This report is focused in analysis the environment factors and strategic options available for Marriott International. This report includes an external and internal analysis for Marriott International, an evaluation of strategies options available with a risk assessment and the recommendation of the strategies options that will perfect fit in the company.
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 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 Organization 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).
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To Summarize, 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.
Introduction:
2.1 Introduction to Marriott International:
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, Renaissance, Residence Inn, Courtyard and Fairfield Inn. The company is headquartered in Bethesda, Maryland, United Stated and approximately has 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 deluxe, comfort and high style accommodation. This company has been success for its high level of guest service satisfaction, positioning 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, ethnographic, or any other combination of demographics but the most predominant source is the middle upper class. The industry is highly fragmented 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. Although 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 Starwood’s 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 the most valuable assistance, 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 Hotel Values: The fundamental ideals of service to associates, customers, and community which serve as the cornerstone for all Marriott associates are exemplified by Marriott’s “Spirit to Serve” philosophy.
Marriott International Core Values:
Our employees:
Marriott international believes that the most important elements that the company has are their employees.
One of the important tasks for the company carefully follow is to support employee’s growth and personal development.
The company always treats employees with respect and trust.
The company provides comfortable and friendly work place environment for its employees
The company provides a reward program when employees achieve company’s goals.
Our Guests:
The company manages the business through the style of “management by walking around”.
Company is focus to details.
The company’s attention is focused to innovate in guest service satisfaction through creativity.
The compromise in quality of service and standard is high in any single property
Our Community: the company strives to demonstrate and prove every single day of the year by corporate support of local, employees, national and global initiatives and programs of how important is doing business through Marriott style.
2.2 PESTEL analysis
Political Factors: Marriot International has been paid attention to psychological and physical working environment conditions since the United States authorities thoroughly regulate it. The government supports tourism industry because it is a lucrative industry for the country; however is one of the industries that host more than 50% of the illegal immigrations.
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. The high cost of the skilled labor in United Stated force Marriott to depend on a solid profit to compensate.
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 International and its owners spend about $ 10 billion annually buying products and services for its more than 3500 hotels around the world. Recognizing this purchasing power, Marriot has teamed up with its vendors to introduce this 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 taxation and card check which are important issues to the lodging industry. According to the American Hotel and Lodging Association, the association believes that this move will bear an impact on the industry.
2.3 SWOT analysis
Strengths
Marriott International is well known for be number one in guest service satisfaction in the majority of its hotel portfolio.
Marriot International has a wide variety of offers. (mentioned in company introduction).
3) Marriott International has a strong market position due to its Corporate Social Responsibility activities related with associates, customers and community.
4) Marriot international has a strong revenue growth continue since the past 5 years, achieving 3% growth year over year.
5) Marriott International is successful in the market for its technological enabled services such CRS.
7) Marriott International has high financial resources and human resources up to 146,000 employees.
Weaknesses
Marriott International has a strong overdependence in its American market.
Marriott International’s cost related to labor force and training are increasing year over year.
Because of its high level of standards Marriott International is facing challenge finding qualified workforce, especially in undeveloped destinations where they have presence like in Pakistan.
Marriot International seems to depend heavily on its key accounts and tour operators to generate most of its business and this is the main reason that is unable to innovate in others distribution channels.
Because of its high quality Marriott International is force to keep high prices.
Because of its global branching are facing difficulties to manage.
Due to Marriott International is not very exclusive does not get the most exclusive customers.
Opportunities
Expansion into new markets such as Mexico, China and Asia.
The impact of the Economic Recession could force Americans to travel in their own country.
Partnership with local airlines such as northwest and southwest may contribute to increase sales.
As a consequent of the constant weakening of the American dollar, Americans will not travel to International destinations.
Innovate (penetrate) into new market offering new product.
Marriott International should redesigns its website as user friendly way.
Threats
The impact of the economic recession could cause fly reduction in many national and international airlines.
Competitors are getting stronger because of the latest sophisticated technology which helps them to understand customer’s needs and preferences.
As a result of global terrorism, travelers may prefer choose holiday destination that does not require air travel.
The negative effects that the swan flu cause last winter to the entire world may happen again if the undeveloped countries do not take necessary precautions.
Due to its poor presence in international markets Marriott International may lose revenue and presence.
Its vast presence in major cities does not allow accommodating those travelling to other small cities.
2.4 Evaluation of strategies options
After a deep analyzed of internal and external environment the following strategies options were developed. This provides the opportunity to select the most appropriated strategies for Marriot International. However is vital for the company that those strategies been evaluated
The strategic options are evaluated on the following criteria:
The required resources
The degree to control over future strategies
The speed with which a change in the position of SBUs can be achieved.
Strategic Options
Environment
Competences
Expectation of the company
Risk involved
Market Development (New opening hotel in CSL, Mexico)
Current market is saturated, it is necessary new geographical market
Current product portfolio, with a combination of high financial and manpower resources.
Increase return and market presence applying this strategy
Very high
Market penetration (reduce rate through one of the brand product)
Increase market share and secure dominance of growth markets
Combination of competitive prices and aggressive promotional campaign
Increase revenue with the volume of sales and become the leader of the market.
Low risk
Business diversification (Acquisition of green hotels)
Increase profit and financial resources
New product portfolio, high financial and manpower resources
Increase financial return and expanding of the business
Very high
Product development ( latest technology in room function)
Increase product attractiveness and product value
High financial resources
Increase profit, optimize product performance and high level of service
moderate
2.5 recommendation and justifications for strategies options
As a result of internal and external analysis of Marriot International and evaluation of the strategies options, the following growth strategies will perfect fit for the company:
Strategies
Attractiveness
Company’s strengths
Level of importance
Market Development (New opening hotel in CSL, Mexico)
Very high
High brand recognition.
Very high
Market penetration (reduce rate through one of the brand product)
high
Number one company in guest service satisfaction with high brand recognition
high
Business diversification (Acquisition of green hotels)
Very high
Will depend on the success of the new business
Very high (green tourism is the current trend and a possibility of innovate)
Product development ( latest technology in room function)
moderate
Product value
moderate
Market Development: Open a resort in Cabo San Lucas, Mexico is a good opportunity for the company due to is the most exclusive tourism destination in Latina America. The competition is very low, only was funded the Hilton and Sheraton’s presence in the destination which will give to Marriott International the opportunity to recover and increase the investment in a short period. This destination has a potential national, European and Canadian market that will help to the company to not overdependence of the American market.
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Market penetration: Marriott International is well known for its variety of hotel portfolio and this strategy will be apply just into one of the hotels brands (Courtyard), that in this case is the only one that can offered very competitive rates in terms of prices ensuring to the company to dominate the market as a result of kill competition. At this stage, the goal of increase revenue based on increase the volume of sale will achieve.
Business diversification: based on the latest trends and customers’ need of contribute to overcome environment issues, Marriott International could contribute to this new emerging market operating green hotels. This new product (Green Hotels) will require a high financial investment as well skill workforce. However, this new business expansion will give to the company the possibility to increase in financial resources and optimize profit.
Product development: several studies in demand behavior had been demonstrated that costumers are willing to pay more for new innovative room. For this reason is highly recommend for the company to improve their product including the latest technology in room function, such as air condition regulation, open and close curtains, turn off and on lights and order any service that the hotel offer through the LCD’s controlled (the latest technology in television). This will give the company product value and the possibility to price up the product obtaining better revenue rate and increase profit.
Conclusion
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 resections. Certain areas such as China and Asia are booming, which could substantially increase profits due 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.
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