Gingers Generic Strategy - Case Study Example

Ginger Hotels’ Case Study Ginger Hotels: An Introduction Ginger Hotels are run by the company, Roots Corporation Limited (RCL), which is a subsidiaryof the Indian Hotels Company Limited (IHCL). The IHCL and its subsidiaries together are known as Taj Hotels, Resorts and Palaces. These businesses are part of the Indian flagship company TATA. IHCL operates in the luxury in upper upscale, upscale and value segment. Ginger Hotels are the result of IHCL’s revolutionary concept of ‘Smart Basics’ which was designed and developed by IHCL indigenously in association with the corporate strategy thinker Dr. C. K. Prahalad. ‘Smart Basics’ create and fill the space for guest comfort, relaxation, smart needs, work facilities, in economic class of the hospitality sector. The first hotel of the Smart Basics concept was developed in Bangalore and named ‘IndiOne’; after its fine tuning the concept was launched under a new name, ‘Ginger Hotels’, in different parts of India (www.gingerhotels.com). Question No.2: Analyze Ginger Roots’ generic strategy and identify its main sources of competitive advantages. What do you consider to be the key resources and core capabilities that have made the Ginger concept successful? Ginger’s Generic Strategy and sources of competitive advantages: Generic strategy is defined as basic approaches to planning and envisioning a desired future that can be adopted by an industry to achieve its goals. Out of the three generic strategies described by Porter, namely differentiation strategy, focus strategy and low cost strategy, Ginger Hotels have adopted the differentiation strategy in its business to achieve their goals. Differentiation strategy: In the economy hotel sector there are already a large number of players, and these hotels are sensitive to price. Here the customers mainly demand standardized services and comfort at economic costs. The customers in this economy segment are different from those Ginger Hotels are targeting. Ginger Hotels’ customers have specific needs which are not currently available in the economy class. The differentiation strategy is appropriate for Ginger Hotels’ target customer segment for smart hotels equipped with modern facilities and infrastructure offering advance services, facilities at a higher but economic cost. Ginger Hotels are using a combination of strategies, both at the company and product levels, for the purpose of differentiation. Some selected strategies and their advantages these provide are described below: 1. Differentiation using values of brand and reputation The group called Taj Hotels, Resorts and Palaces’ is Asia’s largest and finest group of hotels. The group includes Indian Hotels Company Limited (IHCL) and its subsidiaries. The IHCL subsidiary Roots Corporation (RCL) developed the concept of Smart Basics hotels. The experience and financial strength of IHCL and TATA brand provide Ginger Hotels value and reputation. During the process of developing smart hotels, the IHCL developed various policies, processes, intellectual property like trademarks, copyrights, to protect the brand from potential competitors, which are valuable for business. The company got its trademark ‘Ginger’ registered in India. It also launched a registered domain, www.gingerhotels.com as a part of generic strategy to protect, promote and build the Ginger Hotel brand. This helps build company image and brand. 2. Differentiation using company’s resourcefulness and capability Ginger Hotels being a project of IHCL, these hotels have required strengths, financial and human resources adding to the company’s overall capability to take the project forward and make it a success. These hotels have collaborators, distribution channels, contractors which bring value to the hotel. 3. Differentiation by using uniqueness of infrastructure and facilities The existing economy customers demand comfortable lodging and standardized service product. Therefore, Ginger has placed itself as a chain of economy hotels across the country with facilities different from the existing economy hotels. The conventional customers are not dependent on technology, and are not demanding technology- based services at affordable cost. The technology part in conventional hotels is not important, but at Tata Ginger, technology is important and distinct. With the introduction of better IT services in India, people are getting used to internet, mobiles, easy cash from ATMs, and are in need of modern integrated hotel facilities. For this reason the chain of Ginger Hotels is distinct and caters to people demanding such facilities. Ginger’s technology based fully integrated infrastructure, facilities and services help in the operations for organization’s management functions, financial controls, and services to customers. There is uniformity of services across all units of the Ginger Hotel chain. This adds value to customer service. Continuous improvements in infrastructure and improvements in the system through innovative approaches differentiate Ginger as a class. 4. Differentiation through company’s services and business practices A system of self-service by customers saves on tips and reduces customer’s expenditure, and at the same time provides better services and convenience to customers at economic costs. Outsourcing of food and beverages provides customers a wider option to select food from a wider choice, convenience, and satisfaction. This distinguishes it as a different class. Competitive Advantages: Competitive advantage is derived from the uniqueness and distinctiveness of an organization. Ginger Hotels have followed resource-based strategy to give the company a distinctive advantage as compared to economy hotels. Ginger’s advantages are due to the following reasons: The Brand image and status accorded by IHCL/TATA and available resources (physical, financial, human and intellectual), capabilities, superior services, all India nature of the hotel chain, as major competitive advantages. The size of the TATA group as well as the Ginger’s chain, and infrastructure at Ginger Hotels, give them an advantage of size, quality, and economic costs over the conventional economy hotels. All economy hotels have industry specific skills, and the business focus is on the basic services and economic costs. Through the value chain analysis it is possible to identify cluster of activities beneficial to customers, and those less efficient, so that these later services could be outsourced. Ginger Hotel has identified several services like room service; call bell, etc. as non- essential and done away with them. Instead has focused on important ones like comfort, ease, safety. By networking with a variety of vendors and service providers the hotel has not only retained its best parts of services, but added value of its networks to customers advantages. By outsourcing food and beverages, the customers’ advantage is to order food from several food chains. Ginger Hotels have developed superior performance (Porter, 1985) by developing core competencies through their specialized resources and networks which help them provide superior services. The core competencies developed by this hotel chain is better than the competencies of their competitors. Due to cost and size constraints, these core competencies can’t be copied easily by competitors and thus provide Ginger Hotels a major competitive advantage. Key Resources & Core Capabilities Key Resources: Ginger Hotels have used the advantages of all their resources, in particular intellectual capital, physical resources created, financial resources and the human resource. The TATA’s brand image, Ginger’s advance infrastructure, room facilities, business facilities, ATM, hotels chain-network, business partners and collaborators, all are valuable resources and assets for the company. The registered trademark of ‘Ginger’, business secrets, business processes, agreements with staff and partners and vendors developed for operations are unique to Ginger and cannot be copied by any one due to protection under law or due to secrecy. Ginger’s human resource is qualified and experienced. The staff receives regular training in company’s culture, processes and practices. Beside partners are also trained to keep their processes similar to Ginger’s processes. Human resource trained in Ginger’s culture is company’s major resources. Core Capabilities: Ginger’s capabilities are vested in company’s tangible and intangible resources. RCL business model has focused on core competencies of the group in order to give Ginger a distinct advantage over the competitors. Ginger has advantages of the big brand and image of IHCT/TATA, and capabilities due to available resources in form of capital, infrastructure, financial strengths, and human resource. Ginger’s core competencies are in its processes, practices, and the value of trained staff throughout its chain. The company’s core competencies distinguish it from its competitors. Question No. 3: As a relative newcomer to India’s hotel sector, identify and evaluate Ginger’s principal strengths and weaknesses as depicted in the case study. Analyze and evaluate Ginger’s Human Resource and Marketing policies. Would you now recommend strategy policy changes? SWOT Analysis: An analysis of Ginger Hotels using SWOT reveals strengths, weaknesses, opportunities and threats. Some principal strengths and weaknesses are described below: Principal Strengths: 1. The existing economic segment hotels in India have traditional customers. These economy hotels focus on domestic business and leisure travelers who demand convenient lodging, a consistent product and standard services. The percentage-wise distributions of customers who use these services include: individual business travelers (37%), contract corporate travelers (23%) and individual leisure travelers (20%). Here, the customer satisfaction is driven from basic needs. Those conventional customers are not dependent on technology, and are not demanding technology-based services at affordable cost. Ginger Hotels combine smart facilities and systems with services aiming at ease, comfort and efficiency. With the introduction of better IT services in India, people are becoming used to internet, mobiles, easy cash from ATMs, and are in need of modern integrated hotel facilities at affordable cost. For this reason, the Ginger Hotels are filling this need for smart hotels in economy segment of the hospitality sector. Further, a chain of branded hotels create a viable strength for the Ginger Hotels. The concept of Smart Basics hotel is consistent with the current times of fast life and improved IT- based services replacing conventional manually handled services. The concept backed and operated by a flagship company like IHCL/TATA is well accepted in the form of a product. 2. Ginger Hotels’ infrastructure, facilities, services and cost are unmatchable. The facilities covers complete spectrum of single, double, queen size beds; facilities for physically challenged, quality room facilities (flat screen, cable TV, fridge, branded toiletries, 24-hour hot/cold water, etc.); smart sleep offered by posture-pedic mattresses for absorbing pressure and comfort; anti-allergic pillow, smart wellness facility for business travelers, security through close circuit TV, etc. The hotel supporting infrastructure like kitchen, house-keeping, power backup and IT network are highly organized and up-to-date. An integrated information and operation system aim at performance monitoring, cost-effectiveness, quick redressal of problems and better customer services. 3. Ginger Hotels are the only branded economy hotels in India with nationwide presence due to their network of units in different cities. Ginger Hotels had early mover’s status in many markets which gives them advantage over competitors. Though located in different parts of the country, all units offer a standardized product and maintain the uniformity in the services provided by the hotel chain. Ginger Hotels establish regional operational synergy. The innovative products and services offered by Ginger Hotels distinguish them from competitors. 4. Ginger Hotels have established several processes and practices which distinguish them in their class. They do not allow customers to offer tips to staff by enabling ‘Self-help’ measures which helps customers to save on tips. Besides the hotels outsource food and beverages for which they have partners. This saves cost of operation and increases choice for the customer, and establishes the chain as a different class. 5. In their capacity as economy segment hotels (Three Star) they are better protected, and are more stable economically, as against the volatility of the hospitality sector in general, and as compared to upscale segment of hotels. The company deployed differentiation as the strategy for marketing and implemented it successfully. Ginger Hotels are the only branded economy hotels in India with nationwide presence due to their network of hotels in different cities. Principal Weaknesses Some principal weaknesses are the result of the smart concept: 1. The Ginger Hotels have a system of ‘Self-Help’, and does not provide manual services. The Indian customers appreciate personalized services. A good hotel like Ginger Hotels not providing room service, call bell, table service does not go well with customers in the economy segment. This weakness arises from the conceptual gap between perceptions of customers’ belief about ‘service-expectation’. The customers are not properly informed about as to what they should expect from the hotel’s services. 2. In spite of Ginger explaining through videos about ‘No tip’, there is a communication gap between the hotel and customers. Commercials played on videos in hotel lobby and elsewhere in hotel ask customers not to pay tips. The customers not understanding the smart hotels concept due to lack of awareness, often complain about facilities on internet and reception. These complaints are however different from dissatisfaction against services provided. The weakness here is not in communication but in lack of clarity to explain to customers what to expect. 3. The technology part of Smart Basics concept at Ginger Hotel is (in some way) a weakness, because the modern amenities here are even different from those commonly available in metros. This is a weakness because people are not used to it and feel inhibited to use smart services. Once they are aware of the system, its advantages, and have experienced the use, the inhibition factor goes away. The weakness emerges from lack of awareness, education and exposure to similar facilities before. Ginger’s Human Resource & Marketing Policies: Human Resource Policies: Ginger Hotels human resource policies are governed by the need of organization which has a network of several units in different part of India. And each part is culturally different, where there are even differences in languages and culture. The hotels utilize opportunities available to recruit from local populations, but at the same time focus on professionalism. Ginger Hotels recruit the best people from the market and aim to retain them. The staff is given constant training in hotel operations and company culture. The outsourced partners are also trained in policies and processes because they are required to follow policies and processes similar to Ginger. Ginger also leverages hotel management schools to cater to its HRD needs. The company uses HRD as a strategy to differentiate from others as well as provide specialized services at economic costs. The hotels manpower is a major strategy to leverage the company’s goal. Marketing Policy: The policy of Ginger Hotel does not require huge spends on media for marketing, and aims at innovative use of available media and distribution channels. Therefore, the company uses all possible innovative approaches to promote their brand, market products, and book customers. The marketing policy focus is on the distinctiveness, capabilities, resources and competencies of Ginger Hotels which help them provide quality services with efficiency. The various channels used in marketing are: 1. An innovative approach was adopted by building a life-size model of the hotel and someone was made to stay there campaigning about the hotel to metros. This led to BBC/CNN coverage. 2. Ginger has distribution partners like BPCL which is rolling out travel desks at various BPCL petrol pumps in India. 3. They have their own registered website. Besides they use other travel portals and travel related websites, large and small travel agencies, and a call center with toll free number, to promote and market their products. 4. The Ginger Hotels marketing policy aims at strengthening of the Ginger brand along with its registered trademark, trade secrets, intellectual rights, etc. The brand distinguishes Ginger Hotels and protects its technology platforms, services, products from competitors. These strengths provide strength in marketing of products and services. 6. The marketing policy focus is to serve corporate customers, value oriented customers, small medium enterprises (SMEs) business travelers, leisure travelers seeking comfortable and convenient lodging at affordable price. Strategy Policy Changes Advised: The Ginger Hotels are looking at business class in particular. Ginger should explore public organizations as a large segment for their business. Public organizations’ staff involved in development activity is frequent travelers. They need appropriate accommodation for stay at reasonable costs. Business ties with these organizations will be useful for Ginger. There also exists considerable opportunity to tap foreign clients References: M.E.Porter, Competitive Advantage; Creating and Sustaining Superior Performance, Free Press, 1985. Simon & Schuster Inc. Read More