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1. Introduction to Strategy 3
2. Conducting an Environmental Analysis 5
3. Investigating Strategic Alternatives 8
4. Formulating a Strategy 11
5. Implementing a Strategy 13
6. Monitoring and Evaluating Strategic Performance 15
Appendix I: Porter’s 5 Forces Model for Marriott International Inc. 19
1. Introduction to Strategy
Strategic management is the set of managerial decision and action that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long range planning), strategy implementation, and evaluation and control (Hunger & Wheelen, 2011). In this report I will do research about the strategy of Marriott International, Inc. I will give advise on how Marriott can improve their strategy and I will come up with an advisory strategy.
Marriott is organized like picture 1.1, focused on their vision;
Marriott did come up with a vision; To be the number 1 hospitality company in the world.
In order to achieve this vision there are several parts which are helpful.
The purpose of this vision. Which explains why Marriott choose this vision and who is involved.
Furthermore there are values, which are helping Marriott by gaining a competitive advantage.
Moreover there is a strategy involved, in which is stated where Marriott has to focus on (those focus points are listed in picture 1.2).
Finally, Marriott also had to measure how this vision is performing. They are looking at 3 success measures; Loyalty, Profitability and Growth.
Marriott International, Inc is founded in 1927 and in 1983 it became the first hotel chain designed for business travellers. Up till now, Marriott has grown to a chain with 18 different brands and broad segment groups, with 3,900 properties over 72 countries all over the world and with around 42 million members in their loyalty program.
As of March 2013, Marriott International Inc owned six hotels, leased 38 hotels, managed 1,021 hotels and franchised 2,571 hotels. Furthermore Marriott is having 387 hotels (67,000 rooms) in the pipeline since the start of 2013. (Freed, 2013) (Hampton, 2014)
In order to keep consistent, Marriott has a strategy for all their brands and properties. This strategy consists of six parts, which is shown in the picture 1.
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In order to be set apart from the competitors, Marriott did come up with five values. Those values are putting people first, pursuing excellence, embracing change, acting with integrity and serving our world. By achieving those values and keep them always in mind, it should give Marriott a competitive advantage. (Marriott International, 2013)
By looking at the six-parts strategy picture I can say that Marriott is following its strategy well by keeping all the six parts into consideration. They keep looking to the future and are innovative by having a lot of hotels in the pipeline, Marriott has a lot of different brands with different segments, they have a big loyalty program, they own hotels in all kind of different ownership structures and they are having hotels all around the world. But are they really performing that good, or is it only on paper?
2. Conducting an Environmental Analysis
In this chapter I am going to research the internal and the external environment of the Marriott International, Inc. First I made use of the Porter’s 5 Forces model in order to research the external environment by looking at the competition, suppliers, consumers, substitute products and new entrants in the market. With these figures I am able to make a SWOT of the whole brand, by looking at the strengths, weaknesses, opportunities and the threats the company is facing with.
Porter’s 5 Forces Model
Here I would like to give an explanation of the Porter’s 5 Forces Model, and please find the whole overview in appendix I.
The power of consumers is high since there are a lot of discount travel sites where potential guests are checking where they can find the cheapest price and what the features are, instead of looking for a specific brand.
The power of suppliers is low, hence Marriott is a big chain and is therefore creating a big revenue for the suppliers. Suppliers will lose a lot of revenue when they lose Marriott as a client. Next to that, Marriott came with some standards for choosing suppliers. (Marriott International, 2014)
Besides there is not a lot of threat of new entrants, since the big chains (for example Marriott, Hilton, Starwood) already have the primary locations and Marriott already have a good brand awareness worldwide. New entrants start locally, which would be hard to compete to the whole chain Marriott International, Inc.
Furthermore there is some threat of substitute products. Marriott has a strong brand awareness, but is does not have a specific product which is different from the competition. While local, smaller hotels does have a specific theme throughout the whole hotel which can attract guests.
At last, there is a lot of competitive rivalry, there are a lot of other big hotel chains which are located globally, and who have several brands to attract all kind of different segments, just like Marriott. Examples of those chains are Hilton and Starwood.
Please find below the SWOT analysis of Marriott International Inc.
Due to the information above, I want to define some of the stated arguments.
One of the leaders in Ecotourism: “Beginning in the 1990s, the large international chains moved into the ecotourism. The leaders include Sheraton Corporation, Marriott, Inter-Continental and Hilton.” (Honey, 2008)
Good employee satisfaction: According to a case study on employee satisfaction, two Marriott brands scored highest in their luxury segment and three Marriott brands were placed second. Moreover those brands were placed first or second in five of the six segments. (Myers-Briggs Type Indicator, 2009)
Domestic market focus: “Marriott International Inc remain heavily reliant on the US, despite all the international expansion.” (Euromonitor International, 2009)
Individualized customer experiences: The Individual Incentives Team of Marriott will focus on improving the customer experience to better serve the guests . (Marriott Individual Incentives, 2012)
Tourism is increasing again: Please find the data in picture 2.2.
According to the two models that are used to measure the internal and external environment of Marriott International Inc, the chain is doing pretty well. The strengths are strong and there are opportunities where the brand can focus on. To get a clearer view on those opportunities and improvement points, the areas of concern are highlighted and new possible opportunities will be discussed in the next chapter.
3. Investigating Strategic Alternatives
To reduce the effects of the weaknesses and the threats and in order to make as much use from the strengths and opportunities, it is important to highlight the areas of concern and to look for possible new opportunities. This can help to build a stronger brand and a more competitive organization. With the purpose of looking for the new opportunities and the areas of concern, the TOWS (SWOT backwards) Matrix is used (Hunger & Wheelen, 2011). In this model the information from the SWOT is used. The strengths are compared with the opportunities and the threats, and the weaknesses are also compared with the opportunities and the threats.
As can be seen in the scheme above, there are some points of concern where the whole chain Marriott is dealing with.
It is important to maintain the loyal guests and to build new ones at the same time, due to the increasing competition. To be sure of a certain occupancy rate it is essential to have a large group of people of whom are sure they are coming back to the Marriott chain during their next stay.
The environment is becoming more and more important to enterprises and individuals, which means that more and more guests are choosing for a eco-friendly hotel.
Next to that, the brand awareness is declining hence there is an increasing amount of discount travel sites. On these sites the price and the facilities are more important than a specific chain or brand, which makes the competition even harder.
Moreover, Marriott is very reliant on the United States and on the new trends in the US. However it is an international chain which also has to deal with the trends in a specific country or area where an specific hotel is located.
Due to reviews of different Marriott hotels, there were some comments of old-fashioned hotels. This could be renovated and by giving some effective trainings, the service can be enhanced and more individualized. As mentioned before Marriott has, as one of their six-part strategy, Brand Distinction; invest in innovation and differentiation. In order to stick to this part of their strategy, Marriott has to investing in renovating the old-fashioned hotels and they need to focus on differentiation. Differentiation can only arises from the choices of activities and their performance, which is only possible by delivering more or by delivering the same for a lower price, or both. (Bjornsen, 2004)
To give an overview of the competition set of Marriott International Inc I created a perceptual map (Mackillop, 2014). Here is the competition measured regarding the level of quality and the prices. As been showed in picture 3.2, Marriott is performing well, but the competition is close.
By making use of the Confrontation Matrix and by creating a Perceptual Map, the areas of concerns and the potential opportunities are highlighted. The aim of those areas of concern and the opportunities is that they can help the brand. In the next chapter I will use this information to start formulating the new possible strategy which can assist to build a stronger brand and a more competitive organization.
4. Formulating a Strategy
After extensive research on Marriott International Inc. I created a vision on the weaknesses, strengths, opportunities and threats within the company which could be improved by changing the current strategy. Since the business environment is continually changing, strategic decisions need to cope with change. The strongest environmental influences of the business environment are the technology, the general economic situation and the cultural trends. (Proctor, 1997)
According to Michael Porter (1990) there are two generic competitive strategies in order to get a competitive advantage; Lower costs and Differentiation. Next to those generic strategies, the company has to determine whether they are focusing on a broad competitive scope or on a small one (Hunger & Wheelen, 2011). When looking at Marriott International Inc, with their several brands, their global presence and their premium locations (broad competitive scope) and their luxurious hotels (high costs), there can be stated that the most appealing strategy for Marriott is Differentiation.
As was shown earlier, due to the new technology and innovations there is occurring a decrease of brand awareness. As a research showed brand awareness can be helpful to convince potential guests to a brand of which they have heard of (Hoyer & Brown, 1990). Besides technology can also be used as a competitive advantage (Glaser, 1988). With the technology almost everybody can be reached when making use of different distribution channels. Since Marriott is an international company with a broad segment group, this can be a great advantage.
Besides, cultural trends are important for an international company. As already discussed earlier, Marriott is coping with brand dilution. By taking the cultural trends more into consideration, brand dilution will transformed from a struggle to an advantage and, as one of the goals from Marriott, Marriott wants to attract local guests as well as international guests to their hotels.
To sum up, Marriott should implement a strategy which includes the technological trends and make use of this in order to maintain or even enhance the brand awareness. Therefore, the following strategy will be the strategy of Marriott International Inc.
“Create more brand awareness by making use of the new and local technology trends.”
A strategy is a long-term direction which a company is following. Since it is a long-term project and since the future is unpredictable, it is a direction and the strategy can be adjusted in the meanwhile (Johnson, et al., 2008).
5. Implementing a Strategy
After formulating a new strategy the next step is the implementation. The implementation process turns the goals into actions with the aim of achieving those goals. It is a process which has to deal with some pitfalls and is therefore a key part of strategic management, hence nine out of ten companies fails to implement their strategy correctly. (Sage, 2010)
It is important by implementing a strategy to consider three questions: (Hunger & Wheelen, 2011)
- Who are the people who will carry out the strategic plan?
- What must be done?
- How are they going to do what is needed?
Implementing a strategy is a process that concerns the whole company, consequently it affects all the employees. The CEO of Marriott International Inc, Mr. Sorenson, will put together an implementation plan together with the board of directors. This implementation plan will go to the unit heads, who will adjust the plan to their own unit, and so on, until it receives the front-line supervisors. Every employee will be involved in implementing the strategy.
When implementing a strategy, there are some things which need to be developed. With help of the Bart Model (Mulders, 2007) those aspects are highlighted.
The resources will be determined per activity, the amount of resources and which resources need to be mentioned clearly.
In order to succeed, activities need to be performed. One of the activities for Marriott will be their marketing process on the internet in order to attract more guests to their hotels and to create more brand awareness.
A budget need to be set up and a time frame. Given that a strategy is a long term process, the time frame is not as important as the other three aspects.
The new strategy for Marriott International Inc is mainly focused on the technology in order to create brand awareness. When looking at changing the way of using technology, it does not have to be a giant change in the way of working. To be updated on the technology trends, there might be some changes in employees or functions. Next to that the way of handling need to be changed to a more local view. By making use of the different distribution channels in a specific area the brand awareness of Marriott can be increased. To make sure that the change will go smoothly without disrupting the organization the 7s model can be used to see on which aspect attention has to be paid. (McKinsey, 2008) On this part, entrepreneurial spirit can be of great help. This spirit can be defined as ambitious, leadership, passion and positivism. Entrepreneurs can start to set an idea in action in order to make this strategy a success. (Pierce, 2008)
To conclude, with help of the implementation plan Marriott gets a clear view on what will be expected with the new strategy and how to come there. With help of entrepreneurs, changes will be made which in the end will lead to more brand awareness, more attraction of guests and the revenue might increase as well. To make sure this new strategy and the way of implementation will turn out profitable, the only step left is the monitoring and evaluating process of the strategic performance. How well is this new strategy working out?
6. Monitoring and Evaluating Strategic Performance
After implementing a strategy it is important to measure how this strategy is working out and if it has to be adjusted or not. “Without an approach to performance management tailored to strategy and culture, firms will not be in the right shape to deliver the growth expected of them.” (Haygroup, 2012) To make sure, Marriott will get a fast and comprehensive view of their company, a balanced scorecard will be used. (Kaplan & Norton, 1992)
The Balanced Scorecard translates the strategic objectives into performance measures. It presents four different perspectives; financial, customers, internal processes and innovation and improvement measures. The advantage of using this method is because it looks at the current and the future success and it provides a balance between the internal and the external measures. (Kaplan & Norton, 1993)
To get a clear view of how well the strategy is doing, the Balanced Scorecard need to be filled out for Marriott International Inc. Every aspect will be clarified according to the sample above by explaining what the goal is, how to come there and how the company will know when they succeed in their objectives.
The percentages shown are indicators, in case the growth turns out to be more than expected the percentage can be changed to an higher percentage.
In conclusion, after implementing the new strategy a monitoring plan is provided. With help of the Balanced Scorecard Marriott International Inc can check if the strategy is profitable or if it has to be adjusted. Since there are some objectives and measures provided, Marriott has to use the Balanced Scorecard every half a year to see the growth and performance.
People like to go on vacation, to get out of their normal life and to relax or to be active. Marriott International Inc is a well known, globally present hotel chain who are focusing on a broad segment group. After extensive research some areas of concern and some possible opportunities came up. By making use of different models, the most important points to focus on for Marriott International are the less importance of brand awareness, the technological trends and the brand dilution. Matching those point the new strategy for Marriott International would be;
“Create more brand awareness by making use of the new and local technology trends.”
The implementation process is an important part and should be done with a lot of care. Therefore it is significant to have a high-quality implementation plan. With help of professionals within the entrepreneurship and good communication throughout the whole chain, the implementation process will be run smoothly without disrupting the organization.
To be sure this new strategy is going to work, a monitoring plan is provided. When Marriott International is sticking to this plan and use this plan every half a year, the chain will remain or even enhance their brand awareness and be up to date with the technological trends. Moreover brand dilution will not be a weakness anymore but will be turned around to a strength by making use of the local trends. To conclude this, by making correct use of this strategy the chain can get the most out of the their business.
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Appendix I: Porter’s 5 Forces Model for Marriott International Inc.