Strategic management literature has moved forward in the same way as that of marketing. There is now a greater understanding of how significant developments and changes in direction happen within organizations. What follows is a consideration of three key aspects strategic manament which we believe to be most relevant to an entrepreneurial playing approach within the hospitality sectors. These aspects aspects are: the entrepreneur playing a catalyst role in strategy formulation and strategic management; organizational issues, particularly relating to the involvement and motivation of employees; and the changing frame of reference relative to the future and its implications for the strategies employed.
The traditional view of strategic management was that a strategy for, say, a five-year period, was determined within a corporate planning department, agreed by the Board of Directors, and then implementated. Writers such as Mintzberg (1994a, b) have creolized this view as being dysfunctional to true strategic thinking, owing to its emphasis on quantitatively expressed fixed views of the future. Mitzberg beliefs that planners should not create strategies but that they can supply data to help line managers think strategically and then assist in programming the vision.
Stacey (1993) adds to the debate in proposing that we revise our frame of reference on how organizations actually develop strategically. Stacey believes that the process of strategic development is shaped by the reality of the long-term future being substantially unknowable. He believes that since the future is unknowable, strategy is best formulated when spontaneously emerging from the inevitable chaos of challenge and contradiction. This corresponds to Schumpeter's (1994) theories of entrepreneurship emerging from situations in disequilibrium, and evokes echoes of the ideas.
Following this introduction, in which the present state of the hospitality industry has been briefly explored, this report seeks to identify and understand hospitality trends and examine the impacts on the Guoman hotel before analysing a range of strategic issue facing the hotel. The report will gather and analyse information relating to one of the strategic issues or trends before presenting the findings and advise the appropriate decision making. It will also make appropriate assumptions to objectives for the hotel and formulate appropriate strategies to achieve the objectives and present an audience effectively.
A brief background of The Tower Guoman Hotel
The Tower Guoman Hotel is located on the River Thames near Tower Bridge; The Tower hotel in London enjoys stunning views of Tower Bridge, The Tower of London and St Katharine's Dock.Â The Tower is only minutes from the City, and is also near Canary Wharf and near the ExCel Centre, for those attending the exhibitions and shows. Situated on the banks of the Thames River, 4 star The Tower hotel provides a feeling of serenity and peace, away from the bustle of London and the City but still close enough for easy access to business meetings or leisure activities.
The hotel offers 801 luxurious bedrooms, suites and apartments for both the business and leisure traveler, many of which have been recently refurbished.Â The Hotel has also recently opened a new Executive Lounge on the 5th Floor with views out to Canary Wharf.Â Guests can choose from a wide selection of dishes at the Brasserie and the Carvery, as well as in our Xi Lounge which enjoys stunning views out over Tower Bridge. For meetings, special events and conferences near Tower Bridge and near Tower Hill Station, the Hotel offers nineteen fully equipped meeting rooms.Â And for those planning an elegant London wedding, The Tower'sÂ RiverÂ ThamesÂ setting and beautiful views provide an elegant setting for the bride and groom's special day.
The Tower is ideally located for guests wanting to explore nearby attractions such as Tower Bridge, The Tower of London, HMS Belfast or enjoy a river cruise on the Thames.Â Across Tower Bridge, Butlers Wharf is only a short walk from the hotel.Â For transportation, this London hotel is near Tower Hill Underground Station, Tower Pier for Thames Clipper boat services, and is also located near both London Bridge Railway Station and Liverpool Street Railway Station. Source: www.guoman.com
Identify and understand hospitality trends and examine the impacts on the chosen hospitality organization before analyzing a range of strategic issues facing the organization.
Amadeus (2008) has launched a new report that identifies globalization, a new breed of customer and new technologies as three key drivers for the hotel industry. The report was commissioned by Amadeus to identify the trends which will affect the hospitality industry in the future and the technology implication for hotels and hotel chains. www.Hotelmarketing.com
Significant trends driving the hotel industry
Emerging markets like Russia, India, China and the Gulf offer significant opportunities, but cannot be treated as a homogenous whole. For example, customers from china will search for plan and book a hotel in a different way from customers from Russia. The notion of brand integrity is crucial: hotels will need to supply consistent service in a global environment, while adapting to support customers with new cultural background and sensitivities in local markets. www.Hotelmarketing.com
Information key to servicing demanding customer
The mother traveler wants to have experiences built around their personal needs. The hotel industry recognizes it must go further in its adoption of social networking. User reviews expose the truth of a hotel's brand since customers often use their peer group as the main source of information. Hotels are now challenged with maintain high standards and meeting the expectations of customers who have done a significant amount of research before they travel. The more demanding customer of the future will want to engage with a hotel across all touch points where appropriate. Hotel will need to capture and store more data, yet access to it must be faster and more targeted in order to personalize the guest experience. www.Hotelmarketing.com
Technological integration to improve operational efficiency
As destruction channels and content management becomes more complex, ensuring tight integration between these cores systems will become an even higher priority for hotels. Applications, databases and networks must integrate more easily with each other and third-party systems to facilitate collaboration with partners. The growing importance of the mobiles channel is clear. Although the use of smaller divides for booking is not yet common place, it is anticipated the technology platforms used by hospitality companies must support and enable all user interactions to integrate in the future, from phone to fax to PC to PDA to mobile. Antoine Medawar: Managing director, Amadeus Hospitality Business Group, said that it is clear message from this report that the hospitality industry is undergoing a period of unprecedented change and will continue to transform. Customers are changing; technology is changing the markets are changing. Yet this is also a period of unparalleled opportunity and we remain committed to remaining at the forefront of understanding what travelers need and demand, both now and the future. By understanding these key business drivers it is hope to deliver the technology that will make these hopes come true and will support the hoteliers to stay competitive in a rapidly changing world.
Thus, the Guoman Hotel needs to proactively manage the service mix it is offering, by applying a suitable selection of strategies. Guaman Hotel should therefore be aware of the changing and speed of technology in contemporary business environment. Competitors are fast learning the different technological competences of their rivals and Guoman Hotel should be cognisant of this development.
The exploitation of information and communication technology (ICT) tools and their integration with CRM applications are expected to bring several benefits to Guoman Hotel such as improved product and service quality; customer satisfaction; higher productivity; improved financial performance and creation of barriers to entry; enhanced convenience and customer services through the advent of CRM strategies.
The benefits of implementing effective customer relationship management practices and solutions will be dramatic for Guoman Hotel. With improvements to current technology, Guoman Hotel will be able to reduce costs and increase profits. Loyal customers are typically less sensitive to price and therefore drive yields upwards rather than diminishing them. And one of the fundamental benefits of CRM is to enhance customer care strategies thus buttressing customer loyalty.
In addition, distribution costs may also fall as distributing and marketing products through the optimal channel mix for the individual will optimize returns compared with promoting and using inappropriate and ineffective means. According to Sigala (2001) CRM does not just mean differentiated service for high-value customers. Personalization, for instance, need not be limited to those customer segments. The availability of Internet channels such as the Web and e-mail will reduces the cost of mass customization for the Hotel.
Environmental protection programs and conservation practices
There have been numerous studies of the environmental protection practices of hotel, but the majority has focused on large hotels creating to the demands of mass tourism on seashores and in particular resort areas. Inner-city hotels, and especially hotels in large cities, have generally been ignored.contarary to the prevailing notion that only coastal hotels create environmental problems and take measures to solve or prevent them, inner-city hotels also create and solve environmental problems. Thus, it is necessary to determine the nature of their environmental policies and practices of city hotels in order to improve our knowledge of their status and their impacts and to develop and apply environmentally sound solutions. Mengi & Algan, (2003)
The ideas environmental protection, conservation, resource use that accounts for future considerations, and maximum realization of the interest of the tourism industry, tourists and local populations, remain strong. The proponents of sustainability vehemently state that natural and tourism resource should be used and protected so that future generations will also be able to benefit from these resources. (Sitarz, 1994; Tosun, 2001). By determining and discussing the environmental practices to attract the attention of the hotel industry and other interested parties including academics and researchers, to environmental issues and countries with parallel business cultures and practices. Also to prevent new information on the issue for a different location and distinctive business culture, thereby expanding the existing body of knowledge beyond previous localities and countries. Finally, to contribute to the development of better environmental awareness and practices around the world, not only the part of hotel industry but also on the part of every interested party, including policy makers, academics, researchers, the media, and related industries.
Gather and analyze information relating to one of the strategic issue or trend before the findings and advise the appropriate decision makers
Hotels constitute a key element of the organized chain of activity in the travel and tourism industry, and occupy a crucial place in concerns over environmental protection related to tourism and travel. The hotel industry, because of the nature of its functions, characteristics, and services, consumes substantial quantities of energy, water and non-durable products. It has been estimated that most environmental impacts created by the hotel industry can be attributed to site planning and facility management; exclusive consumption of local and imported non-durable goods, energy and water; and emissions into the air, water, and soil. Erdogan & Baris E (2007). A clean environment is a basic component of quality service and is thus important for the development of the hotel industries. Sustainable prosperity of hotel business also calls for the inclusion of environmental protection components in every phase of their business venture, from the preparation and application of site plans and business programs and policies of site plan practices.
To analyse the environmental issues for the Guoman Hotel, the following points should be considered:
Start a linen (both towels and sheets) reuse program in all guest rooms.
Install low-flow showerheads and sink aerators.
Switch to low-flow toilets or install toilet-tank fill diverters. Switch to compact fluorescent light bulbs in guestrooms, lobbies, and hallways. Use sensors and/or timers for areas that are infrequently used.
Whenever possible, buy food and guest amenities in bulk (i.e., use refillable hair and skin care dispensers).
Educate their staff to turn off lights and turn down heating/air conditioning when rooms are unoccupied. Also, during summer months, to close the drapes.
Install window film to lower heating and cooling loads and reduce glare in guestrooms.
Provide guestroom recycler baskets for newspaper, white paper, glass, aluminum, cardboard, and plastic.
Provide recycling bins both in public areas (i.e., poolside), in the kitchen, and in the back office (including one at each desk) to make recycling as easy as possible.
Use recycled paper products (with high post-consumer recycled content) that are either unbleached or bleached using a chlorine-free process. Minimize the amount of paper used for each guest (i.e., reduce paper size of invoices, etc.). Print with soy-based inks.
Use nontoxic or least toxic cleaners, sanitizers, paints, pesticides, etc. throughout the hotel. Make sure all chemicals are stored safely in a well-ventilated area.
Purchase "Energy Star" appliances wherever possible (Energy Star for Hospitality (provides detailed information about energy saving appliances and monitoring systems). Replace old washing machines with both water and energy conserving models.
Provide reusable items such as cloth napkins, glass cups, ceramic dishes, etc. with all food and beverage services.
Provide glass cups and ceramic mugs (instead of plastic) for in-room beverages. Place cups and mugs upside down on paper doilies (instead of covering opening with a plastic wrapping).
Use daylight exclusively in your lobby, bar, and restaurant for as much of the day as possible. Consider installing skylights if needed.
It is evident that the industry all over the world is becoming increasingly environmentally responsible. The main forces exerting pressure on the hotel industry through the world are said to be government regulations, changing consumer demands, shifting professional ethics, and initiatives by professional associations, internal organisations, and nongovernmental organisation. The prevailing recommendations include almost all activities that have environmental consequences and ask managers to develop and apply a wide range of protection and conservation programs and practices, such as reducing waste production and resource and energy consumption by controlling and improving lighting, heating, ventilation, air conditioning, and waste issues, by making proper purchasing decisions on containers, use of returnable containers and recycling materials.
Make appropriate assumptions to set objectives for the hospitality organization and formulate appropriate strategies to achieve the objectives and present to an audience effectively
As mention above The Guoman hotel offers 801 luxurious bedrooms, suites and apartments for both the business and leisure traveler, many of which have been recently refurbished?Â The Hotel has also recently opened a new Executive Lounge on the 5th Floor with views out to Canary Wharf.Â Guests can choose from a wide selection of dishes at the Brasserie and the Carvery, as well as in our Xi Lounge which enjoys stunning views out over Tower Bridge. For meetings, special events and conferences near Tower Bridge and near Tower Hill Station, the Hotel offers nineteen fully equipped meeting rooms.Â And for those planning an elegant London wedding, The Tower'sÂ RiverÂ ThamesÂ setting and beautiful views provide an elegant setting for the bride and groom's special day. Our aim is to be an international deluxe brand, driven by quality and the highest standards of individual service. To achieve this, we need to be passionate, to believe in our vision, and to be excited about the journey we've started. Source: www.guoman.com
To examine the Guoman Hotel's strategic management environment, PEST (Johnson and Scholes, 2006) framework will be used. As argue by McDonald' (2007), Strategic management environment could be seen as the milieu in which the firm is operating. However, the scenario pins down the factors that affect Guoman hotel and how important these are presently and in the near future.
EXTERNAL ENVIRONMENTAL ANALYSIS
The political situation in England is among the most stable for business in the world and Guoman Hotel will surely not going to experience any immediate political upheaval. However, the Hotel chain has operations all over the world and at the moment, the political scenario around the world is very unpredictable; this makes it difficult to exactly position the company in the market on maximum demand.
With internationalization and globalization, more and more hotels are hunting for new markets; governments on the other hand with intention to gain maximum profit as well as get empathy on ethical grounds are imposing heavy taxes on environmental issues.
International terrorism and high oil price will affect movement of customers and thus affect Guoman Hotel's business.
Unemployment has risen due to recession in the market and will result in more people refraining from using luxuries rather may switch to some cheaper alternative. This may affect Guoman hotel's business since it is a premium brand and a four star hotel.
Disposable income has also decreased due to recession as a result the buying power of consumers has decreased, resulting in reduced demand. But for premium segment this will not affect as the customers who could afford it earlier can afford it now also as they lie in medium and upper band of salaries.
All sectors of the UK economy seem to be struggling, with consumer confidence, the housing market, employment and manufacturing either at the lowest point, or dropping faster than ever previously recorded this will also affect the business of the hotel.
Income distribution in today's scenario is not sufficient for most people to afford premium hotels on regular basis or on a habitual basis.
The credit crunch has affected family incomes and made people to not easily part with their money for luxury.
Technological developments are increasing rapidly. New recreation of services provides new ways for people to satisfy their recreational preferences. Therefore Guoman hotel's competitors are learning fast different technological techniques used by their competitors.
The recent advancement in the technology has opened huge markets for organisations to access world population without barriers. This can be taken as an opportunity to reach out to almost every location on the glob. This will create stiff competition for Guoman hotel because competitors can target Guoman hotel's customers using the internet.
INTERNAL ENVIRONMENTAL ANALYSIS
FIVE FORCES ANALYSIS
Source: Porter, M.E (1985)
Competition within the Industry
The knowledge gained from the PEST model does provide vital information about the industrial environment but the analysis still need to relate all the above information with the industry as a whole including Buyers, Suppliers, Competitors and New entrants. The relation between all these forces which affect the business is drawn using Potter's Five Forces Model below:
The Threat of New Entrant: High - The barriers in this industry requires resource commitment but is not steep. Thus, no hotel has attained almost a monopoly causing high entry barrier. However, for any new entrant it will be very difficult to get a foot hold and start thrusting in such market environment. Hence, for new entrant to be successful in such environment will have to introduce some innovation or uniqueness into their services which will be difficult for potential rivals replicate for quite sometimes within which it can make its niche.
The Threat of Substitute: High - There is a high threat of substitute in this industry. However, Guoman Hotel has been making switching difficult for customers because their services are unique and are essential for their customers. They offer special services that customers cannot get from competitors. In a way, extra services provides by Guoman hotel cannot be match by competitors. Most importantly, Guoman Hotel has high customer loyalty and their services offers real benefit compared to other services. Guoman Hotel reduces the threats of substitutes by using tactics such as staying closely in tune with customer preferences and differentiating their services by branding.
The Power of Buyer: High - The buyer in this industry have significant leverage to negotiate best services and other favorable terms. Therefore, Guoman Hotel does not have greater control over its customers thus losing a customer/buyer would put the company in a weaker position. Guoman Hotel also makes it difficult for their customers to switch from their services to competitors' services by providing them with special services but these can be match by competitors.
The Power of Suppliers: High - This is so with Guoman Hotel because the inputs require by the company are not unique, making it costly to switch suppliers. Also the suppliers can sell their supplies directly to competitors' customers. Although the Guoman Hotel has the resources and the technological power, they cannot produce most of their own inputs. The threat can also be seen as due to high concentration of Hotels at the same location and this may give choices to suppliers.
Competitive rivalry: High - Guoman Hotel encounters intense competition in its industry. This is why the Guoman Hotel made service offerings to keep their customers. In this industry, rivalries are mostly centered on and offering customers the most attractive services and creating a stronger brand image than competitors. To minimise competition, Guoman Hotel is trying to distinguish its services from its competitors' by adopting customer relation management strategy.
SWOT analysis is a strategic planning to evaluate the strengths, weaknesses, opportunities, and threats involved in a project, or in a business venture requiring a decision in pursuit of an objective. It involves monitoring the Strategic management environment internal and external to the organisation (Kotler and Keller, 2006). With this, SWOT analysis will be used to analyse and measure the objective/s of Guoman Hotels
Johnson and Scholes (2006)
In the context of its strength, Guoman Hotel has many of the competences needed to meet a changing market; in particular, its track record in innovation and its introduction of customer relation management strategy. Its financial strength makes it able to fund services that are appealing to customers. They also have a brand name which gives distinct identity to Guoman Hotel
The hotel is under the umbrella of Inter-Continental group hotel brand which gives it a brand image rating, increasing it by a high percentage over its key competitors. The hotel is located in central London giving it an easy access to business offices for corporate staffs, and also easy access for leisure tourist to visit attractions. Continues investment of the hotel in customer relations service (CRS) has ensured quicker response times to enquiries.
However, Guoman Hotel has some real weaknesses, given trends in the contemporary business environment. Customers complain of noise from passing traffic as the hotel is right in central London. Because of high level of occupancy during week day's leisure break family inclusive price 10% higher than the competitors.
The credit crunch causing economic slow down in the UK and the increase in crude oil prices would boost costs of Guoman Hotel. Also military conflicts and natural disasters like earthquakes could severely disrupt sales in to countries affected, as well as nearby countries. Major terrorist attacks could undermine customer confidence, potentially causing sharp drop in economic activities thus affecting the Hotel's customer numbers.
Changes in health and safety legislation made the hotel to stop selling cigarettes in self serving machines within the hotel premises and the made sure that kitchen equipment specification is adapted. High exchange rate makes cost of foreign holidays relatively cheaper and negatively influences demand for domestic holidays.
Guoman Hotel plans to focus on established markets with great potential for growth. The Guoman Hotel under the umbrella of InterContinental Hotel group means they will have opportunity to expand to Middle East markets. These expansions would further strengthen Guoman hotel's presence in the Middle Eastern markets.
Relative Market Share (ratio of company share to share of largest competitors) Matrix analysis of Guoman Hotel
'Star' 'Question mark'
Cash generated +++ Cash generated +
Cash use - - - Cash use - - -
'Cash cow' 'Dog'
Cash generated +++ Cash generated +
Cash use - Cash use -
+ + 0
Market Growth (annual in constant £ relative to GNP growth)
Source: (Adapted from Malcolm McDonald (2007))
The Boston Consultancy Group (BCG) Matrix is an analytical model based on a strategic business unit (SBU), relative market share and the industry's market growth. The rate of market growth indicates the attractiveness of a market - high growths are usually more attractive than the low-growth markets. Relative market share indicate the degree of dominance a SBU holds in its market place, and is the share of the company in comparison to the market leader.
Thus, Guoman Hotel's fantastic customer relation management (CRM) and services to their customers falls in to Stars category on the BCG. This is where the cash flow is generated from and the Hotel need to invest further in supporting these initiatives. This is because CRM is a high growth services and at the moment is one of the competitive advantages of the Hotel. Without continuous adaptation and training its growth will slow down if the hotel maintains relative market share, and will become a cash cow.
Cash Cows -Guoman Hotel's infrastructure and facilities enables the Hotel to have a high market share in many places it is operating. These facilities have help Guoman Hotel's success with relatively little need for investment at the moment. However, they need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.
The resources are the core responsible elements within the company which provide its competences. Being part of inter-continental hotel group, Guoman Hotel has a competitive advantage in the fact that it utilizes its wide spread distribution to promote its brands world wide. Guoman Hotel can ask for assistance when require from the InterContinental herd quarters. Competences
Technology and the introduction of customer relation management (CRM) strategy have enables Guoman Hotel to improve their internal efficiency and effectiveness, as well as to enhance their services. Leadership, management and communication are seen as key to promote customer relation management.
The overall strategic business objective of CRM is to build loyal customer relationships, where companies can anticipate their customers' needs and use information to personalize relationships, providing customers with confidence and trust in their dealings with the organization. Under this overall strategy, the Guoman Hotel have translates CRM into a multitude of specific projects or tactics, ranging from introducing new, diverse distribution channels aligned with people's changing lifestyles, to understanding customer value and using this to prioritize marketing and service resources.
Crucially, Guoman Hotel is aware that CRM largely depends on staff attitudes, commitment and performance etc, Guoman Hotel beliefs that success on the external market place requires success internally in motivating and getting employees' commitment. For that being the case, the Hotel put in place schemes that ensure that their employees must be trained to be able to deliver within the CRM strategies.
Technology thus helps Guoman Hotel to focus on their customers and, in doing so, encourages every empowered employee to become innovative. Such technology-supported empowerment clearly indicates a firm's trust in its employees which, in turn, nurtures the pride and ownership that motivates employees to go beyond their job tasks in creatively modifying services to meet customers' individual needs (Sagala, 2001).
The Guoman Hotel is among the InterContinental hotel group which is known globally for their quality standard. The first campaign for brand awareness focused on "a differentiation of Guoman Hotel within the hotel industry based on quality of the services. It also focused on trying to acquire and retain their customers.
Collecting and responding to feed backs through personal interaction between front-line employees who deliver the service and the customers is one of the most important factors in determining customer satisfaction and perceptions of service quality. Such personal service interactions represent crucial exercises in services marketing and the engendering of trust between the customer and the Guoman Hotel. The availability of Internet channels such as the Web and e-mail are used by the Hotel in targeting their customers and this reduces the cost of mass customization Guoman Hotel. Thus, multi-pronged, focused and targeted advertisements and promotions are used to get to retain their existing customers and target the new ones.
To conclude, it is the contention of this report that management strategies are considered important in Guoman efforts to be competitive. Thus the implication is that Guoman hotel should develop their positioning and reposition service offerings competitively, as well as manage their service offerings proactively through customer relation management. This management strategy is perceived to be important for Guoman Hotel in their endeavour to stand out among their competitors.
The dynamics of ingraining and sustaining the CRM concept to achieve growth, cost reduction, quality, and reliability for its future development is a complex process that involves planning and the creation of new ideas and problem solving approaches. In that context, Guoman Hotel is ready for future challenges and is as well positioned as any other hotel to compete and succeed in the current competitive global economy. The Hotel has the right strategy, products, services, technology, and most importantly the right people to take on global challenges.
Since their management strategies shift from acquisition to customer retention; Guoman Hotel is able to build CRM strategies around customization. Also, the Internet, as a collection of interconnected computer networks, provides free exchanging of information. Hence, CRM is a crucial strategy for sustaining competitive advantage in the current marketing strategies of Guoman Hotel
TheHotel underlying strategy is that by putting the guest first, Guoman hotel will grow a portfolio of differentiated hospitality brands in core strategic countries and global key cities to maximise their scale advantage. With a clear target for room growth and a number of brands with market premiums offering excellent returns for owners, the Group is well placed to execute the following strategic priorities: