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“Each organisation has a unique external environment that has a unique impact on the organisation” (Capon, 2009, p7). Furthermore Jain et al (2010) state that organisational success is down to the adaptability of a company in the external environment. The STEEPLE model of external analysis will be used in conjunction with critically appraising the company named Hilton. The worldwide hotel chain shall be analysed using the model and the essay shall conclude with recommendations for Hilton to utilise. The aim of this essay is to critically evaluate the external analysis of the case study organisation. The structure is as follows: A brief background to the organisation; defining what is meant by STEEPLE and how it is utilised; look at each part of the model and relate how this may affect the business and finally to come to a conclusion as to what the main problem areas for the company are.
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What is meant by the STEEPLE model?
“A STEEPLE analysis can be used to analyse a firms current and future environment” (Worthington, 1946, p7). A STEEPLE analysis is an examination of the external market (Campbell et al, 2005). A STEEPLE analysis breaks down the external analysis into six different categories: Socio/Cultural, Technological, Economic, Environmental, Political; Legal and Ethics (Campbell et al, 2005; Harrison, 2010; Jain et al, 2008; Kew et al, 2008; and Worthington, 1946). All of the named categories will have a different effect on the external environment of a particular company. The first part of the STEEPLE analysis is Socio/Cultural, this will be critically evaluated in the next section.
The Socio/Cultural aspect examines the demographic trends, income distribution, social mobility, lifestyle, attitudes to work and leisure and levels of education (Kew et al, 2010). Some of the Socio/Cultural components will affect Hilton. Demographics according to Farnham (1990, p43) is “The statistical study of populations through census returns, records of birth, deaths and marriages and other means.” Traynor (2008, p1) finds that “Britain will overtake Germany and France to become the biggest country in the EU in 50 years’ time”. The Local Government Association seconds this by finding that the rate of births has fallen dramatically however people are living for longer (Local Government Association, 2010). This may effect the Hilton company because due to people living longer, they will need to take into consideration that there will be an increase in people who are retired. This may mean that people will not have the same income as when they were working and they may have to reduce the cost of their rooms. On a more positive note for the company, people will have more time to spend on leisure activities. If the company decides to invest money into upgrading the leisure facilities, people may decide to come and spend their time and money there. As found by Vierich et al (1991), consumers in the future are likely to be specific in their requirements and will be less tolerant of providers that impede their leisure process indicating that if a hotel chain does not have a good leisure facility they may choose to spend their money elsewhere. The Socio/Cultural is an aspect that Hilton shall need to be careful of, the management will need to decide what price the rooms are in order to remain competitive. The next section of the STEEPLE model is Technological. How this affects the organisation will be discussed in the following section.
The Technological factors in the STEEPLE model critically evaluates the use of techonology available and the effect it will have on the organisation (Johnson, 2008). Kew et al, (2010, p6) state that Technological factors looks at: “Research and Development; new inventions; speed of technology and developments of systems” Aksu (2002, p94) states that “Websites have become important sources of advertisement”. This is true as more people get the internet, the information available to them becomed unlimited, this can therefore be linked to development of systems part as the internet is ever changing for the better. Hilton will need to be careful that there website sells the hotel to the customer. Law et al (2005) found that increased Technology meant that customers has a better expereince, booking rooms will be faster, check-in will be quicker and problems will be solved quicker all adding to the customers experience. Although the Technological side does not affect the company in many ways it still has an impact on what Hilton do. The third part of the STEEPLE model critically appraises the Economic factors affecting the organisation.
The Economical factors evaluates the economy and how it may affect the organisation. It uses the economic factors such as supply and demand, inflation and the overall economical impact to the company (Sloman, 2010). It is a known fact that the recession has caused many companies lots of pressure to perform more efficiently (Townsend, 1983). The recession will have a major impact on the company. The company will have to cut costs in order to survive. Staff themselves cost money (Torrington et al, 2008). Supply and demand has the theory that as demand increases, supply increases, but as demand falls, supply falls (Henderson, 2008). The laws of supply and demand will ultimatley affect the organisation in the fact that if people have a demand for wanting hotel rooms or a certain product that Hilton sells, the supply must increase. If people no longer want the product or service the supply must change in order for the company to make money. Another factor affectingh the organisation is the fact that the exchange rates vary daily. This will affect the companies asset prices. For example, if a company has debts in a foreign country, it may work in their favour to wait until the exchange rate is low, therefore costing less.****Need some quotes on where I got this from?**** The Economical side of the external analysis model is arguabbly very important. There are other factors however used in the STEEPLE model, the next part is Environemtnal and this will be discussed in the next section.
Over the last decade or so the environment has been an important part of every day life. Scientists have found that our world is slowly getting warmer and this is known as global warming (Global Warming, 2010). Delworth et al, (2000) find that globa warming is due human-induced increase of greenhouse gasses. Every human being and also organisation therefore has a part to play in saving the environment. The councils around Scotland have recently introduced bins that are to be used for recycling, this is therefore there part to play in saving the environment. Although one organisation changing their ways will not have that big an impact on the environment, every little helps. Hilton must be careful that they look after the environment. It is clear therefore that environmental factors are an important extrernal factor that impacts upon a company. There are laws being passed everyday by different countries to stop the ever growing amount of pollution going into the atmosphere. The environmental issue is a growing concern for companies and therefore is an important factor for companies around the world to remember when scanning the external environment. Now that the Environmental issues affecting the companies have been raised, the model being utilised throughout this essay states that the next part of the political environment and how that affects organisations such as Hilton.
Political parties all have different agendas. How these agendas will affect organisations will differ between the parties in power. At the present, there is a coalition government in place and they have changed things within the country already. Depending on who is in parliament at the time will affect different companies. If for instance a green party is in place, they will be tough on climate change. If the labour government comes back into power, things may change that will help employees and their families. However the coalition government at the present time will have different opinions on how the country should be ran. A part of the conservative party manifesto was to increase support for enterprise and have a fairer and more balanced economy (Conservatives, 2010); where as the liberal democrat side of the government believe in “tax efficient investment vehichles to provide seed captial” for start up businesses (Libdems, 2010). It is clear therefore that different governments in place may affect organisations greatly, therefore becoming a very important part of the case studies external environment. The next part of the model critically analyses the Legal aspect of the environment and suggests how this may affect organisations throughout different countries.
The Legal part of the external analysis for any company is an important one that must be kept up to date, some laws change daily and this is done by the House of Lords in London. The Legal environment is a very important aspect that must not be overlooked, the company must do things legally and have stick to protocol when carrying out a procedure such as disciplinary actions or maybe be faced with a fine issued by employment tribunals. The European Union (EU) also has a part to play with the legal aspects of the external environment. The EU issue directives, which must be in place in all member states or a fine and/or penalty, will be issued. An example of an EU directive that may affect Hilton was issued in 2009 to make it easier for companies to sell their services across all of the member states (BIS, 2010). This is just an example directive, there may be many more for the organisation to consider. One must remember that in multi-national organisations such as Hilton, the laws in each land will be different and it is important that the Human Resources strategy takes this into account. From directives and laws in place such as the ones mentioned, it is clear that the legal environment is a “minefield” for organisations and one that if not careful can be costly to organisations. Rushton (2010) find that employment tribunals have risen by 56% in the last year. It is clear therefore that the Legal aspect of the STEEPLE model is an important factor for the external environment. Organisations must be careful and mindful of the ever-changing laws. The final part of the STEEPLE model is ethics and how that affects the external analysis.
The ethical factor of the external analysis critically evaluates how socially responsible a company is. A new buzz word for socially responsible is “CSR” also known as Corporate Social Responsibility. How socially responsible a company is now a deciding point for most customers. For example, people may not choose to shop in the shop Primark after it was found that they get their clothes made in poor countries where people work for low wages and in poor conditions. Thankfully, Primark have invested in the Ethical Trading Initative meaning that they are taking a pro-active role in how ethical the company is (Primark, 2010). How a company treats their staff therefore is a factor organisations across the globe must be careful off.
Having utilised the STEEPLE model to analyse the external market of Hilton, it can be concluded that there are certain main factors that affect the organisation and therefore recommendations can be drawn:
If as the Local Government Association (2010) finds, the population is living older, Hilton may need to watch their prices for rooms to keep at a competitive rate. A quick search on the company website gives an average price of £104 per room, for one night (Hilton, 2010) This is expensive considering it does not include breakfast especially compared to other hotels such as the travel lodge.
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The organisation will need to keep in touch with increasing technological advancements as Law et al, (2005) found that customers will be impressed by these advancements as it means that processes can be done quicker and more smoothly.
The economical factors of the external analysis are difficult to manipulate and change. The government have all control over the economy and Hilton must know what is happening regarding prices and interest rates.
The organisation must be wary that the environment is now a large factor in deciding strategic movements that organisations such as Hilton make. Hilton must be careful not to make too much pollution and recycle as much as possible.
The government policies will change every time a new party comes into power. It is important that multinational organisations such as Hilton understand that there are different governments in different countries and they must keep this in mind when making decisions.
The Legal aspect of the external analysis model has indicated that there are many new laws brought in and some of them may have a direct or indirect affect on the organisation.
Finally the ethical aspect is one that affects all companies in today’s society. How socially responsible a company is will affect the amount of people that buy there.
Therefore in general using an external analysis framework makes organisations such as Hilton more aware of the potential dangers in the market in which they operate and therefore is an invaluable tool to use (Farnham, 2010).
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