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Starwood Market Research Proposal
Industry Analysis
When businesses intend to venture into a new market, a properly-coordinated industrial analysis is crucial to check and verify the viability of the market, challenges that would be encountered during the setting up of the business in the new region, and to learn proper adjustments required to ascertain success in the new venture. There are many coordinated methods of performing an industrial analysis. However, PEST analysis is the best tool for an industry analysis as it incorporates all the factors that affect a business, and is easy to carry out. PEST analysis refers to the research carried out on a region’s political environment, its economic factors, social-cultural trends, and technology factors and how they affect the business’ activities and decisions (Recklies, 2006). PEST analysis seeks to investigate the current issues affecting the industry, the factors that may change in the future, and how to counter these expected changes (utilize opportunities and shield against threats). This tool is mostly used to assess the viability of a new market. If the new potential market has a bulk of negative forces, which decrease the potential for success, a business will decide to call off the proposed entry into that market (Gupta, 2013).
Political factors: British Columbia has a very stable political environment. Taxation and political interference are minimal, therefore encouraging investment in the region. The political stability of an area, its taxation laws, new entry regulations, and trade regulations are the main political factors to be considered when assessing a potential market. Corruption levels are low in British Columbia. This means that unnecessary costs such as bribes will not be an issue during the setting up of a new Starwood property in the region. Environmental laws and land laws exist to preserve the environment, minimize pollution, and control land degradation. Starwood Hotels operations will have to fall in place with these regulations to avoid issues with the government.
Economic factors: the British Columbia economy has in the past displayed a continuous growth pattern. The employment rate is increasing at a rate of at least 1.9% every year, and the BC consumers are increasing their amount of spending every year. Since the year 2012, provincial GDP has been growing by about 2.3%. These are good indications of economic growth of the province. In the tourism and hotel industry, overnight visits have been increasing since 2012, with a 2.7% growth from 2013 to 2016. There exist only a few significant players in this sector. Therefore, the economic factors prevailing are very encouraging for any investor wishing to set up a hotel property in BC.
Social-cultural factors: this is one of the broadest considerations in PESTEL analysis, as several social-cultural elements are present in any region because every community has different social-cultural practices and beliefs. For this research proposal, we shall only focus on the social factors and prevailing trends in the British Columbia region that affect the tourism and hotel industry. BC’s population is highly composed of ‘baby-boomers’- a population of older persons nearing retirement or at retirement age. This group of individuals are relatively wealthy, having high disposable incomes, and are in pursuit of adventure travel and places with new experiences and services (Williams, Kelly, 2001). This population is good for the hotel and tourism industry, and Starwood Hotels will primarily benefit from it.
Technological factors: BC has a well-developed infrastructure system, with transport, communication, and internet connection throughout the region. Also, the 2017 BC budget mainly focussed on improving facilities in the region, with infrastructure spending getting a 19% boost on funds allocation. Road network, hydro-electric projects, bridges, internet penetration, and schools got the more significant share of the total allocated funds. Technology eases the operations of any business. Therefore, the technological advancements and better infrastructure offer an attractive market for Starwood Hotels in British Columbia.
Situational Analysis
The situational analysis aims at studying the interrelationship between a firm’s internal environment and the external factors, to determine the organization’s capabilities and how to organize them to position the business correctly to avert the risk of failure (Houben, Lenie, Vanhoof, 1999). An example of a situational analysis method is SWOT. SWOT analysis investigates a business’ strengths and weakness, the existing opportunities for the business, and prevailing threats in the business’ environment (Pahl, Richter, 2007).
An internal analysis of Starwood Hotels shows that the firm’s strengths include their excellent knowledge of the hotel industry, an efficient workforce with experienced hoteliers, a sound capital base, and a well-known brand name. However, there are also a few weaknesses that the organization suffers. The high cost of the hotel’s structures and elevated maintenance costs of its facilities are some of the failings facing Starwood. Raw materials and agricultural products costs are also quite high, incurring additional transportation costs. The difficulty in predicting the number of customers that will be hosted in the various properties owned by Starwood Hotels is also a weakness in the management of the business.
Opportunities exist for Starwood Hotels in the nearly untapped British Columbia market that provides a great opportunity for a new property. Agricultural products and infrastructure facilities readily available in the region will also largely support the setting up of property. Threats exist in that consumers may at any time shift their interest to another competitor brand, leaving Starwood Hotel with only a few customers. Strict government regulation and an increase in the entry cost in the British Columbia market can also pose a risk for the business undertaking in the region (Shaffer, 1995).
The management of Starwood, therefore, needs to properly plan to ensure that their existing strengths enable them to seize the opportunities they have in British Columbia, at the same time allowing them to reduce the potential of the threats occurring.
References
Recklies, D. (2006). PEST Analysis.
Gupta, A. (2013). Environmental and pest analysis: An approach to external business environment. Merit Research Journal of Art, Social Science and Humanities, 1(2), 13 17.
Williams, P. W., & Kelly, J. (2001). Cultural wine tourists: Product development considerations for British Columbia’s resident wine tourism market. International Journal of Wine Marketing, 13(3), 59-76.
Houben, G., Lenie, K., & Vanhoof, K. (1999). A knowledge-based SWOT-analysis system as an instrument for strategic planning in small and medium sized enterprises. Decision support systems, 26(2), 125-135.
Pahl, N., & Richter, A. (2007). SWOT Analysis. Idea, Methodology And A Practical Approach.
Shaffer, B. (1995). Firm-level responses to government regulation: Theoretical and research approaches. Journal of Management, 21(3), 495-514.
