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PESTEL analysis: Political

This report is the international marketing plan for the hotel Red carnation which is a UK based run business. The hotel is currently operating in the various countries i.e. Ireland, UK, South Africa, Switzerland and USA. The company has core values that provide commitment to the customers, employees and the communities in which the hotel is operating. This report discusses about the international marketing plan for the Red carnation to expand its business in the international market. The report includes PESTEL and Porters Five Forces analysis of the hotel industry. The report also includes the analysis of four countries i.e. France, Nigeria, Thailand and China for the selection of one suitable market. The strategies of risk evaluation are also provided in the report (Red Carnations, 2014).

Red carnation is the important part of the global hotel industry. PESTEL analysis for the Red carnation is discussed in appendix 1 and the summary of analysis is as follows:


The political factors play an important role in the business of hotel industry. The main target of the hotel industry is to attract the international tourism. It is well known that the hotel industry has to follow the rules and regulations imposed by the government as the support of the government is helpful in gaining competitive advantage in the market. Government imposes charges of huge amount and tax on the luxury hotels at the global level. Any small steps taken by the government always affect the operations of hotel.


Economic factors include some factors such as inflation, taxation changes, exchange rates and interest rates. Economic changes have significant impact on the behavior of the hotel. The hotel industry is trying to capitalize the travelers as they bring huge amount of money along with the huge expectations from the five-star hotels. There are many guests who pay extra for the extra services they demand. It means the hotel industry will grow.


There are various cultural and social factors which have impact on the overall hotel industry. One of the main factors is that hotels have to focus on the growing aging population. Change in the social factors impact on the demand for the services and products of the hotels. In the global hotel industry, there is the need to be variety of options which can be availed. The room for single bed and twin bedroom is to be perfect for the males. Further, individual or single bedrooms are mainly preferred by the females. So, social customs, habits and attitudes of the customers impact on operations in the global hotel industry.



In terms of hotel management, the use of technology must be beyond the standards. The software used in the hotel industry is helpful in meeting all the needs of the customers and staff members. Guests also prefer those hotels that are embedded with the innovative technologies. They are considered more secure and safe. Technology is helpful in reducing the reducing the work pressure and improves the outcomes. Many of the hotels in the hotel industry are providing Wi-Fi facility and security purposes. Customers and business people prefer technologically integrated hotels to achieve the customer satisfaction quickly.


Environmental or weather changes have significant impact on the hotel’s operations. In the serious weather, taxes are applied on the environment related products. There are some environmental factors i.e. storm, flood or heavy rains which affect the operations of hotel industry. These factors especially monsoon season play an important role. Natural factors such as earth quack directly affect the sales of hotels (Kearney, 2010).


There are many changes made which affect the behavior of hotel industry. The hotel industry at global level has to follow the age law. The legal legislative law affects the hotel industry. Along with this, customers get attracted to leisure based hotels which are legal and provide safe and secure services.

The five forces analysis of the Red carnation provides the description of global competitiveness and it is discussed in appendix 2. The summary is described below:

Threats of new entrants-

For the hotel Red Carnation, the entry risk of potential competitors is relatively low because of high initial cost of establishing such a big business and high competition among the existing hotel corporations. The three star, four stars, five stars   hotel industry is dominated by few big competitors like Marriott, Hyatt Regency etc. so for new entrants it is very hard to enter in the hotel industry.

Bargaining power of suppliers-

The bargaining power of the suppliers of hotel Red Carnation is low due to shortage of uniqueness of products and service supplied.  Moreover, the importance of volume of orders for the suppliers of Red Carnation is paramount and there is no supplier switching cost for Red Carnation. Red Carnation has effective supply chain management that ensures purchasing from, and development of, socially diverse supplies.  

Bargaining power of buyers-

Hotel Red Carnation has consumer diversity. Now days, consumers are getting more opportunities to choose their expected services from different hotels due to increasing in  hotel corporate activities in global era. That’s why bargaining power of buyers is high.


Threats of substitutes-

The choice of consumers can be changed due to other hotels like small lodges, business hotels, boutique hotels, eco-friendly hotels against the Red Carnation. But hotel Red Carnation has a strong competitive advantage due to wide range of branches so this threat can be considered moderate.

Competitive rivalry-

Hotel Red Carnation is facing hardships to deal with the strong competition in the global hotel industry. It is analyzed that hotel Red Carnation has high rivalry with its existing competitors.  Red Carnation competes with Marriott, Hyatt Regency, Radisson Blu, Westin and other premium segment hotel chains in the global market.  

The value chain analysis for the Red Carnation is described in the appendix 3. The inbound logistics of the hotel includes business activities, supply chain management, dealing with suppliers, negotiating markups with distributors etc. In the operations part of the Red carnation hotel, there are three segments i.e. ownership segment, timeshare segment and management and franchise segment (Armstrong & Cunningham, 2012). Outbound Logistics of the Red carnation includes competitive advantage, set of services and facilities, service provisions of highest standards, and transportation services for the customers etc. In the part of marketing and sales, Red carnation includes primary activities of marketing actions to add value in the services. Along with this, it includes marketing teams to provide effective services. In the part of services, there are qualities of services having competitive advantage. There are customer service member to address the customer service related issues. Red carnation has well developed infrastructure for providing effective services to the customers (Grant, 2010).

Red Carnation hotel is the famous brand which is very popular for its effective hospitality services. The SWOT analysis for Red Carnation is described in the appendix and the summary of the analysis is as follows.

Since international analysis is considered as one of the best ways for a corporate to prepare its plans and policies. Red Carnation is on the way of designing its growth around the international scope. To increase its market share the company is spending its money on research and development. However, as Red Carnation is concentrating more on international expansion for improving its market share in the China market. There is the weakness of hotel Red Carnation that it is focusing on high end product. While the company is very good at high end brand but the hotel should focus on its business mission also (Iplik, Topsakal & Dogan, 2014). The mission of Red Carnation is to be the leader in providing the best hospitality services to its customers and it achieves that mission through its spirit to serve culture. Therefore, not opening that much kind of product line is a large weakness for the company. Another threat that hotel Red Carnation faces is public confidence. This is because of people’s unawareness about the brand and not knowing the kinds of facilities and services provide by the company. The hotel is threatened by the similar offerings that other hotels give out at lower rates (Peñaloza, Toulouse & Visconti, 2013).


The market comparisons for the Red carnation can be done by the analysis 12C framework. There are the markets of some countries i.e. France, China, Thailand, and Nigeria. Based on the comparison, it analyzed that there are both advantages and disadvantages in each and every country. For the expansion of Red carnation, the most preferred country is China.

From the analysis in appendix, it is observed that China is third largest importer of food product in all over the world. In this country, disposable incomes of the customers are on rise and Chinese customers are looking for high class hospitality services, especially international and western brand. So, there would be the market opportunity for the hotel Red carnation. Along with this, China has experienced significant GDP growth rate and this indicates that the purchasing power of customers in China will increase significantly (Zhang et al, 2010). It is expected that the hotel market in China will surpass U.S. in 2025 with the 40% of tourism growth. According to the World Travel and Tourism Council (WTO), China is the second largest global market in terms of travel and tourism (Pine, Zhang & Pi, 2000).

The Red carnation hotel is seeking for the business expansion in the China market. The hotel can use both the strategic options i.e. market development and diversification. As discussed in appendix, there are basically four strategic options in the Ansoff matrix which can be adopted by the Red Carnation in the China market (Cristina, Enrique &Ricardo , 2012). There are strategies for the competitive advantage, growth, targeting, segmenting and positioning which are described below:

  • For the success in the overseas market, hotel can adopt the strategy for merger and acquisition, or diversifying the hospitality services portfolio while entering the market of China.
  • In terms of competitive advantage, the strategy for the Red Carnation is providing effective luxury experience and other benefits and technical advantages to the customers with the help of new and latest technology. Social media sites are also very effective for creating customer loyalty and customer engagement effectively (Lawrence et al, 2007).
  • In the segmenting strategies, the marketing could be based on various segments i.e. airport hotels, business hotels, holiday resorts, suite hotels etc. The targeting strategies should include the business hotel segment and the hotel resort as these segments are expected to provide the maximum benefits for the Red Carnation.
  • To establish the China market, positioning strategy for the Red Carnation should include unique service proposition by effective designs and structure according to the needs and requirements of the customers in China market (Meesak, 2015).

Beijing is the most suitable city for the business expansion of Red Carnation. As discussed in the appendix, the city has different attractive places for the tourists. Beijing is the famous tourists’ destination of the country China. This is the capital of the country so, attracts the foreign investors to invest in the hotel industry. Along with this, there are various growth opportunities for the Red Carnation in the Beijing that is very helpful for the business expansion (Bickhoff, Hollensen & Opresnik, 2014). In the appendix, appropriate modes of entry in the international market are described. Licensing, franchising, joint venture and whole owned subsidiaries. For the hotel Red Carnation, franchising and licensing are the less preferred options for the global options. For the hotel, the most preferred options are joint venture and whole new subsidiary in the China market. But there is the issue that it will not be easy for the Red Carnation to find right business partner in the new country so, joint venture cannot be much effective in this case. Red Carnation is owned and run business so for the hotel, joint will not be an appropriate strategy to expand the business. It is also analyzed that Red Carnation has not entered in any kind of joint venture earlier. So based on all the facts and research, the best mode of entry for the Red Carnation would be setting up wholly owned subsidy in the China market. This would be done either by the investment or by the acquisition. To establish the business in the overseas market, investment would be effective option for the Red Carnation hotel as proper structure and design are the main factors of the business and investment is needed to provide effective services (Roger, 2013).



For hotel Red Carnation core product is hotel rooms in which customer stay for a specific period of time. Hotel Red Carnation offers a set of popular facilitating services like bars and restaurants, customer services and online reservation facilities. A range of supporting products are also offered by hotel Red Carnation like 24/7 room service, free newspapers and magazines for business travelers etc. Hotel also offers membership discounts, luxurious rooms and relaxed hotel atmosphere.


Hotel Red Carnation owns the upper scale rooms and thus the hotel follows upper scale pricing strategy. Hotel Red Carnation only offers five star and four star rooms but in his very competitive market guests are strongly influenced by pricing and packages. The hotel rates are defined keeping in mind to attract or impress guests (Ellickson &Misra, 2008).


The main of distribution strategy of hotel firm can be recognized as making available the products and services to customers where, when and how they prefer it. The hotel’s distribution strategy is mainly depends on information technology and internet facilities in various formats. For service distribution the company uses its official website as an effective platform as it provides wide range of features and capabilities such as booking a room, planning events and weddings and booking of airport pick-ups. The specific reason behind the selection of internet as distributer relates to extensive range of convenience associated with internet (Russell, 2010).


Since promotion is a key element in putting across the benefits of your product or service to the customers.  Promotion is the way that hotels used to communicate with its customers. Some of the promotional techniques used by the hotel Red Carnation are brochures, communication through television, through official website of hotel, creating Facebook and Twitter accounts etc (Tan & Dwyer, 2014).

There are some risks identified for the Red Carnation while entering in the China market. It is important for the hotel to minimize the impact of risk for the effective business operations. The identified risks are as follows:

Reputational risk-

There can be the risk of reputation due to the negative comments by the customers on social media sites. The negative opinion of the customers can impact the business of Red Carnation in many ways. To avoid this issue, the manager can correct the facts in the single response. Further, manager can give justification to the unhappy customers.

Risk of getting trained staff-


There is the need to have skilled and trained employees in the hotel for the effective business operations. In the new market, there can the risk of getting new employees with the required skills. This issue can be managed by offering attractive offers and packages to attract new employees (Turnbull & Valla, 2013).


From the above analysis, it can be said that the hotel Red Carnation is doing well in the business operations. The hotel is trying to expand its business in the global market. By the analysis of given four country Nigeria, China, Thailand and France, it is analyzed that the country China is the most suitable market for the business expansion. Although there are some risks in the country such as strong competition, and terrorism but by the proper strategies, hotel can be able to establish its business in the market. So, the preferred market for business in China. It should be noted that China market is the famous tourists’ destination for the travelers in all over the world. For entering in the new market, it is important for the hotel Red Carnation to analyze the effective entry mode. There are many four entry modes in the market i.e. franchising, joint venture, licensing and wholly owned subsidiaries. By the analysis, the most suitable entry mode for the hotel is owned subsidy which will satisfy the values and requirements of the company and its business objectives. In this mode of entry, the investment cost will be high so, it is important for the hotel to adopt appropriate strategy to improve the profit in the overseas market. Further, the report has also analyzed that there are some risks in the new market which has to faced by the hotel i.e. risk of terrorism, and risk of getting skilled staff and risk of damage of reputation etc. so, it is crucial for the Red Carnation to understand the requirements of China market so, hotel should carefully analyze the business activities of the competitors.


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