External and Internal Factors Affecting Business Environment

Question:

Discuss about the Elements of Strategic Social Media Marketing.

Business environment includes both internal and external environment that influence the operation procedure in a business. However, client, customer, supplier, competitors, technology, government rules and regulation, role of social media and economic growth of the country are the major factors of business environment (Kew & Stredwick, 2017). This study deals with the business environment in the context of Shangri-La Sydney, which is a luxury hotel in Sydney. For this organization, it is crucial to understand their business environment in order to run their business in a successful manner. Thus, it is important for this organization to gather knowledge about the components of the business environment.

External environment analysis can be done by using Porter five forces model as it enables an organization to carry out a market research regarding their competitors (Wee, 2017). In the context of Shangri-La Sydney threat of new entrants is a big challenge as it may harm the existing business of such organization in Australia. However, new entrants affect the profitability of the existing firm. On the other hand, bargaining power of the consumer is another big barrier of a business as it allows the customers to put the firm under pressure by resisting their purchasing power. In the context of Shangri-La Sydney, they try to implement customer loyalty program to reduce the bargaining power of the customer (Shangri-la.com, 2017). Next, the bargaining power of the supplier that is the switching cost of the supplier may leave a negative impact on the business. 

Threat of the substitute often creates a barrier for an organization to compete in the global market (Kew & Stredwick, 2017). In the context of Shangri-La belongs they focus on the customer loyalty to enhance their service. Similarly, Four Seasons Sydney, which is the major competitor of Shangri-La belongs also gives their concern towards the customer loyalty. This competitor offers a good leisure experience for the new generation and exceptional customer service. This ensures that the threat of substitutes is high for Shangri-La belongs. Industry rivalry is a big threat for an organization to survive in the competitive market. In the context of Shangri-La, the major two competitors are Four Seasons Sydney and Intercontinental Sydney. However, these are the major two luxury hotels in Sydney and offer high-quality service (Fourseasons.com, 2017). These three companies operate in the same industry with good positions. This may develop a big threat for Shangri-La Sydney.

Analyzing Competition in the Hospitality Industry using Porter’s Five Forces Model

Porter generic competitive strategy is applied to analyze the current competition in the market. Cost leadership, differentiation, cost focus and differentiation focus are the major four components of this strategy (Kharub et al., 2017). Cost leadership enables a firm to become a low cost producer in the global market. However, Shangri-La Sydney can use this strategy to reduce their operation cost. This also enables them to reduce the supplier bargaining power, which is a major threat for their business.

Focus strategy includes cost focus that will enable Shangri-La Sydney to seek cost advantages in their industry. On the other hand, differentiation focus highlights the differentiation of the target market. However, the differentiation strategy the organization tries to make them unique by product differentiation (Kew & Stredwick, 2017). In the context of Shangri-La Sydney, their competitors like Four Seasons Sydney offers various services like spa and workout to the gussets beside the accommodation. This organization also focuses on the incorporation of the new features in their hotel design besides adopting variation in service. On the other hand, Shangri-La Sydney also offers the spa and treatment in the hotel premises; however, the variation in the hotel design of its competitors may develop a barrier for such organization. Thus, they need innovation in their hotel design to achieve competitive advantages.

Interest group, news media, social media and public beliefs are the major parts of the public opinion regarding a topic (Endo, 2017). However, the public belief focuses that Shangri-La Sydney offers an extensive service to the consumer in order to meet their demand. However, it is crucial for a hotel to develop a customer-centric business to meet the business goal and objectives. In the context of Shangri-La Sydney, they aim to develop a better service for the customers that highlight the positive aspect of their business. On the other hand, working culture of Shangri-La Sydney is good, as the employees have stated that they like to work in this hotel. Apart from this, operating the public bar in this hotel is quite difficult according to the labor union. For the in-house guest, the employees face difficulty to in operating the public bar in this hotel. An environmental group is categorized in the interest group. This hotel focuses on the environmental sustainability as they have established 5 busy bee hives from which 14-kilogram honey is produced for the guest (Shangri-la.com, 2017). According to the environmental group of Sydney, Shangri-La Sydney is the first luxury hotel in Sydney that follows the urban bee keeping trend. On the other hand, this organization is popular in the social media as they give updated information for their service.

Identifying Current Competition in the Market using Porter’s Generic Competitive Strategy

Development of a channel through which the photos can be shared regarding the service will be a great social media strategy for the hospitality sectors (Xiang et al., 2017). In the context of Shangri-La Sydney, they can share photos regarding their hotels and destinations by using Instagram and Pinterest. However, both are mobile applications and will be effective for such organization to share the photos of their organization and service in the public domain. Maximum people spend their free time on social media. Thus, this strategy will be helpful for such organization to introduce their product and service on the customer domain belongs from different geographical regions. Other social media tool like, Facebook, Twitter, Youn Tube, Linkdin will be effective for Shangri-La Sydney to introduce their service information in a large population. However, social media reduces marketing cost, attract the customers and allows the organization to gain customer feedback regarding their service (Felix, Rauschnabel & Hinsch, 2017). One of the major disadvantages of social media application in the context of Shangri-La Sydney is the decrease in the benefit if this organization does not have any clear marketing goal.

Based on the analysis of the social factors in the context of Shangri-La Sydney, it has been received that such five-star hotel, focuses on providing service, especially to the upper and middle-class guests. This resists the other customers to access the service, which also decrease the customer number in this organization. Hence, for this organization, it is important to give preference to their guests according to their social class and meet the diverse needs of different types of consumers. For a hospitality sector, it is crucial to identify, the different customer needs to increase the customer loyalty (dos Santos et al., 2017). There are financial, employment and legal issues in the Sydney market, which often creates problem for the luxury hotels to expand their market share in this segment. Hence, it also affects the market expansion of Shangri-La Sydney in Australia. Establishment of the partnership working will be effective for Shangri-La Sydney to reduce the financial issues in Sydney market. This strategy will enable such organization to invest more in their business and to enhance the employment rate in their organization.

According to the Porter five forces analysis, the external environment of Shangri-La Sydney includes the threat of alternative products, which is driven by its competitors. However, Four Seasons Sydney is one of the biggest competitors of Shangri-La. This organization focuses on the establishment of the customer loyalty through offering unique service. On the other hand, Shangri-La also gives effort to meet the customer need. Hence, similar service offering by their competitors ensures the barrier to gain competitive advantages. Establishment of product differentiation is effective for a business to reduce the threat of substitutes (Richard & Richard, 2017). In the context of Shangri-La product diversification will enable them to make their service unique in the Australian hospitality industry. On the other hand, it is important for Shangri-La to develop a competitive strategy by incorporating new feature in their business, which will reduce the threat of existing competitors. Development of the customer-centric approach by using social media application will allow this organization to understand the current market trend in order to compete in the global market.

Recommendations for Shangri-La Sydney to Achieve Competitive Advantages

Analysis: The current data as per table 1 shows that the customer focus is high in every hospitality sector in Sydney. It has been observed that weighting of Shangri-La Sydney is high in the context of customer focus. Thus, it can be said that their business is customer-centric. However, the competitors of Shangri-La Sydney also focus on the customer loyalty, which may cause a threat of alternative service in the context of Shangri-La Sydney. On the other hand, the weighting of the product price of Shangri-La Sydney and its competitors is low in comparison to the other success factors. However, the pricing strategy of Shangri-La Sydney and Intercontinental Sydney have similar weighting rate, which highlights that these two hospitality sectors follow premium pricing that may decrease the customer number. On the other hand, employee satisfaction rate is low in Shangri-La Sydney, while in Intercontinental Sydney employee satisfaction rate is high. Hence, this may generate the high turnover in the context of Shangri-La Sydney. Product diversification rate is high at Four Seasons Sydney. While in the context of Shangri-La Sydney they only focus on the upper and middle-class customers. Thus, they need to diversify their service to meet the needs of various customers belong from different social classes. In order to achieve competitive advantages in the same market segments, Shangri-La Sydney should give their concern towards the employee satisfaction, pricing strategy, and product diversification. Based on this current competitor’s analysis, it has been said that the competition level is high in Sydney, thus Shangri-La Sydney needs to make their service unique in every aspect to gain competitive advantages.

Conclusion

The entire study reveals the external environment in the context of Shangri-La, which is a popular five-star hotel in Sydney. However, the major competitors of this organization are Four Seasons Sydney and Intercontinental Sydney, which are operating in the same market segments. These two competitors offer the similar service facility to the Australian consumers that highlight the major challenges for Shangri-La. However, there is a threat of substitutes, which may affect the profit margin of such organization. However, it is crucial for this hospitality sector to develop a customer-centric business to reduce the huge competition and make their service unique. Identification of the current demand of the customers can be done by using the social media marketing in the context of Shangri-La.

References

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Fourseasons.com. (2017). Fourseasons Sydney.  Retrieved 16 November 2017, from https://www.fourseasons.com/sydney/

Kew, J., & Stredwick, J. (2017). Business environment: managing in a strategic context. Kogan Page Publishers.

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Shangri-la.com. (2017). Shangri-La-Hotel-Sydney. Retrieved 16 November 2017, from https://www.shangri-la.com/sydney/shangrila/

Shangri-la.com. Shangri (2017). -La Hotel, Sydney Makes a Sweet Contribution to the Local Environment. Retrieved 16 November 2017, from https://www.shangri-la.com/sydney/shangrila/press-room/press-releases/shangri-la-hotel-sydney-makes-a-sweet-contribution-to-the-local-environment/

Wee, C. H. (2017). Think Tank—Beyond the Five Forces Model and Blue Ocean Strategy: An Integrative Perspective From Sun Zi Bingfa. Global Business and Organizational Excellence, 36(2), 34-45.

Xiang, Z., Du, Q., Ma, Y., & Fan, W. (2017). A comparative analysis of major online review platforms: Implications for social media analytics in hospitality and tourism. Tourism Management, 58, 51-65.