The Demand For Hotels In The Uk Economics Essay

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To get down the treatment of the assignment subject, it is imperative to specify and cognize what the term concern environment refers to. Business environment refers “ to a set of political, economic, societal and technological ( PEST ) forces that are mostly outside the control and influence of a concern and that can potentially hold both a positive and a negative impact on the concern ” ( Varian, 1992, p 4A ) .

Here Is have two subjects to cover this assignment. Topic 1 is Using the theory of demand show what factors will find the demand for hotels in the UK. & A ; Topic 2 is Critically explain with peculiar mention to the cordial reception direction industry what strategies need to be considered and used in a globalised concern environment. To exemplify the replies of subjects, I took aid from few concern environment books, cyberspace, diary, lecture sheets and so on.

Subject 1: Using the theory of demand show what factors will find the demand for hotels in the UK.

Demand Theory:

Demand is a measure of a good or service that consumers are willing and able to purchase at a given monetary value in a given period. ( Sloman, 2004, p.30 )

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Now i am traveling to concentrate on different factors that affect the demand for a merchandise ( the monetary value of that merchandise ) of hotels in the UK. These are call determiners of demand. There are five determiners of demand:

Ability to pay

Consumer Preferences

Monetary values of other merchandises

Customer ‘s perceptual experience

Degrees of client income and the nature of the merchandise

Ability to pay

Income is the cardinal determiner of demand. Because the ability to pay for goods and services will evidently hold a immense influence on demand. If clients have a batch of passing power ( disposable income ) , demand for most merchandises will lift. Conversely clients are ‘hard up ‘ , demand will be given to fall. The power of client disbursement will depend among other things such as: the degree of income additions, revenue enhancement rates, involvement rates, employment and unemployment in the state.

See the demand for a nutrient. I want nutrient and take one hotel ( Ramada Jarvis ) i like. But the monetary value is higher comparison to the other hotel. So one do n’t purchase. One ground my income is non big plenty to be able afford this sum. Therefore, income must be one of the factors that affect the demand for a given merchandise. In peculiar, for cognizing the income snap of demand we can utilize a expression:

Percentage alteration in demand for a merchandise

Percentage alteration in income

Again, we normally divide at one. If the figure is less than or equal to +1, the merchandise is

called a “ necessity ” . This means that if income falls, the demand falls really small because

the merchandise is needed. If the figure is greater than 1, the merchandise is called a “ luxury ” . This

agencies that if income falls, the demand falls greatly because the merchandise is non needed.

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Figure: The monetary value snap of Demand

Consumer penchants

The 2nd determiner of demand is the altering face of client penchants. If fiscal issues find the clients ability to purchase, penchants concern the clients willingness to purchase. It is obvious that people change over clip in what they want to purchase. It may be that one type of merchandise is in demand 1 twelvemonth, but non the following. Preference can be influenced in several ways:

It may be influenced by increasing or diminishing tendencies, like because of recession last twelvemonth people did n’t hold occupation and they drink a batch which increase the demand of intoxicant.

It may be influenced by advertisement, like for ruddy vino the telecasting show 60 Minutes reported that imbibing ruddy vino reasonably every twenty-four hours lowered cholesterin and hence lowered the hazard of holding a bosom onslaught.

Some goods are capable to seasonal fluctuation.

Monetary values of other merchandises

The 3rd determiner of demand is the monetary value of other merchandises. This concerns the nature of a merchandise in inquiry and how it relates to other merchandises. A merchandise can be related to other merchandises in one of two ways: it can be a utility merchandise or complementary:

Substitute merchandises are related in every bit much as you will non purchase merchandise A if you buy merchandise B. This is because merchandise A forms the same map as merchandise B. Hence an addition the monetary value of merchandise A will take to an addition in demand for the rival merchandise. Like in recent old ages the monetary values of new autos have been falling. This should increase the demand for new autos and cut down for 2nd manus autos.

Complementary merchandises are related inasmuch as you will necessitate to purchase merchandise A if you buy B. It follows that an addition in demand for merchandise A will excite an addition in the demand for merchandise B. For illustration, the demand for DVD participants and DVD pictures, when there is a autumn in the monetary value of DVD participants we expect to see more DVD participants bought, taking to an enlargement in market demand for DVD picture.

For happening, how much the demand for a merchandise will alter if there is a given per centum

alteration in the monetary value of another merchandise. This is called the cross snap of demand and is given by the expression:

Percentage Change in the Demand for a Merchandise

Percentage Change in the Price of a Different Merchandise

Notice that this figure measures how much the demand for one merchandise responds to a alteration in the monetary value of a different merchandise. If the figure is positive, the merchandises are replacements ( if the monetary value of the other merchandise rises, the demand for this merchandise besides rises ) . The larger the figure, the closer the merchandises are as replacements. If the figure is negative, the merchandises are complements ( if the monetary value of the other merchandise rises, the demand for this merchandise falls ) . If the figure is zero, the merchandises are wholly unrelated.

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Figure: Cross snap of Demand

Customer ‘s perceptual experience

The 4th determiner of demand is the clients perceptual experience to the hereafter. If the client ‘s of a merchandise jointly believe that their will be future deficit of the merchandise, so the demand will increase within the short clip. Conversely, if they believe that the monetary value will come down, they will detain purchases therefore cut downing short-run demand.

Degrees of client income and the nature of the merchandise

The 5th demand is determined by the nature of the merchandise itself. There is a nexus between the demand for different merchandises and other variables, such as personal income. A comparing between the measure demanded of goods compared to personal income shows three wide types of merchandise.

A normal good is one where demand increases with income- the more you earn, the more you buy. Examples of normal goods are host: with lifting income we will be given to purchase more bottles of vino, more vacations etc.




Figures: Normal good

Inferior goods show increased usage with rising income but merely up to a point. When a certain degree of income is reached, people switch to superior merchandises and hence demand for inferior merchandises diminutions. Examples of inferior goods would include the cheaper nutrient trade names and usage of ‘cash-only ‘ supermarkets.




Figure: Inferior goods

Cheap necessities show an initial addition in demand with income but there comes a point at really low degree of income where ingestion remains changeless whatever the income. Examples oil, salt and sugar. However much you earn, your demand for oil remains the same.




Figure: Cheap goods

Subject 2: Critically explain with peculiar mention to the cordial reception direction industry what strategies need to be considered and used in a globalised concern environment.

Globalization was the cant of the 1990s, and in the 20 first century, there is no grounds that globalisation will decrease. Basically, globalisation refers to growing of trade and investing, accompanied by the growing in international concerns, and the integrating of economic systems around the universe.

The globalisation of concern is easy to acknowledge in the spread of many trade names and services throughout the universe. For illustration, Nipponese electronics and cars are common in Asia, Europe, and North America, while U.S. cars, amusement, and fiscal services are besides common in Asia, Europe, and North America. Furthermore, companies have become multinational or multinational-that is, they are based in one state but have operations in others. For illustration, Japan-based car manufacturer Honda operates the largest individual mill in the United States, while U.S. based Coca-Cola operates workss in other states including France and Belgium-with about 80 per centum of that company ‘s net incomes come from abroad gross revenues.

Businesss may take to globalise or run in different states in four distinguishable ways: through trade, investing, strategic confederations, and licensing or franchising. Companies may make up one’s mind to merchandise touchable goods such as cars and electronics ( ware exports and imports ) . Alternatively, companies may make up one’s mind to merchandise intangible merchandises such as fiscal or legal services ( service exports and imports ) .

Finally, companies may take part in the international market by either licensing or franchising. Licensing involves allowing another company the right to utilize its trade name names, hallmarks, right of first publications, or patents in exchange for royalty payments. Franchising, on the other manus, is when one company agrees to let a company in another state to utilize its name and methods of operations in exchange for royalty payments.

Schemes for the Globalised Business Environment

By and large, a cordial reception industry develops its international scheme by sing its overall scheme, which includes its operations at place and abroad. We can see four facets of scheme:

Scope of operations

Resource allotment

Competitive advantage and


The first constituent encompasses the geographic locations, states and parts of possible operations every bit good as possible markets or niches in assorted parts. Since companies have limited resources and since different parts offer different advantages, directors must choose the markets that offer the company the optimum chances.

The 2nd constituent of the planetary scheme focuses on usage of company resources so that a company can vie successfully in the chosen markets. This constituent of scheme planning besides determines the comparative importance of assorted company maps and bases the allotment of resources on the comparative importance of each map. For case, a company may make up one’s mind to apportion its resources based on merchandise lines or geographical locations.

Following, direction must make up one’s mind where the company can accomplish competitory advantage over other companies in the industry. Management can place their competitory advantage by finding what the company does better ( or can make better ) than its rivals. Companies may recognize this advantage through a host of techniques such as utilizing superior engineering, implementing more efficient organisational patterns and distribution systems, and cultivating well-known trade names. This constituent of the scheme involves non merely placing bing or possible countries of competitory advantage but besides developing a program for prolonging countries of competitory advantage.

Competitive Advantage

UK hotels that provide high quality nutrients at premium monetary values

Chinese hotels that provide nutrient but non superior quality

Indian masala zone that provide simple, standard nutrient.

Starbucks coffee stores supply different types of java

Cost Differentiation

Broad Target

Competitive Scope

Narrow Target

Figure: Generic schemes in world-wide hotel industry

Finally, planetary scheme should affect set uping a program for the company that enables its assorted maps and operations to profit one another. For illustration, a company can utilize one line of merchandises to promote gross revenues of another line of merchandises and thereby enabling different parts of a concern to profit from each other.

Offshoring, outsourcing and offshore outsourcing

Despite the attending that outsourcing offshoring presently demands in the public media, there is small empirical grounds on its economic impact. As a effect of lifting frights of occupation losingss associated with the phenomenon, most bing research on the topic is chiefly concerned with turn toing related labour market issues.

Here the term “ offshoring ” is frequently associated with “ outsourcing ” but neither implies the other. Whereas outsourcing refers to the resettlement of occupations and procedures to external suppliers irrespective of the supplier ‘s location, offshoring refers to the resettlement of occupations and procedures to any foreign state without separating whether the supplier is external or affiliated with the house. Outsourcing may therefore include occupation resettlements both within and between states, whereas offshoring refers merely to international resettlements. The term offshore outsourcing hence merely covers the resettlement of occupations or procedures to an external and internationally located supplier.











National International

Between houses

( Outsourcing )


Within houses

( Insourcing )

Within states Between states

Figure: An exemplifying matrix of insourcing, outsourcing and offshoring

Phases of Globalised Strategies Development

Strategy development itself by and large takes topographic points in two phases: scheme preparation and scheme execution.

Strategy preparation entails analysis of the company and its environment, set uping strategic ends, and developing programs to accomplish ends every bit good as a control model. By measuring itself and the planetary concern environment, a company can find what markets, merchandises, services, etc. offer chances for growing. This procedure involves the aggregation of informations on a company and its environment, including information on planetary markets, ordinance, productiveness, costs, and rivals. Therefore, the aggregation of informations should provide directors with economic, fiscal, political, legal, and societal information on assorted states and their markets for different merchandises or services. Based on this information, directors can find what markets and merchandises offer economically executable chances for planetary enlargement. Once this analysis is complete, directors must set up strategic ends, which are the important ends a company seeks to accomplish through a peculiar chase such as come ining a new regional market.

After the strategic ends have been established, companies should develop programs that allow them to carry through their ends, and these programs should concentrate on how to implement strategic programs. Finally, scheme preparation involves a control model, which is a procedure direction uses to assist guarantee that a company remains on the right class when implementing its strategic programs. The control model basically responds to assorted developments while the strategic programs are being implemented.

Globalised market Control and Evaluation

While many facets of international scheme and its preparation are similar to their domestic opposite numbers, some cardinal facets are non, and therefore call for different methods and different sorts of information. Deriving cognition of international markets is one of these cardinal differences-and a important portion of developing an international scheme. In order for a company to come in a new market, gaining control market portion, and thereby increase gross revenues and net incomes, it must cognize what that market is like.

When analyzing different international markets, a company should see the market potency, competition, ordinance, and cultural factors of each. Company directors can measure market potency by roll uping informations on the gross domestic merchandise ( GDP ) , per capita GDP, population, transit, and other figures of assorted states. This sort of information will enable directors to find the disbursement power of the consumers in each state and find if that disbursement power allows them to buy a company ‘s merchandises or services. Directors besides should see the currency stableness of the different markets, which can be done by utilizing paperss from the place states to find currency value and fluctuation over a period of old ages.

Following, company should measure the regulative environment of the prospective markets, since cognizing revenue enhancement, trade, other related policies is indispensable for a successful international concern. This measure entails finding the several duties and trade barriers of prospective markets. Different types of trade barriers may act upon the sort of concern activity a company chooses for a peculiar market. For illustration, if a prospective market has trade barriers that restrict the entry of foreign-made goods, a company might make up one’s mind to entree the market through foreign direct investing and fabricate its merchandises in that state itself. Ownership limitations besides may restrict a company ‘s involvement in a peculiar market ; some states permit foreign companies to put up local operations merely if they set up a partnership with a local company. Companies besides must do concerning authorities stableness. Since some states have unsmooth authorities passages ensuing from putschs and rebellions, companies must permit the possibility of political convulsion that could well interrupt concern.

The last measure in international market rating is the appraisal of cultural factors. To avoid troubles associated with cultural differences, some directors look for new markets that have cultural similarities to their place market, particularly for initial international market incursion enterprises. Unlike market potency, competition, and ordinance, cultural differences are more hard to measure. Nevertheless, directors must seek to find the consumer demands and penchants in the prospective markets. Directors must besides account for cultural differences in labour dealingss such as worker motive, compensation, hours, etc.

Designation of ends and other terminal points to be measured

Does the public presentation lucifer the criterions

Measurement of these criterions

Constitution of preset criterions

Continue as before

Take disciplinary action

After analyzing the prospective markets in this mode, companies are ready to measure the advantages and disadvantages of each possible market. One manner of making so is the finding of costs, advantages, and disadvantages of each prospective market. The costs of each market include direct costs and chance costs. Direct costs are those a company pays when set uping a concern in a new market, such as costs associated with buying belongings and equipment and bring forthing and transporting goods. Opportunity costs, on the other manus, refer to the costs associated with the loss of other chances, since come ining one market regulations out or postpones come ining another because of a company ‘s limited resources. Hence, the net incomes that could hold been earned in the alternate market represent the chance costs.



Figure: The control and rating procedure