect a firm include inflation rates, interest rates, tariffs, the growth or stagnation of the economy, and exchange rates, among others. For my firm, global exchange rates could be very important in determining new locations for hotels. Tourists are more likely to visit affordable locations and the cost of business will be lower. These items are critical for a strong strategy.
Sociocultural – The social and cultural influences of regions can be critical for a business’s success. Language, religion, leisure time and demographics can all greatly affect these items. For instance, a hotel entering a region dominated by a religion that forbids people of the opposite gender touching should consider this when implementing a spa or other personal services.
Technological- Technology is very central to managing threats and opportunities. Technology can also be critically important to the value chain, and the speed of production. With regard to hospitality, technology can have many factors. For instance, the prevalence of internet has decreased business travelers, but has increased the need for corporate offsites or retreats, as teams are so much more dispersed than in previous years. These two examples provide just two ways in which the mere presence of technology can affect the industry, both positively and negatively. Other instances include the technology of running actual hotels, like internet, computers, and laundry facilities, and innovative technologies new customers might prefer, like ipads in the room or online room service ordering.
Environmental- Environmental factors can be viewed as direct and indirect operating costs for the firm, such as waste issues, pollution, and environmental practices. My firm, now called Two Roads Hospitality, defines itself as concerned with its environmental impact, and for this reason, likely pays higher costs to act in a manner it considers responsible.
Legal- Legal factors include the laws of the region, how stable they are, how highly they affect a firm’s ability to do business, and how quickly they may change. For instance, Carpenter and Sanders describe Lands’ End battle with the German regulation of allowing guarantees. While these regulations were eventually disbanded, they seriously affected the firm’s competitive advantage (2008).
In my industry, hospitality, these external factors can be critical to choosing new locations to build or buy hotels. As an industry so location based, these factors can single handedly affect business levels and success. Additional microsegment factors should be considered, as well. For instance, the Thompson brand positions itself as millennial and trendy. This brand then has hotels in “hip” areas, including New York, and newly, Nashville and Seattle.
Carpenter, M. and Sanders, W. (2008). Strategic Management: A Dynamic Perspective. Upper Saddle River, NJ: Pearson Education, Inc.
Two Roads Hospitality (2016). Retrieved on November 3, 2016 from tworoadshotels.com.