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Lahore University of Management Sciences, Lahore *

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Nov 24, 2024

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Introduction The report intends to provide a critical evaluation of the intercontinental Hotel group PLC’s strategic position and strategic directions. Also, the report will provide recommendations about possible future strategic directions. The report is drawn from the environmental analysis of the intercontinental Hotel Group PLC. The increased growth of Intercontinental Hotel group PLC is driven by its strong presence in the global market particularly in the developing economies. The competitive leading positions as well as the growth of the hospitality industry particularly in the emerging economies have also contributed to the growth of the firm. The industry is increasingly becoming competitive with the entry of new firms. However, the firm is using its distinctive and threshold capabilities to increase its competitive advantage. In evaluating the strategic position of the firm, environment analysis using various tools including SWOT and PESTLE are applied. The strategic directions are analyzed through the application of the Ansoff matrix and the BCG matrix. PART A 1. Analyse the impact and influence of the macro environment on a given hospitality organisation and its strategies by applying appropriate frameworks Political Factors: Hilton hotels & resorts are one of the most popular global hotel chains. Political stability in the country becomes a very important factor as hotels need to cope with the political situation in various countries in which it is operating. If a particular country is not stable then people will fear to go to that country for leisure or work purposes which will reduce the number of visitors to that country and thus affecting the revenues of the hotel adversely. Hilton hotels operate in various countries so it is exposed to various political risks associated with the country. Like recently the UK has left European Union which will reduce the number of visitors visiting the UK and thus reducing the revenues of the hotel in the UK. Also trade war between various countries now will impact on the hostel operations and profitability. Also due to lockdowns imposed by various countries now have tremendously affected the hotel industry and so it is having a very tough phase now. But gradually many countries are also now easing their lockdown which will help the hotel industry to grow and increase their revenues. Economic Factors: . Due to COVID-19, many countries are having very low interest rates to incentivize the various investors to make investment in the country. Loans are available at very cheap rates than before. So, it can be a very good time for hotels to expand and diversify its business due to cheap availability of credit. Also,

most of the countries are in slowdown due to nationwide lockdown, so the level of productivity is pretty low in the various countries across the globe. The pandemic has really affected the operations of the various businesses and thus people are left with less income to spend on various leisure activities which is definitely not a good factor for the hotel. Social Factors: Hilton hotels brand is very well known among international visitors. Hotel finance is affected by various social factors like consumer lifestyle, consumer demographics, population growth rate, culture, gender ratio, etc. With increase in income of the people their spending habits also change. So, their willingness to spend on leisure activities increases which is a good thing for the business. Also, as the lifestyle of the people across the globe is improving which is also a very good sign for the hostel profitability in the future. Due to COVID-19 people have fear interacting with various people and they prefer to stay at their home. They avoid various social gatherings which is a matter of concern for Hilton hostel. As a hotel, it does not have control over the social factors, so it can wait for the things to get better in the future. Technological Factors: There is continuous improvement in technology in today's competitive world. A company cannot afford to ignore these factors to compete with various competitors. Hilton hotel must upgrade its technology wherein necessary for improving its value proposition which it offers to its customers. Adopting technology which disrupts the industry is very important as it may help company in reducing its costs and also at the same time enhance customer experience. Hotel should accept all modes of payments which is very important in today’s world of digitalization. Due to the rise of social media and development of various websites had helped customers to book hotels anywhere at any time at their convenience. Critically analyse the hospitality macro environment to determine and inform strategic management decisions (Merit Criterion) Political aspects have been found to be predominant influencing factor in the management and operations of InterContinental Hotel Group given the fact that most of the hotels and resorts are situated in countries that have experienced both political stability and instability in the recent past. Like any other industry or business, InterContinental Hotel Group requires politically stable environment in order to achieve its goals. InterContinental Hotel Group will thrive to expand in countries that experience political stability. The recent economic recessions in many countries across the globe have resulted into many smaller businesses going under the operation levels. The disposable income has reduced considerably and few businesses are transacted. Besides, small hotel chains do not have supportive infrastructures as larger firms do.in as little as 3 hours

Fortunately, InterContinental Hotel Group has considerable infrastructures that can support underperforming facilities. Therefore, economic decline greatly affected InterContinental Hotel Group. Though the economy is slowly recovering, it will take time before the individual disposable income increases while the spending on luxury products increases (Porter, 2000). Many social issues affect hospitality industry. However, the firm aligns its services with the target market needs including age and culture. The most important social factor influencing the industry is culture. However, the services of the firm are aligned with the socio-cultural needs of customers. InterContinental Hotel Group incorporate online activities in its operations. As such, technology is integral for its success. The company relies in the development of ICT as most of its operations rely on the availability and usability of information technology. In essence, technology forms an integral part of the firm. All aspects of the firms including sales, purchases, marketing, management, and operations depend on the development of technology. Therefore, InterContinental Hotel Group will only invest in an environment where technology is available and are cost effective. Legal factors are critical for the establishment and operations of the firm. InterContinental Hotel Group must comply with the legal requirements of the country in which it operates. Being an international firm, InterContinental Hotel Group must adhere to some of the legal requirements of each country business establishments. InterContinental Hotel Group can only open its businesses or websites in countries where the legal framework supports its business operations. 2. Analyse the internal environment and capabilities of a given hospitality organisation using appropriate frameworks This is defined as an analytical technique which leads company to analyse its resources for utilising them effectively in order to sustain in global market. IHG implement this model as a tool in strategic planning for developing its effective decision-making procedure to improve competitive strategies.  Valuable:- The managers of IHG majorly focus on their food and beverage services as to meet the needs and wants of clients for enjoying luxurious and comfortable lifestyle in hotel. This enhances

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clients to entertain with qualitative services provided by managers of hotel to spend their vacations effectively at least cost pricing strategy.  Rareness:- Managers of IHG emphasize on their kitchen operations as to bring fresh material or ingredients for cooking food as per the requirement of client by being aware of customers health. The main motive of hotel managers is to be conscious about health of clients and take necessary steps for providing them nutritious and qualitative food services with proper packaging.  Imitability:- The managers of IHG focus on building their effective infrastructure through beautiful interior designing of rooms. As being differentiated from its rivalries and quite difficult to be copied by them. It attracts large number of customers to survive their livelihood in pure and creative environment of rooms with facilities of LED, beds, lamps, etc.  Organized:- Managers of IHG emphasize on developing their business structure within good atmosphere as they plant more and more trees in surrounding that provides fresh and pure air to breathe. This result in increase of sales, profitability ratios and maximise market share in perfect competition market for being stable at its position. From the above mentioned VRIO model, the managers of IHG focus on developing good infrastructure with beautiful interior designing of rooms that leads to enlarge customers. 3. Critically evaluate the internal environment to assess strengths and weaknesses of an organisation’s internal capabilities, structure and skill set. (Merit Criterion) The main purpose of SWOT matrix is to identify strategies of an organisation that leads to increase strength and opportunities for controlling weakness and threats. IHG implement SWOT analysis as to eradicate weakness by intrinsic strength and restrict threats by developing more opportunities. It is most important for IHG to increase competitive strategies as to sustain in global market by competing with rivalries. Strength (S)  The IHG is having strong market presence that leads to expand hospitality industry by developing trust and faith of its targeted audience.  IHG emphasize on providing high level of satisfaction to its end-users by building good customer relationship management that leads to analyse the change in their taste and preference. 4 Weakness (W)  IHG face weakness in not able to invest more on technologies as they pertains that adoption of new equipment will leads in high cost as being obsolete in future.  IHG have limited market share with very low brand diversification that result in decrease of sales and profitability ratios. Opportunities (O)  IHG are advantageous in enlarging their customers through online or digital marketing that tends to attract visitors by providing image and video of hotel for converting them to their clients through solving their queries.  The adoption of new technologies provides an opportunity for IHG in manufacturing

services at differentiated pricing strategy in new market. It increases customer support and loyalty by supplying them qualitative services. Threats (T)  IHG face challenge of high competition with its rivalries in perfect competition market  IHG is mostly unfavourable and adversely affected by the terrorist attacks that result for instability of organisation. 4. Applying Porter’s Five Forces model, evaluate the competitive forces of a given market sector for a hospitality organisation. This model was published by Michael E. Porter in 1980, for analysing the competitive strategies adopted by industry rivalries for being stable in global market. The managers of IHGimplement this strategy as to determine the intensity of competition of an industry with its profitability level. It is essential for an organisation as to minimise its barriers by developing various strategies to increase strength and opportunities for overcoming weakness and threats.  Competitive rivalries:- It has been evaluated that there is high competitive rivalries in hospitality sector, as there are number of other entities those are offering products and services to customers in competitive price range. (Taghian, D’Souza and Polonsky, 2015). It is most important for IHGas to examine their strategies for developing strategic management plan as to restrict the adverse impact of rivalries by supplying qualitative services to its customers that increase loyalty.  Threats of new entrants:- According to the evaluation it has been evaluated that Grosvenor is facing low threat of new entrants, as new entrants required to make high investments in order to establish themselves in marketplace. By taking opportunity of this IHG can serve more number of customers and can enhance their brand image for more profitability.  Power of Suppliers:-There is low power to supplier in hospitality sector as suppliers wants to conduct their business operations with leading entities like Grosvenor. Thus, this creates significant opportunity for respective hotel as they can effectively negotiate prices for raw material and can further conduct their operations in cost effective manner. It enhances their profit earning capabilities in effective manner.  Power of Buyers:- Hospitality industry is having high power of buyers, as there are number of organisations those who are offering same services and products in affordable price range. Thus, to develop good customer relationship in competition market it is essential for IHG to offer qualitative goods and services at low cost to customers. The buyers are always considered as King for an organisation that tends to provide services at least cost for increasing sales with the motive to ascertain high profits in future (Umeze and Ohen, 2015).  Threats of Substitutes:- There is high threat of substitution in hospitality industry, as it has been seen that rivals also adopted strategies by its substitutes in developing similar products and analyse the variance by comparing their strategies. Thus, it is essential for IHG to focus on building corporate social responsibility by meeting the needs and wants of customers through supplying them qualitative goods at low price. This enlarges customer growth and result in high market share for sustaining in perfect competition market.

From the prescribed Porter’s Five Force strategy, the managers of IHG majorly focus on this as to analyse their competitors which are Hilton Hotel, Marriott International, Ritz Hotel, etc. The main purpose for identifying this is to minimise threats by developing precautionary steps for restricting errors. Managers provide training and development programs to improve and update skills for taking effective measures to reduce threats. 5. Devise appropriate strategies to improve competitive edge and market position based on the outcomes. (Merit Criterion) PART B Porter’s Generic Strategies The company has adopted a combination of cost leadership, differentiation and focus strategies to handle the competitive pressure. The customer base expansion and sales growth objectives are obtained by focusing on most appropriate intensive growth strategies based on three generic strategy streams (cost, differentiation and focus). cost leadership strategy Cost leadership is the main generic strategy that Hilton uses in various consumer markets. This strategy allows Hilton to expand the market share by targeting the middle class, which makes the largest proportion of overall consumer market mix in most of the countries. Middle class consumers generally place high importance to the pricing factor and cost leadership is the best strategy to cater the needs of this consumer segment. Hilton focuses on affordability and easy accessibility of its produce across the globe, which leads towards high brand awareness and high sales growth and provides a strong competitive advantage basis. Other than charging low prices by lowering production cost and maximizing supply chain efficiency, Hilton frequently offers discounts and coupons to achieve sales targets and handle the competitive pressure by its closest rival. The intended outcome of these discount and promotional campaigns is to increase brand popularity and encourage consumption. The discussion of Hilton’s cost leadership strategy has outlined many benefits offered by this generic strategy, such as- gaining quick brand recognition, expanding the customer base, encouraging consumption and achieving sales targets by emphasizing over product’s affordability and accessibility. Although, the analysis of Hilton Hilton’s competitive advantage strategies highlight cost leadership as the main strategy, the company also uses the differentiation strategy along with cost leadership to set the basis for sustainable competitive advantage in the intensely competitive global consumer market. differentiation strategy The adoption of differentiation as a secondary generic strategy allows Hilton to expand the customer base by emphasizing over the unique product features. Hilton's strategic objective of using this strategy is to differentiate by embedding the innovation and address the consumers’ growing health concerns. For example, Hilton has extended its product line after studying the consumers’ changing interests to differentiate itself from competitors and expand the scope of opportunities within the industry. The combination of the differentiation and cost leadership has helped Hilton build a strong and loyal

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customer base. Through differentiation generic strategy, Hilton positions its product offerings in a way to stand out and be different from the available alternatives. Being the experienced brand with strong foothold, the company uses differentiation as a tool to reduce the pressure by other. Heavy investment in marketing, advertisement and celebrity endorsement is made just to differentiate the Hilton from other brands. Extensive experience, the oldest brand and strong presence in all over the world are some differentiation factors that are highlighted in the company's marketing and communication strategies. focus strategy Hilton adopts the focus strategy both in terms of low cost and offering the best value. The low-cost focus strategy is adopted by serving the needs of a niche market segment at the lowest possible price. While, best value focus strategy is adopted by emphasizing over the taste, size and design of the product that could best match the customers’ needs and requirements. By focusing on product attributes, Hilton revises its branding strategies and brings continuous changes in the product designing and packaging to satisfy the customers’ psychological expectations and maximize value for money Ansoff Strategy Market Penetration The main goal related to IHG’s strategic objective and the market entry plan is to increase sales and reduce costs through cost leadership. In this case, a relationship between low cost and low prices can be developed for the organisation. IHG implements another way to achieve this growth goal by combining innovation to lay a clear foundation for diversity. It will still support IHG to win buyers despite the ferocious industry rivalry. However, the costs for entering the industry would be higher if the sector hits its maximum capacity. This would lead to better yields, and would allow companies to pursue more aggressive plans. In this case, spending in commercial activities and promotive practises. Product Development Organisations seeking growth such as IHG have adopted the approach of product development when they see growth opportunities in the current market and current product lines. In recent years, fierce competition has prompted IHG to introduce new products to certain markets. Moreover, targeting existing customers that new products require less time, resources and energy; this is because IHG has already been established and therefore has developed customer awareness and trust. Market Development IHG takes market development as a growth strategy in order to support market entry and product development. In addition to this, IHG has implemented the system extensively. Therefore, the organisation is currently ahead of the competition. The main goal of IHG in implementing this method is to expand profit margins to support the growth of the distribution network. The ability of IHG is to reduce costs and achieve leadership and cost positions enables the organisation to successfully implement this intense development process. The layoffs are in line with the requirements of IHG to increase new customers. Besides, the firm constantly creates new services depending on the demand and the need of clients. The ever-changing customer needs to drive the services and product development of the firm. Moreover, the application of information technology has enabled the firm to has additional value on its products

and services. The firms’ capabilities to develop new products as well as the application of information technology have added a competitive advantage to the firm. The firm’s capability to increase its presence in diversified markets has also increased its competitive advantage. The diversifications of the market are in terms of both geographical and demographic segmentations. The InterContinental Hotel Group PLC hotels and resorts are spread in diverse countries and cultures. Besides, the firm target diversified customers ranging from low-income earners to high- end market segments. Proposed strategy Corporate- Focusing on its quality service: The IHG PLC claims that IHG is one of the finest hotels in the holiday industry today. IHG's strategic philosophy focusses on service efficiency that results in greater loyalty for consumers. As an influence, the organisation is a trustworthy company worldwide. However, IHG's management and human resources contribution is worthy of mention in the growth of the company. It can be inferred that IHG has been able to hit the skies in a brief amount of time with its business approach that is centred on service efficiency. SBU: IHG views market development as a growth strategy that provisions market/product development. In addition, IHG has successfully employed this procedure. Therefore, IHG has passed its rivals in the competition. When applying this process, the main purpose of IHG is to exploit profits to support the growth of distributed networks. IHG’s capability to decline its costs and achieve leadership and value enables organizations to organize this challenging development process. The layoffs are fully in line with IHG’s goal of enticing new customers. In current years, ferocious rivalry has led IHG to unveil new products in certain markets. In addition, it takes less time, resources and energy to attract existing customers with new products. Critical evaluation of the strategy Suitability About the analysis, product development is the most suitable strategy given the fact that it meets all the requirements observed in the environmental analysis. However, diversification is not suitable given the current economic situations particularly in countries the firm intends to establish new hotels Acceptability The firm’s marketing and expansion strategies should enable its penetration into new markets and capture a sizeable market share. Moreover, the corporate core strategies should enable the firm to be easily accepted in areas it intends to operate particularly in developing countries. Also, the firm should utilize its financial capabilities to offer services to the communities in which it operates. Feasibility

All the strategies of the firm are financially feasible given its financial capabilities. Moreover, the firm has recorded substantial returns in some of its geographical sectors thus increasing the financial abilities to fund the implementation of its strategies. Sustainability The firm should be socially sustainable towards the communities as well as governments. Besides, the firm’s strategies are environmentally sustainable (Johnson et al., 2011). Moreover, the strategies are market-oriented and socially sustainable to the clients. Recommendations The firm should focus on the implementation of the current strategies considering other factors such as the economic situation as well as other threats the firm is facing. Moreover, the firm should continue to pursue its expansionist strategies that are essential for its increased presence in the market. However, given the InterContinental Hotel Group PLC’s current strategic position in the global tourism market and hospitality industry, the firm needs to enhance its brand performance to counter the threat posed by the upcoming economy hotel chains. In other words, the firm should ensure that its brand remains attractive and sustain market position leadership against competitors. Also, the firm should aim for excellent returns through increased operations efficiency and revenue delivery. Moreover, the firm should continue to increase and utilize its threshold and distinctive capabilities to increase its competitive advantage. The firm should also be aggressive to ensure the realization of excellent returns, which are critical in augmenting its financial capabilities enabling the firm to operate efficiently and effectively. Conclusion InterContinental Hotel Group PLC has been successful in most of its operations. Also, the firm has continued to offer varied services through its hotel chains spread across the globe. The accomplishments of the firm have been attributed to the successful implementation of its core business and operations strategies. However, many factors influence the firm’s strategic operations. Overall, not only internal factors but also external environmental issues affect InterContinental Hotel Group PLC management and operations. Despite external environmental challenges, the firm has managed to sustain its competitiveness. However, the firm needs to ensure that its core strategies are implemented and core competencies are fully utilized to enhance its competitiveness in the market.

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