Part 2, Unit 4 The external

environment: PEST

analysis

Tourism Strategy

Part 2: Strategic Analysis Strategic analysis utilises techniques for situational analysis.

This involves reporting on the current and future opportunities and threats and strengths and weaknesses facing the organisation.

Opportunities and threats summarise the external environmental factors that a tourism organisation faces. The key elements of the external environment may be summarised as C-PEST factors which refer to the competitive political economic socio-cultural, and, technological environments.

Of these, PEST factors are analysed in chapter 4, whilst the competitive environment is considered in chapter 5.

Strengths and weaknesses analysis summarises the state of the internal resources of an organisation. Resource analysis is undertaken in chapter 6.

All these factors are brought together in a comprehensive SWOT analysis at the end of chapter 6, thus concluding strategic analysis and part 2.

Reading

Book Ch

Tribe, J, (2010) Strategy for Tourism, Goodfellow Publishers, Oxford.

4

Capon, C. (2008) Understanding Strategic Management, Prentice Hall: Hemel Hempstead.

2

Tribe, J. (2005) The Economics of Recreation, Leisure and Tourism, Butterworth Heinemann, Oxford.

8, 9

Johnson, G., Scholes, K., and Whittington, R. (2008) Exploring Corporate Strategy, Prentice Hall: Hemel Hempstead.

2

Learning Outcomes

After studying this chapter and related materials you should be able to understand:the political environmentthe economic environmentthe socio-cultural environmentthe technological environment

and critically evaluate, explain and apply the above concepts.

Discussion Point

What is the external environment?What risks arise from the external

environment?

Case Study 4: Tourism and the 2008 Economic Crisis 2008 can be added to the list of significant

economic crises which include the Great Depression (1929-35) and the Asian Economic Crisis of 1997-8. By 2007 an unsustainable set of economic conditions were developing.

Two quarters of falling output in 2008 confirmed the arrival of a recession in both the UK and the US.

For tourism, the UNWTO predicted stagnation (0% growth) or even slight decline (-1% to -2%) throughout 2009. Amongst those most affected were the Americas and Europe as most of their source markets were affected by recession.

Case Study 4: Tourism and the 2008 Economic Crisis

Opportunities and threats in the changing political Competition policy Health and safety Transport and

infrastructure Global carbon

agreements and targets

Taxation and spending plans

Disability and access legislation

Foreign policy

Visa policy and home security

Regulation and deregulation

Regeneration plans Employment and

training policy Travel advisories Minimum wages

Political Environment: Aftermath of Kenyan unrest 2008

What are the key variables?The economic environment affects

organizations in the leisure and tourism sector in two main ways. Changes in the economic environment can

affect the demand for an organization’s products

Changes may affect an organization’s costs.

Borrowing Employment Taxes

Expectations Disposable

Income

Benefits

Government

Expenditure

Household

Consumption

Savings

Exports Demand Imports

Investment Tourism Organisation

The economic environment and demand

Opportunities and Threats in the Economic EnvironmentOpportunities Threats

Low interest rates High interest rates

Low unemployment High unemployment

High consumer expenditure Low consumer expenditure

Low oil and other commodity prices

High oil and other commodity prices

Low Taxes High Taxes

Favorable exchange rate Unfavorable exchange rate

Stable prices Inflation

Optimistic expectations Pessimistic Expectations

The Economic Environment for an airlineVariable Comments Opportunit

yThreat

Interest Rates

Employment

Exchange Rate

Taxes

EconomicGrowth

The sociocultural environment

Factors in the socio-cultural environment of tourism entities include the size and structure of the populationlifestyles and inter-cultural differencesother factors (including attitudes and

values about travel, availability of paid leave and unemployment)

tourist motivations

The technological environmentThe technological environment offers both

opportunities and threats:Opportunities may be found in cheaper provision,

or improvements in goods and services, in better marketing or easier distribution.

However technology may result in an organisation's product or service becoming obsolete, or subject to new forms of competition.

The technological environment may be divided into Information Communication Technology and other technology.

InformationCommunication Technology ICT relevant to tourism encompasses

information search, purchase of services, post travel engagement and networking.

It includes information and reservation systems for airlines, hotels and attractions, timetables for transport systems, search engines (e.g. Google) online travel services (e.g. Expedia, Orbitz, Lastminute.com, Opodo, Travelocity and edreams), destination management systems (e.g. visitbritain.com), networking and web 2.0 portals (e.g. tripadvisor.com) and price comparison sites (e.g. travelsupermarket.com).

Other Technology

Other areas where technologies have had a significant impact on tourism include:Construction techniques - allowing faster erection of

buildings.Bridge technology – extending access and cutting

journey times.Materials – lighter and more durable materials.Glass – especially with better insulation properties.Fuels – e.g. biofuels.Energy – especially alternative sources of energy

such as wind and solar power.Security scanning – which enables quicker and more

accurate passenger checking at airports.

Part 2, Unit 4 The external

environment: PEST

analysis The End

Risk Management and Strategic Planning