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Impact Of External Environment On Business

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Category: Business

Autor: anton 08 March 2011

Words: 2018 | Pages: 9


This paper will present a general idea about small and medium size enterprises in goods or services. Marriot Hotel in Melbourne is chosen as an example of discussion the following sections. The discussion will cover the following points: a profile and nature of Marriot Hotel, rationale for selecting this hotel, illustration of how changes in external environment factors have impacted on business over the last 5 to 10 years. Also, this paper will examine the environmental forces that are relevant to the business and discuss the rationale behind the environmental forces. Moreover, it presents an outline why other factors and forces may not be relevant to this business. Finally, this paper will identify and discuss the forces that may effect on business over the next decade or so supplemented with a proposed marketing strategy.

Small and medium size enterprises


There is no single definition of a business, or of a firm or enterprise which are often used to mean the same thing. Generally, it means a legal unit, person or group of people producing goods or services under their own control and with their own legal identity. A branch or office of a larger organisation is not in itself a business.

There are many definitions of a small and medium sized enterprise. However, the best to be found is the European Union definition. They define a small enterprise as one with under 50 employees, and a medium enterprise as one with at least 50 but under 250 employees.

Characteristics of small and medium-sized enterprises

Small and medium-sized enterprises are characterized as:

• Sole proprietorships, run by one self-employed person;

• Partnerships run by two or more people; and

• Companies in which the working directors, are counted as employees.

Role of small and medium-sized enterprises

Small and medium-sized enterprises (SMEs) take the role as majority of companies in most countries, and are also a major engine of job creation. Unfortunately, many SME owners and managers are concerned, mostly due to the lack of appropriate information, that is implementing environmental measures in their companies requires significant investment, and that they will not obtain an adequate return on their investment.

Lovelock et al (2001) argue, “…the Internet will revolutionise the processes of international marketing, its greatest impact may be for SMEs (small- and medium-sized enterprises)”. They cited Quelch and Klein (1996) and said, ‘…competitive advantages of economies of scale (for large organisations) will be diminished, advertising costs will be lower and small niche marketers will find enough customers globally via the Internet’. Moreover, Lovelock et al (2001) have indicated, “It will be, in effect, a low-cost gateway to global markets for SMEs” .

Profile and nature of Marriot Hotel


Melbourne Marriott is an AAA Five-Diamond boutique hotel situated in the centre of the theatre, shopping, and business districts, approximately 14 miles from Melbourne International Airport. Local attractions Botanical Gardens, Crown Casino & Entertainment Complex, Luna Park, Melbourne Aquarium, National Gallery of Victoria, and Telstra Dome.

Melbourne Marriott hotel boutique

The boutique Melbourne Marriott Hotel exceeds the expectations of today's business, leisure and meeting guest with warm, friendly service, comfortable and stylish decor along with Marriott's world-renowned spirit to serve. Boutique in size, but grand in style the hotel boasts 185 spacious guests rooms and suites, dedicated executive services, superior meeting and event facilities with wireless Internet access and contemporary dining.

Services provided

The hotel provides services such as mini bar, laundry service,restaurant,24-hour room service, television, bureau de change, parking, safe deposit, bar, computer facilities, Internet access, swimming pool, disabled access, business facilities, childcare facilities, air conditioning, non-smoking rooms, fitness club.

Room features

The hotel room has special features such as work desk with lamp, two-line phone with speaker and data ports, high-speed Internet access, satellite/cable TVs, in-room movies, voice mail, in-room fax, weekday newspaper delivered, coffeemaker, iron and ironing board, trouser press, bathrobe.


The hotel has conferencing facilities to conduct seminars, executive meetings, and special functions such as graduation ceremonies. It can accommodate up to 200 people. Moreover, it provides catering and audio/visual services.

Rationale for selecting Marriot Hotel

The rationale behind choosing Marriott hotel Melbourne, is to describe all aspects of the industry and try to give direction, advise and as well as new plan and strategies that could improve the position on the market chain of hotels. Also, to try to find out which type of factors and forces may or may not be relevant to this business.

Changes in external environment factors

Hotel industry is sensitive to any factor which affects travel by international visitors to Australia, travel by Australians within Australia. This industry has been seen to be sensitive to changes in the world over the last decade. Regional or domestic economic growth, changes in business and consumer confidence, changes in household disposable income, changes to fuel prices and to domestic and international airlines, major travel agency financial collapses and more recently to war and actual or perceived terrorist attacks or threats and fears about the spread of diseases (such as SARS), either regionally or across the globe are believed to be external factors affecting hotel industry.

Exchange rates

On the other hand, exchange rate has an impact on the relative attractiveness of Australia as a place to travel by overseas visitors and also has some impact on the number of Australians travelling overseas and their travel destinations.The major factor which affects the performance of the hotel industry is the extent to which the investment and growth in room supply increases relative to room demand.

Economic recession

As a consequence of the significant investment in hotels in the late-1980s, and the economic recession of the early 1990s, in 1990-91, the national average hotel room occupancy rate declined to 49 per cent. This was accompanied by a 5.7 per cent real reduction in hotel room tariffs, as significant discounting occurred amongst operators as they tried to manage the fall in room demand.

Industry Competition

Tariff based on competition due to a downturn or slowing in demand as well as from an oversupply of hotel accommodation (on a local level) has a negative effect on the growth in revenue of this industry.

Travel and Tourism in Australia, country report February 2004, And Hotel

Accommodation in Australia July 2003,


Relevant environmental forces to business

Miller and Layton (2001), have argued that macro environment factors affect all the industry and microenvironment factors affect a particular firm and they consist of suppliers, marketing intermediaries and customers. While Anderson and Vincze (2004), suggest that the external micro environment consists of relationships among customer markets, competitors, suppliers, marketing intermediaries, distribution channels, and other public or private entity that may have a direct influence on a firm’s ability to market its products.

It is believed that the factors that are relevant to this chosen business are:

Financial collapses, Bali bombings and series of recent bombings, potential terrorist threat in Australia, economic conditions, competitive environment, relationship marketing, unemployment, economic recession, service quality and customer satisfaction, consumer retention, is relevant to the business

Financial collapses, Bali bombings and series of recent bombings, and potential terrorist threat in Australia, These factors can affect travel by international visitors to Australia, travel by Australians within Australia which will pose as a threat to the five-star hotel industry, and decrease the numbers of visitors to the hotel.


Unemployment effects hotel industry as a whole. To be specific, the higher the unemployment the less people tend to go to the hotel.

Competitive environment

Hotel industry has grown over the years into a multimillion industry, with organisations varying in size from small, countryside bed and breakfast to city based chian hotels operating across the world. This whole process over these years has created very competitive market to operate in. Therefore, the hotel should provide unique services with edge to overcome the competition. These unique services could be online reservation facilities, broadband Internet accesses from function room or even wireless broadband access from bedroom, facilities offered to guests, branding and image.

Service quality and customer satisfaction

To improve services, Marriot hotel must use multiple research approaches among different customer group to ensure that they are hearing what customer are saying and responding to their suggestions Lovelock, (2000).

The satisfied customers are repeat customers and can remain loyal and would be able to be retained in an increasingly competitive situation, subject to a number of critical marketing variables being achieved by the hotel. Some of the specific customer focused is product, pricing location and booking, and service quality aspects.

Consumer retention

Consumer retention has a relationship with high quality delivery of service, which normally will be build through consumer loyalty to the brand or hotel and it creates positive word of mouth. Kotler et al, (2003) have suggested that customer retention is one of the important factors in purchase decision.

Also, Kotler et al, (2003) have suggested that studies have shown to get new customers it cost a hotel 4 to 6 times more than maintaining an existing one.

Repeat business depends on the satisfaction of a customer with an existing hotel which makes it difficult to convince the customer to use another hotel. Therefore, it is very important for Marriot hotel to retain its customers and to do so it requires training, empowering and monitoring its employee time to time. Also, it requires providing special packages to its customers as well as offered special discounts.

Irrelevant environmental factors to business

Factors and forces that are irrelevant to the business, such as social and cultural environments, inflation, deflation, interest rates, increase or decrease in Australian dollar, economic slowdown in other countries, and collapse of Ansett Airlines.

The above factors and forces will not have a strong impact on the business, For instance, increase or decrease in the interest rate will not influence spending night or two in the hotel or dining in. However, it will influence in the long term purchases, such as housing (Miller and Layton, 2001).

Miller and Layton (2001), has argued that inflation rate general affect government policies, consumer and marketing program. For example, “during periods of high inflation, consumers spend less as their buying power declines. At the same time, they may overspend today for fear that prices will be higher tomorrow” (ibid).

Economic slowdown in other country or collapse of Ansett airlines does not have greater impact on the hotel because if there is an economic slowdown in some country it may not stop tourists from other country to visit Australia. The collapse of Ansett airline did not impact on the hospitality industry because of the present of other airlines such as Qantas airlines.

Future forces that may impact on business

Forces and factors that may impact on the business over the next decade or so are believed to be:

• Economic recession; the hotel industry also suffered due to the recession in the 1980’s (Sampson, 1993).

Occupancy levels in Melbourne in five-star hotels dropped to 60%. Recessions are projected to take place around every ten years so in the near future there maybe another one that will affect the accommodation sector negatively.

• Unemployment; will be another major factor that could impact on the hotel industry. For example, if unemployment rate is high less people tend to go to the hotel.

• Terrorist threats, Bali bombings and series of recent bombings and potential continues terrorist threats to Australia have caused great damage to hotel industry. In the future, if such threats continue it will generate a greater impact on the five-star hotel industry, and decrease numbers of visitors to the hotel.

Proposed Marketing Strategy

The recommended strategies that five-star industry could adopt in this sort of occasions are thought to be:

1. to start expanding into apartment style accommodation;

2. targeting its catering to business personal;

3. upgrading the hotel into seven-star categories to target rich customers;

4. generating big group of alliance that could be beneficial to the hotel;

5. setting incentives for travel agents to recommend customers choose their type of accommodation in comparison to other types;

6. offering different types of attractive packages to different businesses; and

7. opening channels of communication.

Reference list:

Bartol K., Martin D., and Tein M., (2001) Management A Pacific Rim 3rd Edn. McGraw-Hill Pty Ltd, Australia.

Kotler, P., Bowen, J., Makens, J. (2003), Marketing for Hospitality and Tourism, 3rd Edition. Prentice Hall international, New Jersey.

Marriott Hotel 1996-2004, Marriott Hotel, Melbourne, viewed 27 September 2004, (

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