Topic 3 External Analysis

Topic 3.
External analysis
Grado en Turismo
Strategic Management
Prof.: Mara Razumova
Contents
3.1 General competitive environment
Macroenvironment
3.2 Specific competitive environment

Microenvironement
Escuela Universitaria de Turismo Felipe Moreno

Escuela de Turismo de Baleares www.etb-baleares.ess
Strategic analysis
Socio-demographic
Internal analysis
Political
Industry
(Strengths / weaknesses)
External analysis
Economic
Firm
(Opportunities & Threats)
Microenvironment
Macroenvironment
Competitive
environment
Environmental
Technological

Concepts and definitions

Macroenvironment
Affect the whole industry in which a firm
operates
Political, technological, environmental,
social and economical factors
A firm is unable to influence them


Microenvironment
Immediately surrounds a business
Frequent interaction
A firm has some influence on it
Competitors, suppliers and customers

Contents
Macroenvironment

Microenvironment


Benefits of the Macro environmental analysis:
Managerial awareness of changes

Improving resource allocation
Providing information for risk management
Focusing attention of the strategically important
influences
Early warning system


Components of Macro environmental analysis:
Monitoring of the new trends and patterns

Assessing the possible effect of current trends
Scanning for warning signs
Forecast future directions of changes
Limitation ME changes very quickly!!

STEEP analysis
Social influences
Technological influences
Economic influences
Environmental influences
Political influences

STEEP Social influences

- Social culture in different countries (tastes &
preferences, attitudes to work, ecology, ethics,
saving and investment, etc)
- Demography: size and age (to define workforce
and markets) and their dynamics
- Social structure groupings (men/women,

rural/urban, old/young, rich/poor, etc)

10
STEEP Social influences

Example: Airline industry
Social factors of the greater use of air travel
More healthy and prosperous people

Increasing number of retired people
Decline in average family size
More paid holidays
More double income families
Social factors against the greater use of air travel

Awareness of the air and noise pollution
11
STEEP Technological influences

Information and Communication Technologies
- PC, networks, satellite, cable, Internet (very mobile)
- Software (better and faster, analysis and
coordination)
- Substitution of the middle level management
Transport
- faster, further, bigger volumes

12
STEEP Technological influences

Example: Airline industry:
Reservation and marketing
Global distribution systems (increased reach of the hotels)
Search and booking engines (increased reach of the clients
rumbo.com, atrapalo.es, etc)
Revenue management (optimization of the prices, classes)
Aircraft
More efficient aircraft - decreases in the operating costs
Viability of the very long and very short routes

13
STEEP Economic influences

Fiscal and monetary policy affect:
Ability to pay: Economic growth, exchange rates,
inflation, unemployment
Costs and competitiveness: wage level, inflation,

exchange rates
All indicators has to be monitored in comparison to
the competitors abroad
14
STEEP Economic influences

Major macroeconomic effects related to:
Cyclical economic pattern (e.g. Gross Domestic
Product)
Fuel prices fluctuations
Exchange rate (aircraft prices, fuel)

15
STEEP Environmental influences

Growing concerns for:
- Natural environment (global climate change, ozone layer
depletion, deforestation, extinction of species, waste, water and air

pollution, etc)
- Built environment (deterioration of historical sites, traffic

congestion, poor urban planning, visual impact of buildings)
o Demand for green products

o Environmental legislation
16

Noise pollution development of less noisy aircraft,
noise abatement systems in the airports
Aircraft emissions (Co2 and water vapor)
Ground infrastructure long pubic consultations
(Fifth terminal for Londons Heathrow Airport)

17

Hotel industry: Scandic Hotels - one of the pioneers
1994: abolition of individual soaps and shampoo
packages (40 tones and 10 000 000 packages
ANNUALLY)
1995: Eco rooms, 97% recyclable
Swan certification (official eco-label in Sweden)
Resource hunt: in 2 year 15% decrease in Co2
emissions and 20% of energy costs)
Eco hotels, entire construction is guides by
environmental principals
18
STEEP Political & legal influences

Related to:
Legislation and regulation

Economic policy
Government owned businesses
International policy
Political risks
Political situation (W. Europe and N. America vs E. Europe,
Africa, Middle east)
Elections time
Political crises
19

Airline industry:
Legislation: regulation of the airspace
Political uncertainty: risks of flying over countries
involved in wars (air crash of the Malaysian air jet in
Ukraine)

20
STEEP how to analyze

Scanning and monitoring for actual of potential
changes
Assessing the relevance and importance
Analysis of the important changes in detail
Assessing and forecasting impact
21
STEEP what to analyze

Effects on:
1) firm
2) product market (size, structure, segments,
customer needs) and resource markets
3) industry (further in more detail)

22
Contents
Macroenvironment

Microenvironment

23
Strategic analysis
Socio-demographic
Internal analysis
Political
Industry
(Strengths / weaknesses)
External analysis
Markets
Economic
Firm
(Opportunities & Threats)
Microenvironment
Macroenvironment
Competitive
environment
Environmental
Technological

24

Microenvironment
immediately surrounds a business

frequent interaction
A firm has some influence on it

25
Elements of microenvironment
Porters 5 forces framework: factors affecting the
degree of rivalry in a sector
Threat from
new entrants
Bargaining
power of
suppliers
Intensity of
rivalry in the
industry
(competitors)
Bargaining
power of
buyers
Threat of
substitutes
26
Competitors
The rivalry will be higher if:
Significant number of competitors
Slow market growth
No differentiation of products/services (hotels in
Arenal)
Excess of capacity / high fixed costs (aircraft)
Strategic interests (entering a new market)
High exit barriers (family business)
27
Buyers
Understood in a general sense, not only as a final client:
(E.g. buyers of a hotel may be tourists, tour agencies, tour
operators)
When buyers have bargaining power?
Few buyers and big volumes of purchases (few big TO)

No differentiation (e.g. a TO has no preferences for hotels)
Transaction costs to switch between suppliers are low
Complete information (prices, costs, demand)
Possibility of vertical integration upwards

28
Clients: Vertical integration upwards
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Tour
operator
Travel
agencies
Tourists
29
Suppliers
When suppliers have bargaining power?
Unique resource - no substitutes (e.g. collection vine)
If the supplier sells an important resource/service for
a firm (high quality food)
The suppliers are large (Coca-Cola)
The firms buying form suppliers are small (a single
hotel)
High transaction costs to switch between suppliers
Possibility of vertical integration downwards
30
Vertical integration upwards
Hotels
Tour
operator
Travel
agencies
Travel
agencies
Travel
agencies
Travel
agencies
Travel
agencies
Tourists
31
New entrants - Potential competitors
When the entry barriers are low?
Low capital investments
No need for economies of scale
Product differentiation (easy to enter with a new
product)
Easy access to inputs and distribution channels
Existence of attractive locations
No administrative or legal barriers
No resistance offered by existing businesses
32
Substitute products/services
When there is a threat of substitutes?
Lower costs
Attractive new features
Modern features
No brand loyalty
Easy for the clients to switch to substitutes
Examples: Airbnb, Uber

33
Basic reading
Evans et al.: Chapter 7 and 8
Rocha Casanueva et al.: Captulo 2.2

34
Review questions
What is macroenvironment?
Explain the activities - components of
macroenvironmental analysis
Describe the components of each of the
STEEP influences
What is microenvironment?
Describe when the rivalry in an industry is
high using Porters 5 forces framework

35

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Topic 3.

3.2 Specific competitive environment

Escuela Universitaria de Turismo Felipe Moreno

(Opportunities & Threats)

Escuela Universitaria de Turismo Felipe Moreno

Concepts and definitions

Escuela Universitaria de Turismo Felipe Moreno

Concepts and definitions

Escuela Universitaria de Turismo Felipe Moreno

3.2 Specific competitive environment

Escuela Universitaria de Turismo Felipe Moreno

Concepts and definitions

Managerial awareness of changes

Escuela Universitaria de Turismo Felipe Moreno

Concepts and definitions

Monitoring of the new trends and patterns

Escuela Universitaria de Turismo Felipe Moreno

Escuela Universitaria de Turismo Felipe Moreno

STEEP Social influences

- Social structure groupings (men/women,

Escuela Universitaria de Turismo Felipe Moreno

STEEP Social influences

More healthy and prosperous people

Social factors against the greater use of air travel

STEEP Technological influences

Escuela Universitaria de Turismo Felipe Moreno

STEEP Technological influences

Escuela Universitaria de Turismo Felipe Moreno

STEEP Economic influences

Costs and competitiveness: wage level, inflation,

STEEP Economic influences

Escuela Universitaria de Turismo Felipe Moreno

STEEP Environmental influences

depletion, deforestation, extinction of species, waste, water and air

- Built environment (deterioration of historical sites, traffic

o Demand for green products

STEEP Environmental influences

Escuela Universitaria de Turismo Felipe Moreno

STEEP Environmental influences

STEEP Political & legal influences

Legislation and regulation

STEEP Environmental influences

Escuela Universitaria de Turismo Felipe Moreno

STEEP how to analyze

STEEP what to analyze

Escuela Universitaria de Turismo Felipe Moreno

3.2 Specific competitive environment

Escuela Universitaria de Turismo Felipe Moreno

(Opportunities & Threats)

Escuela Universitaria de Turismo Felipe Moreno

Concepts and definitions

immediately surrounds a business

Escuela Universitaria de Turismo Felipe Moreno

When buyers have bargaining power?

Few buyers and big volumes of purchases (few big TO)

Escuela Universitaria de Turismo Felipe Moreno

Examples: Airbnb, Uber

Rocha Casanueva et al.: Captulo 2.2

Escuela Universitaria de Turismo Felipe Moreno

Escuela Universitaria de Turismo Felipe Moreno

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