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: External analysis of tourism and hospitality businesses – Macro…
: External analysis of tourism and hospitality businesses – Macro environment
Definition & Importance of Macro-environment
Definition
The macro-environment refers to the broad environment outside an organization’s industry and markets
It is generally beyond the control and influence of the individual organization
have significant impact on the micro-environment (industry and market) in which the organization operates
Importance
bring about the birth or death of an entire industry
make markets expand or contract
determine the level of competitiveness within an industry
Benefits & Limitations of Macro-environmental Analysis
Benefits
increasing managerial awareness of environmental changes
increasing understanding of the context in which industries and markets function
increasing understanding of multinational settings
improving resource allocation decisions
facilitating risk management
focusing attention on the primary influences on strategic change
acting as early warning system, providing time to anticipate opportunities and threats and devise appropriate responses
Limitations
the macro-environment can be extremely complex and at any one time there may be conflicting and contradictory changes taking place
the pace of change in many macro-environmental situations is increasing and becoming more turbulent and unpredictable
By the time that an organization has come to terms with one major change in the macro-environment, another change often occurs that requires even more attention and action
Rules in Macro-environmental Analysis
be aware of the limitations and inaccuracies of macro-environmental analysis
carry out the analysis or update it continuously (because it changes so frequently)
constantly seek to improve sources of information and techniques for its analysis
use the information as one source of organizational learning
use the information to inform future strategy
Steps in Analyzing Macro-environment
Scanning macro-environments for warning signs and possible environmental changes that will affect the organization
Monitoring environments for specific trends and patterns
Forecasting future directions of environmental changes
Assessing current and future trends in terms of the effects such changes would have on the organization
What to analyze
the effects of STEEP factors on the
The internal parts of an organization
core competencies
strategies
resources
value system
the organization’s functional areas
operations
marketing
human resources
human resources
An organization’s markets
product market
market size
structure
segments
customer needs
customer wants
resource markets
human resources
financial resources
The industry in which the organization competes
five competitive forces
buyer power
supplier power
threat of entry
threat of substitutes
competitive rivalry
STEEP Analysis
Socio-demographic influences
social culture
culture of a country consists of the values, attitudes and beliefs of its people, which will affect
consumer tastes and preferences
attitudes to work
attitudes to education and training
attitudes to corruption and ethics
attitudes to credit
attitudes to the social role of a business in society
demography
demography is the social science concerned with the charting of the size and structure of a population of people
The size of the population will obviously be a determinant of the size of the workforce and the potential size of markets.
The age structure will determine the size of particular segments and also the size of the
working population
social structure
There are a number of ways of defining social structure such as by socio-demographic groupings by age, sex, location, population density in different areas,
will affect people’s lifestyles and expectations
will strongly influence their attitudes to work
affect their demand for particular products and services
Technological influences
Change in ICT makes businesses more flexible and responsive
changes in transport technology transport tourists and business people, as well as materials, components and products, with far greater speed and at much lower cos
Economic influences
Broadly speaking, the regulation of a national economy is brought about by two key policy instruments
Fiscal policy is the regulation of the national economy through the management of government revenues and expenditures
they can affect any or all of the following economic factors
economic growth rates
levels of income in the economy
levels of productivity
affect costs of production and competitiveness.
wage levels and the rate of increase in wages
levels of inflation
levels of unemployment
balance of payments
exchange rates
affect people’s ability to pay for products and services and hence affect levels and patterns of demand
Monetary policy is the regulation of the national economy by varying the supply and price of money
Environmental influences
increasing concerns about ecology and ‘green issues’ has been an important social trend
This has led to pressure on governments to introduce legislation and other measures to control pollution and limit emissions
combined desire of consumers for products which are themselves environmentally friendly
business organizations realize that there are profits to be made by being ‘environmentally friendly’
Political, governmental, legal and regulatory influences
Governments have direct control or influence over
Legislation and regulation – this covers laws that influence employment, consumer protection, health and safety at work, contract and trading, trade unions, monopolies and mergers
Most governments have sought to construct policy over a number of key areas of business activity
control of inflation (to improve international competitiveness)
promotion of economic growth and investment
control of unemployment
stabilization of exchange rates
control of balance of payments
control of monopoly power, both by businesses and trade unions
provision of public and merit goods like health, education, defence, etc.
control of pollution and environmental protection
redistribution of incomes (to varying degrees)
consumer protection
regulation of working conditions
regulation of trade
Economic policy – particularly over fiscal policy. Governments usually set policy over the levels of taxation and expenditure in the country
Government-owned businesses – nationalized industries
Government international policy – government intervention to influence exchange rates, international trade
SWOT
Definition
SWOT is the key technique for presenting the results of strategic analysis. It provides a platform for going on to formulate the strategy for the future
The strengths and weaknesses should normally
be based upon the internal analysis of the organization
managers can control the internal environment through the decisions they make
strengths
build or protect so that they continue to be strengths
weaknesses
address so that they become strengths in the future or they are eliminated
the opportunities and threats should
be based upon an analysis of the organization’s external environment
they cannot control the external environment
opportunities
position the organization so that it is able to selectively take advantage of the opportunities available
threats
position the organization so that the threats are removed or that they are understood and the
organization is protected from their impacts