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Economic analysis and PESTLE for a London hotel and restaurant.

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Introduction

BUSINESS ENVIRONMENT BY MR Abhishek R Patil 735607 Introduction: Business environment comprises of two words "Business" and "Environment". According to Worthington. I, Britton.C, 2009. 'Business' is a commercial activity which is designed to provide goods and services or both to the consumer in order to generate profit on a consistent basis. On the other hand 'Environment' refers to the different aspects of surrounding. Therefore Business environment can be defined as surrounding which affects the performance of the organization which cannot be controlled. Environment has two components: * Internal environment. * External environment. Internal environment: it consists of 5M's, Man, machinery, management, money, material. It is can be control easily and can make changes accordingly. External environment: it consists of micro and macro environment. Micro environment include suppliers, customer, competitor, buyer and public which are close to the organization. Macro environment include social, economic, political, legal and technology which normally gives opportunities or creates threats to the business. It not only affects the performance of the organization but also there is the need to change the strategies accordingly. 1) THEORY OF DEMAND: According to Burton.D and Wall.S, (2011). Demand can be defined as the quantity of goods or services that customer is willing to buy or purchase at a given price in that given period of time. For e.g. Even in recession UK hospitality shows 12% rise due to large number of international visitor visiting Britain and the demand for rooms has been increased at any given price. Bighospitality.co.uk From this example we can conclude that if there is demand for a particular product it needs to be fulfilled by supplying right amount of product at any given price. Each of us have an individual demand for a particular goods or services and demand reflects the value of the product in a particular market. The term 'effective demand' means when a consumer willing to buy a particular product is backed up by the ability to pay for it. ...read more.

Middle

* Habits forming goods: Goods such as alcohol and drugs are inelastic in demand, irrespective of the price change the consumer tend to buy the product. 2.1) Cross elasticity of demand It measures the responsiveness of demand for a product to change in price to other related product. CED = % change in QD % change in price Parkin.M, (2008). For e.g. In our hotel there is roof top restaurant which does not take booking for lunch or dinner at busiest time of year which indicates that price is inelastic when demand is there, but during slag time we taking booking for party or table booking and price change due to demand. 2.2) Income elasticity of demand. It measures the responsiveness of demand for a product to change in income of the person demanding goods, holding all prices to be same. It all depends on the nature of the goods for e.g. if it is necessity good then person will buy it and will cut down on luxury goods if the income is low of that person. IED= % change in quantity demanded/ % change in real income. Fair.R, Case.K, (2008). 2.3) Total Utility: The total satisfaction gained from all unit of a particular commodity consumed over a period of time is called total utility. For e.g. a person gains 50 utility of total utility when he consumes a egg. This total utility is sum of utilities of successive units, for first egg 35 utility, 15 for second egg and 5 for third egg. It is the sum of marginal utility of each successive consumption of unit which can be derived in formula as shown below: TUx = ?MUx Baumol.W, Blinder.A, (2009). 2.4) Marginal Utility: Marginal utility is the change in satisfaction from the consumption of one more unit of a good. For e.g. when consumption is increased from one to two the utility is increased from 30 to 45 utility. ...read more.

Conclusion

Newly renovated 10 suites which are costing around 1,100,000gbp. 2) Close to good attractions and market such as London Bridge and spitalfields market which is approximately 10 minutes walk. 3) Each room with unique design and space of around 37 sqm of each room. 4) 3 different restaurants with 3 different cuisines in house provide the guest with ultimate food experience. 5) Renowned brand of 51 restaurants and 1 hotel which come under D&D groups. 6) Green technology has helped us in cutting the power usage by 20%. 7) Sales generated through social networking sites such as facebook and twitter is almost 4% of the overall sales. 8) Non smoking floor with 5 suites and 5 basic rooms. WEAKNESS 1) Online sales contribute only 4% to overall sales. 2) As it is a new hotel brand awareness level is about 42% as compared to crown plaza which is 75%. 3) Customer complaints have increased by 8% as compared to last year. 4) Market share has drop by 1% as compared to last year. 5) Staff turnover 58% as compared to last year. OPPORTUNITIES 1) Joining the design hotels. 2) Using the high profile events such as London fashion week and east London design show to increase awareness and brand value. 3) Introducing IMAC technology in suites. 4) Improvement in the strength of traveling market. 5) No direct competition in terms of '5 star' boutique property. THREATS 1. Saturated boutique market. 2. Easy to enter a market. 3. Recovery from recession may take time. The boundary hotel Brochure Summary If we see at the strengths of the hotel it can clearly seen that due to its location and excellent social media marketing hotel demand has increased but it lacks recognition as compared to neighborhood hotel crown plaza whose brand image is higher than boundary hotel and due to which demand decreases sometime due to lack of brand recognition. But if we take advantage of high profile events such as London fashion week and designer show where we can market our product and increase our demand in high socialites. ...read more.

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