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The company does not exist in vacuum, it is surrounded by other firms and institutions which influence its operations. These external forces constitute its marketing environment. It is made up of two parts: (a) the microenvironment which consists of forces in the immediate surrounding of the company – suppliers (firms and individuals that provide the resources necessary to produce goods and services), intermediaries (firms that help to promote, sell and distribute the product to customers), competitors (the firms working in the same market segment) and public (any group that has an actual or potential interest in the firm's business activity), and (b) the microenvironments which consists of more general influences of society: cultural, economic, political and technological. The analysis of how these factors will affect a hospitality company's success is called environmental analysis. Social and cultural factors include forces that affect people's values, preferences, and patterns of behavior, which vary in different social, ethnic (people of the same nationalities living as distinct communities) and age groups (for example, teenagers, seniors), etc. The economic factors include the state of the national economy, the demographic situation (the population in terms of size, density, age, and other statistics), development of consumerism and public-interest groups (an organized movement of citizens to defend the rights and power of buyers in relation to sellers). Political environment is made up of laws and regulations, produced by government agencies, pressure political groups that influence the organization's business. Technological environment is made up of forces that create new technologies, in their turn creating new product and market opportunities.





The success of the company's operations depends greatly on the trends and developments affecting its suppliers. Suppose that a restaurant manager wants to run a live lobster special for the weekend promotion. The seafood supplier promised to send 200 lobsters but on Friday morning something happened: lobsters are shortened on the shipment from Boston, and they cannot be delivered until Saturday night. In hospitality industry, even greater is the companies' dependence on the intermediaries who help to deliver the resources and sell the product. Suppose the transport workers responsible for the shipment of that seafood are on strike! In this case there would be no lobsters in the market for a week. The manager, who already has sent invitations to his frequenters, may try to find an alternative source only to find out that the prices for lobsters are doubled.

In hospitality industry, the companies usually have little control both over the suppliers and the intermediaries, since there is usually no contractual arrangement between them and the firm. For example, most guests make their own reservations when traveling for business or pleasure. As airline fares increased, both companies and individuals cut back on travel. As a result, the hotel business suffered losses. Some companies that are heavily dependent on their guests being delivered by air must work with local and state tourist bureaus to ensure that there are enough flights serving their region. Or they may start their own airlines. Typical intermediaries of a hotel firm are travel agents, wholesale tour operators, and hotel representatives. For example, a wholesaler creates leisure packages that include air ticket, ground transportation, and hotel accommodations. These packages are promoted through newspaper advertisements and travel agents. Through volume purchasing, the wholesaler receives reduced prices, which enables him to pay the travel agent a commission for selling the product, give the customer a good price, and produce a profit for himself.



1. Find in the text the following topical words and phrases, make sure that you are able to explain in English what they mean, and add them to your working vocabulary:

"a live lobster special", a shipment, a wholesaler, an airline fare, a hotel representative, a leisure package.


2. Write out from the text the sentences or their parts which contain the words and phrases given below and translate them into Russian:

a trend, to be shortened, an alternative source, to deliver by air, volume purchasing, a commission.


3. Answer the following questions using the topical words and phrases:

1. What problems connected with supply of perishable goods can unexpectedly emerge?

2. What is the function of intermediaries in marketing hospitality services?

3. Why is it difficult for hospitality companies to control their transportation intermediaries?

4. How does airline fare increase affect hospitality business?

5. What services are usually included in a leisure package?

6. How does a wholesaler earn his living?




Among the external forces that influence a hospitality company the most important is economic situation. The inflation, high rate of unemployment, and increased taxes of the 1970s reduced the amount of money the Americans could spend on traveling. Their becoming cautious buyers forced the hotel business to introduce economy chains, and the restaurant business responded with rapid growth of lower-priced fast-food chains.

In the 1990s, however, economic conditions have improved, and current projections suggest real income will rise due to rising income in certain important segments. The baby-boom generation moved into its prime wage-earning years, and the number of small families headed by dual-career couples increased. These more affluent groups demanded more time-saving products, more travel and entertainment, more physical fitness products, more cultural activities, more continuous education. People change spending patterns as their income increases. Ernst Engel found that as family income increases, the percentage spent on food declines, the percentage spent on housing remains almost constant, and the percentage spent on other categories increases. The economic situation of the 1990s has confirmed Engel's Law.

However, that period got the name of the decade of the "squeezed customer". Along with rising incomes came increased financial burdens: repaying debts acquired during the spending splurges of the 1980s, increased taxes, saving ahead for college tuition and retirement. The income distribution was very skewed. At the top are upper-class consumers who are a major market for luxury goods. The middle class also can afford the good life, at least some of the time. The working class must stick close to the basics of food and clothing. The persons on welfare must count their pennies. Changes in major economic variables such as income, cost of living, interest rates have a large impact on hospitality industry. Nevertheless, businesses can adjust their marketing mix to ride out of the economic storm. Restaurants, for example, can vary their menus and offer a number of lower-priced entrees during a recession.

Among factors that influence living standards of people are demographic, such as age structure of population that has been changing during the last 50 years. The most important demographic trend is the aging of population. A falling birthrate has meant fewer young people. At the same time, life expectancy is increasing, which raises the population's average age. Current average life expectancy is 75 years, a 26-year increase since 1900. Nowadays there are twice as many elderly people (in the US they are called "seniors") as there are teenagers. The changing age structure of the population will have a considerable effect on hospitality industry, as the people of different age groups create different segments of hospitality market.




1. Find in the text the following topical words and phrases, make sure that you are able to explain in English what they mean, and add them to your working vocabulary:

inflation, rate of unemployment, an economy chain, real income, the baby-boom generation, a dual-career couple, affluent groups, physical fitness products, a squeezed customer, spending splurges, economic variables, interest rate, living standards, re­cession, spending patterns, seniors.


2. Write out from the text the parts of sentences which contain the following words and phrases and translate them into Russian:

a cautious buyer, prime years, time-saving products, continuous education, to confirm, college tuition, basics, to count one's pennies, to ride out of the economic storm, a birthrate, life expectancy.


3. Answer the following questions using the topical words and phrases:

1. What usually reduces the amount of money that could be spent on traveling?

2. How did the hospitality industry respond to changed spending patterns?

3. Why could people improve their living standards in the 1990s?

4. What do more affluent groups of people expect from hospitality industry?

5. What did Ernst Engel find out while studying the family incomes?

6. What is meant by "skewed distribution of income"?

7. How do the living standards of members of different classes differ?

8. Why was the end of the 20th century called "the decade of the squeezed customer"?

9. What can restaurants do in order to ride out of the economic storm?

10. What demographic trend has been especially noticeable recently?

11. Why does the population's average age raise in spite of the fact that birthrate drops?

12. How does the changing age structure of population affect hospitality industry?




As life is becoming more and more complex, in terms of products and technologies, public concern about its safety increases. The 1960s witnessed the emergence of a great number of public-interest groups trying to protect natural resources, water, earth, and air damaged by industrial and business activities. Societal Marketing Concept insists that of all forces of marketing environment the political factors (state legislation, government agencies, and pressure groups that limit industrial and business activities) must have priority over all other. Legislation affecting business has been enacted for three reasons. First, it protects companies from each other. While most businesses praise competition in general, they try to neutralize it when it affects them. In the United States it is the job of the Federal Trade Commission and the Antitrust Division of the Justice Department to define and prevent unfair competition. Cases often emerge in which one company lodges a complaint that another is guilty of deceptive advertising and pricing which may injure its business. Second, government legislation and regulation also aim at protecting consumers from unfair business practices. If unregulated, firms might make unsafe or low-quality products, be untruthful in their advertising, or deceive through packaging and pricing. Various government units define unfair practices and offer remedies. Businesses, of course, can minimize government intervention through active self-regulation. Such associations as the American Hotel and Lodging Association and the National Restaurant Association

define and encourage good trade practices. These associations have developed

guidelines for truth in menu presentation, alcoholic drink service, and sanitation.

Third, government regulation also aims to protect society's interests against unrestrained business behavior. Profitable business activity does not always improve the quality of life. Thus regulations are passed to discourage smoking, littering, polluting, and the like, all in the name of protecting society's interests. Regulation aims to make firms responsible for the social as well as private costs of their production and distribution activities.




1. Find in the text the following topical words and phrases, make sure hat you are able to explain in English what they mean, and add hem to your working vocabulary:

public-interest groups, pressure groups, unfair competition, deceptive advertising, to deceive through packages, unrestrained business behavior.


2. Write out of the text the parts of sentences which contain the following words and phrases and translate them into Russian:

the Antitrust Division, to lodge a complaint, to offer a remedy, government intervention, to define trade practices, guidelines, sanitation, polluting.


3. Answer the following questions using the topical words and expressions:

1. What are the pressure groups trying to protect?

2. What does Societal Marketing Concept insist on?

3. What is the first reason for Government business regulating legislation?

4. How can unfair competition practices be prevented?

5. What sort of unfair business practices can happen in hospitality industries?

6. How does government legislation protect consumers from unfair business companies?

7. How can business companies minimize government intervention?

8. How does government legislation protect society's interests from both consumers and business companies?

9. Why is it necessary for managers to know the government legislation affecting business?




1. Using the given Recall Pattern, explain the meanings and interrelations of the key notions which are arranged in it:

Natural Technological Environment

2. Discuss the following concepts and notions:

marketing environment, micro- and macro environments, the environmental analysis, spending patterns, consumerism, the demographic situation, public-interest groups, a leisure package, a spending splurge, recession, time-saving products, unrestrained business behavior, a birthrate, deceptive advertising, business meals, unfair competition.


3. Give your definitions of the following topical words and phrases:

suppliers, intermediaries, a competitor, public, seniors, household income, a dual-income family, a shipment, an airline fare, a media firm, real income, interest rate, continuous education, college tuition, adult-only pastime, day-care services, takeout food, a room opener, seamless connectivity, a smart card, a conventional procedure.


4. Choose a topic for Project Work from those given below:

1. What environmental trends will affect the life of Moscow restaurants at the beginning of the new century? If you were the manager of a small restaurant, what plans would you make to deal with these trends? Arrange a talk show on this issue.

2. How have environmental trends affected the design of hotels throughout the 20th century?

3. If we have little control over the macro environment, why should we bother about it? Arrange a talk show on this issue.




Date: 2016-01-03; view: 3544

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