Decision Making For Hotel & Restaurant Managers Define the term environment in this context. We say that strategic managers within organisations must consider environmental influences before arriving at business decisions; discuss what these environmental forces are and how they would impact on the decisions made by strategic management on the future viability of the business. As well as this, do a brief analysis of the 5 forces driving competition in the hospitality industry using Porters model as the basis of your analysis.
If there is a question: ”What must be considered for managers in the first stage of business decision making? ”, one of the component elements included in the right answer definitely is analysing the external environment of the organization. As Dess commented (2008, p. 37), “Strategies are not and should not be developed in a vacuum. They must be responsive to the external business environment”. Especially in hospitality – a service-based industry, the term “external environment” is extremely important cause the products are intangible, which are dedicated according to the markets’ demands.
This paper will base on a concise definition of the term “environment” in hospitality in order to give a view in details of the common environmental forces as well as how they affect the business that drive the decisions made to adapt to the environment. External environment can be simply defined by everything outside an organization that can influence its present and future. According to Davidson (2009), there are two layers composing the external environment of an organization, which are general (or macro) environment and task environment.
While the general environment includes all major impacts at the industry level namely economic, demographic, technological, socio-cultural, political-legal, and international trends; the task environment contents the relevant forces at the level of individual, which directly affect the organization’s activities such as customers, competitors, suppliers, regulators, strategic allies(Kew, p. 1,2005). In the view of strategic management at industrial level, hospitality managers should consider current specific trends occurred in the macro environment.
Firstly, economic trends always play the major role in every business’ development. Illustratively, the economic downturn made 2009 became a rough year for hoteliers caused by increased inflation, high unemployment rate, and decreased consumer spending. This situation confronted hoteliers with decision made that whether they should continue funding and investing or not. Another dimension that also considerably affects the hospitality industry is technological trends. Reid (2009, p. 59) suggested that “Many of new technologies in the hospitality and tourism industry are intended to improve the efficiency of firms, thereby reducing costs”. His example illustrated that hotels and airlines do maximize their revenues through price setting by using sophisticated systems to capture costs and demand. Moreover, together with the rapid development of information technology, the informational demand become higher and more complex that result the advanced reservation systems, modern management software –which managers should keep abreast with.
The tendency of globalization in hospitality and tourism industry keeps growing that causes the international trends together with political and legal trends influencing the hospitality organizations. Therefore, managers at this stage are face to the options of which direction their business would grow and compete –internationally or locally. When the decision has been made, they then have to concern about the political and legal changes. “All levels of government have a tremendous impact on the operation of hospitality and tourism firms throughout the country”, stated by Reid (2009, p. 59). Additionally, socio-cultural and demographic trends give manager useful information for their target markets such as number of special interest group, population shifts, population aging, and cultural dimensions. Decision makers should “seek answers to questions regarding any emerging attitude changes and social attitude with regard to environment” (Pizam, 2005, p. 226). Beamish (2008, p. 74) reckons that society nowadays becomes more multicultural resulted by more varied immigration sources and assumptions about what is “normal” or “acceptable” become less clear.
Supermarket products’ range is good example with a vast variety of food choices. Last but not least, sustainability trends become more significant day by day. The application of sustainability is an important factor in the management of any business, because Lockyer (2007, p. 185) believed that “there is a vital relationship between continual growth and available resources and the future which requires serious consideration”. In addition, although Capon (2008, p. 31) considered the term “environment” refers to much more than the ecological, she could not deny that “being environmentally riendly and reducing the carbon footprint can be part of an organization’s strategy”. In fact, many “green” hotels succeed with their strategy of social responsibility and ecological health such as Starwood’s Element Hotels, which are simple and smart designed in order to get natural energies that bring their customers the healthy living environment. At the layer of components that directly affect an organization’s activities, an industry analysis, which is usually made by Five Forces Model called Porter analysis, is crucial for planning and decision making.
This paper will make a brief hotel industry analysis in the view of globalization tendency. Threat of potential new entrants Threat of new entrants -High capital required -Large investment on technology, labor costs by high staff turnover rate – Well-known international brands may pose a credible threat Bargaining power of buyers Consumers tend to be susceptible to price sensitivity and alternative choices. Buyers easily switch cost with the increased choices of promotion packages, free services and facilities offered Competitive Rivalry Very many competitors -Products and services are quite similar, so consumers experience little loss in switching from one brand to another Threat of substitutes Other property types in the accommodation’s market will soon be able to deliver modern living environment with good service and competitive price such as clinics, residences, elderly care centre. Bargaining power of suppliers Bargaining power of suppliers There are many suppliers for hospitality industry, therefore easily to switch to alternatives. However, there are special stocks that need to be e-fulfilled and maintained as a unique brand’s symbols. Therefore, some specific suppliers have more power Bargaining power of buyers Threat of substitutes In conclusion, external environmental conditions are situational that incessantly change multi-dimensionally. Therefore, to identify and evaluate trends and events beyond the control of an organization is one of the critical manager’s tasks so that the right decisions made, which are foundational stage for others functions in management, might dedicate efficient and competitive strategy.
Obviously, decision makers are able to accomplish the business’ performance at its peak through the process of inputting information – transforming knowledge – outputting action based on understanding not only internal but also external environment. REFERENCE LIST 1. Beamish R. Hubbard (2008) Strategic Management, 3rd ed, Pearson Education Australia, NSW 2. Capon Claire (2008) Understanding Strategic Management, 1st ed, Pearson Education Ltd. , England 3. Dess Gregory G. , Lumpkin G. T & Eisner Alan B. (2008) Strategic Management Text & Cases, 4th ed, McGraw-Hill, NY . Davidson Paul , Simon Alan & Woods Peter (2009) Management Core Concepts And Applications, 2nd Australian ed, John Wiley & Sons Australia Ltd, Milton Qld 5. Kew John & Stredwick John (2008) Business Environment: Managing in a Strategic Context, 1st ed, Chartered Institute of Personel and Development, London 6. Pizam Abraham (2005) International encyclopedia of hospitality management, Butterworth-Heinemann 7. Reid Robert D. & Bojanic David C (2009) Hospitality Marketing Management, 5th ed, John Wiley and Sons