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Tourism is concerned with pleasure holidays, travel going or arriving somewhere. These are the motivation that makes people leave their normal place of work and residence for short term temporary visits to other places not more than one consecutive year. Tourism is generally considered to be beneficial activity and for most people an ideal land use activity; a non-polluting, job generating and foreign exchange earning industry. However, years of sobering experiences have led to the realisation that mass and uncontrolled movement of people creates certain social, economic, political and environmental impacts of the destinations. These impacts vary as per the type of tourism promoted and can be both beneficial as well as adverse. This essay discusses and defines the key term sustainability and competiveness and how they can be use as a strategy to develop tourism in Maharashtra, which is one of top ranked tourist destination in India.

The key word in the analysis of tourism is sustainability, a notion that at its most basic summarizes the growing concern for the environment and natural resources, though sustainability has also had increasing resonance in social and economic issues in tourist destinations.

The destination has played an important role in tourism. It is a mix product of the tourism which offers integrated experiences to its tourist and consumers. Basically destination are regarded as well define geographical areas such as a town, a city, a country, a nation or as whole world where tourist stay at least one overnight (WTO, 2007). On the other hand it is growing subjectively by the tourist and consumers depending on their flexible demands as when they plan their itinerary on the basis of culture background of the destination and the purpose of visits. It may be educational, business, or vacations to experience importance of the place. Such as a Paris as a destination for German business travellers, for Leisure Japanese, Europe may be a destination within their specified period of a trip (Vlahovic, S., 2010). Apart from this A Jungle may be a destination for scientist and researchers who involve in nature related study simultaneously it is destination for people who like to visit Jungle in their vacation such as Jungle Safari. In addition to it ‘tourist destination also helps in generating revenue to the government as well as private sector which is a significant factor while considering tourism’ (Edward, J., 2010).******************

Since beginning destinations are divided by manmade borders such as geographically and politically, which does not considering the consumer preferences or tourist industry functions (Vlahovic, S., 2010). Whereas Holloway and Taylor (2006) say that all destinations share certain features such as the place of attraction, services and facilities and accessibility of the destination.

Currently in all worlds destination a high competition can be seen. Due to mobility and accessibility of the tourist destination around the world, also emerging changes in tourist destinations with technology, infrastructure, and communication. ‘Therefore destination cannot escape the competitive challenges by the justification that the task is too difficult’ (Vlahovic, S., 2010).

Mostly, destination are varied in nature, these are not always with equal potential, some have lot of potential resources competitive advantages, and some have limited natural resources and infrastructure to support the tourism development in particular destination (Ritchie and Crouch 2000 cited McCartney et al.2008). According to McCartney et al., 2008, there were question between Ritchie and crouch 2000, that whether destination are by born or created? The answer is in question itself. Further Ritchie and Crouch (2000) mention the definition of destination competitiveness and how it’s related to sustainability as firstly ‘its ability to increase tourism expenditure, to increasingly attract visitors while providing them with satisfying memorable experiences and to do so in a profitable way, while enhancing the well-being of destination residents and preserving the natural capital of the destination for future generations’.

As a result of this it can be assume that destination competitiveness in tourism has several sustainability dimensions such as economic, social, cultural and environmental. Competitiveness has become a central point of tourism policy. As its increases and tourism activity become stronger, so there is need to put some limelight on improving the competitiveness by creating a constitutional outline to examine, to control and enhance quality and effectiveness in the industry and to protect (to sustain) resources (Vlahovic, S., 2010).

Sustainability has defined by Bruntland’s Report (1987 cited Cooper et al., 2008) that “meeting the needs of the present generation without compromising the ability of future generation to meet their own needs” So to understand the sustainability of resources and how much potential available in destination, there is necessitate to do SWOT as well as PESTLE (Tribe,1995) analysis of the destination from internal and external then require to focus on essential innovative strategy to come up from weakness and threats and to strengthen it to create more opportunity in the future.

Strategy has defined by Quinn 1980, “It is an outline of a plan that combines organizations major goals, policies and sequence of action in to a cohesive whole”, whilst strategy is the way and scope of an organization, it has two phases ‘one short term about three year and second long term more than 5 year (Cooper et al,. 2008) preferably which matches its resources to its changing demand from the surrounding particularly in destination markets to tourists and consumers so as to meet stake holders opportunity (Tribe, 1997).

Pike and Ryan (2004 cited McCartney, et al, 2008) said that ‘competitive strategy through comparing cognitive, affective and conative perceptions of the destination.’ They concluded in their studies that “effective positioning requires a succinct, focused and consistent message. Positioning analysis requires an understanding of how a destination is perceived to perform on attributes deemed important to the target market, relative to the competition”. On the other side in terms of income and expansion of a national tourism industry in the global market of develop and developing countries, which could therefore raise the real income of its citizens and develop its standard of living (Hong, 2008).

Therefore, high demand in competitive strategy or policies require proper and better education and training about the sustainability tourism through academic orientation programmes, government and private organization, also through various information channels (Harris et al 2002).

The concept of Sustainability strategy has become in practice by World Conservation Strategy (WCS) in 1980. It was commissioned by the United Nations Environment Programme (UNEP) which jointly with the World Wildlife Fund (WWF) provided the financial Support for its operations. The main strategy has aim to make basic structure and legal guideline to develop and developing country to explain the involvement of living resources conservation to human survival such as green house gas effect, emission, destruction, degradation, extinction of flora and fauna species, pollution, genetic diversity and soil erosion and to sustainable development identifies the main concern of conservation problem and the main requirements for dealing with them and proposes ways for effective accomplishing the strategy’s goal (NSSD, 1980).

There are mainly four pillars of sustainable strategies that are economic, environmental, social and cultural. And it requires suitable consideration of all above four parts of pillars for well being of all stakeholders, to achieve long-term goals requires the engagement of all the stakeholders concerned to the production and consumption process of sustainable tourism though it is related to ruralisation or urbanization (Cooper et al., 2008).

Economic Sustainability:

Cooper et al., 2008 explained that ‘economic sustainability requires holistic planning across all industrial sectors. It must also reach beyond the destination to make sure that intermediaries such as tour operators are not able to circumvent or put unwanted pressure on the planning processes’, it may create a negative impression on the tourist and tourist destination. Mowforth and Munt (2009) have mentioned that ‘economic sustainability is not less important than all others in any tourist development. Sustainability in these terms refers to a level of economic gain from the activity such as planning, training etc., sufficient either to cover the cost of any other special measures taken to provide for the tourist and to mitigate the effects of the tourist’s presence or to offer an income appropriate other conditions or both’. In contrast, Baumgartner and Quaas (2010) have different view as ‘the general definition of sustainability has based on the notions of weak and strong sustainability’.

Environmental Sustainability

Environmental sustainability in tourism requires greater attention and knowledge about the impacts and ways of translating those impacts into the economic marketplace. The tourist, or service provider in the tourism industry have to understand their responsibilities such as disturbing the natural life cycles so for this reason government legislation should be there in system that in case of failure to abide by those systems (Cooper et al., 2008). Further there is need to calculate carrying capacities, it is an important method of assessing environmental impact and sustainability (Maldonado et al. 1992 cited in Mowforth and Munt 2009).

Social sustainability

Social sustainability is a ability of a community, may local or national, to understand changes such as excess tourists, for short or long term and continuing functioning either without the creation of social disharmony as a result of these contribution or by settling its functions and relationships so that the conflict created can be improve or mitigated (Mowforth and Munt 2009). As per the Cooper et al., (2008) that ‘tourists who do not want to adapt at all will always create negative impacts on the local community. So to avoid it tourist who may be through natural interest where the concerned visitor intrigued by local customs and behaviour so they go to scrutinize and that inspection can set in movement of a commercialisation process that will sooner or later change the events’.

Cultural sustainability

Travel can change person’s life through its visits to various parts of the world and more interaction between the local people of the destinations. It helps to develop the understanding about the tourist destination and its culture of the local people. But some time the relationships within particular society, the mores of interaction, the lifestyle, the customs and traditions are all subjectively means of exchange. Even its culture may be irreversibly altered. Culture is a dynamic a feature of human life as in the society, community and economy; so then it can be assume that changes in culture not always welcome in to the society. That means sometime it creates negative effects. But, the cultural sustainability refers to the ability of people to maintain or understand the elements of their culture which distinguished them from others people (Mowforth and Munt, 2009).

According the definition that destination has made by manmade borders, so here every destination has its own administrative as well as managing style. This includes the rules and regulation of the town, city, states, countries and all worlds to sustain the balance of Environmental, economic, social and cultural sustainability. So, the role of government and private organization to make strategies and policies is to keep engaging and motivating the participants on long term basis such as government stakeholders, private organizations, and other local authorities also the NGO’s in to development of the tourism product. Due to the vast nature of the industry it involves wide-ranging of operations, decisions and planning area with understanding sustainability and non sustainability and the requirements of tourist destinations, its consumer and suppliers such as tourism intermediaries and others like infrastructure developers and legal procedures such as visa and tourists destination management, its statistics of visitors and economy which circulate by the tourism industry (Prugh et al., 2000).

The destination which I have taken that is Maharashtra state of India. So first of all according to definition of destination need to understand geography of Maharashtra.

Maharashtra is a state which located in the western part of India. It is the second most populous and third largest state by area in India. There is a huge tourism potential available in Maharashtra due to its culture and vide range of geographical area.

The borders of Maharashtra is the Arabian Sea to the west of India with a 720 km long coastline along the lush green Konkan region, nestled Sahyadri mountain range are several hill stations and water reservoirs with semi-evergreen and deciduous forests. Gujarat and the Union territory of Dadra and Nagar Haveli to the northwest, Madhya Pradesh to the northeast, Chhattisgarh to the east, Karnataka to the south, Andhra Pradesh to the southeast,

Goa which is the part of Maharashtra it has located at the southwest it is a famous holiday spot in the world it is well known by its various beaches. Vasco da Gama sailed down at Malabar Coast in 1948. The Goa’s economy is solely depending on the tourism.

Maharashtra state covers an area of 307,731 km2 (118,816 sq mi) or 9.84% of the total geographical area of India. Mumbai, the capital city of the state, is India’s largest city and the financial capital of the nation. Marathi is the mother tongue of Maharashtra (Govt. of Maharashtra, 2006).

It is also the richest state in India, contributing to 15% of the country’s industrial output and 13.2% of its GDP in year 2005-06.

History

The name Maharashtra also appeared in a 7th century inscription and in the account of a Chinese traveller Hiuen-Tsang, was a famous Chinese Buddhist monk, scholar, traveller, and translator that brought up the interaction between China and India in the early Tang period.

The potential available at Maharashtra that it has four world cultural heritage sites as first two located in the Sahyadri Mountain Range these are 1) Ajanta caves 2) Ellora caves at Aurangabad and 3) Elephanta caves at the Elephanta Island at the Mumbai. And the newly inscribed site is ‘Chhatrapati Shivaji Terminus’ (CST) before it was known as ‘Victoria Terminus’ (VT) (MTDC, 2010).

Bhandardara is noted place for trekking place of Maharashtra followed by Pratapgarh near Mahabaleshwar, Torna near Bhor and Panhala near Kolhapur. Also Sahyadri ranges provide about 7 to 8 trekking cites which has around Pune, Satara, Lonavala and other places. And the rock climbing at Karla Mountains, believed to be dating back to 160 BC. It is home to the huge cluster of Chaitya caves (Planning commission of India, 2007).

The water sport activity available at Panshet Aqua Sports centres 40 km drive from Pune, such as windsurfing, speed boating, kayaking, water scooters etc. Close to Mumbai, Esselworld at Gorai is an amusement park which has roller coasters and water slides. Also the Sailing which is most popular in India available at Mumbai and Pune, in Maharashtra, sailing equipments are available only at the Khadakvasla Lake in Pune. Currently, MTDC has started the Scuba and Snorkelling diving school in the water of Arabian Sea at Konkan (MTDC, 2010).

Before propose, justify and to defend strategy for the chosen destination, require a SWOT analysis of destination internally as well externally (Tribe, 2003). Then it is easy to understand the nature of competitiveness and threats among the four pillar of sustainability. The analysis involves consideration of the major influences upon the tourist destination success in terms of: resources and environment (Tribe, 2003). So according to this, the analysis of Maharashtra’s tourism sector is also based on national and global factor as resources and environmental consideration.

SWOT analysis of Maharashtra (Govt of India, 2007):
Strength available in Maharashtra

Maharashtra has immense potential with natural beaches, heritage and culture. Mumbai is comparatively higher in strength of Maharashtra States. It is commercial as well as entertainment capital of India. Recently, the achievement by A. R. Rehman from Slumdog millionaire movie, It has received a prime interest to population of Indian origin in the source of market of USA and UK.

Mumbai has an international airport brings about 26 per cent of most of the international tourists. Also, it has advantage of getting most of the tourist to the state before any other states in India.

Further, in Agricultural tourism wine tourism now in boom. Because of The international level research institute and providing a better knowledge about the agricultural products which includes export quality product to other countries and how to sustain the farmers land to grow well crops in future. While considering health Medical tourism also in budding stage in metro cities.

Weakness in Tourism of Maharashtra

Every tourism require tourist for its growth so, the tourism industry in Maharashtra is highly depend on the long haul market include USA, UK, France and Germany.

Secondly, the host ambience; when tourist arrived in Mumbai they experience that the condition of western highway is poor, ample amount of advertisement boards and then on the road beggars this all creates a very poor host ambience the reason behind it is population of Mumbai about is approximately 13,788,305.

Thirdly, destination transits status shows that only 5-8 per cent out of 50 per cent of international tourist who visits to India is ready to travel to Maharashtra’s destination. The reason behind it the Safety and security concerns and poor marketing campaign available around India and other countries.

Fourthly, unfocused development and lack of co-ordination between MTDC (Maharashtra Tourism Development and Corporation), ITDC (Indian Tourism Development Corporation) and IRCTC (Indian Railway and Catering Tourism Corporation) etc. have followed their own objectives and plans and are working on separate platform. Lack of co-operation between various governmental organization involved in tourism creates inconvenience to the tourist. For example : A visit to Ajanta World heritage site requires a tourist to purchase as many as 7 tickets due to a distinct jurisdiction issue.(Planning Commission of India, 2007). And Deccan Odyssey Luxury train which serves 7 tourist destinations in Maharashtra has getting less revenue, because of poor marketing strategies and promotions from various tourist information Kiosk available in Maharashtra and other part of India.

Opportunities to sustain tourism in Maharashtra

Due to 9/11 terrorist attack, the domestic tourism growth has increased. Maharashtra Government undertaking initiatives to attract domestic tourism as a tourism strategy. Secondly, Indian government’s Golden Quadrilateral Highway project is now in last stage to connect North- South, East-west corridors by the National highways, and is expected to increase accessibilities in domestic tourism (GoI, 2002). The growing tourism source countries of Japan, China and Sri Lanka have Buddhist populations (Buddha Dharma Education Association) their interest is in Buddhist architecture and heritage is a great opportunity for Maharashtra to offer then its unique ‘Cave Architecture’. Thirdly, the nature of tourist market in Mumbai, the high spending business and leisure tourists mostly from East European countries affects on the market. The available outbound market is China.

Threats which affects to sustain competitive tourism in Maharashtra

Maharashtra had significant threats in last decade that all affect on the tourism of Maharashtra. The series of incidents as bomb blast in 1993 target was Hotels and tourists attraction, train bomb blast 2006 and then at the end terrorist attack on 26th to 29th November 2008 on Hotel Trident, The Taj Mahal Palace and Tower, and Chhatrapati Shivaji Terminals in Mumbai. Secondly, the competitor of it started Economic Impact assessment working with the help of WTO and WTTC, Kerala has already started their vision 2025 to sustain their development growth in tourism. Thirdly, the most competition can be seen in Heritage tourism, beach tourism, back water sport and special interest tourism.

Cultural sustainability and strategies in Maharashtra:

Under the cultural tourism strategy of Maharashtra the government considered that it has distinctive aspects of its rich culture and tradition would be identified and promoted as an integral part of Maharashtra’s tourism. To Identify and promote the state’s folk arts and organize folk dance and music programmes at tourist destinations (Govt of Maharashtra 2006). But to sustain it there is less financial support to those participants in to the entertainment field. The financial support is not on time they need to wait sanction the amount from government. Currently, there is a lot of attention to Bollywood artist, so here it can be seen that celebrities has taken over on Maharashtra’s culture such as following dress sense of Hollywood actresses is now seen in metro cities. There is still no any specific step has been taken by any of the entertainment industry to give chance to local folk artist to perform on large scale.

Environmental impacts and strategies of sustainable tourism in Maharashtra:

Due to dramatically rise in the Domestic as well as international tourism, currently metropolitan cities such as Mumbai and Pune, has facing pollution level problem, considering the case of Pune, in Pune the pollution level always on critical level. Local authority made strict rule for transportation and traffic rule to control the negative impact on the environment but still it not up to the good level to achieve low pollution in those metro cities.

Every tourism activity affects the natural and built environment. The issue between tourism and environment has lot of complication, but to sustain it there are some strategies such as government has made plane to develop eco- tourism for this according to the requirement such as there is no any new construction will take place in preserved area for sanctuaries and other important places such as lakes and forest land. Changes can be made in old building such as government rest houses at hill station and sanctuaries. But, in fact those cost and expenditure on old construction is comparatively higher than new construction. On another side to develop or to sustain such sites, government and NGO’s providing financial and knowledge about the eco- tourism to local people who surviving on the nature.

For environmental sustainability government has chosen some part of Konkan in Mumbai, in this, the residence at those places are paid by government to develop their houses (Huts and Cottages) with amenities and other facilities but to ensure that life cycle of nature it should not be disturb. This is a really good example as well as strategy to understand the rural life at those places in touch with nature for next generation as well as the tourists from urban part also helps to increase income level and living standard (GoM, 2006).

Economic sustainable strategies

The economic Sustainability means the balance of rural and urban economics development. The government and private policy maker should consider reduction of rural as well as urban poverty in specific destination Shen et al., (2008). According to this as per mention earlier that currently the government and various private organization institutions working on the research area of Agriculture, nature (wildlife), medical (Health and safety), information technology-communication and at the end human resource development in the Maharashtra, to provide better employment opportunity to each people and to generate and increase the income level of each people and their standard of living.

Now the current competitiveness shows that unbalance growth in various sector, such as labour on contract and seasonal basis. In short when the pinnacle period of any season starts then the employers often outsource the employment instead of local. The effect of this rises in dispute between local and outsourcing employee.

The India is still developing country; Japan has been supporting in reconstruction of Ajanta caves in Maharashtra and Nalanda University is an ancient centre of higher learning in Bihar, it was a Buddhist centre of learning from 427 to 1197 CE.

The economics of Maharashtra has highly depend on long haul and outbound tourist whose spending capacity is more than domestic tourist, as per discuss earlier that the stake holders play an important role in development in sustainable economic growth through employment and taxation, such stake holders in Maharashtra as Taj, Oberoy, Hilton, Best Western Hotels, Hyatt and in tourism Thomas Cook, Cox and King, SOTC and Raj Travel and other well known tourism service providers.

Social sustainable strategies:

Stren and Polese’s (2000) define social sustainability as development (and or growth) that is compatible with the harmonious evolution of civil society, fostering an environment conducive to the compatible cohabitation of culturally and socially diverse groups while at the same time encouraging social integration, with improvements in the quality of life for all segments of the population (Davidson, M., 2009).

Sex tourism a new phenomenon issue, according to Nair, P., and Sen, S., (2005) that ‘not all the tourists are sex tourists, some of them definitely are’. The sex incident happened in Goa had significant effect on Goa’s tourism, in which there is use of young girls for sex and pornography, by giving them shelter. According to Cooper et al., (2008) ‘the growth of such activities is often supported by a network of facilitators ranging from pimps and brothels through to the apparently more respectable taxi drivers and hotel workers. The internet has only added to the problem by creating an international communication network that can market these services on international scale’. Also, there are lonely child labour in small scale industries and without family, and mostly international tourists who come to enjoy their vacation, consider that child is safe as they feel that the children don’t have any Sexual Transfer Diseases (Nair, P., and Sen, S., 2005).

According to this the people of Maharashtra, stays in various societies there is always up and down glimpses of society can be seen in the social contest. So therefore, social upliftment and improved quality of life through exchanging culture adopting changes in environments and social life. In the situation like natural calamities, the requirement of unity to overcome from natural and manmade unpleasant incidents can be seen in the people of Maharashtra. Though, there may any disputes between different origins of people’s culture.

Whereas, Kulkarni G., (2010) say that ‘people may argue that issue of environment is enough, the enormity of the problem demands that, if each one of people of Maharashtra without blaming to the government authority does their bit toward conserving and sustaining the environment. Then it will ready to lend a hand to next generation to sustain environment with low economic price’

Conclusion:

As a consultant, that every destination and attraction’s consumer and providers should understand that sustainable and non sustainable culture. Then, only the specific growth in next 10-15 year long term period can be achieved without extra energy. Also, balance must be maintain between limits and usage so that continuous changing, monitoring and planning ensure that tourism can be managed properly in Maharashtra (GoM, 2006). There is various strategies can be followed to develop competitiveness in tourism, keep in mind the importance of sustainability such as:

Education and training:

Once, people get basic education or knowledge about the environment and the sustainability in their life, and then the improvement within them can lead to help to their respective destination. For example: local tourist guide training programme, which will help to understand the history as well as importance of the place by local people and how they can serve to the tourist on competitive level. For, this government institution at Mumbai, Pune, Nagpur and Nashik has been playing an important role to give education and training to the seekers. In private organization Taj and Oberoy institution has most influence on tourism industry management in Maharashtra.

Equal opportunity:

There should be put some lime light on rest part of Maharashtra, because current policies highly concentrated on Mumbai only, it provide lots of job and opportunities to the people of respective destination and attraction, so the govt and private organization should not ignore the immense potential available at other places of Maharashtra. They could concentrate on Agricultural tourism, medical tourism, heritage tourism, adventure tourism and wild life tourism etc.

The role of researchers and professional in decision making process:

It can play an important role policy and strategy analysis, in simple words to identify positive and negative points through various researches which conducted by professionals and scholars. Because, the management and the govern body is solely responsible for any changes in process of development in tourism some time it can lead damages.

Safety and security:

Tourist should not be a victim of any manmade and natural calamity; extra care should be taken by the local government and tour operator because of any vulnerability in case of woman or loss human of national and international countries can affects on the specific destination and the future tourists and their decisions.

Decentralization and accountability:

The process of operation and management involves variety of task and governing body, to reduce timescale the requirement of quick and perfect decision to make changes or implementation of original strategies. As well as keeping records of each event and financial transaction leads to clear accountability in the tourism sector. And can help to make better forecasting for tourism in Maharashtra.

Tourism is of strategic importance to country as an export commodity to generate foreign currency earnings and a potential generator of taxes for local authorities. Government investment and development of tourism infrastructure benefits all sectors of tourism industry, foreign and domestic tourists, as well as the local in habitants in a tourism destination area. (Jamal, T. and Robinson, M., 2009)

Well conceived development of a critical mass of attractions by the combined efforts of private and public interest directly benefits to all the industry sectors involved in the tourism system, which improves the attractiveness and competitiveness of the destination. For a country to have a successful tourism it is highly essential to maintain the sustainability of its tourist destination. Tourist destination is “a place that a traveller chooses to visit for a stay of at least a night in order to experience some feature or characteristic of a place perceived as a satisfying leisure time experience.” (Jamal, T. and Robinson, M., 2009)

Destinations are regarded as a popular aspect of tourism as they encourage visitors by delivering valuable experience through various locations, resources and service. On the contrary they even attract disasters caused by natural hazards or by human activities.

Disaster is stated as “a serious disruption of the functioning of a community or a society causing widespread human, material, economic or environmental losses which exceed the ability of the affected community or society to cope using its own resources. (Ritchie, Brent W., 2009)

Natural disasters is the result of caprices of nature which includes earthquakes, floods, volcanic eruptions, etc where as manmade disasters are a cause of terrorism, war or industrial action. After comparing these disasters it can observed that, both have immediate threat, danger and the potential for ongoing disruption but manmade disasters to some extent can be preventable and controllable. (McDonald, R., 2003)

This paper will illustrate the effects of Man-made disasters resembling Terrorist attacks and Hotel collapse in Spain, including the marketing strategies that could be adopted to mitigate these disasters for retention of tourism in the destination (Word Count – 2)

Spain is the package holiday capital of Europe and second most popular tourist destination globally, for specialising and maintaining the country’s image of ‘sun, sand and sangria’. In terms of tourism Spain has gained marvellous victory being one of the world’s top five destinations which offers over a million bed spaces in serviced accommodation sector .As per latest research Spain is the second European country after France which holds a market share of 11.4% in terms of international arrivals (UNWTO, 2010). Being famous for its summer holidays, it attracts most of the tourists from countries such as United Kingdom, France, Germany and Scandinavia. (Spain Travel Guide, 2011)

The Spanish economy has generated one and a half million jobs supported by tourism, contributing to one-third of the country’s export earnings and which accounts for 12 percent of GDP. However this achievement has been earned at the cost of society and the environment. The result of this has led to massive expansion through development of apartments and holiday villas as well hotels near the coastline. (Boniface Brian, G. and Cooper, C., 2005). Similarly by gaining popularity, the destination has created huge traffic jams and has the highest amount of cars as compared to Europe. (TV Choice, 2000)

But the major disaster to be considered in Spain is of Majorca which faced Series of Bomb Explosion that occurred in 2009 by Euskadi Ta Askatasuna (ETA) terrorist organisation (BBC News,2009) and the hotel collapse in 2008(Expatica, 2008) which created severe havoc in the region by affecting the life of the tourists.

The blast had affected the itinerary of thousands of visitors as most of the flights were either turned back or diverted for safety. The Spanish economy is highly reliable on tourist for its source of income and tourism trade; but this attack has frightened the localities and has challenge the travellers and tourist’s security beliefs, enabling them to give a second thought of whether to fly back to the destination. On the Contrary, the incident of hotel collapse which occurred due to negligence of the construction has taken lives of many construction workers.

After all these disasters occurred the first priority of the Spanish government was to cut down further repetition of the crises for which the government had implemented certain Counter Terrorism Strategies. The government started providing appropriate training to local police and actors in the civil society for identifying signs of terrorism in the vicinity, by ensuring efficient collaboration between the relevant bodies and front line staff and developing regular contact with local communities.

A software named as Check the Web (CTW) was introduced to monitor regular activities of the militant Islamic websites of Europe to avoid future threats. Various information systems such as Schengen Information System and the Visa Information Systems were developed for protection of citizens and infrastructure by ensuring an area of freedom, security and justice.

The Spanish Presidency adopted an Action Plan to combat Cyber Crime foreseeing the short-, mid- and long-term threats on European network and information security. (Council Of The European Union, 2010)

After the car bombings that occurred in 2009 in Majorca the government took additional securities in all the modes of transport including passenger and air cargo for prioritising the safety of the tourist. For reducing the terrorism threat it is very essential that public and private sector work hand in hand, for data exchange and information sharing relating to Passenger Name Records, processing and transfer of Financial Messaging Data and the information distributed within the local area.

The concept ‘Marketing Strategy’ refers to “an organisational function and a set of process for creating, communicating, and delivering value to customers and for managing customer relationship in ways that benefit the organisation and its stakeholders.” (Ferrell, O.C. and Hartline Michael, D., 2008). The problems faced by Spain in terms of tourism requires a market – led response for which certain marketing strategies if adopted by the Spanish government, can facilitate in times of considerable unease and market turbulence to maintain its tourism.

Firstly the Spanish government has encouraged the Australian tourists visiting Madrid in 2011 for World Youth Day to register at their website, in order to take advantage of insurance facilities and accommodation benefits along with preventing cautions and monitor developments. (Smart Traveller, 2011)

Being the initial country outside Italy to promote this event for the second time it can facilitate better promotions by offering discounts on attraction, restaurants and theatres. The event being conducted on a wider scale in the capital state, it essential that the government should form an alliance with the Airlines, hoteliers, wholesale tour operators and other sources for effective marketing management. (Beirman, D. 2003)

This event will last for a week (Catholic Pilgrim Office, 2011) which if managed properly, can generate income for the country from sources such as additional usage of public transport in that period, expenditure by visitors in tourism and leisure area. Being an island in the Mediterranean it is essential that Spain develops new holiday styles to reduce seasonality, encourage higher spending visitors and to spread tourism more evenly throughout the country.

Madrid being the political and financial capital of Spain serves as the principal transportation hub including centre of technological education, training and development and as a cultural and business centre. Additionally the city is renowned for conducting venues in recent years for international conferences and being the headquarters of World Tourism Organisation (WTO). (Perret, S. and Bijaoui, P., 2006)

In order to promote the destination Spain and its most recognised football club ‘Real Madrid’ have signed a pioneer agreement. This agreement will promote and enhance the tourism brands of the destination globally using its slogan “Visit Spain, Visit Madrid”. However the capital city has effectively developed its public- private collaboration through the city’s marketing agency ‘Promocion Madrid’ and has pioneered its network of strategic alliances with various tourist destinations, including New York, Sao Paulo, Buenos Aires, Mexico and Tokyo. (Andaluz, 2011)

These international alliances will foster the culture and attractions of the destination to the rest of the world. Thus Sports Tourism signifies a great platform for the Region of Madrid to encourage international travellers. This strategy of intensive marketing will feature temporary discounts or incentives as tactics that can be applied to recover losses incurred by the destination due to disasters occurred earlier. Similarly establishment and maintenance of effective media coverage and public relations will play a major role in driving the tourist back to the destination.

Furthermore, the Madrid region is given the opportunity to host the 2018 Ryder Cup. This will create an excellent platform for encouraging Golf tourism at a global level which in return will generate a high business volume for the region due to vast arrival of spectators. In order to maintain sustainability in the Sports Tourism the Government of Spain has signed a Treaty with sports bodies such as Spanish Royal Football Federation and Real Madrid in order to boost the brand image of the destination in international countries. (The Guardian, 2010).

Secondly, Spanish National Tourist Organisations (NTO) has started various promotional campaigns such as ‘Passion for Life’ and ‘Spain Marks’, for promoting the brand image of Spain. The campaign highlights the appeal of the Spanish Lifestyles and the cultural heritage, emphasising on the different regions. (Boniface Brian, G. and Cooper, C., 2005)

Spain Marks describes the various attractions and activities available to tourists in different parts of the country, additionally positioning the destination in terms of lifestyles and attractions.

Turespana, the Spanish National Tourism Authority reveals that buying patterns in major markets are changing and leisure visitors are becoming more independent, preferring self – tailored holidays to packaged tours. The changes are fuelled by low cost and changing preferences of activities. Today the Spanish major islands provide low fare services and independent beaches/islands are growing. Spain Marks is intended to show the country’s flexibility to adapt to this changing market. Hence both its branding and marketing strategy are intended to respond to these trends. (Lennon John, J.et al, 2006)

Such promotional campaign will reduce the barrier of threat created by terrorism in the minds of tourists visiting Spain due to the following criteria. It will help to maintain its reputation of the topmost tourist destination within the target markets. Generate more revenue to the country’s tourism business as a direct result of the campaign activity by retaining and increasing the number of domestic and international tourists visiting the destination. Similarly the campaign will assist in identifying the key consumer insights for domestic and major European markets. Finally it will even improve the relationships with non – tourists sectors. All the above criteria state that the capital is open for business through assortment of events to provide the country’s tastes and fashions. (Ladkin, A. et al., 2007)

However Spain can even encourage the ‘third age’ tourism where Spanish senior citizens can reside in resort hotels at reduced rates outside the peak season (Boniface Brian, G. and Cooper, C., 2005)

Lastly for designing the hotels, the Spanish government can adopt a value chain strategy from coordinating and programming of architecture, towards site security design and risk assessment by maintaining a sustainable collaboration between public and private sector in order to increase local contribution. (Luman Ronald, J., 2011)

The Spanish hotel market can promote itself by being more focus towards leisure oriented than commercially oriented. This can be possible by encouraging the local commercial market and increasing the number of high spending European weekend break visitors. In order to make this strategy successful the local government will have to incur high spending on its infrastructure investments and beaches.

As the hotel sector becomes more internationally reputed it will be an attractive target for international investors, developers, banks and operators to expand their representation in the destination. Additionally, development of boutique hotels and extended stay products will generate revenue for the economy. (Perret, S. and Bijaoui, P., 2006)

Eventually more approaches towards conferences, golf tourism, winter sports facility and activity holidays will increase the brand value of the destination.

After analysing and implementing the concerned marketing strategies, we will now glance at the pros and cons of these strategies.

Firstly, Madrid being the capital has become the major hub of various events and thus acts as a brand ambassador for the destination. Various short, mid and long term marketing strategies for promoting tourism, has been implemented in the respect to Sports, conferences, public welfares and attractions. This generates a huge income for the economy and promotes the brand image of the country.

But after applying such strategy, the threat it will attract is the unpredictable terrorist attacks which create a sense of fear in the environment and in the mind of tourists. Similarly there are chances that huge involvement of media in such events might work in favour or against the situation in case of sudden calamity.

As Spain is highly bound to face terrorist attacks in future, it needs to take precautions over expansion of its promotional campaigns which unite all the international tourists together at a specific location. The fear of such disaster reduces the profit margin of the economy finally leading to a decline in the expected annual budget.

Secondly, the next strategy of promoting various campaigns such as Spain Marks have been quite effective in promoting the country’s brand image as similar strategies have been proved effective in promoting London where Total London Month (TLM) and Total London Tour (TLT) was structured in encouraging the Londoners for using tourism facilities by offering discounts on attraction, restaurant and theatres.( Ladkin, A. et al., 2007)The only side effect of this is that where on one side it generates more revenue for the country on the side it increases traffic jams and pollutes the environment due to increasing arrivals of tourists.

Finally the rapid development of hotels on the island attracts the involvement of international companies to invest in the destination which imports more international currency and builds a strong economy. However this will affect the environment as it reduces the land for plantation, affecting the ozone layer.

After analysing the above strategies, the best approaches that will work in favour of Spain is of the high interest shown in the field of sports, conferences, public welfares, unexplored attractions along with promotion of various campaigns. This is essential as the current trend demands experiences, fulfilment and rejuvenation rather than promotion of destinations and commodities.If these targets are implemented successfully then Spain stands an excellent chance of being the top most tourist destination in future.

To make a final conclusion for this paper it is recommended that the various stakeholders engaged in the tourism sector, need to maintain effective collaboration between public and private organisation as tourism being their basic economic activity and consider additional prevention measures against the problems created from the external environment. Similarly there is a need to reinvent various strategies for attracting tourist due to the changing revolution. Hence there is a need to practice and remember the saying “Prevention is better than cure.”

Introduction to the Hospitality Industry

The hospitality industry composed with service oriented industries which included industries in vast range of fields like Tourism, Hotels, Restaurants, Lodges, Leisure Parks, Transports, Medical Hospitals & Services, Advisory Services, etc..

It consists with low profitability an industry to Highest Profitability industries which are broadly distributed among the world and also this profitability is greatly fluctuates than manufacturing industries due to the several reasons. These each and every Hospitality firm consists of several working groups such as Front Office, Back Office, Maintenance Unit; Operations Unit, Human Resources, Marketing, Promotion and Advertising, etc (David, and Chon, 2006).

Depend on the type of service they offer, this hospitality industries covers a broad range of organizations. They can further divided into sub categories depend on the Skills and qualifications their workers have to cater their customers with the set of services they have.

E.g; Cooking, Nursing, Entertaining, Advising, etc

They are in position to cater the needs of customers better than the competition is more likely able to sustain competitive advantage over time. Catering to customer needs is dominant to delivering desirable levels of customer satisfaction in the tourism industry. The formula for executing this task is particularly fragile in tourism because of the heterogeneous and simultaneous nature of service production and consumption.

Tourism experiences are rarely, if ever, delivered without in-depth employee-customer interactions. Thus, tourism experiences are people-intensive on both sides of the service fence. Additionally, tourists tend to have higher expectations for hospitality and overall levels of service quality because their context is typically more emotionally charged. An empowered workforce is a secret to success in these unique area employees who are inspired and enabled to make meaningful and suitable decisions close to customers in order to take care of important customer needs

Internationalization is described as the expanding of activities and resources among the other countries of the world, beyond domestic level. However, in the internationalization the firm should be more effective and efficient enough to cater the customers in the world over domestic level. Although starts at that level, when a firm becomes a larger, they can generates more profit and thus with their efficiency, they can reached far and wide variety of consumers while making the market more attractive. It leads to broaden the market continuous way in the world (David, and Chon, 2006).

Strategies of internationalization in hospitality industry

There are several strategies of internationalization to gain more customer satisfaction n with effectively and efficiently.

The development of computer technology, communication technology, and new means of transportation all leads to develop the internationalization. Today, internationalization has turn into one of the major concern of firms As barriers to international trade fall down in most of the parts of the world, managers happen to attentive in new trends in an fluctuating global environment (Macleod, 2004).

For example, the Euro currency is ahead a chief position within the European market and it forced to the Eastern European markets to develop rapidly to face this competition, it effects to the Asian markets too. They are opening to the world.

International firms change their strategies from one geographical region to another, to sustain in the competitive business environment.

Eg: One of express delivery service in the world, Federal Express (FedEx) dominates the market in the American Region, but in the other markets like European Region, FedEx was not successful. That market dominated by DHL.

Hotel franchising agreements is a legal document in which a franchiser offers an approved opportunity to a franchisee to carry out their business. This is permission to franchisee use brand name, reservation systems, products, operating systems. Franchising strategy is used by Hilton International as a part of its international strategy decision (Shepherd, and Cooper, 1997).

Management contracts means in which management is separated from their ownership, where a company can contract its overseas operation of management to a management team in revisit for a payment

For an example: Sodehxo is one of the companies which use management contract in the industry.

Strategic alliances means in which a bond or a partnership or a connection forms between two or more companies that can support from larger market exposure, economies of scope or range enlarged visibility for the brand name . The best example is the strategic alliance between Nortel and Microsoft Company.

Joint venture means in which the international firm provides a partial equity venture to home businesses to protect their promise to the agreement. Accor is actively involved in joint ventures in different Asian markets such as Malaysia and Vietnam

Call Center Service Recovery means Telephone based customer service is the largest customer services’ channel in both North America, and Europe (The Editors 2007). Call centers’ customer service volume is higher than electronic mail support service. Despite this lack of acknowledgement from call centers, there is a gap between the service provided and customer expectations.

The Green strategy means industry perceptions and perspectives as a new market -driven business focus for gaining competitive advantages. All businesses no matter how benign or smart their operations are create some level of environmental harm. These impacts can be minimized or controlled by a adopting a well-articulated firm-level green strategy. This require to green should not just be to address companywide environmental challenge but also a proactive strategy to stay on the right side of the regulation and for profitability (Kotler, Bowen, and Makens, 2003).

Issues and impacts of internationalization on hospitality industry

Issues and impacts bring together the latest developments in international hospitality operations with the current management principles. It provides a truly international viewpoint on the hospitality and tourism industries and provides a fresh insight into hospitality and tourism management.

Internationalization is a major trend for today’s organizations. The services sector is also unquestionably becoming increasingly international in scope. A rapid Internationalization of world economy during the 1990s has increased the opportunities to export services and services are now the fastest growing part of international trade. Speed up by their aspiration for growth and profit, host governments provide incentives, and invest throughout the world. Hospitality organizations have revealed that their survival and growth in the future depend on extending of their services around the world (Hearns, Baum, and Devine, 2009).

The global hospitality industry is therefore one of major part of international business. Those companies therefore have to look up the inferences of the global framework in which they operate and always need to prepare for the changes of this highly fluctuating environment.

The Internationalization of industry and its way is characterized by communicating over vast distances in foreign languages, normally travel to overseas countries, trading in many currencies, and coping with social systems, series of political and, cultures and customs. And regulatory environments, the aspects of Internationalization of are very easy to identify, considerate the basic current and future trends and market can be analysis and reveals a number of issues are reshaping the Internationalization hospitality industry, though there are very clearly some multifaceted questions that are still to be resolved (Mason, 2008).

International spreading out with general product and brand position;

Organizational structures that tolerate delivery of services with local operational control;

Cross-border employee training to support operations; and

Use of the world capital markets as sources of funding.

The Positive Impacts of Internationalization on the hospitality industry;

Exposure to different cultures: Due to the internationalization of the managers of hospitality industry, they would be able to gain knowledge of different cultures, as they get to fuse with people from different walks of life and thus, enhance their awareness.

Larger Market: Due to internationalization, the customer base has enlarged significantly. Not only for holydays, people travel all over the world for various purposes like business, Pilgrims, Education, health, etc. Thus, this has widened the market of hospitality industry, which gets their major income from these international visitors.

Boosts the economy: As visitors come in and spend money it effects to the foreign exchange of the country and it gets increase. Thus it gives huge boost to the economy as internationalization leads to pump money into the country.

Technology Development: Since firm needs to attract more tourists as possible, hospitality organizations always need to improve and develop their products and services.

Example: Fly Kingfisher, use innovative and newer technologies in hotels to satisfy their customer needs.

Allow to creativity: Firms are continuously thinking of new and innovative ideas to draw more customers.

More Jobs: Due to internationalization, more visitors come into the country and thus more people will be required to serve their needs. Therefore, with the internationalization, there are lots of more jobs opportunities for people within the areas which hospitality industries are located.

Variety of International Services: Since there are lot of diverse visitors from various cultures, cuisines, traditions, and languages, hospitality industry should include cuisines and various other services to cater them. These services also will be available to the

locals, which makes more satisfied local customers.

Boosts the Travel Industry: Due to internationalization more people travel around the countries. To facilitate this, the tours and travels industry require to develop as well.

People who come into the country by air, ship or land, will use the transport services obtainable as well.

The negative impacts of internationalization on the hospitality industry;

Language Barriers: Due to internationalization, the hospitality Industry can make use of people from different type of countries as they are usually cheaper. They may have troubles in communicating with customers.

Events/Disasters in the Countries: A disaster or incident taking place in one country may affect to the other country also.

For example, the financial crisis makes people to spend less money. It drops down the travelling, Hotel bookings, etc.

Due to increase in terrorism activities some visitors are not willing to travel to those places.

Cultural Barriers: As there are people from a mixture of cultures, one needs to be watchful not to insult them.

For Example, a Muslim not eats pork. Service provider have to make sure not serve food with pork. What’s acceptable by one culture may be reject by another.

Seasonal Employment: During climax periods, a lot of jobs are available in some industries, but as soon as the customers return to their countries, the jobs get vanished as well.

Example: Goa of India; the people in Goa get their revenue only during the climax season, (Dec- Feb and April – July) In other seasons, they have no jobs and no earnings.

Growth of the Communication Technology: Due to international barriers, there is a constant growth in the use of communication technology (Internet, Email, etc). This

reduces the human involvement.

Developing Countries: As technology continuously gets developing, some Countries are unable to keep up with these developments in the technology and they tend to lose out. Example: Though the some African countries have lot of natural resources for the attraction of tourists, they do not have proper infrastructure to cater that large amount of tourists. To maintain that large amount of visitors, they should have to improve

infrastructure.

Increase in Crimes: When tourist arrival increases, crimes increase too.

Example: smuggling, hustling, rape, etc

Bad Habits: Tourists come from other countries sometimes may influence to the local youth in a bad manner. Increase of drug consumption and promiscuous behavior, etc

(Source: Market of sustainable tourism, [online],

Available from: http://towards2015.co.uk [Accessed 12th April 2011])

Integration of the hospitality industry

To offer a better customer service and keep loyal client come back today’s hospitality industry require integration system. Thereby they can maintain their controls and improve their business. To have a smooth running integration system can aid organizations with a sustainable competitive advantage by improving quality of the service while reducing cost.

Superior performance and sustainable product with good quality can help a company to reduce the threat of conflicts/problems with their Suppliers, Staff, Local People, and Government and improve its position as an esteemed partner in destination. That mean, better access to major business resources such as funds, the capability to improve prod­ucts to meet rising market demand, better dealings with governments, and a motivated and faithful staff.

Egg: The computer software is a combination of various modules, which cater to the various aspects of hotel management. It including with hotel staff management, hotel reservation and hotel accounting are taken care of by the different modules in a single software unit. Many software companies have gathered more areas of hotel management into their software. All the operations like bookings, billings, reservations, check-ins, checkouts and etc, are available on screen and can do within few clicks of mouse. Therefore, taken as a whole, efficiency of the hotel staff and the management system is increased. Clients can reserve the rooms and other services through the hotel website directly. There is no room for any third party connection in these events (Kneafsey, 1998).

However, there are some advantages in this integration as follows;

It helps to reduce the cost of transportation as the general ownership outcome in closer geographic regions.

The costs for transactions can be managed if a firm gets hold of the other firms in the vertical chain, so the one division of the company can transfer the goods to the other divisions of the same company. Thereby, transaction costs for transport, negotiations; Monitoring, control & etc. will be eliminated. The by and large, average cost of the firm will be reduced, because if the divisions are in under the same management, then there will be internal supply and department heads will decide the transfer price (Macleod, 2004).

If a firm purchases half finished goods from an outside firm then the work culture could be different and there are opportunities of dispute concerning terms and conditions of supplying or if the outside supplier make a contract and couldn’t supply the goods on time then the firm cannot accomplish its assurance to the third party and the good will of a firm will come to an end. Organizational inferences; if the supplies provider supplying the goods to a firm is big, in terms of sales, size and structure, then it will state the terms and conditions. On the other hand if an internal source is used then there will be no market difference and the supplier cannot oblige any adverse conditions (Haywood, and Maki, 1992)

We can split the benefits of integration into short-term or static gains and more long-term dynamic gains.

The establishment of the Single market within Europe has led to significant gains for the participating member states. The removal of internal market barriers and the harmonization of national regulations are expected to lead to an increase in trade and reductions in cost.

Conclusion

Hospitality and tourism industry plays a key role in international competitive business environment. On one hand, it goes for lot of fluctuations due to different types of global factors. Although, it has been sustained over long period of time by facing to those factors, the two main parts of Hospitality and Tourism Industry combined with is Internationalization and integration. They lead to the growth, sustainability and profitability of the Hospitality Industry and their impacts will be directly involved to the evolutionary change of this Industry.

Four Seasons Hotels and Resorts, the worlds leading operator of luxury hotels with a history spanning four decades and a portfolio that extended worldwide. It is one of the world’s biggest and finest chains of luxury hotels which have developed from one motel started by Isadore sharp 1961 in downtown Toronto Canada, to 82 luxury hotel properties in 34 countries worldwide.

Four Seasons owns its own hotels, principally under the Four Seasons and Regent names, as well as some others, including the Ritz-Carlton in Chicago and the Pierre in New York. About half the company’s earnings come from management fees, and half of it from properties it owns directly.

Their highly admired service quality helped them to become benchmark in luxury hotel market.

The basic operational policy of Four Seasons hotel is “Treat others as you would like to be treated”. Highest quality of service to the customers is acquired by Four Seasons by maintaining and improving their service standards also with an innovative approach and continuous development and an eye for detail every single time of service.

The company shifted from hotel owner to hotel operator in 1990’s the company’s 95% of the shares are owned by Bill Gates the founder of Microsoft and Al-Waleed Bin Talal (Prince of Saudi Arabia equally). Rest of the shares are owned by Isadore sharp CEO and company founder.

Establishment of Four Seasons:

Four Seasons Hotel Chain was founded in 1961, by visionary Isadore sharp with the opening of 126 rooms Inn on the Park in downtown Canada. Sharp was a degree holder in architecture and not from a hotel management background thus Sharp was totally new to the Hotel Business. Sharp describes himself ‘a builder’ who joined his fathers business after graduation.

Joining a hotel industry business was not at all in his mind or his intention till he was working on a project to build a motel. He got an exposure with the motel project and he realised about the upcoming market of luxury hotels. The need of personalised service round the clock with the booming economy made him take a decision to get into Hotel business.

The hotel he opened is named as The Four Seasons motor hotel which he opened with the help from his brother in law. The hotel became famous amongst the business travellers and celebrities as it had a innovative design it was different from other hotels as he built all rooms facing inwards giving a view of inner courtyard and swimming pool instead of the outside neighbourhood.

Growth and expansion:

With the initial success of his first hotel, the big break through which Isadore Sharp was waiting for came in 1970 by opening first Four Seasons Hotel in Hyde Park area of London. Comparatively the room rates were higher than the competitors in the 270 room hotel but then also Four Seasons enjoyed 95% occupancy through out the year. The success came with an innovative idea of hotel equipped with latest amenities unlike old traditional hotels in London.

In 1972, Sharp opened a massive 1600 room hotel convention centre in Toronto, Canada in partnership with Sheraton. It took a long time to complete the project, almost 10 years.

In 1980 the economy was booming and the demand for luxury hotels increased , and thus Sharp started building hotels across the North America, later in almost every major US city, also to take an advantage of real estate deals.

In three decades by 1990, Four Seasons already opened 23 hotels in three countries with net earnings of $15 million.

Four Seasons became Global leader in 1992 with acquisition of Regent International hotels. further strong financial base to build and buy hotel properties worldwide came in 1994 when Saudi Prince Alwaleed Bin Talal bought 25% of company’s shares. They also signed a contract with Carlson Hospitality to develop and expand regent brand worldwide through establishing management contracts and franchising agreements.

Initial Success Factors of Four Seasons:

“To combine best of small hotels with the best of large hotels”

Isadore Sharp

He came up with the idea of opening the medium sized hotels which was enough to give a touch of personalised service providing with a range of luxury amenities and services.

Running business from Customer’s Perspective:

The most effective initial strategy for Sharp was to look at the business from customer’s point of view. He was a innovative thinker to fulfil customers needs in terms of luxury. Example When Four Seasons came into existence the trend was to use flimsy towels in bathroom, he replaced that we 100% cotton towels which worked really well. With experience of opening the first hotel, Sharp realised customers are ready to spend for one thing that’s service. And as Four seasons most guest were business travellers and with the experience he came to a conclusion that for them Service means luxury.

Luxury Redefined:

Maintaining high quality service can also be a brand if delivered constantly according to Sharp. This idea provided him with the initial success in medium sized luxury hotels which gives commitment of providing homelike comforts and personalised service. Thus luxury was redefined as Service and not as decor and architecture. Quality of service comes before the hotel decor and architecture for the customers. As most of the customers for Four Seasons were business travellers Sharp commented

“They are mostly executives, often under pressure fighting jet lag, stress and the clock. We decided to redefine luxury as service.”

Thus the key towards Customer satisfaction was achieved by Sharp and he knew what the customers wanted “unmatched service quality” will give them competitive edge. Although Four Seasons charge 20% extra room rate than the closest competitors but still they were successful of maintaining high occupancy rates. Further Sharp wanted the highest personalised service quality for the guest which was possible only if employees are motivated and happy they will deliver it. Thus employee motivation, mutual respect and empowerment played a vital role in achieving customer satisfaction. And thus he introduced the golden rule.

Golden rule:

Sharp refer to his first business rule as Golden rule ‘treat your customers as you want to be treated’. This became the operational policy for Four Seasons. Every employee is a member of customer service and in charge of it.

And he believed employees are the most important part of Four Seasons hotel because there is very limited time in which service encounter takes place unlike other industries. And the employee has to give his best to maintain proper service standards thus lot of screening and interviews are done to ensure the right candidate is selected for right job.

Innovation:

Innovation contributed a lot in the initial success of Four Seasons. Most of the luxurious amenities and services like Shampoo in the shower, bathrobes, 24 hour room service, two- line phone in guest room, pressing iron, 24 hour secretarial service, big well lit desk were the First to be introduced by Sharp and Four Seasons. The Custom made mattresses is now became the standard of luxury hotels which was Sharp’s favourite.

Vision of Isadore Sharp: Provide each and every thing in the guest room that will make the customer happy.

Growth Strategies adopted by four seasons:

Initial success for Four Seasons did built a platform for them to grow world wide. It created a network of mid sized luxury hotel in almost all key financial cities all over the world.

During this process Four Seasons adopted many different growth strategies as follows:

Brand name is competitive advantage:

The biggest asset for Four Seasons group was their brand name which was not responsible for their initial success but also a part of their global expansion strategy.

The core business strategy for four seasons was

“to continuously improve their market position and profitability to ensure the competitive advantage while obtaining new management contracts worldwide.”

Strategic relationship with investors:

With the help of strategic relationships with many small private institutions earlier helped them to expand their opportunities worldwide. Prince Alwaleed bin Talal bought 25% of company shares and with his major investments in Four Seasons which helped them to enter in new markets as well the ownership was not of Four seasons so it served their primary objective of being a management company.

From Hotel owner to Hotel operators:

Their unique business development model stated they wanted to be a hotel chain operator than hotel chain owner. It has ownership of only three hotels out of their sixty three hotels.

Under this unique business model Four seasons hotel doesn’t have a burden of ownership, the major capital is brought by the partners with whom Four Seasons developed strategic relationships.

There is wide range of management fees (base fee, incentive fee, sales and marketing charge and reservation charge) for providing these services to the owner.

How Four Seasons responded to economic downturns?

Four Seasons faced economic downturns in different years in four decades 1970, 1980, 1990, 2000 in the following years 74, 81, 91, 2001. And all of them made a significant impact on Four seasons strategy.

The hotel business during the time of recession were mainly affected by

Increased interest rates and

Decrease in market prices

With the increased airfares and the increased occupancy rates the tourism was badly affected. Executives of the company were travelling less and the leisure facilities were decreased for the executives which affected the hotel and tourism market.

Furthermore increased terrorism affected hotel and tourism market.

There were drastic steps taken by different hotel operators by cutting labour cost, lowering prices buy Four seasons believed that the industry is going to return to normal soon and Isadore Sharp adopted exactly the other way. He took the challenge during the time of recession and saw the opportunity to develop the hotels. He told his executives about his thoughts that “when our competitors are lowering standards we will raise ours”

The different actions taken by Four Seasons as an answer to economic downturns are:

Four Seasons followed their words to look after their employees:

During the time of recession most of the hotel operators cut down their labour cost but Four Seasons tackled the situation the other way, they responded by cutting the overhead costs but not the labour costs. They aimed for maximizing labour’s value instead of lowering labour cost.

Sharp explained this strategy to his executives,

“And we also know that what we must do to meet that goal, is to lower costs and raise service and product quality. But cutting costs and raise service and product quality. But cutting costs by cutting labour, if carried too far, lowers quality. The only way these seemingly conflicting aims can be reconciled is by responsible employees committed to working smarter. Instead of minimizing labour’s cost we should maximize labour’s value: by convincing our employees that our purpose merits commitment.”

Four seasons offered Flexible Contracts to the employees rather than job cut, in which employees will be called on duty as per the demand of the business which replaced working four days a week instead of five days a week. It was in the agreement of the employees and all the employees were in favour of the decision furthermore the salaries and the bonuses of the managers was also affected. This all resulted in sharing a common policy in heading towards company’s goals.

Improving the products:

Most of the hotel operators paused the construction or running of a hotel for a temporary period but the property business is really high during the time of recession because the properties are sold out on lower rates thus Four Seasons tackled the situation by renovation and refurbishment to improve the products. Isadore Sharp believed that providing quality service to the guest are a necessity and not a service by itself. And if the hotel wants to sustain in the market the new trends in the hotel industries should be followed to keep up with the market. Thus to accommodate these changes and provide customers with quality service. During recession the room occupancy is the lowest thus the inconvenience caused to the guests are very less and thus the guests get a royal out of the world service. They followed this strategy during recession period which gave them a steady growth over the decade.

Advertising costs:

Most of the competitors of Four Seasons hotel kept cutting their advertising and marketing costs, but Four Seasons didn’t cut their advertising and marketing budget to maintain the brand recognition as they had a very good recognition in the Hospitality industry. It is easy to maintain the momentum rather than restart it. This strategy helped them to gain a competitive edge over their competitors in maintaining their brand recognition.

Property market:

During recession the supply in the market for the land was than the demand on low prices. Four seasons took the advantage of low prices of the land and they picked the premium locations which would have been difficult to buy them in normal times. Thus this strategy paid off to Four Seasons during the time of recession and they came with the finest of the hotels in top locations after recession.

How four seasons managed various stakeholder expectations?

Stakeholder: Person, group, or organization that has direct or indirect stake in organization because it can affect or be affected by the organization’s actions, objectives, and policies. (www. businessdictionary.com)

There are three most important aspects of managing stakeholder expectations:

Know your stakeholders

Know what exactly they except from you

Make them accountable for realities of project by making them aware of risks and consequences.

(According to Dr. James Brown, president of the project management company Seba Solutions).

Different stake holders of Four Seasons hotel are

Stakeholders play a vital role for a company to survive thus the company or organisation needs to implement a strategy for managing their stakeholder expectations.

Thus Four seasons implemented following strategy for managing their stakeholder expectations:

STAKEHOLDER MANAGEMENT

Managing the stakeholder’s expectation is a step by step process:

After identification of stakeholders, the second step is to identify their needs.

Needs and expectations of the stakeholders of Four seasons can be described as follows:

Owners: Returns on investment by profit

Management: Management fees on the basis of gross revenue.

Employees: Empowerment, Career opportunities and job security.

Customers: High quality service and luxury.

Society: Corporate social responsibility.

Their strategy to manage stakeholder expectations can be summarised with relation to value chain analysis as well

value_chain_analysis

Value chain analysis is a concept to create competitive advantage and sustaining superior performance.

Owner: Expectation of the owners are really high on returns in terms of profit because they are the one who made the capital investment in the projects.

The different aspects of value chain used by four season hotels are like Infrastructure of the hotel, the most innovative idea of the initial strategy was to come up with medium sized hotels, and it worked really well. It was made possible and successful by Isadore Sharp who was the degree holder in architecture and he knew the latest designs of buildings and hotels like building rooms facing inwards to avoid view of neighbourhood made significant contribution to it. These innovative designs really helped Four Seasons to come up with the highest occupancy among the travellers. Thus they were successful in managing owners expectations by giving returns on their investments in less time.

Management: To ensure a good gross revenue it is vital to get higher occupancy with good average room rate throughout the year.

Sales and Marketing and technology come into picture from Value chain analysis. The marketing strategy for Four season hotel is to target the luxury segment of the market. 69% of their business comes from business travellers and groups. So almost all of their advertising and marketing programmes were designed to enhance the awareness of luxury service provided by Four seasons hotel. Technology played a vital part in achieving their goal by newly designed website and superior reservation system. They gained an advantage over other hotels by Global reservation system which gave an option to the guests to be comfortable with their own local language in North America, Asia and European Network.

Example: There are so many hotels in Hyde Park area but over 30 years Four Seasons has gained and enjoyed the highest occupancy in the area with their strategy.

Employees: Employees expect Mutual respect and Empowerment from Four season hotel.

Employees are the most important stakeholders of the organisation, if they are happy to work for the organisation the whole business cycle can run smoothly, If Employees are happy then the customers are happy with their service it leads to word of mouth publicity and the organisation gets a repeat business.

Employees deserve a mutual respect from the management. Human Resource Management from value chain ensures that employees should get what they deserve and expect. And most importantly the Golden Rule of Four Seasons is ‘treat others as you would like to be treated’ also they believe that if employees are happy then only they can make customers happy.

Four Seasons has maintained empowering their employees, and the best outcome and results can be obtained from their employees by empowering them.

I’m sure we’ve all read reports on the productivity gains achieved by empowering employees. And we all know the workplace has to change to attain this. And in a survey of 264 big company chairman, 62 percent agreed that “one of the most important business issues facing them” was “building and keeping a qualified workforce.”
-Isadore Sharp

d.) Customers:

The expectation of the customers is very high as Four Seasons targets luxury segment of market. Service factor from Value Chain is wisely utilized by Four Seasons to manage expectations of luxury for the customers.

They redefined luxury as service. Four Seasons gained a competitive edge by provided high standard of service with personalised touch. Customers got what they expected from Four Seasons. And they are very successful in making customers happy.

E.) Society:

As Society expects some corporate social responsibility(CRS) from all the hotels and organisation, their expectation for four seasons towards society is really high as well. CSR includes encouraging activities for development of society and avoiding practices which causes harm to the environment.

Four Seasons explain how they help and take initiative towards community by various training and mentoring programmes for young people and helping whoever in need in their website www.fourseasons.com .

Example: They donate organic food to local farmers to feed their animals (Costa Rica) and also providing shelter camps to Urban Elephants(Golden Triangle, Thailand), Raising significant funds for cancer research and awareness programmes.

Recommendation:

Four Seasons has a strong portfolio in the Hotel Industry but to sustain they should focus on few things which are as follows:

Four Seasons should concentrate on building more brands and focus on all the categories like upper-scale, middle and budget hotels. Unlike Accor group of hotel they have segmented their hotels and created a brand focusing the needs of its customers such as Etap, Ibis, Novotel, Sofitel etc.

To compete with other leading brands Four Seasons should come up with more hotels all over the world for more brand recognition and for customers to have a taste of their service.

Furthermore Four Seasons should continue the effective management of the hotel the way they are doing it to sustain in the market.

CONCLUSION

With the base of the case study and research on Four seasons hotel, Canadian based business has an excellent brand recognition all over the world. The company is moving ahead with excellence along with strong financial and operational management. Different innovative ideas of Four Seasons hotel helped them grow in this hospitality business over the years furthermore during the time of recession Four Seasons hotel did really well, thus it says Fours Seasons Hotel has turned economic down turn to a competitive advantage over their competitors by coming up with different properties with prime location after recession (they responded very well to economic downturn). They took the down turn as an opportunity to expand and thus they are achieving excellence in their business.

The rapid development in the hospitality industry which has lead to importance of strategic planning required in order the firms can have a steady rise in the industry. The life standards of people have been improved due to globalisation which in deed contribute to the development of the hospitality industry. The diversification was a most important priority of the firms in order to utilise the high profiled customer base which they possessed .It is easy to target the customers who are in your door step and this lead to various formulation of strategic plans to target them.

Key words: hospitality, strategic planning

Strategic planning is an organization frame work of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ) and PEST analysis (Political, Economic, Social, and Technological analysis) or STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors) and EPISTEL (Environment, Political, Informatics, Social, Technological, Economic and Legal).

Strategic planning is the official consideration of an organization’s future course. All strategic planning deals with at least one of three key questions:

What do we do?

For whom do we do it?

How do we excel?

The hospitality industry consists of broad category of fields within the service industry that includes lodging, restaurants, event planning, theme parks, transportation, cruise line, and additional fields within the tourism industry. The hospitality industry is a several billion dollar industry that mostly depends on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, or even an amusement park consists of multiple groups such as facility maintenance, direct operations (servers, housekeepers, porters, kitchen workers, bartenders, etc.), management, marketing, and human resources.

The hospitality industry includes a wide range of organizations offering food service and accommodation. The hospitality industry is divided into sectors according to the skill-sets required for the work involved. Sectors include accommodation, food and beverage, meeting and events, gaming, entertainment and recreation, tourism services, and visitor information. (wikepedia n.d.)

Strategic planning for the hospitality industry

(1) The increasing popularity of strategic planning in recent times is attributed to accelerating changes in industries and economies and increasing global competition.

(2) The rapid development of strategic-planning that executives find useful. Firms that engage in strategic planning tend to have higher performance.

(3) A recent study of hotels in the United Kingdom found that business performance was positively associated with the thoroughness, sophistication, participation, and formality of strategic-planning processes.

(4) Strategic analysis the systematic investigation of a firm and its environment is the foundation of the strategic management process.

STRATEGIC PLANNING IN JACK IN THE BOX

Jack in the Box recently announced plans to open 100 to 150 restaurants combined with convenience stores over the next five years.

The stores will feature full-size restaurants and also sell gasoline and other typical convenience store items such as bread and milk. How did Jack in the Box arrive at this decision? According to the company’s CEO, Bob Nugent, an analysis of the convenience-store market indicated that there was plenty of opportunity, primarily because no individual company dominates. The largest player in the convenience-store industry which dominated the market, 7-Eleven, Inc., controls slightly over 4 percent of the market. Compare this to fast foods, where McDonald’s controls 43 percent of the market and Jack in the Box a mere 4.6 percent. Nugent also justifies his decision on the basis of research which indicates that a convenience-store customer is twice as likely to eat fast food as a non-convenience-store customer.”

(5) Strategic analysis can provide excellent information on which to base long-range decisions such as this one.

Knowledge is one of the most important competitive weapons a firm can possess.

(6) As the Jack in the Box example illustrates, detailed knowledge about a firm and its environment can be used to generate new ideas for business and to evaluate the feasibility of ideas before they are actually implemented. Strategic analysis also allows a firm’s managers to become more aware of the company’s strengths and weaknesses and to understand the reasons behind successes and failures. Knowledge about the competitive environment can help to anticipate and plan for changes and predict how competitors or other stakeholders such as customers or suppliers will respond to new strategies or other organizational activities. Strategic analysis can open up channels of communication between high-level managers and subordinates, allowing them to share ideas and perspectives. The participative process will help subordinates to accept changes more readily after decisions are made. (Harrison – April, 2003)

STRATEGIC PLANS AT FelCor LODGING TRUST

For FelCor Lodging Trust, one of the largest hotel real estate investment trusts (REITs) in the United States, a strategic planning exercise led the company to rethink its strategy. Calling itself the ” New FelCor, ” the firm has made dramatic steps toward repositioning itself. The firm business strategy is to dispose of nonstrategic hotels, including all of its Holiday Inn Hotels located in secondary and tertiary markets. After the sale, it will have lower exposure to markets with low barriers to entry.

Other elements of the new business strategy are

(1) To acquire hotels in high – barrier – to – entry markets

(2) To improve the competitive positioning of core hotels through aggressive asset management and the judicious application of capital in the industry

(3) To pay down debt through a combination of operational cash flow and the sale of nonstrategic hotels. The company will become a lower – leveraged company with a stronger and fully renovated portfolio of hotels.

STRATEGIC THINKING AT STARWOOD

When Starwood thought of expanding their business to a field which is relevant and easy to attract customers .They in hotel industry and had a close association with the luxury segment customers so they thought Expansion through Diversification strategy in order use their same luxury customer base to sell their newly introduced ” Heavenly Bed “.

Westin Hotels & Resorts, with 169 hotels and resorts in more than 31 countries and territories, is owned by Starwood Hotels & Resorts Worldwide, Inc

The ” Heavenly Bed, ” first launched by the Westin brand of Starwood Hotels & Resorts, has transformed the bed, a basic feature of any hotel room, into a luxurious object of desire, enhancing the revenues of the chain and leaving many hotel operators to follow suit with copycat linens and custom bedding of their own.

The strategic process at Starwood began with consumer analysis and product testing. First, Westin conducted a study involving 600 business executives who travel frequently. The results showed that 84 percent said a luxurious bed would make a hotel room more attractive to them to enjoy the comfort. What is more, 63 percent said a “good night” sleep is the most important service a hotel can provide. Half of those surveyed said they sleep worse in hotels than at home. After testing 50 beds from 35 lodging chains, Westin developed its prototype all – white Heavenly Bed with a custom – designed pillow – top mattress, goose down comforters, five pillows, and three crisp sheets ranging in thread count from 180 to 250.

Once the product was designed and tested, the firm introduced the bed with a carefully planned marketing strategy are

USA Today ran a story on the front page of its business section.

The same day, 20 pristine white Heavenly Beds lined Wall Street up to the New York Stock Exchange in New York City.

Inside the Stock Exchange, Barry Sternlicht, the then Chairman and CEO of Starwood Hotels & Resorts rang the opening bell and threw out hats proclaiming, “Work like the devil Sleep like an angel.”

Meanwhile, at New York Grand Central Station, 20 more beds graced one of the rotundas there, and commuters disembarking the trains were invited to try them out.

Similar events were staged the same day at 38 locations across the United States, tailored to each city.

Savannah’s event featured a bed floating on a barge down the river with a landing skydiver. Seattle s event took place atop the Space Needle.

To reinforce the message, a concurrent advertising campaign asked, “Who’s the best in bed?”

AN EMERGING RETAIL STRATEGY FOR THE HEAVENLY BED

In the early stages of introducing the heavenly bed .In the first week of launching the Westin Heavenly Bed, 32 guests were interested to buy the bed. A light bulb went on. Westin executives put order cards with a toll – free number in every room. They started placing catalogs by bedsides and desks and set up a web site. By June of 2004, Westin had sold 20,000 pillows – $ 75 for the king – sized version – and 3,500 bed/bedding combos, at $ 2,965 each, enough to spread the idea throughout Starwood, with the Sheraton, St. Regis, and W lines all turning into retailers. The unanticipated success of the Heavenly Bed has spawned a new business – companies that help hotels run their retail arms. Boxport, a spin – off of San Francisco – based hotel procurer Higgins Purchasing Group, operates web sites and catalogs for several chains that now sell bedding.

In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the strategic plan.

It is also true that strategic planning may be a tool for effectively plotting the direction of a company; however, strategic planning itself cannot foretell exactly how the market will evolve and what issues will surface in the coming days in order to plan your organizational strategy. Therefore, strategic innovation and tinkering with the strategic plan have to be a cornerstone strategy for an organization to survive the turbulent business climate.

This assignment is generally based on Olympics 2010. On 6th July 2005, the International Olympic Committee (IOC) announced that London would congregation the (The London 2012 Olympics, Bob DigbyCommunity Geographer, and Geographical Association)

2012 Olympics It was chosen to be held in London Stratford, Newham. This is a sports competition which all the people in the world celebrating. To become an Olympic champion the athletes in all around the world together in one city challenging each one in range of games. Games are likely to be held on end of July 2012.

TASK1

Introduction

In this task I do investigate planning principles and marketing planning process of 2012 Olympics. Develop the strategic marketing plan.

The marketing planning principles and process

The most basic marketing principles (According to kotler (1980) are applied to customer point of reference to recognize what goals gathering now, believe, and do. The course of act begins with marketing research to identify market segment and potential needs, desires, attempt, concerns, performance. Then settle on the target market be able to influence and satisfied. Then use” 4ps” to power on to the market. The”4ps” are product, price, place and promotion. As well as the marketing mix. The marketing principles also revolve around the customer. The principle is “getting the customer the right services and goods in the right time. The principles also place emphasis on customer involvement and well as integration or involvement of staff in all marketing decision making. To get this right, the process has to be taken into consideration.

The marketing planning process (marketing principles and practice)

Where are we now?

Where do want to be?

How do we get there?

Which way is the best?

How do we ensure safety arrival?

Where are we now?

To complete the marketing research and collecting the past data about the project is the first step. And also have to analyse this information and present that to future plan.

This process helps to

consider the financial and trade environment

Consider present status in the marketplace and main sides of sales.

Come across at the strengths and weakness of the company.

To analyse the existing circumstances have to carry out situational analysis.

SWOT analysis of 2012 Olympics.

SWOTS stand for- strengths and weakness as related to opportunities and threats.

STRENGTHS-

Quality and a well highly regarded construction of conducting the project.

Sir Robert Mc Alpine is one of the construction firms on the london2012 project. Because this company is an icon in the in a building construction sector in UK

The West Midlands is geographically and economically well-placed for the London 2012 Olympic Games.

Weakness

Marketing techniques not superior. Need to improve new marketing techniques to customers before, during and after the Olympic.

Staffing and management problems

Opportunities

Encouraging young people to sports.

The peace can be developed.

Enhance the tourism of UK.

Threats

Security of people- Dr peter Rayon the adviser of London Olympic 2012 added special team for supervise bomb management and VIP, Athletics security.

Current financial circumstances

Where do we want to be?

After identifying strengths, weakness, opportunities and threats of London 2012 project and made assumptions about outside factors that may affect to the project have to set up the marketing objectives.

The objectives are what we want to achieve to complete the task. This is the first action of entire process of preparing a marketing plan.

Objectives of London 2012

Care for lands cape without any changes

To make sure to give safe games for london2012 the Olympic organisation committee work in partnership with police, government, public authorities and security companies.

Ensure best personal safeness before and during Olympic competition.

The goals of london2012

The business and employment development

In the education sector skills and desires.

Enhanced health and better life.

Superior environment (Sources)

Better communication

The mission of london2012

Source: IOC website (2005) Mission Statement.

The Olympics should provide aˆ¦

“Sustainable environmental legacies, such as

aˆ? Rehabilitated and revitalized sites,

aˆ? increased environmental awareness,

aˆ? improved environmental policies and practices,

The vision of London 2012

The vision of london2012 is a great change in different areas by the power of games. Such as changes in people’s lives, sports. And also motivates the people to go head on their lives through the sports.

(c)How do we get there? (How to write a marketing plan by john Westwood)
Strategies

The marketing strategies are the broad methods selected to accomplish exact objectives. There are different types of strategies

Defensive strategy

Developing strategy

Attacking strategy

First look at the type of strategies that available is to use a matrix that was developed by Ansoff.

Market penetration-

Worldwide market penetration-The International Olympic Committee was leap to propose the games event to China.

Global sponsors -Consumer products giant Procter & Gamble has signed up as a global Olympics sponsor.

Product development
Olympic park master plan (designbuit-network.com)-

In 2006 January (ODA) was workout the master pan of Olympics.

Olympic Games will provide local tourism business for both to new visitors from overseas and regional travellers.

Market development ((gamesmonitor.org)

New report predicts that the value of the UK CCTV market will increase by 10 per cent by 2012.

Investment opportunities – to fabricate Olympic named products and services. E.g. Olympic t-shirts , mugs, cups, hats, toys

Diversification

London 2012 Business Network

The Network component

1) Vital information for West Midlands business

2) attractive business events

The expansion of new clean tech industries and other strengths in artistic industries, media, logistics, and tourism.

(d)Which is the possible meaning?

Tactics

Tactics are built-in the particulars of entity path of achievement that will be followed on a daily basis.

Once developed the marketing strategy, there is a “Seven P

Formula” should apply to constantly assess and revaluate Business activities.

The seven P’s

Product

Price

Promotion

place

process

physical evidence

People

Product

Compare to the other competitors offer be superiority deal.

E.g.-

New website presents including verity of facilities and opportunities

Development of Olympic park

Price

The ticket prices have been announced. Tickets are available from ?20. Also special prices offered to young people, seniors across all Olympic sports. In this case from the cheapest price to higher price tickets are available according to customers’ needs.

Promotion

To promote London 2012 and attract the people on that specially designed ticket draw was introduced.

Place

Local people and visitors are making improvement works that have taken place along The Greenway, for the Olympic Park to Victoria Park and West Ham Station. East London is being developed with all the facilities and attractiveness.

People

To this huge project education sectors, business sectors, cultural organisations, charity, volunteers are involving to this. And all the range of customers is target in all around the world.

(e)How do we ensure safety arrival?

Control measures

The ODA has resolute to clear its progress manage utility via a Planning

Committee.

This manuscript provides direction for the authority of the ODA’s

Services biased the Planning Committee, particularly to release

Of the expansion manage.

Creation decisions on preparation application

Prepare and submitting planning reports to the Planning Committee

Offer planning advice to the team.

The strategic plan

Overall strategic concept

Guidelines

Strategic objectives

Strategic principles

Strategic phase

Develop of Olympic facilities

Principles and locations

Plan and design Olympic green

Total reflection for Olympic games

Environment development

Pollution control

Environment development

Transport development

Information and technology development

Social environment development

Cultural environment

Health care and security

Legal environment

Strategic support

Speedup economic development

Advance development new technology

Develop human recourse management

Olympic action plan

Action plan proposal

Strategic conception

Work task

Support measures

Transport construction

Guide lines/ objectives

Transport (urban)

Traffic management

Traffic support system

Traffic organisation

Energy development

Proposals

Mix and readjustment

Clean energy projects

Environment protection

present states

guidelines/ objectives

prevent/ control pollution

mange assure measure

task1 (b)

Here I am going to discuss the SWOT management tools that could help to analysis the current 2012 environment with reference to marketing.

The SWOT management tools

SWOT analysis is for Strengths, Weaknesses, Opportunities, and Threats.

A SWOT analysis is a planning tool used to understand the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business. It involves stating the objective of the business or project and identifying the internal and external factors that are either supportive or unfavorable to achieving that objective. SWOT is often used as part of a strategic or business planning process, but can be useful in understanding an organization or situation and decision-making for all sorts of situations.

Internal factors – The strengths and weaknesses

To identify the strengths and weakness have to audit 7ps, 7s, ans5m

External factors – The opportunities and threats

To identify the external factors have to cover PEST analysis.

A SWOT analysis can be used a method of sales distribution

a business idea

a strategic option, such as entering a new market or

launching a new product

SWOT ANALYSIS

INTERNAL

EXTERNAL

STRENGTHS- recourses and capabilities can be used for competitive advantage

e.g.-strong brand names

WEAKNESS- absence of certain strengths

E.g.-weak brand name

OPPURTUNITIES- external environment analysis can reveal opportunities for growth. E.g. unfulfilled customer needs

THRETS-changes in external environment

e.g. new regulations

Can be identified strengths and weakness in the current environment when we do the SWOT analysis. So after that whatever the weakness we can convert for strengths. And also we can match opportunities and strengths and supply best service for London 2012

PEST ANALYSIS
What is PEST Analysis?

Organization considers PEST before and beginning the marketing process. After that environmental analysis should be continuous and feed all aspects of planning.

The entire Marketing environment is made of

1. Internal environment e.g. staff

2. micro-environment e.g. our external customers

3. macro-environment e.g., Economic forces

Political factors.

Stability

government’s policy on the economy

government view on culture and religion

Terrorism influence in traffic Activities and it will boost need for crisis and business stability.

Economic Factors.

Consider the state of a trading economy.

1. Interest rates.

2. The level of inflation Employment level per capita.

e.g

Global contest may persist to boost over the next 5 years.

London 2012 Olympics driving venture.

Drive to reduce costs.

Social cultural Factors

In this case have to consider

the roles of men and women in society

the population

customer constitutional rights and responsibilities

Technological Factors.

It is a competitive advantage, and huge driver of globalization.

Cheap and supper standard of quality

Distribution change of technological development. e.g. books via the Internet

Technical improvements to trim down exhaust waste.

Potter’s five

A business has to understand the dynamics of its industries and markets in order to compete effectively in the marketplace. Porter (1980a) defined the forces which drive competition, contending that the competitive environment is created by the interaction of five different forces acting on a business.

competition amid suppliers
Threat of new market entrant
Bargaining power of buyers
Power of suppliers
Threat of substitute products
Task 2
Introduction

In this task i am going to discuss the market strategy options available and benefits and limitations.

THE MARKET STRATEGY OPTIONS

A marketing strategy is the outcome of decisions being made a exacting product or service promote to its aim customers.

In this case i do present

Ansoff growth matrix- four strategies

Market penetration

Penetration pricing

insistent advertising

Traditional industries. – Memorial souvenir, sporting goods which benefit from the Olympic boom.

Market development

Targeting new customers

The new website has been developed to keep you up to date with our product development. It includes-

News
Technical
Technology
Products
Future Website Development:

On-Line facilities

Product development

Product line stretch

Introducing new line

offensive new product with new sector

The Sponsorship Programme with five-year calendar of events and opportunities.

Diversification-

Advantage of diversification is even one side of business go through bad situation, the other may not be affected.

Marketing mix

Marketing mix is putting the right product in the right place, at the right price, at the right time.

American author, Philip Kotler prefers the 4 Cs.

He suggests that the 4 Ps are a seller’s mix or sales orientated approach and it therefore should be replaced by the 4 Cs which are more customer orientated, or marketing orientated.

It is made up of

Customer needs and wants (the equivalent of product),

Cost (price),

Convenience (place) and

Communication (promotion).

1960 by E J McCarthy.

The 4Ps are:

Product / Service

Place

Price

Promotion

Product/Service

Have to consider what the Customer needs from the product or service are and Features that needs.

Then look at the place. The easy places to customers can reach this product or service and access the right distribution channels?

After this, what is the price as they want and What is the value of the product or service Are there established price points for products or services in this area and What discounts should be offered to trade customers, and also compare the price with competitors.

Then think about the Promotion. In this case competitor’s promotions and how that influence to our promotional activity does all those have to consider.

When consider the Olympic 2012 in London, when we do practical the marketing strategic options the marketing mix has allots of benefits and also varies limitations.

Because of London 2012 the construction sector, business economic sectors, education sectors transport systems, like that allots of sides on UK is being developing. But because of the security reasons like terrorism and pollution, environment protection there are some limitations have to consider with all the strategic options. This project pushes the country through the development of new technology such as giant screens and environment protection like green scheme.

Task 2 (b)
The stake holder

‘Stakeholders are anybody who might directly be affected and influence on London 2012 Olympic

Main stake holders of London 2012

British association

The BOA is completely dependent and commercial sponsorship who support for GB.

DCMS

Responsible for the London Olympic Games and Paralympics Games and works closely with other key stakeholders –

THE MAIOR OF LONDON

The Mayor of London is Co-Chair of the Olympic Board, which oversees the 2012 project.

Olympic Park Legacy Company

After the London 2012 Games this company is responsible for the long-term planning, development, management and maintenance of the Olympic Park.

Secondary stake holders

Media

TFL

Schools

Police/ forces

Customers

sponsors

Stakeholders are analysis according to their power and interest of the organization.

There are four types of stakeholders

Keep Satisfied -high power /low interest

Engage Closely and Influence Actively- high power/ high interest

Monitor (minimum effort)

Low power low interest

Keep Informed-low power / high interest

It is important to involve stake holder to marketing decisions be cause some types of planning purpose will need to comprise a report of participation to show stakeholder conversation in move ahead of the submission of the planning application. And some projects, like business planning require stakeholder participation and wider communal liability. Key stakeholders are directly influence and important to the success of the project.

Task 3(a) current changes

The pest analysis of London 2012

Political-

Political factors are mostly including government legislation forcing businesses.

The Olympic Games are frequently under attack by terrorist groups.

Sports events are mostly developed and improved in education sector.

The cost of Olympics budget may affect to present government stability.

Economical-

Economic services consist of effects of increase, interest rates and exchange rates.

Present financial dip can be a pressure to the government.

Over budgeting of the project

Hard to cover the Skills gap

Social-

In the schools increasing participation in sport

Community Development such as charity organizations, volunteer work forces.

Technological-

Technology is changing speedily. Depending on market, technology can be change.

For London Olympics giant screens are best example for that people can watch the Olympic in live where ever the country when screens are available.

On line people can do investments and develop the business through the new web site.

Task 3 (b) how respond

For all these changes planning committee and project team has to respond to reach their goal.

So they….

Have to consider with health and safety rules and regulations and follow them accurately for safeness of the people.

The data’s of the project and employees and all the people who involve to the project must be protected

And the mean time have to provide best opportunity to the people.

For technological changes if there any skills gap have to make use from another countries. It may be very expensive.

Task 3 (c) the functional areas may develop

Hr

Security

media

transport

HR

In the hr sector have to clarify the present job opportunities. And to get maximum out come from human recourse. And also by minimise the number of jobs and cover the budget of the project.

School student’s projects and volunteer workers projects and also awarding systems can be introduced next 3 years.

Security

For security purpose high tech speed cameras can be fixed.

Train a special secret security team with special hidden cameras and mike that no one can recognise.

Media

Giant screen

New website

Special magazines

Transport

Development of roads, highways

Special buses, fights, trains for London 2012

Management can be generally defined as a art and science of getting the things done from others. The previous definition explains that a manager plans and guides a particular work which is done by other people. In this assignment I will be discussing about different strategic management process. Strategic management process is one of the very important management process which are been used by different organisation’s.

Strategy :- Strategy are the resources used by the managers to achieve long term objectives. In simple term, strategies are the idea’s which are been used by the management.

Strategic management :– Strategic management is a conduct of drafting, implementing and evaluating cross functional decisions in enabling to achieve its long term objectives.

There are different types of process involved in strategic management :-

Marketing is accepted globally as a life blood of any organisation. In this analysis I felt that strategic management is at the same level as marketing which decides the future and prosperity of an organisation. Practicing the management of strategies is very crucial in the competitive world. Successful managers will have to know their business market situation and position and to implement the strategies when required. I kept these objectives in mind and invented some management qualities in myself while doing a research on this topic. I feel that I need more knowledge of the management practices. So in my research on strategic management I had a good understanding of strategic management and practices.

Basically the concept of strategic management closely resembles elements of foresights; this means planning a head is a major element in the business. Strategic management is considered as a life blood of any organisation. This assignment on strategic management covers the change and development in the organisation.

I have also understood that having a clear idea of strategic management is crucial in today’s competitive business world. Company’s now a days seek ways to achieve a competitive advantage with other players in the industry that they operate. The environment in which a company operates can provide circumstances where the outcomes may be positive or negative. Many organisational studies have presented numerous theories that help companies in taking new ways in dealing with their operations.

Strategic management is one of those important management theories and process that has been employed constantly by any business to address their management and decision making needs.

I have chosen Holiday Inn as an example to illustrate the adaptation of strategic management and its process. In this assignment I have written about how holiday inn hotels analyse and critically evaluate the organisation practice to solve the problem connected with implementing their strategies.

Main body :-

Now I will be giving a short history on Holiday Inn hotel. Kemmons Wilson initially came up with the idea after a family road trip to Washington, D.C., during which he was disappointed by the quality and consistency provided by the roadside motels of that era. The name Holiday Inn was given to the original hotel by his architect Eddie Bluestein as a joke, in reference to the Bing Crosby movie.

In 1957, Wilson franchised the chain as Holiday Inn of America and it grew dramatically, following Wilson’s original tenet that the properties should be standardized, clean, predictable, family-friendly and readily accessible to road travellers. By 1958, there were 50 locations across the country, 100 by 1959, 500 by 1964, and the 1000th Holiday Inn opened in San Antonio, Texas, in 1968. The chain dominated the motel market, leveraged its innovative Holidex reservation system, put considerable financial pressure on traditional hotels and set the standard for its competitors, like Ramada Inns, Quality Inn, Howard Johnson’s, and Best Western. By June 1972, when Wilson was featured on the cover of Time magazine, there were over 1,400 Holiday Inn hotels worldwide. Innovations like the company’s Holidome indoor pools turned many hotels into roadside resorts.

The company later branched into other related enterprises, including Medi-Center nursing homes, Continental Trailways, Delta Queen and various related enterprises. Wilson also later developed the Orange Lake Resort and Country Club near Orlando and a chain called Wilson World Hotels. The family of founder Kemmons Wilson still operates hotels as part of the Kemmons Wilson Companies of Memphis. Wilson retired from Holiday Inn in 1979.

Although still a healthy company, changing business conditions and demographics saw Holiday Inn lose its market dominance in the 1980s. Holiday Inns, Inc. was renamed “Holiday Corporation” in 1985 to reflect the growth of the company’s brands, including Harrah’s Entertainment, Embassy Suites Hotels, Crowne Plaza, Homewood Suites by Hilton and Hampton Inn. In 1988, Holiday Corporation was purchased by UK-based Bass PLC (the owners of the Bass beer brand), followed by the remaining domestic Holiday Inn hotels in 1990, when founder Wilson sold his interest, after which the hotel group was known as Holiday Inn Worldwide. The remainder of Holiday Corporation (including the Embassy Suites Hotels, Homewood Suites by Hilton and Hampton Inn brands) was spun off to shareholders as Promus Companies Incorporated. In 1991, Bass launched Holiday Inn Express, a complementary brand in the limited service segment. In 1994, Bass launched Crowne Plaza, a move into the upscale hotel market. In 1997, Bass created and launched a new hotel brand, Staybridge Suites by Holiday Inn, entering the North American upscale extended stay market. In March 1998, Bass acquired the InterContinental brand, expanding into the luxury hotel market. In 2000, Bass sold its brewing assets (and the rights to the Bass name) and changed its name to Six Continents PLC. InterContinental Hotels Group (IHG) was created in 2003 after Six Continents split into two daughter companies: Mitchells & Butlers PLC to handle restaurant assets, and IHG to focus on soft drinks and hotels, including the Holiday Inn brand.

Business relationship with Gulf Oil

In 1963, Holiday Inn signed a long-term deal with Gulf Oil Corporation in which the lodging chain would accept Gulf credit cards to charge food and lodging at all of its hotels (in the United States and Canada). In return, Gulf would build service stations on the premises of many Holiday Inn properties, particularly those along or near major U.S. and Interstate highways. Many older Holiday Inns locations (including some no longer part of the chain) still have the service station properties intact today, either still in operation or closed down. With the exception of a few locations in the eastern U.S., hardly any of the still-open stations are now Gulf outlets. The portion of the agreement which permitted Gulf credit cards to be used for payment of food and lodging at Holiday Inns was copied by competing lodging chains and major oil companies during the mid-to-late 1960s. Most of those agreements fizzled out with the 1973 oil crisis. The Gulf/Holiday Inn arrangement ended around 1982.

The brand name Holiday Inn is now owned by IHG, which in turn licenses the name to franchisees and third parties who operate hotels under management agreements.

In January 2002, The Wall Street Journal reported that the company, led by Ravi Saligram, was producing a new 130-room “Next Generation” prototype hotel to rebuild the brand. It would include a bistro-like restaurant and an indoor pool. The first of these prototype hotels, the Holiday Inn Gwinnett Center, was built in Duluth, Georgia, in 2003.

On 24 October 2007, IHG announced a worldwide relaunch of the Holiday Inn brand. The relaunch is “focused on delivering consistently best in class service and physical quality levels, including a redesigned welcome experience and signature bedding and bathroom products…” The first relaunched Holiday Inn is expected to open in the USA in the spring of 2008. The whole relaunch process is planned to be complete by the end of 2010.

In September 2008, IHG announced the creation of a new timeshare brand, Holiday Inn Club Vacations, a strategic alliance with The Family of Orange Lake Resorts.

As told before strategic management is a set of activities undertaken in the order of time. One of the first tasks in strategic management is environmental analysis. Environmental analysis is the study of an organisations environment to pin point the environmental factors that can significantly influence the organisational operations. It provides a frame work for understanding an organisations environment with the aim of helping to find the key issues and different ways of coping up with the complexity and change. A business organisation operates in an external and internal environment. The factors which influencing the external environment is known as PESTEL.

PESTEL stands for political factors, economical factors, social factors, technological factors, ecological factors and legal factors.

Analysis:-

The political, economical and social context stood as a big challenge for the organisation of Holiday Inn when they entered the market. the holiday inn operations are highly influenced by the policies set by the government in which ever territory or country they operate. Most of the Holiday Inn are controlled by regulations of operations and policies of individual properties. The Holiday Inn group will also focus on concerns such as health and safety employment, laws , worker protection and environment. From my studies I think all these elements are seen in the control of government that authorises licensing of hotels in different states. Being in a business environment they have to abide by the employment procedures and tax obligations where they operate. As the company is widely expanded and well developed they must co-operate with the practices set by political body. After my research I think this company should get full co-operation from the political power to succeed in local and international market. as many private enterprise when holiday inn was opened the management had very informal sense of direction setting up a few long time goals without implementing proper strategy. How ever by implementing a new scenario in their strategy with set an international competitive advantage in hotel industry as tourist increased every where and the hotel accommodation was in demand after this the management of Holiday Inn realised the need and development of planning strategies. The management achieved a competitive advantage position and enhanced the holiday inn group’s performance in relation to its competitor. Company have taken a very good advantage of this point and served this market segment all the time. They have given market what they want according to the expectations. I think by going through company history the Holiday Inn is spread all over the world. This vast expansion is because of its good economical stability.

The company has its own concerns involving economic factors. The branches and franchise like Holiday Inn has the tendencies to experience the hard ships in instances where the economy of the respective countries is hit by inflation and changes in exchange rates. Because of the disposable income of the citizens in developed countries the holiday inn group gave prior importance in marketing their business because of the economic stability of these countries.

Holiday Inn is a world wide chain and its international functional strategies will always yield profitable returns. The potential customers are from all over the world. It is been noted that the holiday inn company has given the market such as Europe, Asia, America with regards to their social-cultural needs. Holiday Inn, like all other hotels has established a good system in determining the needs of the market. The company uses the concept of product, personality, behaviour of the customer and purchasing to its advantage.

Now I am going to talk about the technical factors influencing the company. This is because of the technical advancement due to which the company could reach in a very short span to many people about their various products and service information. Customers can contact Holiday Inn by many means such as emails, telephone, travel agents, website etc. holiday inn is providing their guests with all modern amenities and facilities to their rooms to provide the best accommodation experience. Their hotels all over are fully equipped with modern amenities and technical advancement. The above mentioned study helped me a lot to determine how much the elements of PESTEL were helpful and positive for the development of the company

After the analysis of PESTEL and depending upon that outcome I have also carried out SWOT analysis of the company Holiday Inn which gives me exact position of the company in the market.

SWOT stands for strength, weaknesses, opportunities and threats. These are the factors influencing the internal environment. SWOT analysis is extremely useful for understanding and decision making for all source of situation in business and organisation. It also provides a frame work for reviewing strategy position and direction of the company.

I think it is therefore important to evaluate the environment opportunities in relation to the strengths and weaknesses of the organisation resources.

Strengths: – as mentioned in the history of the company it clearly states that the Holiday Inn Corporation is a well established organisation and industry leader in hospitality. Holiday Inn is well diversified hotels in the high end, business and mid priced classes in their product mix. Holiday Inn also poses a solid integration features such as owning the companies that manufacture its furniture and has invested in online reservation travel enterprises. It also has easy access to all its customers to get information and also has a excellent reservation system.

Weaknesses: – according to my research Holiday Inn may be narrowly focused making it susceptible to the down turn in the global economy and other world wide catastrophes that could limit global travel. Holiday inn hotels may also be venerable to employee’s strikes and crack down on undocumented workers. I think the aggressive expansion policies may put the company in trouble during the global down turn. Some of the branches or franchises do not follow the holiday inn set standards, recruitment process efficient accounting systems.

Opportunities:- Holiday Inn corporation is a global pioneer in hospitality industry. Their position is strong financially and they are widely expanding all over the world. They offer an array of distinctive and specialised services to their guests. They also have an opportunity to expand or acquire a cruise line company. The holiday inn corporation should take advantage of emerging markets especially with business clients and mid priced markets. The holiday inn corporation has a strong affiliation with REIT (real estate investment trust) or similar organisation that provides a strong back up for hotels. It has a strong skilled work force all over.

Threats: – Like all other business, the major threat for holiday inn will be an emergence of a new competitor. The competitors will be more active in promoting the concept of global brand name. Holiday Inn has its own resources to sustain their global brand name. In general the hotel industry faces a threat from internet reservation channels which represents a growing share of hotel room booking. To overcome these threats Holiday Inn has its own centralised reservations system.

Looking at strategic direction of the company the mission statement says GREAT HOTELS GUEST LOVE shows that holiday inn makes all efforts to exceed their customer expectation. This statement covers all aspects on hospitality firm in a brief manner. The vision statement and the values of the company states that year after year holiday inn (IHG) and the management will be regarded as the best and most sought hospitality group. From my personal experience while working with holiday inn group I can say that they are following their vision and mission statements.

By observing their strategic formulation they have adopted cost leadership strategies. They are one of the lowest cost providers for their product. This makes many customers to become potential and loyal. They have targeted very broad market from high and society to middle and the lower one. While offering this wide variety of offers to the customers they have developed and achieved best value strategy. During my analysis on holiday inn I discovered the difficulties faced by them or in other words we can say their weakness. They faced great difficulties while entering the Asian markets. The reason behind this was they were not familiar with Asian market. To overcome this problem they had to take a strong action plan by signing a joint partnership with Asian hotel firms. This provided them a base to learn about the Asian environment and their establishment. Holiday Inns vision for the future was a property that delivers new levels of customer convenience by extending hotel systems for guest and employee access using the hotels wireless infrastructure.

RECOMMENDATIONS :-

From my analysis since holiday inn is expanding it is wise to deal with proper authorities in the respective markets where they intend to operate. The company has to accomplish and satisfy all the prerequisites for doing business. The company should also carry out a well conducted market research before penetrating the new segments of market. the company should always obtain relevant information from the target market in addition to the individual customers of organisation. A comprehensive market research is a must before granting a franchise. I think similar research should be made in areas like consumer behaviour and purchasing patterns of the market. Holiday Inn Corporation has to re-evaluate its internal environmental factors like Strengths, Weakness, Opportunities and threats to overcome with a strategic direction adjusting its mission and vision and at the same time maintaining its values. These are the few strategies that holiday inn must adopt to attract more diversified clientele. Therefore in order to survive and maintain the brand name holiday inn corporation should be consistent with their excellent service being always innovative. They should also create the role of middle managers and let them to be more innovative.

I think the biggest challenge for Holiday Inn is expansion and franchises. The main features of Holiday Inn Corporation should be put as a standard one for the franchisers to follow. Will the franchisers really set the standards followed by Holiday Inn Corporation? What are the efforts that are to be put for the franchisers to follow the standards set by Holiday Inn Corporation?

Holiday Inn is also using its technology to its advantage. The interactivity and the real time effects of communication is a good way to find suppliers.

CONCLUSION :-

Successful strategies always demand a company to choose the market in which their unique capabilities will gain competitive advantage. However the adoptive and incremental context of strategic management means that the company starting point leads the firm to a stable position. Corporate strategies of Holiday Inn have been able to use strategic management to stay in the competition in the global market. I believe that the strategies as well as the leadership styles used by the management of Holiday inn have been the major cause of their competitive position in the hotel market.

Though Holiday Inn is considered as a leader in hospitality sector there is a need of flexibility. Slight changes in the market can effect their operations of the business. They should not rely on their past success but instead they should innovative and ready for any future uncertainties.

Holiday Inn Corporation focuses on services rather than accommodation itself. I truly agree that the true asset of the organisation is the staff. The staff are the one who represent Holiday Inn hotels through their excellent services. So there is a need to make sure that the staff is always happy with the behavioural integrity of work place. The corporate strategy of Holiday Inn has been able to guide the company from challengers and opportunities that appears in the market environment in order to sustain the competitive advantage. Therefore I think the leaders of the company should continue their style to motivate their employees and become a major asset for the success of the company.

This report is going to analyse and evaluate the strategic fit of Thomas Cook plc and its critical success factors using analytical tools. The PESTEL Analysis is used to evaluate conditions in the Travel and Tourism market environment and how these conditions affect Thomas Cook plc and its competitors now and in the future. A porter’s five forces analysis will also be used to determine the competitive intensity and therefore attractiveness of the travel and tourism industry.

Introduction

Thomas Cook Travel Company was first started by its namesake in June of 1841 and has since become the world’s most recognisable name in the travel industry. The merger of Thomas Cook AG and My Travel Group plc on June 19th of 2007 produced Thomas Cook plc, making Thomas Cook the second largest leisure travel group in the UK behind TUI Travel plc its major competitor. Thomas Cook specialises in providing a wide range of package holidays to destinations. (Thomascook.com)

INDUSTRY ENVIRONMENT ANALYSIS (Task A)
PESTEL ANALYSIS

The PESTEL frame work categorises environmental influences into six main types which are political, economical, social, technological, environmental and legal (see appendix A). The PESTEL framework helps managers understand the key drivers of change and also the differential impact of these external influences and drivers on the industry, markets and individual organisations. (Johnson, Gerry, 2005).

Political factors – According to CIPD, coalition government’s spending cuts are going to result in 0.7million job losses in the public sector. The travel and tourism industry is in the public sector; therefore their employees are faced with fears of redundancy. Announcement of redundancies will invariably have an adverse impact on morale, motivation and productivity of remaining employees. The negative effects can be reduced by sensitive handling of redundant employees and those remaining and to be as honest as possible with the remaining staff to gain back their trust and confidence. (cipd.co.uk)

Economic factors are of concern to travel and tourism, because they may influence demand, costs, prices and profits. Package holidays are an income elastic business, as income decreases or rises; it can have a significant effect on the demand. Therefore looking ahead, public sector cuts are likely to have a major consequence on the travel and tourism industry.

Social Factors – Redundancies and other government cuts will potentially result in limited disposable income for consumers. According to Mintel, some 12% of consumers are spending nothing on non-essentials, with 35% describing themselves as ‘very cautious’, 30% as ‘quite cautious’, and only 5% as ‘not at all cautious’. This is because of the decrease in disposable income. If income decreases, then spending will become more cautious, especially on income elastic items such as package holidays, therefore reducing profit margins for the travel industry. With all the package holidays in the UK, supply will remain very high as demand decreases forcing companies to reduce their prices.

The spending cuts will mean that business executives will have to cut their budgets and most likely use low-cost travel planes such as Easy Jet and Rynair. Video conferencing is improving all the time, and the price has fallen to zero using online systems such as yahoo messenger, business may be forced to use this method to communicate to reduce their costs. This going to affect the travel industry a lot, executives provide business anytime of the year whilst holidays are seasonal. This will reduce customers. If classy seats are either vacant or earning less revenue, this means less departures or soaring economy class fares. Companies will also be forced to provide bargains for leisure travelers willing to upgrade to business class.

Technological Factors – The most powerful example technology is the emergence and improvement of the internet, which led to reduced costs and increased operational efficiency within the tourism agencies and airports. Because the internet is becoming better every day, it’s causing intimacy between tour operators and clients and improving contentment for both parties. Aside the internet, other major technologies that support the continuous growth of the tourism industry are those implemented by transportation, which is becoming safer, quicker and more pleasing. The technological implementations within tourism operations have led to changes in working behaviour and will also result an increase of demand for labour force, implying as such that educational institutions place more emphasis on teaching tourism.

Environmental Factors – Protecting the environment is one of the most talked about and sensitive matters today, making environmental responsibility part of the factors that determine a tour operator’s success. According to global warming 2020, ‘aviation which ferries hundreds of thousands of tourists across the globe is of great concern to those seeking to protect the environment. A major concern for the industry is greenhouse gas emissions and their implication for climate change. Aviation produces at least two percent of emissions. One way the aviation industry is working on this problem is by rolling out newer planes that have fuel efficient engines which means less carbon emissions. However not all airlines especially in the poorer countries can afford buying new aircraft’.

PORTER’S FIVE FORCES ANALYSIS

Porter’s five forces analysis (see appendix B) was developed to as a way of assessing the attractiveness of different industries. The five forces constitute an industry’s ‘structure’. (Johnson, Gerry, 2008)

Threats of substitutes

The lack of disposable income and the effect of coalition government spending cuts are likely to change consumer spending habits, as a result with a significant shift in demand from luxury goods to inferior goods which are much more affordable, consumers are likely to shift to local and cheaper holidays and may choose to use trains (eurostar) or their cars to local holidays. Terrorism has affected the mentality of travellers and has made travelling more difficult and uncomfortable. People have to think about security issues from when they start packing to when they reach their destination, this will convince more travellers to use trains or holiday locally. This is however a moderate threat because customers usually prefer airlines because they are much quicker.

Competitive Rivalry

The Travel and tourism industry occupies a big segment of the business market and therefore provides many opportunities for tour operators; however it’s a very competitive industry. To be successful a package holiday company needs to discover the best fit between their individual skills, competencies and resources and external market characteristics to make sure that they stay on top of their game. Brand recognition and strength also determine the success of a company against its competitors, especially if times are tough in the economy.

Negotiating powers of buyers

Demand in package holiday industry is extremely elastic; this means that buyers will not just accept a given price by a package holiday company. Customers will use any information sources available to them such as the internet to look for better and exclusive deals available around, and with so many package holidays available in the UK, they are likely to find one and use a different company. As discussed above about the effect of economy on the travel industry, the powers of buyers are that they have a huge influence on the setting of prices in accordance with the prices which are around in the market.

CRITICAL SUCCESS FACTORS

Critical success factors are used to identify key factors that a business needs to focus on to ensure that their business is successful.

To survive and prosper, all industry participants must use an emergent strategy. Emergent strategy is a way of action that develops over time in an industry without a specific mission, goals or long-term plans. Emergent approaches should be thoroughly analysed in the context of an increasingly active, highly competitive and global business market. Influential external forces mentioned in the PESTEL analysis are pushing companies to reduce costs, improve processes and identify new opportunities for growth and an emergent strategy will help companies cope with these factors.

An emergent approach leads to more creative and responsive strategy making which is well suited to the hyper-competitive and unpredictable environments such as the package holiday industry. It is more suited to instigating positive, transformational organisational change such as diversification or restructuring. It also has the added benefit of helping to reduce resistance to change as it allows time to build employee support while the strategy is taking shape. (powerfulwords.co.uk)

Strategic concepts in tourism, hospitality and events

Individual assignment: Grande Bretagne Hotel Athens; External business environment

INTRODUCTION

No company in the world is working standalone and in isolation. That’s even more emphasised in the tourism industry where the location of the tourism companies follows the location of the tourism product, the tourism destination. A hotel can not be located standalone in a no attractive tourism destination and expect success, it should be as close to the epicentre of the tourism happening and movement. The problem is, every tourism company wants that, and they all have to compete in the saturated, consistent market with each other and with the environment like a whole.

In this assignment we will discuss the challenges and implications of the external environment applied to our hospitality organisation of a choice based on the selected theoretical model. Further evaluate the competitive environment using the Porter’s Five Forces Model with closing recommendation for the future of the business.

BRIEF DESCRIPTION OF CHOSEN SUPPLIER

For the purpose of this assignment we had chosen the New Hotel Athens.

New Hotel Athens (formerly Olympic Palace Hotel), along with 4 other hotels, is a part of Yes Hotels chain, and they are part of the worldwide Design Hotel company with more than 250 independent hotels in over 50 countries worldwide. (http://corporate.designhotels.com/about_design_hotels)

Situated in Plaka area in central Athens, New Hotel is a 79 room establishment designed by the Brazilian award winning design duo Fernando and Humberto Campana. The hotel also sports exquisite all-day bar-restaurant, New taste, and Workshop Floor, meeting space with teleconference facilities.

IDENTIFICATION OF FACTORS ISSUES IN THE EXTERNAL ENVIRONMENT (MACRO ANALYSIS)

Business environment refers to those factors of the surrounding of business enterprise which have influence on the functioning of a business. The business cannot control these aspects but can respond to change if needed. This is also call macro environemnt.

(http://books.google.gr/books?id=nfADHVmJkTUC&pg=PA3&dq=external+business+environment&hl=en&sa=X&ei=jiJvVNnjHJP5asqEgvgL&redir_esc=y#v=onepage&q=external%20business%20environment&f=true)

External business environment

Economic conditions

Economic conditions are global as well as national, and when there is a global financial crisis as in 2007, and the recent one, changes in the external environment can be dramatic. Positive economic condition of the nation have also positive effect on their spending habits. And opposite, when the nation is suffering financial hardship, the money that will be spent for recreation and holidays will be less. Indirectly, the negative economic condition increase the unemployment rate and the interest rate and taxations.

New Hotel Athens, operates within the EU and Greek economic environment. Considering the not so positive economic condition of the country and the Euro zone generally, we can say irrefutable that it reflects negatively on the business. After a calamitous recession in which the economy shrank by 30%, government debt now stands at 174% of GDP and the budget deficit last year was almost 13% of GDP (The Economist 2014). This leaded to aggressive rise of the taxes, increased interest rate for bank loans and credits and overall increase cost of the raw materials and imports.

In the table below we can see the country’s economic freedom index and few other economy related facts and figures like, the the freedom of corruption, fiscal freedom, business, labour and trade freedom etc. (The Heritage Foundation 2014)

Greece, Economic Freedom index 2014 – Source The Heritage Foundation

Regardless of the present adverse condition in the country, there is a positive forecast for the future economy of the country from international and domestic experts. High government official also promised a new taxation “roadmap” that would be unveiled in the future, with the maximum income tax cut to 32 per cent from 42 per cent and the corporate tax rate reduced to 15 per cent from 26 per cent. (ABC News 2014)

Market (competition)

The market/competition is a constantly amending factor in the external environment of the business. Not only that new competitors arise and other disappear, but also the existing ones are changing and adapting their marketing strategies, product lines and prices. Often those changes are not evident so the businesses must be alerted to what their competitors are doing.

Our hotel is one of the 23, exclusive 5 star hotels in the central area of Athens, excluding Piraeus and Glyfada (Greekhotels.com 2014), and one of the 176, 5 star hotels in the country. (Hellenic Chamber of Hotels 2006). In that saturated market are included as well the big international players like Starwood, Intercontinental, Hilton and other hotel chains with great influence on the market and provide fierce competitiveness. But New Hotel Athens diversificate in many ways from the competition, and their business model follows the fresh market trends providing a product for a niche tourism clients.

Technology

In the last half a century, one of the rapid change factors in the external environment and the constant pusher on the businesses and organisations has been the technological change. If the don’t react sufficiently quick to this change, they can face with the risk of losing market shares. The technological change don’t affects only on the design of the products, but as well on the delivery of service.

In the example with our hotel, we must say that this external factor is taken into consideration seriously, and even used for competitive advantage. The property is recently renovated according to the latest standards and trends, with implemented computer controlled in house systems, offering free WiFi to the customers (unlike most of the 5 star hotels), and having great interactive web page and social networks presence.

Climate change

Climate change is an insidious threat because the pace of change may be recognisable only if considered on a decade-by-decade basis. The effect of climate change will not fall equally on all nations and all businesses. Businesses that depend directly on a good supply of water e.g. agriculture, field sports will be adversely effected if climate change results in reduced rainfall. However the flow on affect of drought will eventually work their way through to all businesses in the affected community.

Legal

The most common law changes that affect business include Workplace Health and Safety, Consumer Protection, Industrial Relation and Environmental Law. But most obvious change in law through legislation is the taxation. Sometimes the taxation changes occur fast and with little warning and there is not much time for the business to prepare.

The New Hotel Athens guests are protected by the general Greek consumer protection law for all transactions you make while travelling in the country. As enterprise, the hotel is obliged to issue written receipts, that safeguards the consumer in the event of any claim or dispute with the enterprises. (VisitGreece 2014)

Media

The significant changes in the technology and the rise of the internet, reflected on the media as well and changed it from ground up. That affected deeper on the external business environment. The old channel for communication where suffocated, altered and brand new ones appeared. The businesses had to embrace this change and adapt to it as fast as possible.

New Hotel Athens following the modern media trends, had build extensive online presence all over the internet (as a medium). And had gained significant positive feedback. For example Trip Advisor, according to the votes by the customers, had awarded this hotel with the “Travelers Choice Award” for 2014 and had ranked it as number 7 out of 324 hotels in Athens. Except the booking sites, New Hotel Athens heavily uses the social media for promotion and communication with the customers and the public.

Political

Just like law, changes in the general government policy can be well notified and discussed or changes without notice. Many organisations depends on the government financial assistance and if there is a change in the government policy, those funding can be reduced or to completely disappear. Also any political instability in the country, leads to destabilisation of the society and have repellent effect on the tourism. For example the recent political crisis in Greece and the rise of the radicalism had negative impact on the tourism as a whole. Some of the media even scared out the tourists with warnings of racist attacks (Hamilton Spectator 2012). Or the few cases when the strict immigrants policy mistreated few tourists by the police in Athens (BBC 2013).

Demographic

The population changes include increasing or decreasing of the population, change in the age group proportion, change in the ethnic diversity, change in the number of two-income families, number of marriages and geographic population distribution. All those changes affects the external environment of a business. Human resources, security and mentality wise.

New Hotel Athens operates in quite diversive demographic environment that just adds to the colourfulness of the business.

USING THEORETICAL MODELS TO SUPPORT THE DISCUSSION?????

PORTERS 5 FORCES (MICRO ANALYSIS)

Porter five forces analysis is a framework to analyze level of competition within an industry and business strategy development. It includes three forces from ‘horizontal’ competition and two forces from ‘vertical’ competition. Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment (Porter 1980).

The Porter’s Five Forces is a powerful and simple tool for understanding where the power lies in a business situation. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.

Porter’s 5 Forces (Source Wikimedia)

Supplier Power:

The bargaining power of suppliers is also described as the market of inputs. Suppliers of components, raw materials, labor, and services to the firm can provide power over the firm when there are few or no substitutes. Suppliers may refuse to provide those supplies to the firm or charge high prices for the unique resources. Potential factors are:

Supplier switching costs, supplier concentration, degree of differentiation, substitute, labor unions, supplier competition etc.

New Hotel Athens, being part of the YES Hotels chat and part of Design Hotel chain, can maintain wide supply chain due to the dispersed suppliers connection of the sister companies and the mother company. If there is leak of supplies from one source, they can easily switch to other supplier connected to some of the other properties or globally with the mother company, Design Hotel Chain. From F&B materials to technology. Though, thats not applicable to the suppliers who provide unique supplies to the hotels.

Buyer Power:

The bargaining power of customers, is described also as the market of outputs. It is the ability of customers to make a pressure over business, therefore to affects the customer’s sensitivity to price changes. The companies can take measures to reduce buyer power, such as introducing a loyalty program and promotions. If the buyer have many alternatives then his power is high and opposite. Potential factors for this are: buyer concentration, buyers switching costs, buyer information, substitute products, barganing leverage, buyers price sensitivity etc.

Competitive Rivalry:

For most of industries the intensity, competitive rivalry is the biggest determinant of the competitiveness of the industry. Potential factors includes: Innovation, advertising, competitive strategies, company concentration, degree of transparency etc.

Threat of Substitution:

The existence of different products that can satisfy the same need, can make the customers switch to alternatives. Potential factors here includes: the propensity to substitute, price performance of substitute, buyer switching costs, product differentiation, number of substitute products available, ease of substitution, quality depreciation etc.

Threat of New Entry:

Power is also influence by the ability of companies to enter the market. If it does not cost much time or money to enter the market and compete effectively, if there are few economies of scale in place, or if there is little protection of the key technologies, new competitors can quickly enter the market and weaken the existing business position.The following few factors can affect on how much new entrants can be a threat: existence of barriers to entry, government policy, capital requirements, absolute cost, economies of scale, product differentiation, brand equity, expected retaliation, access to distribution, customer loyalty, industry profitability etc.

BASED ON THE ANALYSIS, FEW REALISTIC RECOMMENDATION FOR CHANGE

Conducting macro and micro environmental analysis we can come up with some conclusion …

Carnival Corporation plc is a global cruise company, with a portfolio of 12 brands. It is one of the leading cruise operators in both North America and Europe. The company primarily operates in the US, the UK, Continental Europe and Canada. The company recorded revenues of $11,839 million during the fiscal year ended November 2006, an increase of 6.7% over 2005. The operating profit of the company was $2,613 million during fiscal year 2006, a decrease of 1% as compared to 2005. The net profit was $2,279 million in fiscal year 2006, an increase of 1.2% over 2005.

Carnival’s mission statements reads, “Our mission is to deliver exceptional vacation experiences through the world’s best-known cruise brands that cater to a variety of different lifestyles and budgets, all at an outstanding value unrivaled on land or at sea”.

To be the leading cruise operator in all segments entered and to maintain the most up-to-date fleet of cruise ships in the world

To develop new cruise segments and innovative cruise packages to reach a larger number of potential and past cruisers

Employ sophisticated promotional efforts to achieve a greater awareness by the public concerning the availability and affordability of cruise travel

Attract the first-time and younger cruisers (Carnival), experienced cruisers (Holland America), upscale cruisers (Seaborne), and cruisers wanting a sailing vacation (Windstar)

Promote cruises as an alternative to land-based vacations

Provide a variety of activities as well as ports of call

Be innovative in all respects of operations of the ship

3. Strategies:

Global growth through concentric diversification via acquisition of cruise lines and building new ships, particularly in the Asia and European markets.

High quality of the service towards the customer resulting in high customer satisfaction, leading to new and repeat customers.

Economies of scale by increasing the size of the company resulting in the lowest break-even point in the cruise industry.

Horizontal growth financed through internal funds.

4. Policies:

Sophisticated promotional efforts to gain loyalty from former customers and new customers

Remodel its ships, varying offered activities, and being innovative through RD in all aspects of ship operations.

Strategic Managers
Board of Directors

Although information is not available about most of the board members, we do know that at least two members of top management are also insiders on the Board: Micky Arison (Chairman of the Board) and Howard Frank (Vice Chairman).

The stock of Carnival Corporation is publicly traded and at least 20% of privately held stock of the Arison family has been sold to fund expansion. Arison probably controls the board.

Top Management

Members of top management are as follows:

Micky Arison, Chairman, CEO, (Carnival Corporation)

Robert Dickinson, President and COO (Carnival Cruise Lines)

Kirk Lanterman, President and CEO (Holland America Lines)

Howard Frank, Vice Chairman and COO (Carnival Corporation)

Gerald Cahill, Senior VP Finance and CFO (Carnival Corporation)

Lowell Zemnick, VP Treasurer (Carnival Corporation)

Peter T. McHugh, President and COO (Holland America Lines)

Meshulam Zonis, Senior VP of Operations (Carnival Corporation)

Carnival Corporation is a family tradition passed down from Ted Arison (founder) to his son Micky (current CEO and Chairman). Micky Arison and Bob Dickinson seem to be the main driving force behind strategic decisions in the company.

III. EXTERNAL ENVIRONMENT (EFAS Table; see Exhibit 1)
A. Natural Environment

Environmental groups

Stringent regulations on ships

Environmental and health and safety regulations

Could increase costs of compliance

Instituted Safety and Environment position

EPA – studies on waste water

Annual award program

Financially supporting ocean conservation groups

B. Societal Environment
1. Economic

Unstable economy

2. Technological

Computer and information technology extremely important

3. Political-Legal

Increased regulations are issued by the Coast Guard, U.S. Department of Health and Federal Maritime Commission.

4. Sociocultural:

Growth is slowing in the cruise travel industry (2% from 1991 – 1995). It is also estimated that only 5-7% of the North American market has ever taken a cruise.

Two-income families have more disposable income to apply towards vacations.

The aging of America means more potential customers for the Holland America Line, which serves an older, more established clientele. Increased emphasis on family vacations and a growing “family” cruise segment.

Periodic political tensions which occur in cruise an area (such as the Mideast or Mediterranean) causes cruise competition to intensify in safe waters until the tensions cease.

B. Task Environment

Threat of new entrants is low, given the recent rash of cruise line failures, mergers, and buyouts.

The competitive nature of the industry makes it unattractive to enter, and high start-up costs serve as a barrier to entry.

Rivalry between competitors is high, with six major competitors (including Princess and Royal Caribbean Cruise Lines) and eight minor competitors.

With berth capacity increasing, rivalry may grow more intense if demand doesn’t rebound.

Bargaining power of suppliers (shipbuilders) is moderate since shipbuilding is a very money- and time-intensive process.

If a shipbuilder can’t deliver on a contract, Carnival can’t easily obtain a replacement ship.

Bargaining power of customers may grow in the future due to the combination of increased berth capacity and decreased demand.

The combination of these factors would lead cruise operators to offer deep discounts, and customers would have more affordable options in choosing the cruise they want.

Threat of substitutes is escalating with the introduction of all-inclusive combination cruise/land packages such as Disney’s Big Red Boat vacations.

Other stakeholders such as the American Maritime Union pose a threat, with their continued charges against Carnival (and other operators) concerning exploitation of cruise employees.

IV. INTERNAL ENVIRONMENT (IFAS see Exhibit 2)
A. Corporate Structure

Carnival Corporation serves major market segments through Carnival, Holland America, and Seaborne (joint venture).

Decision-making is centralized, with top management and the Board of Directors controlling all strategic decisions.

The corporation attempts to reduce routine decision-making by standardizing shipboard operations when possible.

B. Corporate Culture

Carnival Corporation’s culture seems to internalize the concept of providing guests with the highest service standards while keeping a firm grip on operating costs.

There is significant corporate pride regarding Carnival’s position as the leader and innovator in the cruise industry.

C. Corporate Resources
1. Marketing

Carnival Corporation’s main marketing objective is to hold on to its 44% market share in the cruise industry.

It plans to retain the leadership position through aggressive promotional campaigns by gaining loyalty from former cruisers and by being innovative in shipboard activities and operations. Carnival’s cruise product is well-defined and positioned to serve three major markets: contemporary, premium, and luxury.

Carnival Cruise Lines (contemporary) targets young and first-time cruisers with moderately priced packages which include airfare and a variety of shipboard amenities.

Prices are competitive with those of other similar cruise and land-based packages. The “Fun Ship” cruise theme markets the ship itself as the primary vacation destination, with ports-of-call being of secondary importance.

Holland America Lines (premium) is positioned to attract higher income travelers with cruise prices averaging 25-35% higher than Carnival Cruises.

HAL serves an older, more established clientele. Carnival provides additional vacation opportunities through Westmark Hotels, Westours, Gray Line Tours, and the McKinley Explorer railroad coaches in Alaska. These auxiliary tours and hotels are marketed primarily to satisfy growing demand for Alaskan land vacations in conjunction with Carnival’s Alaskan cruises.

Seaborne serves the luxury market with South American, Mediterranean, Southeast Asian, and Baltic cruise destinations.

Seaborne serves very wealthy clientele with worldwide cruises up to 98 days’ duration.

Windstar Sail Cruises serves a specialty cruise niche with ships that have small capacity (fewer than 150 guests) and can approach smaller, less traveled ports-of-call.

Carnival Corp. was the first cruise operator to advertise on television.

Carnival books 99% of its cruises through travel agents and has implemented an incentive program to reward travel agents who suggest a Carnival cruise before other vacations.

2. Finance

Currently Carnival Corporation’s primary financial consideration is the control of costs in order to maintain a healthy profit margin (greater than 20%).

Another main concern is the current expansion plan funded by internal growth.

The financial ratios show several areas that need to be addressed in the company.

Carnival has very low liquid assets, as evidenced by the low current and quick ratio, and has negative working capital, which may cause creditors to doubt whether Carnival can meet its current obligations.

Overall, the liquidity of the company is very poor but may be common to the industry since so much money is tied up in the fixed assets portion of the balance sheets.

In other areas, Carnival is doing much better with a profit margin of 22%, ROI of 11%, and ROE of 19%.

The company isn’t overburdened by debt and has two revolving credit agreements for a total of $1 billion, $815 million of which is still available for the refurbishing and building of ships.

In the past five years the corporation has experienced losses due to the discontinuation of the Fiestamarina Line and two of its hotels.

Carnival recently purchased $101 million of secured notes issued by Kloster Cruise Lid. (Norwegian Cruise Lines).

Kloster has experienced financial difficulties, and if the company fails, Carnival will be in position to claim a portion of Kloster’s assets.

A financial strength of Carnival Corp. is that it is registered as a Controlled Foreign Corporation and thus is exempt from U.S. Federal income taxes at the corporate level.

3. Research and Development

Carnival relies on RD on the part of its shipbuilders to produce faster, more fuel efficient, technologically advanced ships.

Carnival also uses service RD to implement and improve shipboard entertainment and activities to serve the disparate needs of the three market segments they serve.

4. Operations

Main operations consist of the twelve cruise lines and the auxiliary tours and hotels mentioned in the analysis of marketing.

The company expects to take delivery of ten new ships (including several “superliners”) in the next four years; seven for the Carnival Line, two for the Holland America Line, and one for Windstar. These ships will result in a 20,484 passenger increase over Carnival Corp.’s current capacity and cost $3.3 billion.

This expansion will enable Carnival to stay competitive with its rivals, who are also expanding, but if future demand remains depressed, the extra capacity could negatively affect future profitability.

The major strength of Carnival’s operations is that they are very efficient; it has the lowest break-even point of any organization in the cruise industry.

It has also been able to achieve significant economies of scale by standardizing layout and shipboard operations on its ships.

Carnival’s fixed costs make up 33% of the company’s operating expenses, and they can’t be reduced in proportion to decreases in passenger loads and revenues.

Major variable costs as a percent of operating expense are as follows: airfare (25-30%), travel agent fees (10%), and labor (13-15%).

Shipboard operations are very labor-intensive, which results in high labor costs.

Carnival Corporation’s cruises are also subject to general threats in the environment such as political conflicts and natural disasters in areas where they cruise.

Human Resource Management

Cruises are labor-intensive, requiring extensive screening and hiring of employees.

Employees work on contracts of 3-9 months and are recruited mostly from third-world countries.

Carnival has employees from 51 nations

Carnival has been cited by the American Maritime Union for exploitation of employees, but the average employment period is approximately eight years, and supply exceeds demand for all cruise employee positions.

Information Systems

Although it is not mentioned in the case, Carnival Corporation’s information system is assumed to be quite extensive, in order to record passenger reservations taken from hundreds of travel agents and to orchestrate the daily operations of this large company.

The information system also appears to give very detailed breakdowns of expenses between cruise divisions and within cost categories.

Analysis of Strategic Factors
Situational Analysis (SWOT) (SFAS Matrix; see Exhibit 3)

1. Strengths

Largest cruise operator

Strong brand portfolio

Strong geographic presence

2. Weakness

High debt burden in FY 2006

3. Opportunities

Expansion of cruise operations

growing travel and tourism in China

reopening of cruise centers

4. Threats

Economic slowdown in the US

Increased minimum wages in the US

Intense Competition

VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives

1. Growth Strategies: Move more aggressively into the family cruise market segment.

Pros: Taps a new, growing market with fewer competitors than the traditional cruise industry. It allows alternate use of ships that aren’t being used if future demand remains depressed. This strategy allows Carnival to keep ahead of its competitors, and the company’s low break-even point puts it at an advantage over competitors who are pursuing a similar expansion plan. Pursuing moderate expansion allows Carnival to maintain its position as the market leader. This seems to be the strategy that the company wants to pursue, and management has been successful in bucking negative industry trends in the past.

Cons: This strategy requires a new way of thinking to be successful in satisfying family needs. In addition, a lower price may be necessary to attract families who are looking for affordable vacations. Competitor Disney is a major force in the vacation industry. If demand doesn’t rebound, the industry may face price wars and deep discounts. This effect will be compounded by Carnival’s inability to cut fixed costs in the face of decreasing demand, and profitability may be sharply reduced.

2. Pause Strategy: Considering the possibility of decreased demand and the uncertainty of future demand, it may be prudent to delay contracting for any additional ships until it is apparent whether cruise demand will rebound.

Pros: The company wouldn’t be tying up capital in additional ships when demand may not merit it. This would allow the company to concentrate on refining its current operations and marketing strategy. It may also lead to an improvement in the liquidity ratios.

Cons: If demand does rebound and Carnival hasn’t ordered additional ships, there will be a time lag until it receives new ships. In addition, if Carnival’s competitors continue expansion, then the company runs the risk of losing its leadership position in the industry.

3. Retrenchment Strategy: Carnival currently isn’t in a position where retrenchment is recommended. However, if demand doesn’t rebound, retrenchment could become a necessity in the future.

B. Recommended Strategy

Recommend that the company continue to pursue its current growth plan.

This strategy allows Carnival to stay current with its competitors.

If demand remains depressed in future years, there will still be ample time for Carnival to reassess its corporate strategy as long as they don’t delay indefinitely.

IMPLEMENTATION

The recommended strategy doesn’t require any extensive changes in current programs.

Top management should closely monitor the industry and general economic trends to determine whether demand will rebound as expected.

If not, management should formulate alternate strategies that adjust to these conditions.

EVALUATION CONTROL

Carnival’s management needs to address the poor state of the company’s working capital and current ratio.

These are of concern since a low current ratio may cause the company to default on certain debt covenants.

However, the state of the working capital and current ratio may be normal when compared with industry standards, since a large portion of the balance sheet assets is concentrated in fixed assets.

The company’s information systems are sufficient to evaluate the performance of the recommended strategy and to separate costs associated with the expansion.

Carefully monitors future demand and makes necessary adjustments, I think it is in a good position to maintain its leadership position in the industry and continue to be financially successful.

IX. EFAS, IFAS, and SFAS EXHIBITS

Exhibit 1

EFAS (External Factor Analysis Summary)

Key External Factors

Weight

Rating

Weighted Score

Comments

Opportunities

Only 5-7% of N. American market has cruised

.12

5

.60

Great number of potential customers

More emphasis on family vacations

.08

3

.24

Developing market segment

Two-income family – more disposable income

.08

3

.24

Cruises are an option

Changing industry

.13

4

.42

Threats

000000.0000

00000

Slowing growth in the cruise industry

.10

5

.50

2% in 1991-1995

Very competitive industry

.20

4

.80

Six major competitors

Demographic changes

.08

4

.32

Aging population

Strong economic conditions

.15

5

.75

Threat of substitutes

.06

3

.18

air, car

TOTAL SCORES
1.00
4.05
IX. IFAS, EFAS, and SFAS EXHIBITS

Exhibit 2

IFAS (Internal Factor Analysis Summary)

Key Internal Factors

Weight

Rating

Weighted Score

Comments

New larger ships

.05

4

.20

Future over capacity

104% capacity

.10

4

.50

#1

“Fun Ship” cruise theme

.05

4

.20

Effective

Clients – only tap 5%

.05

4

.20

Hard to get rest

Strong management team

.15

5

.75

Best in industry

Marketing/travel agents

.12

5

.60

strong team

Corporate culture

.10

5

.50

Strong

Acquisitions – concentric diversification

.14

4

.56

Great acquisition

HRM – exploiting employees

.05

4

.20

Stay 8 years

Financially strong

.10

4

.40

Low B/E and cash for new ships

Market share – 26%

.10

5

.50

#1

Healthy profit margins

.04

4

.16

TOTAL SCORES
1.05
4.77
IX. SFAS, EFAS, and IFAS EXHIBITS

Exhibit 3

SFAS (Strategic Factor Analysis Summary)

Key Strategic Factors

Weight

Rating

Weighted Score

Duration

S I L

Comments

Only 5-7% of Americans have taken a cruise

.15

4

.60

X

Potential customers

Growing family vacation market segment

.10

3

.30

X

Potential customers

Very competitive industry

.15

4

.60

X

Six competitors

Escalating threat of substitutes

.10

3

.30

X

Disney

26% market share

.15

5

.75

X

Industry leader

Lowest break-even point

.15

4

.60

X

Efficient

High fixed costs

.10

4

.40

X

Standardization

Poor liquidity ratios

.10

2

.20

X

Cash-poor

TOTAL SCORES
1.00
3.75