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Pest analysis

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  • Pages: 3
  • Word count: 641
  • Category: Economics

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Pest analysis is used to describe a framework of macro-environmental factors which are Political, Economic, Sociocultural and Technological. This is a part of external analysis when doing the market research. It gives a company an overview of the different factors in the overall environment in order to understand the market growth or decline, also understanding the situation, potential and operational direction of the company.

In 2001, McDonald’s Switzerland CEO planned to operate a hotel which is closed to the Zurich as Switzerland is already a potential market. However, there are lots of competitors and it was a big challenge for this project.

Expansion of Zurich Airport (Political factor)

The Golden Arch Hotel is located close to the Zurich Airport, thus the target market is business traveler. In 2001, Zurich was on the way of upswing. The occupancy of Hotels around Zurich was high and gained benefit from this market growth. Furthermore, Swissair acquired many small European airlines. Both of the business, leisure traveler and airline crews was increasing rapidly thereby it increased the demand of accommodation. Simultaneously, Zurich became a well-developed city by high investment of facilities and infrastructure from the Swiss government.

Government tax (Political factor)

According to the corporate tax rate in Switzerland was around 20% which is a high tax rate. The profit of golden arch hotel can be affected.

Employment laws (Political factor)

Due to the employment law in Switzerland, there are some regulation between the employer and employee(s). Employer has to ensure the employee’s health and safety and their working hour.

Currency exchange rates (Economic factor)

The frequent individual travelers are the main target market of Golden arch Hotel and they are mainly from Europe, the United States. As the exchange rate between USD and CHF was low in 2001, the individual travelers increased because of this.

Extra Capacity for Airplanes (Economic factor)

The amount of travelers were leaded to increase because of the major expansion of the airport was increase its capacity by 50% in the first decade of the new millennium. As the demand was increasing, the supply of accommodation also needed to be increased in that situation.

Competitors (Economic factor)

In the Zurich region, there were 17 new hotels and two extensive enhancements were planned, currently under construction or already finished. They would be the new and potential competitors that Golden Arch was facing. As a four star hotel, Golden Arch has to consider the price of rooms as well as comparing to others.

Higher expectation on four-star hotel (social-culture Factor)

The Concept and brand of the McDonald’s which is cheap fast-food shop and it does not match the image of being part in hospitality industry while four-star hotel means luxury. It might not really satisfy the customer’s expectation.

Lack of domestic labor (Social-culture Factor)

In the country with the population of 7 million, it is quite hard to fulfill all the departments that needed in the hotel. Thus, the hotel had to look for foreign labors which cost them a little more. But the locals are somehow more flexible than international labors. On the other hands, a few conservative hoteliers complained about the high ratio of foreigners. No matter Zurich is a trendy place, it can’t create such ideal destination as another city because of its size.

Technology innovation (Technological factor)

Owing to the different peak-period demands and also in order to provide optimal comfort for guests, they decided to invest money on technology innovation such as self-check-in system, which guests would have opportunity for self-check-in as well as check in and out of the hotel at the airport terminal. Moreover, there would be nine meeting rooms with the possibility of being transformed, larger 30-person conference room by using a foldable-wall technology.

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