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Marketing analisys is a fundamental tool in constructing successful business. Understanding the market and where the firm is positioned helps to identify various factors that can influence company and its clients in order to figure out the feasibility of the product, distinguish project or possible evolution (Morgan, N., Pritchard, A. 2004). Therefore companies tend to adapt their approaches on business to the marketing environment.
This report is the analysis of promotional strategy of the property described in the case study: «Golden Arch Hotel: McDonalds Adventure in the Hotel Industry» from different perspectives. It discusses the examples of additional 3Ps of the Marketing Mix model, determines PEST and SWOT analysis, indicates the value that is created by this particular organization and evaluates the positioning concept of the firm. All discussed ideas are supported with examples from the case study, and some other theoretical information. Such are critically analysed and presented according to different methods of analyses.
2. Findings, Results and Analysis
2.1. Question 1
Explain the additional 3 Ps of the 7 Ps model and illustrate with examples from the case study. Analyze and explain how each one of those characteristics is important in the success of the Golden Arch Hotels.
(written by Jae Woo Martin Jeong)
Generally speaking, 7Ps marketing mix tools have become more and more important since the traditional marketing tools 4Ps were not enough to give a frame work for thinking of marketing and planning marketing strategy especially for service industries (Wilson and Gilligan 2005, p. 6). The additional 3Ps consisting of People, Process and Physical Evidence will be distinctively explained bellow with the examples from the case study and a simple graph of them will be shown on Appendix 1.
The first dimension of the expanded marketing mix is “People”. It indicates individuals who are directly and indirectly involved in providing customer satisfaction (Blythe 2009, p. 16).
Golden Arch Hotel was running its hotels under “the motivational job rotation principle” according to the McDonald’s restaurant philosophy, which aims to implement the consistent service standards for all the tasks. This was not only to bring customers’ satisfaction but also to produce synergy effect during the peak seasons by assigning employees to different positions and tasks (Michel 2005, p. 3~4).
The second dimension is the “Process”, which is about how the product or service is delivered to clients to please them (Wilson and Gilligan 2005, p. 534).
Golden Arch Hotel was giving high priority on cleanliness of the rooms by adopting McDonald’s service standards (Michel 2005, p. 3), which is one of the most crucial factors for the guests’ satisfaction. Another distinguished process of Golden Arch Hotel was the hotel’s 24 hours operated McDonald’s restaurant (Michel 2005, pp. 3). 24 hours food and beverage service was very unusual to find in Switzerland, however, it enabled both in-house and drive-through guests to get the meal at any time of the day.
The last dimension is Physical Evidence, which means the tangible proof of a service, such as: environmental surroundings of the products and services, ambient elements and everything that can be communicated how service has been delivered (Jeong, 2004).
In the case of Golden Arch Hotel, it seemed to focus more on the guest rooms than any other hotel with facilities for guests’ comfort. Its efforts were proved by implementing in-room high-tech facilities such as electronic key, internet access and other computer facilities and investing large amount of money to accommodate oversized beds.
Furthermore, it was also offering meeting rooms that could be flexibly transformed according to the numbers and the needs of the customers.
In the case study about the Golden Arch Hotel, the important and undeniable role of additional 3Ps in the marketing mix tools are stated fairly clear through Golden Arch Hotel’s competitive advantages towards its competitors. That is because of the precise and reasonable use of marketing mix tools of the hotel management.
2.2. Question 3
The SWOT analysis is useful in creating a strategy that helps a business distinguish itself from its competitors. Why did the McDonalds decide to enter the hotel industry? What were the company’s strengths that they hoped to transfer into this new venture? Were they able to do this? Why or why not?
(Written by Diogo Pessoa e Costa)
McDonald’s Corporation decided to enter the hotel industry in the early 2000. This was part of a diversification strategy, which is proven way of generating new growth and to try to avoid complete market saturation. Another important reason was that the chairman of McDonald’s Switzerland, Urs Hammer, came from an hotelier background and his knowledge and experience in the business was valued in taking over such a project. He firmly believed that the sharing of knowledge between the different restaurants would permit the emergence of new services or products.
A SWOT Analysis is a strategic planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or a business venture. It involves identifying the internal and external factors that are favorable and unfavorable to achieve specific goals and objectives.
McDonald’s hoped to transfer several of their strengths into this new business.
These strengths included the fact that they provided “fast and friendly” service. The hotel crew would therefore consist of a permanent employee pool that could implement the consistent service standards for every task in order to better serve the guests. High focus was given to the interior design and layout of the hotel as well as room cleanliness and comfort.
The firm also used their decent relationship with their suppliers and local communities as a marketing strong point to restore their image after several discoveries of unsanitary practices in McDonald’s restaurants.
Several weaknesses were found into this new adventure.
First of all, one of McDonald’s biggest problems had to do with their positioning statement. A four-star hotel in Switzerland means luxury therefore it did not match McDonald’s brand image at all. Also, most analysts were not very convinced that this expansion fit well with the corporation’s overall strategy. This was just a test and there was no real possibility of penetrating other important markets.
By examining customer feedback, you can clearly identify the hotel’s main weaknesses. The only food available was McDonald’s and since the hotel was relatively isolated, you had almost no possibility of eating somewhere else. Also, the staff did not prove to be so friendly and some guests felt the hotel was odd and did not like the atmosphere created by the design. Finally, the brand name “Golden Arch” was not chosen carefully since the two words do not translate well into the German language.
By identifying the different opportunities, you realize that the hotel has a great potential for success but unfortunately, it is not being used to the best of its capacity.
Since the Golden Arch was an airport hotel, it could negotiate contracts with airlines or surrounding large companies in order to retain market share for layovers.
Due to its proximity with the Zürich Messe and the Autobahn, the hotel could put in place an efficient marketing strategy that would also attract Frequent Individual travelers coming from all around the world.
The threats involving such a project come from the hard competition surrounding hotels in Zürich. McDonald’s had to compete with well-established hotel chains such as Mövenpick, Hilton, and the Accor Group. Several of this hotels had a fine dining, had larger meeting rooms, and were situated either closer to the airport or to major business centers.
Within three years, the 7500 hotels rooms in Zürich were to be supplemented by around 3000 more rooms. The danger was that the market was reaching over-capacity and this would have negative consequences for the Golden Arch and the surrounding hotels, both in terms of occupancy and ADR.
Another threat was the fact that the Swiss Human resources were drying out. Nobody wanted the do the simple and dirty jobs (except for foreigners) and it was almost impossible to find chefs or front office personnel. This conditions favored labor piracy.
2.3. Question 4
According to theory, what is value and how is it created by a hospitality organization? How does the Golden Arch Company attempt to create value for its customers? Did they succeed? Illustrate with examples from the case study.
(Written by Malgorzata Szal) (references?)
Hospitality companies’ strategies nowadays are continuously developing through new trends and fashions that are instituted by people globally. They try to create new and innovative marketing strategy to give their brand a significant meaning. In this industry, client’s satisfaction is the most important objective, therefore companies invest in their benefits and values in order to keep their promises by delivering successfully. Due to this process, people are able to differentiate one brand from one another and as well decide which company offers the most for them.
Every potential guest possesses different values, which are determined by factors such as culture, traditions, birthplace and family status. Hotels around the world try to attract and satisfy the biggest part of their market target by researching, understanding and analyzing their needs and consequently provide them with what they desire. Because of that, value is mostly created through packages, which means products are mixed and sold together with service provided. Usually they include accommodation, food and entertainment. Such combination increases significantly the value of the service products.
“Once we understand the fundamental laws of the physical and social world, we can analyze, plan and control them” (Smart, 1992)
Golden Arch Company before reaching standards of four stars hotels had analyzed all customers’ needs. As they decided to attract businessmen their design was focused on this type of guests. They provide many benefits to create value for their client which are presented in physical evidence part of Appendix 1.
Bith hotels of Golden Arch company can be accessed easily. People traveling by car can use the underground parking or above ground parking and eat in their McDonald’s restaurant, open 24 hours which is unusual in Switzerland. The hotel’s designers tried as well to improve guests’ satisfaction by creating a unique layout of the building and to give an impression of larger rooms by placing the bathroom behind a glass door, which unfortunately raised complaints and the doors had to be replaced.
All the managers and employees were determined to succeed and they delivered. Their occupancy rate is not high but the hotel started to make profit from the first month of its operation. Unfortunately, the rate of returning guests is very low. People are not satisfied of the whole concept of a four star hotel run by McDonald Company. Daniel Deutscher, the owner of DEKA Treuhand was very surprised when he heard of this investment. It is hard to believe and imagine the McDonald’s hotel to achieve four stars. There are standards that are hard to cover. Some guests’ complaints were about the service quality in the front desk saying it is very poor (Michel 2005, p. 7) and about the bad decoration of the lobby, bar or even the bedroom influencing the atmosphere (Michel 2005, p. 6)
Golden Arch Company tried to combine its’ well known fast food brand image of McDonald’s with four-star luxury hotel brand. According to the figures shown in exhibits in the case study, this idea has not been a success as forecasted.
2.4. Question 5
Explain the concept of Positioning and describe how The Golden Arch Hotel was positioned in this very competitive market. What market segments was the hotel hoping to reach? Did the company succeed? Why or why not?
(Written by Kateryna Krupka)
Positioning is defined as «arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the mind of consumers» (Kotler, P., Bowen, J.T. and Makens, J.C. 2010). According to the same authors, such has to be designed taking in consideration customer value differences, and therefore either increasing the benefits of the product, either decreasing some of its costs.
As it is described in the case study, it was decided to position the Golden Arch Hotel as a 4-star property with luxury service and some business facilities. The hotel most probably attempted to reach the customers, coming from the airport for a night stay, as well as wealthy business people with a need of advanced comfort, coming for the meetings or conferences. However this appeared to be done unsuccessfully due to some factors, analysis of these is provided onwards.
One of the most significant issues in regards to a hotel property is dining facilities. In discussed case McDonald’s restaurant was the only place for the guests to eat, which might be enough for the people who are staying overnight, but seem to be not acceptable for the customers who stay longer. Furthermore, if the aimed customer was expected to stay some days entertainment facilities should have been provided, but this was not the case.
Another important point is that Golden Arch had some of the additional facilities such as conference rooms and beds that modify their position, but did not fulfill some of the basic needs of its customers. One of these is need of food and drinks, as it was discussed before. The other one is safety need that was not fulfilled due to hotels’ location close to the large avenue and small amount of people around.
However, according to one of the quests, the prices for the rooms were of high range. This also signifies that wealthy people were aimed to be attracted. Meanwhile guests were complaining about not getting immidiate service, having to ring the bell for the receptionist to come, as well as to ask for the possibility of having rooms sold at a better rate. Furthermore there was a situation decribed when the guests were clearly at the position of cheaper «post 9pm walk-in» rate, and were not told that such posibility exists. Moreover these costomers were told to buy three rooms for five people at the full price. Clearly such suggestion did not satisfy their expectations. This attitude towards clients damages reputation of the property and affects its positioning in a negative way. Thus, it can be generalized, that all the details in the product have to coinside with the image drawn by positioning.
Additionaly, inside the rooms there were many signes indicating that the hotel belongs to McDonalds company, however from outside this was not the case. According to the appendixes of the case ctudy, the logo of the hotel is different, and the name does not have «McDonalds» in it, moreover, it is silently located by the side of the road. These should probably be done vice-versa, as the signs and logo might attract the guest to the property from outside and seem not to be needed inside of the rooms in such quantity.
It it suggested that «If the company promises greater value, it must then deliver greater value» (Kotler, P., Bowen, J.T. and Makens, J.C. 2010). Failure of compliance of this is probably the reason of unsuccessful positioning of the Golden Arch brand. The image, ambiance and service are seem to be transfered from the McDonalds restaurant insted of being developed specifically for the hotel. Nevertheless McDonald’s brand statement is «Everyday affordability» (MacDonald 2008) and the Golden Arch meant to be luxury, however these two types of brand do not normally attract the same market. Therefore some issues were not addressed properly, such as fulfilling basic needs of the guests, selling accommodation at a price that corresponds the level of its facilities and providing appropriate service.
In a competitive marketing environment, located close to Zurich airport and A1 highway, Golden Arch hotels seemed to be successfully at implementing McDonald’s service standard into their hotels, high-tech facilities and unique design features.
These were enforcing the image of the property and helping to sell its services. However poor customer satisfaction as well as improper positioning led to destruction of the brand image in the minds of clients.
After the analyses were done, it was recognised that there are some changes that should have been done by the company in order to improve such situation. Firstly the company should have re-evaluated its’ service standards before implementing to the luxury segment. Secondly, they should have implemented impactive service audit program. Furthermore they could have matched the design with the class of hotel and type of customers. Finally, the hotel should have either repositioned itself as a lower-class property, either added some facilities that match 4-star range, such as, for example, one more restaurant.
(Michel, S. 2005)
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