Environmental Scanning of Hilton Hotels Corporation - Case Study Example

Introduction Hilton Hotels Corporation is one of the leading hospitality chains in the world having a diversified presence across the globe. It is currently operating more than 3000 hotels across 80 countries offering its services at a level which is considered as unique. The overall portfolio of the company is not only diversified but it is also unique in the sense that it caters to the needs of different groups of customers and as such allowing the firm to capture different small segments of the market in order to maintain its penetration. It is however, important to understand that despite having a good market penetration, a firm has to continuously look for improvement in its processes as well as make a constant scanning of the competitive environment within which it is operating. Environmental scanning is considered as a process of continuously evaluating and monitoring the information from internal as well as external environment in order to ensure that organization remains aware of various trends and patterns emerging out of the environment within which the organization works. This therefore allows an organization to better understand the basic dynamics behind the competition as well as how to prepare against any competitive pressures that may emerge in the future. This paper will present a scanning of the environment within which Hilton Hotels UK work and will undertake to establish a suitable environmental scanning with activities, analysis and activities as well as identify the industry structure. Hilton Hotel UK As discussed in the introduction that Hilton Hotel is one of the leading chains in the world having a diversified presence in almost all areas of the world. Hilton Hotel UK is also one of the leading chains that are considered as some of the best in the Europe. Over the period of time, Hilton Hotels UK has transformed itself into one of the best hospitality centers where businesses as well as travelers are offered a unique experience of hospitality and care. Environmental Scanning Firms are generally faced with two types of environments i.e. the remote environment and Task environment. The remote environment presents little opportunity to the firm to influence it as it is highly correlated with the external environment of the firm on which firm can hardly exercise its influence. The factors that form the part of the task environment of the firm are those factors which can be controlled and firm can exercise significant control over them. (Pollard and Hotho) The remote environment of the firm mostly comprises of political, economic, socio/cultural as well as ecological environment of the firm. These factors remain largely out of the control of the firm and firm cannot relatively influence the outcomes emerging from such environment. (Snyman and Kruger). It is also critical to note that task environment is relatively different because it comprises of those factors which a firm can easily control. Such factors include customers, suppliers, competitors, industry as well as functional areas such as HR, Marketing, admin etc This paper will discuss both of these environments with special reference to Hilton Hotel UK. Remote Environment As discussed, remote environment of the firm is largely uncontrollable and firm has little or no control over it. In order to assess the remote environment of Hilton International Hotel UK, following factors may be considered: Political Political environment of the UK is relatively stable with little or no political volatility existing in the country. UK is also one of the oldest democracies of the world having a very established and sound political system in place. Political environment for Hilton International Hotel UK is therefore relatively more predictable and is in favor of businesses. UK government favors free market economic policies and as such there is very little hindrance from the State in starting any business. Further, the legislative environment is also favorable for the firms and as such laws are made to facilitate the pursuit of capital accumulation and individual liberty. This therefore makes the existing political environment relatively more stable as well as favorable for doing business. (Rugman, Kudina and Yip) Identifying different political factors basically serve the purpose of defining the overall political environment within which Hilton Hotel International has to work and whether such environment can pose risk to the firm or not. Economic UK is going through a strong economic downturn which has resulted into the negative growth during current period. The Credit Crunch that occurred in 2007 carried forward its impacts in current year also and as such overall meltdown of the financial institutions of the developed world. As a result of this, the overall consumption has decreased in the UK economy and the consumers do not prefer to spend on the luxury items such as going to Hotels. (MACDONALD) This fact alone indicates that the overall demand patterns for the hospitality business may decline further in the near future. Though, the economy of US is recovering however, the chances of recovery of UK’s economy is not so bright and as such the overall aggregate demand patterns may remain suppressed. (Carrigan and Pelsmacker). This therefore may result into the price reduction promotional tactics by the management of the Hotel in order to make the business more attractive for the customers. (Goodridge). Economic conditions also warrant that the future economic scenario may not be entirely favorable for doing business at least in the short run because the overall unemployment trends as well as consumption patterns are not healthy and firms are finding it difficult even to concentrate on recovering their short term objectives. Such economic conditions therefore may not allow the firms to continue to enjoy the same degree of success that was enjoyed by the firms in first part of the decade. Socio/Cultural elements Socio-cultural elements are considered as the strongest elements which influence the buying decisions of the customers. The overall socio-cultural elements in UK are relatively friendlier towards businesses as people like to spend and socialize at great length. (Wilson) Socio-cultural elements therefore may favor the trends for the hospitality sector because of the relatively strong demand due to cyclical patterns. What is however, significantly more important to understand that hospitality sector is moving towards new trends where design of hotels will be one of the deciding elements due to issues like global warming. There are increasing trends which indicate that the customer loyalty as well as future media relations will largely depend upon how the hospitality and tourism sector emerges out of these marketing trends which are suggesting a radically different approach towards future trends to be emerged. Technological Factors Though technological trends may not entirely affect the Hilton International Hotel however, given the rising threats of terrorism where terrorists are continuously targeting hotels and resorts, technology may play a significant role. Hospitality sector therefore can implement technology which can insulate it from terrorist attacks such as plantation of metal detectors, fire fighting systems, emergency evacuation systems etc. Obtainment of technology therefore can result into substantial improvement of the overall image of the hospitality sector in providing a secure environment to spend the leisure time of their customers. (Buick) Ecological Factors Large resorts are often attacked for their exploitation of environment in a manner that attracts the attention of specially those who are advocating the green movement. The ecological factors therefore shall be considered as a significant threat to hospitality sector specially. It is also often argued that the ecological factors are relatively more important for executing a business expansion in hotel business therefore the overall implications of the ecological factors is relatively more important in cases where business expansion activities are undertaken. (Blum) Ecological factors therefore can also alter the overall buying habits of the customers and as such customers may prefer those businesses which have in place a relatively better strategic policy defining the interaction of the business with the ecological environment. (Gharavi and Sor) The above discussion broadly sets out the system for setting up remote environment system within the organization. The factors discussed above primarily define the different elements of the system which need to be analysed in order to effectively understand the external environment of the firm. This is critical from the point of view of the strategy formulation. Complexity of the remote environment It is important to understand that the overall remote environment in not so complex except the fact that economic factors are relatively difficult to predict. Otherwise, the society itself allows freedom at all costs and there are no potential issues which restrict the trade such as repatriation of funds, quotas or other external barriers which can restrict the overall pursuit of profit seeking. Task Environment Task environment is an environment which can be radically controlled by the firm and as such the response to such environment can be easily formulated through the formation of strategies and policies which can significantly allow firms to withstand any risks arising out of this environment. Next section will discuss the task environment of Hilton International Hotel and will also attempt to define the various domain definitions, industry structure, interdependencies as well as complexities of the societal environment. Establishing Domain Definition Hotel Hilton International UK works in the hospitality sector therefore its primary geographical area is UK. However, the domain definition can further be broken down into the sub-geographical regions within UK where Hotel has the presence. The primary segment of the competition for the firm is acquisition of business customers and as such the overall focus is on penetrating the market for corporate customers rather than focusing on retail customers. This allows hotel to largely concentrate on high net worth clients and all subsequent activities and policies therefore shall be directed at serving an identified target market group. The major descriptors of the target market would include following: 1. Large to mid- tier corporations. 2. High level executives of such corporations 3. Individuals falling in higher income groups. 4. Tourists. It is important to understand that the primary focus of the hotel shall be on the large to mid- tier corporations therefore Industry Structure Hospitality industry is fragmented in the sense that there are lots of small to medium players in the market which offer customized services to different segments of the market. (Brotherton) Most of such smaller competitors such as road side motels etc however are relatively smaller in size and may attract the tourists who prefer to stay on the same route. However, since our focus in on large to mid- tier corporations, therefore the overall competitors for hotel include Carlton Hotel, Sheraton, Langham Hotel London etc. This industry, as identified above, is dominated by small to medium and large hotel chains therefore the overall competitive landscape is really tough and hotel have to keep an eye on different competitors according to the different dimensions of the competition set. Potential competitors may also include smaller hotels offering cheaper services specially to individual customers therefore it may be possible that such hotels may take up smaller share of the market. Suppliers relatively do not hold significant influence over this industry therefore it may be not entirely difficult to assume that suppliers have relatively negligible bargaining power. However, buyer may hold a significant influence over the different outcomes as our focus will be on targeting the large to mid tier organizations. Such large borrowers relatively hold the key for overall success and failure of the hotel chain. A good environmental scanning system therefore must continuously evaluate the requirements of this segment of the market in order to understand the potential changes that may take place in the overall attitude and preferences of this segment of the market. Determining Interdependencies As discussed above that the suppliers do not hold much influence over this market however buyers are the key and in order to manage the interdependencies between the hotel and the buyers, it is important that an strategic overview of the overall market trends must be undertaken. The determination of interdependencies therefore will allow hotel to identify key groups of buyers and determine its overall strategic response to meet the demands of its most profitable buyer groups. Identifying Interdependencies therefore will also allow hotel to determine the resources required to service the various groups of key target market niches so as to improve the overall brand image of the hotel. In order to determine the interdependencies, it is therefore critical that the hotel must scan the critical relationships it held with its different stakeholders including key buyer groups as well as suppliers besides determining its relationships with the different environmental factors such as different societal as well as political trends that may emerge and pose risks for the firm. Organizational Structure and Information needs It is critical that the firm shall continue to evolve it and scan the different organizational structures which are existing within the market. The current organizational structure of the Hotel though is relatively informal and professional in its orientation however, there is still a need to understand the type of organizational structure that will be typical for the success and failure of the hotel. The different information requirements of the hotel can be fulfilled through scanning the popular media as well as the industry related publications which can provide critical information about the emerging industry trends. Further, communication and information within the organization must flow from top to bottom in a manner that the communication flow is not hindered due to internal or external noise. The overall information requirements therefore will be both internal as well as external and as such firm has to keep a continuous eye on external sources of information such as flow of tourists, registration of new firms, movement of the corporate executives etc. Conclusion In today’s competitive environment, it is important that the firms must continue to scan their environment and adjust their strategies so that a proper response to the different external events can be prepared. Hilton International Hotel’s external environment is relatively more volatile because of the existing financial meltdown experienced by the UK as a result of which the overall consumption has declined. This reduction in consumption is also decreasing the overall demand for the Hotel services thus a re-adjustment of strategies is one of the options that may be exercised by the Hotel. Internal environment is another important aspect which also needs to be considered for strategically reviving because of the strong influence of external factors. 1. Bibliography 2. Blum, Shane C. "Organizational trend analysis of the hospitality industry: preparing for change." International Journal of Contemporary Hospitality Management 8.7 (1996): 20 - 32. 3. Brotherton, Bob. International Hospitality Industry: Structure, Characteristics and Issues . London: Butterworth-Heinemann , 2003. 4. Buick, Ian. "Information technology in small Scottish hotels: is it working?" 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Snyman, Retha and Cornelius Johannes Kruger. "The interdependency between strategic management and strategic knowledge management." Journal of Knowledge Management 8.1 (2004): 5-19. 12. Wilson, Mervyn D.J. "The UK contract catering sector of the hospitality industry." Facilities 15.7 (1997): 177 - 186. Read More