PESTEL Analysis
A business has to operate in the external environment. There are various factors present in the external environment, which tend to affect the business (Home – HOTEL GRAND CENTRAL LIMITED, 2018). The given report aims to elaborate on the external environment of one such business in Singapore. The chosen company is a listed company named Hotel Grand Central Limited. A brief description of the company has been provided in the given section.
Hotel Grand Central Limited is involved in managing and operating hotels. The company operates in five segments- Malaysia, Singapore, Australia, New Zealand and China. In Malaysia, the chain has over 10 hotels. The Australian properties of the hotel are located in Launceston, Brisbane, Melbourne and Adelaide. In New Zealand, the hotel is located in Wellington and Auckland (Alagarasan et al., 2015).
The hotel has conference as well as event facilities. It has various restaurants in its hotels as well and its segment in China provides with similar facilities in Jade city.
The hotel is registered under the Stock Exchange of Singapore and is current trending at around 1.47SGD as on 2 February 2018. The hotel is located a minute`s walk from the shopping and entertainment at Orchard Road. The modern hotel is located at a five minutes walk from the metro station. The hotel provides various amenities like Free Wifi, Free parking, Outdoor pool, Room service, Complementary breakfast and other child friendly restaurants as well.
PESTEL Analysis can be described as a strategic management tool, which is generally used by various business enterprises in order to make an analysis of their business environment and identify the threats and the opportunities that are available to the firm. The given strategic analysis will be performed on Hotel Grand Central Limited to assess the impact of the factors on the future of the hotel (Alagöz & Ekici, 2014).
- Political- Since the hotel and tourism business is greatly connected to a country`s ell being, the political scene of the country greatly impacts the prospect of hotels. If the political condition of the country is stable, more tourists flock to the country. Singapore has a stable government and is under a structured leadership system. The free agreements with respect to Trade with Taiwan and China have widened the market base. The government has various amendments to make the country attractive and increase the tourism. It has easy Visa rules, which then attract the tourists and increase the hotel business. The tourism industry is often considered the backbone of the government and Singapore has various Hotel Act and Regulations to review the performance of the sector, which promote competitive advantage in the industry.
For Grand Central, the promotion of the tourism aspect by the government goes a long way in brining business for its hotel.
- Economic- Being one of the most favorable environments for business opportunities, Singapore offers its economy great resistance. Economic factors such as taxation charges, growth, interest rates and inflation affect the hotel industry (Anderson et al., 2015). The impact of the country`s economy goes a long way in influencing the behaviour of the hotel. Various conferences, workshops and business dealings tend to bring in customers for the hotel.
These guests tend to pay extra for extra services. The tax system of Singapore is rigid and tends to increase the prices of the various services, which are offered to the customers.
Grand Hotel needs to price its services accordingly, keeping in mind the kind of visitors it has and the tax regime of the country (Eden & Ackermann, 2013).
A snapshot is given below:
Socio-Cultural- The social environment of a country tends to have a significant impact on the business of any firm or a hotel. The income of the consumers, tourist footfall, and consumer preference tend to affect the trends. Consumers in Singapore work on trust factor. As Grand hotel has been existing in a long period of time people have invested a lot of trust in it. These customers expect the hotel to provide them with optimum services (Barney, 2014). Travelling is a popular hobby and Singapore is a traveler`s destination. The tourist footfall is high and this is a very good prospect for hotels like Grand Central
- Technological- In the 21st century, there have been various changes in the field of technology. Singapore is technologically advanced and this has enabled the hotels to upgrade their technology. Even tourists like to visit hotels that are advanced in terms of technology and therefore, Grand Hotel Central should adapt to the changes required.
Michael Porter’s Five Forces Analysis
Using technology also helps to reduce operational costs by making use of automation, Cloud IT and green technology.
- Environmental-The environmental factors tend to have a huge impact on the hotel segment. These days there are eco-friendly hotels, which are able to attract a larger section of the tourists. These eco-friendly hotels are also ale to gain tax reliefs. Very often flood, storm and rain play a vital role (Buono, 2015). The hotels should take proper measures to combat against the given. The government has applied various carbon emission control measures which the given hotels need to abide by.
- Legal- The legal environment of Singapore comprises of various legal and regulatory rules and policies that the hotel industry needs to remain restricted to. There are certain safeties, health labor laws which the Grand Central needs to keep in mind before rendering services. If the hotel has the capability to provide secure services, only then will it able to attract customers (Hill, Jones & Schilling, 2014). War and other conditions affect the operations.
The Michael Porters Five Forces analysis is a strategic tool to analyze the environment within the hotel industry. Given below are the five components.
- Competition in the Industry- High
In Singapore, the competition in the industry is extremely intense because the cost of switching and product differentiation costs are non-existent. Greater business growth is required to cope with the existing cots. The industry has high capital costs and price-cutting prevails except on holiday seasons and the weekends. Singapore being a tourist destination, the number of tourists visiting the country is extremely high and the number of hotels is huge (Hillier, 2015). The global hotel chains have an advantage over the local hotels, as they are very popular.
Some of the hotels in Singapore are:
- bis Singapore on Bencoolen
- Pan Pacific Singapore
- InterContinental Singapore
Threat of New Entrants in the Industry- High
The hotel industry has a high cost range in order to bring the hotels to an operational condition. It needs to utilize the resources in the most efficient manner in order to avoid wastage. As stated earlier, the hotels with a good brand image have an advantage over the ones who do not have a good brand image and work locally (Editorial, 2018). Quality service and the target market is something, which the new entrants need to be careful about. The entrants will also need to invest in innovative services. They will need to abide by all laws in Singapore as well. However, the hotel industry being an attractive one, the threat of entrance is high.
- Power of Suppliers –LOW
The power of suppliers in the given industry is comparatively low. The primary requirement of the hotel industry is labor, trained personnel and their power is high as there is a great requirement of them in the given industry. The hotels in Singapore are not subjected to the bargaining power of the suppliers as the component has low pressure on the competitiveness of the industry (Taylor, 2013). However, in prior to succeed among its competitors, the Grand Central Hotel needs to have a cost advantage.
- Power of Buyers-High
When the buyers in a particular industry are highly concentrated then the industry is generally subjected to a higher power of the buyers. The scenario is similar in Singapore where a certain group of global hotels tends to exercise their power. These leading hotels tend to have a large number of tour operators, domestic as well as international airlines association and participants (Slack, 2015). The brands are under constant pressure to keep their services unique in case of the travelers who tend to stay there for business purposes and the groups who travel for leisure need to be attracted with competitive prices. As Singapore has a large number of visitors, competitive pricing prevails in the industry.
Recommendations
Except for recession, the hotel industry survives without any adequate threat. However, recent concepts like the one used by Airbnb makes use of house accommodation and stands in the way of hotels. These accommodations are cheap and even provide the clients with attractive add on services and a home experience.
Hence, the given factors prevail in the hotel industry in Singapore and need to be assessed carefully before any primary decisions are taken by Hotel Grand Central Limited (Rothaermel, 2015).
As per the analysis using the strategic tools the following can be recommended to the Grand Central Hotel-
- The hotel needs to upgrade its infrastructure and include technological aspects in its hotel in Singapore. The hotel is located at a prime location and provides various amenities to the customers; however, it is unable to compete with the leading hotels in terms of technology. There have been various reviews available on the internet, which suggest that the hotel should upgrade its services and provide a comfortable service to its customers. This aspect was also realized in the PESTLE analysis where it as found that the hotel has not been able to cope up with the current technology yet (Lin, 2015).
- Very often the hotels have a habit of just earning through just food and beverages; however, it has to realize that apart from these there exist various other revenue streams which are conferencing, room up gradation, personal training, gym facility, meetings, cycle hire, car hires, limousine pick up and tour activities. The hotel has to realize the potential that exists in an attractive place like Singapore and it should harness those opportunities.
- Utilize social media marketing tools. Social media and networking is a powerful tool today. Through social media, a company can have access to a wide base of customers. This shall prove to be quite beneficial for the hotels as they will be able to advertise their services to a larger mass. Through social media the company will be able to know about various current trends of the customers and will be able analyze the reviews they receive. If they receive complaints, they will be able to get back to the customers easily (Morschett, Schramm-Klein & Zentes, 2015).
- Going eco-friendly- There is a current craze of eco-friendly hotels whereby the travelers look out for options where the services, which are rendered to the given consumers, are environmental friendly in nature. Grand Hotel Central can go green and due to this move, it can get certain tax benefits from the government of Singapore. The government has been trying to improve its environment and make it pollution free. Hence, if any enterprise goes eco-friendly it shall benefit greatly.
Conclusion
Therefore, from the analysis done with respect to the external environment of the business it can be stated that the external environment of Singapore is extremely dynamic. The economy of the country is in a good condition and hence, it is favorable for all the businesses that are operating in the given country. Grand Central Hotel has been in the industry for a long period and hence, is exposed to the various factors that are present in the external environment of the business. From the PESTEL Analysis it can be concluded that, although the Political environment of the country is stable, the tax regimes set by the government are on a higher side. It can become a problem for the hotel to save profits because of this.
The technological environment of Singapore provides the consumers with various opportunities, which need to be analyzed carefully in order to survive and adapt to the era. The socio-cultural environment allows for a wide variety of opportunities for the hotel, which need to be kept in mind before designing the services. From the Michael Porters Five Forces Analysis, it was found that the threat of competition is high in the industry. Although the threat of substitutes is low there exists, opportunities for other services like Airbnb. The low supplier power is beneficial for the company. Lastly, the report provides certain recommendations for the improvement of management by Grand Central Hotel
References
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Lin, Y. H. (2015). Innovative brand experience’s influence on brand equity and brand satisfaction. Journal of Business Research, 68(11), 2254-2259.
Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management (pp. 978-3658078836). Springer.
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Singstat.gov.sg. (2018). Welcome to Statistics Singapore. Retrieved February 03, 2017, from https://www.singstat.gov.sg/statistics/visualising-data/charts/visitor-arrivals
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Taylor, B. W. (2013). Introduction to Management Science (Global Edition ed.). Virginia Polytechnic Institute and State University.
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