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The topic of strategic management is one of those hot button concerns that had attracted a significant amount of attention over the past four decades. Strategic is a means adopted by the management in order to achieve the long term objectives.
Strategic management Process, is a process through which organizations analyze and learn from their internal and external environments establish strategic direction, create strategies that are intended to move the organization in that direction, and implement those strategies, all in an effort to satisfy key stakeholders.
In hospitality context the traditional process for developing strategies consists of analyzing the internal environments such as Owners/Board Directors, Managers and employees and external environments of the company such as competitors, activist groups, suppliers, unions, financial intermediaries, government agencies, local communities, customers and media to arrive at organizational strengths, weaknesses, opportunities and threats (SWOT). The result from this situation analysis are the basis for developing missions, goals and strategies and the typical question that the organization have to find out in order to have a clear business definition are who is being satisfied? What is being satisfied? and how are customer needs satisfied? In general, a company should select strategies that take advantage of organizational strengths and environmental opportunities or neutralize or overcome organizational weaknesses and environmental threats. After strategies are formulated, plans for implementing them are established and carried out. The environment is the primary determinant of any strategic success. A good management is associated with determining which strategy will best fit environmental, technical, and human forces at a particular point in time, and then working to carry it out. Some studies show that the ability to align the skills and other resources of the organization with the needs and demands of the environment can be a source of competitive advantage. (Cathy Enz, Strategic Hospitality Management, 2010).
As it has been mentionated before the strategic management process has three core areas: Strategic Analysis, Strategic development and strategic implementation. Strategic Analysis referes to organization, its mission, vision, value, culture and objectives have to be analyzed and examined. Strategic management provides value for the people involved in the organization-its stakeholders. Strategic Development: the strategy options have to be developed and then selected. To be successful, the strategy is likely to be built on the particular skills of the organization and the special relationship that it has or can develop with those outside such as suppliers, customers, distributors and government. In short for many organizations, this will mean developing advantages over competitors that are sustainable over time. There are usually many options available and one or more will have to be selected. There are three levels of strategies to be formulated: business unit level (Departmental strategies); corporate level (Organizational Strategies) and International level (Global Strategies). Strategic Implementation: the select options now have to be implemented. There may be major difficulties in terms of motivation, power relationship, government negotiations, company acquisitions and many other matters. It is very important clarify that a strategy that cannot be implemented is not worth the paper it is written on. (Richard Lynch, Strategic Management, 2009).
To Summaryze organizations need to develop strategies in order to optimize the use of these resources otherwise will not get the success. Particularly, it is essential to investigate the sustainable competitive advantage that will allow the organization to survive and prosper against competition. In other words it is essential for a company to create and develop strategies in order to achieve the long -term goals and objectives. The importance of the strategic management is highly significant, just allows and organization to be more proactive than reactive in shaping its own future; it allows an organization to initiate and influence activities and thus to exert control over its own destiny. Small, business owners, chief executive officers, presidents and managers of many for-profit and non-profit organizations have recognized and realized the benefits of strategic management. Historically, the principle benefit of strategic management has been to help organizations formulate better strategies through the use of the more systematic, logical and rational approach to strategic choice. Such as financial benefits (improvement in sales, improvement in profitability and improvement in productivity) and non financial benefits (improved understanding of competitors strategies, enhanced awareness of threats, reduced resistance to change and enhanced problem-prevention capabilities). But in today's world we can easily reflex the following improvement benefits in organization's strategic process management like for example: taking an organization-wide, proactive approach to a changing global world; building an executive team that serves as a model of cross-functional or horizontal teamwork; having an intense executive development and strategic orientation process; defining focused, quantifiable outcomes measures of success; making intelligent budgeting decisions; clarifying your competitive advantage; reducing conflict
empowering the organization; providing clear guidelines for day-to-day decision making; creating a critical mass for change, empowering middle managers, focusing everyone in the organization in the same overall framework, speeding up implementation of the core strategies and providing tangible tools for dealing with the stress of change.
Marriott International overview
Currently Marriott International is a leading lodging company with more than 3,500 lodging properties in 68 countries and territories such as Americas, Middle East, Africa, Asia and Europe. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, The Autograph Collection, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Bulgari brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club, The Ritz-Carlton Destination Club, and Grand Residences by Marriott brands; licenses and manages whole-ownership residential brands, including The Ritz-Carlton Residences, JW Marriott Residences and Marriott Residences; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. The company is headquartered in Bethesda, Maryland, USA, and had approximately 146,000 employees at year 2010. Marriott International reported sales from continuing operations of nearly $11 billion dollars. Marriott International main product is all about deluxery, confort and high style accomodation. This company has been success for its guest service satisfaction positionated it as one of the best hospitality company all over the world. Marriott International target market is mainly defined by age, gender, geography, socio-economic grouping, technographic, or any other combination of demographics but the most predominat source is the middle upper class.
The industry is higly fragrmented and no player commands more than 20 % of the market share. Competition in the industry is generally based on the quality of the rooms, restaurants, meeting facilities and service, attractiveness of locations, availability of global distribution system, price and other factors. Althought Marriott's global presence across 68 countries enables it to offer services to a large number of customers, it lags behind its competitors who are present in 80-100 countries such as Starwoods Hotels and Resorts; Choice Hotels International; InterContinental Hotel; Hilton Hotels; Orient-Express Hotel and Hyatt Hotels Corporations.
Marriott International mission statement: " To win in service by proactively offering customers theÂ most valuable assistance,Â information and support in a uniquely warm and caring manner".
Marriott International Vision: "To be the world's first choice for full-Service Hospitality.
The company main product is deluxery accomodation and confort".
Political Factors: Marriott Hotels cannot discriminate when employing people based on sex, ethnicity, religion, orientation. The government supports tourism because it is a lucrative industry for the country. Marriott has to pay attention to physical and psychological working environment conditions since the American government thoroughly regulates it. Economic Factors: In the short-term, Americans are affected by the economical crisis, so they should focus on giving an image of affordability. In the long term, they have a very solid reputation so when the economy bounces back, they will be able to return to their original status which is a chain of luxury hotels. Social Factors: Green issues are very important in America so the Marriott would have to focus on recycling, not being wasteful and in general be as eco-friendly as possible. Elderly population in America is wealthy that means that spend on leisure, travelling and hotels. Technological Factors: Marriott is defined by luxury therefore it should be up-to date with the latest technologies such as free, fast and accessible Wi-Fi, functional and easy to use website and paying bill on cell phone. Ecological Factors: Each year, Marriot Internationa and its owners spend about $ 10 billon annually buying products and services for its more than 3,300 hotels around the world. Recognizing this purchaising power, Marriot has teamed up with its vendors to introduce these greener solution at no extra cost such as Greener key cards, Eco-pillows, Earth-friendly towels, Recycled pens and low VOC paint and Biodegradable laundry bags. Legislative Factors: the hostelries in America are about to expect lobbying and legislative action that will affect travel company traxation and card check which are important issues to th lodging industry accroding to the American Hotel and Lodging Association. The associatio believes that this move will bear an impact on the industry.
Strong market position
Strong revenue grow
Technology enabled services
Strong business model
Overdependence on the US market
Weak operating margin
Expansion into China and Southeast Asia
Recovery of business travel market
Rising interest rates
One of the main concerns of the group regarding sales strategies has been its overdependence on the US market. While the company has more than doubled its market share of rooms in the United States over the last 15 years, its market share outside the United States is less than 1%, leaving considerable opportunity for expansion. Identifying new international opportunities is a priority.
In fiscal 2008, Marriott operated 2,349 out of 2,741 hotels in the US. This represents more than 85% of the total hotels. This over dependence has affected Marriott significantly, especially at time of slow economy. Furthermore, the company has only a small presence in the vast, and yet still growing, Asian market. This lack of geographic spread in its revenues is a major weakness for the company. Although the company's operating margin has increased marginally in fiscal 2009 from 4.7% to 4.8% over fiscal 2008, its operating margin has lagged behind industry average. Over the five year period from 2004-2009, the company's operating margin, which was 4.6%, trailed the industry average of 10.2%. Weak operating margins indicate increasing costs and can adversely affect the long term financial position of the company.
The hospitality industry is characterized by a large number of players, with many of them having a worldwide presence similar to Marriott. There are many large hotel chains similar to the company, such as InterContinental, Hilton Group, Accor and Hyatt Corporation, who are also expanding into potential growth regions such as Asia. Its competitor, InterContinental has the largest presence in China with 55 hotels, with plans to double the number by 2011. Accor has 24 hotels in China, with 33 under planning stage. Marriott has limited presence in India, with plans to introduce other brands in the region. Whereas InterContinental has 15 hotels in India and Hilton has re-entered the Indian market. Furthermore, the wide presence of independent hotels especially in the European region holds a major potential for consolidation. This will increase competition and might result in a loss of revenues and market share for the company. Some of the company's union contracts in New York, Chicago, Boston, and many other major cities are set to expire in 2011. The hotel union is threatening a strike in all of these cities simultaneously. The union's big demand for the ability to
unionize more hotels without management interference can prove to be a significant threat for the company. The US has seen 17 successive interest rate hikes over the past few years. Inflation fears in US may see another raise in the short term. This could affect the company's growth plans by increasing the financing costs. In addition, rising interest rates could lead to reduced spending by corporate clients, which would affect the company's revenues.
A strong market position enables the company well for future growth. However, increasing competition in the global hospitality industry could affect the company's market share.
The company operates hotels in mid-scale, upscale, upper upscale and luxury segments caters to both business and leisure travelers with its vast portfolio of accommodation services. The company's customer-loyalty program is also the largest in the industry and ensures repeat traffic in its hotels. The company's strong hotel pipeline of 75,000 rooms ensures that it can consolidate its market position and continue to generate additional revenues. The company's increased focus on technology as a business tool has resulted in significant investments in bolstering its web based services portfolio. These efforts have given Marriott the best online reservation system in the industry which attracts almost six million visitors every month. In addition to this, the company has also tied up with expedia.com and hotels.com to drive traffic to its hotels via online channels. Furthermore, the company is able to provide the industry's lowest cost per reservation and lands cross-selling opportunities. Technology is "plug and play", thanks to Marriott 's exclusive hight-
tech connectivity panel that links laptops, iPods and other personal entertainment equipment with state of the art 32 inch high definition TV and sound system. With high-speed internet access in all its hotels, and hotels offering Wi-Fi, Marriott leads the industry in keeping its customers connected. Marriott is developing and testing new systems, including check-in via lobby kiosks and wireless handheld devices, as well as pre-arrival e-mail confirmations that provide customers with local and hotel-specific information prior to their stay. A focus on technology will enable the company to generate incremental sales as well as improve the quality of experience for its customers.
Marriott works on a business model that separates ownership of hotel assets from the management and franchising of its brand. The result was a split of the company into Host Marriott and Marriott International. Today, Marriott focuses on investing in its brand, leaving real estate investment to third parties (e.g., Host Marriott, Sunstone, and Diamondrock). This business strategy is a less capital-intensive model that generates higher average returns on assets than real estate-based models. Marriott's manager-franchisor model also ensures a steady fee stream. Under the fee-based model that Marriott pursues, ensuring a steady stream of new additions to the number of branded rooms under management or franchise agreement is critical to the company's earnings growth.
As discussed earlier Marriott International may improve to a great extent. With travelers recognizing that Marriott's brands represent the highest value and quality in the industry its hotels could take advance of this situation an enjoyed at least a 15 % revenue per available room premium to direct competitors. Over the next years, the company will necessary have to expect owners and franchisees to invest a significant amount of money in property improvements, that reflect its "new look and feel". One of the most transformative changes is the new bedding, which is now in almost all Marriott branded hotels in addition to high thread count sheets and multiple pillows, the replacement of the traditional bedspreads with freshly laundered linens is making Marriott's bedding the cleanest and freshest of any mayor hotel chain. Eight out of 10 business travelers said they would be willing to pay more for the new, innovative room.
The company has announced plans to add over 600 hotel properties by 2015, the bulk of the additions will be in the emerging markets of India, where it plans to have 100 hotel properties and other countries include China and Southeast Asia. This will add a great dimension to the success of Marriott International. The growth of the Marriott's operations outside of the United States also makes them susceptible to the risks of doing business internationally due to geopolitical factors and region-specific economic resecions. Certain areas such as China and India are booming, which could substantially ioncrease profits dut to region specific economic booms. However, concentrated recession could lower revenues, increase costs, reduce profits or otherwise halt business.
The recent economic recession has caused a tremendous impact on all the industry sectors including the hospitality industry. The company must constantly observe the change in the customer trends in all the major regions it operates. An innovate plan regarding management system in Marriott International should be transfer managers from one region to other region in order to increase the flexibility of the managers. The next possible step is to avoid investments in the regions that are involved in political and war conflicts such as Afghanistan at this moment.
Meanwhile the competitors are implemented IT strategies alliances that are not productive, Marriott International continue to focus on service, leveraging its understanding of guest and technology, through such industry leading initiatives as "Spirit To Server its Guests", for example today guest can use the web to order room service prior to arrival. Local cultures must not be compromised irrespective of the success the organization achieves in its international ventures. By forming strategic alliances with international tour operators Marriott can find new inflow of guests. The Marriott system continues to grow with a healthy pipeline of hotels that means that guest will have more choices across more brands in more locations than ever. In few words Marriott is ready to deliver what its customers want, when they want it, the way they want it. Its superb brands, products and services are reaching a new audience and dramatically changing perception of travel.