Choice Hotels International and its Strategies - Term Paper Example

Choice Hotels International Choice Hotels International is a global company that has been functioning in many regions across the globe. The company was founded in the year 1939. It is headquartered in the United States at Rockville, Maryland. The company has been pursuing certain strategies to sustain in the market, as identified in the following: ANALYSIS OF STRATEGIES USED BY CHOICE HOTELS INTERNATIONAL Market Penetration. Market penetration is the strategy adopted by Choice Hotels International to grow its existence in the global platform by establishing hotel branches in the targeted market. Choice Hotels International is expected to accomplish a considerable rise in its overall revenue generated and profit by functioning in different nations. For instance, Choice Hotels International penetrated into Florida through a strategic alliance contract with Bluegreen Corp to set up its collection of boutique hotels in Florida, which was a part of its autonomous hotel offering. This provides an idea that Choice Hotels International was pursuing the strategy of market penetration in Florida, which can be termed as an interstate penetration within the US (Hitt, Ireland and Hoskisson, 2014). In fact, there are several hotel industries across the globe that maximises the competitive forces within the industry context owing to which, in order to sustain, the market penetration strategy has been pursued by Choice Hotels International. This strategy would help the company to introduce hotel rooms at a reasonable rate as compared to its competitor’s hotel rooms, which in turn would result in increased market share by attracting the customers with reasonable price (Jakle, Keith and Jefferson, 2002). Therefore, it can be asserted that the main aim of the company is to increase its market share through market penetration. Market penetration can be observed as a continuation of the existing strategy being followed by Choice Hotels International since the past few years that has helped in offering distinct choices to each and every customer maintaining adequate alignment with their preferences. In the US, through market penetration, the organisation has established 280 hotels, which has resulted in attracting millions of customers annual on an average. There are seven brands that function under Choice Hotels International, which provide ample choice to the customers, along with a flawless match for the company with its wide-ranging location across the US and other nations (Gray, n.d.). Its organisational culture is based on the belief that if its properties provide a good performance, the company will have a good return on investment made in terms of market penetration. Moreover, market penetration has been used as a strategy by the hotel in order to increase its variation in the range of hotels and result in improved performances. It would be worth mentioning that market penetration would act as a driving force for changing its direction and the way in which, it had been previously performing. This change in direction can be identified in terms of its cultural transitions, as it has to imbibe different cultural principles in its business functioning to perform effective market penetration in various locations. Moreover, a change will also be visible in the Revenue Per Available Room (RevPAR) and Average Daily Rate (ADR) rate through market penetration, as the company would have to focus on reducing its cost of hotel services following a competitive pricing strategy that would attract a larger volume of customers (Gray, n.d.). Through market penetration, the company would be protected from several risks related to its business functioning. It can be affirmed in this context that Choice Hotels International through market penetration would be protected from market volatility in the US, as the strategy would reward flexibility to the company’s strategic capabilities that would further permit it to react to the changing business situations with greater efficiency. It would also ensure that the company will be able to obtain new opportunities in its business functioning. Moreover, this strategy would help Choice Hotels International to expand its business establishment and reduce the risk of competitors in the hotel industry, as the company would be able to attract more customers through this strategy. Through market penetration, it can be ascertained that the strategy would provide a competitive advantage to the company in the US market, as the company would be able to diversify its currently offered range of services and offerings in the hotel industry. Stating precisely, Choice Hotels International would be able to measure the success of its market penetration strategy by assessing whether this strategy has helped increasing the sales of the company. Moreover, the company will also have to assess whether the company, through market penetration, could increase its market share to obtain better sustainability and comparative advantages. Overall, it can be asserted that the company would be successful in the US market through market penetration, considering the fact that it will enable the company to diversify its brands functioning under Choice Hotel, ensuring better sustainability in the market (Meyer and Tran, 2006). Market Development. Choice Hotels International has been following the strategy of market development to grow its business establishment in various targeted market segment in accordance with the preferences of the customers sufficing the existing demand of services following its accurate market trend assessments. The main objective of Choice Hotels International, when applying market development strategies, has been to target a new segment of customers through market development strategy that would ensure that the customers will get attracted to the services offered by Choice Hotels International (Choice Hotels International, Inc, “Develop Your Business with a Global Leader”). Market development strategies have been used by the company in order to expand its business in the prospective market, segmenting the customers according to their expectations and preferences. It has therefore been revealed that the company plans to accomplish increased sales through market development by targeting new segment of customers. Correspondingly, Choice Hotels International has been pursuing market development strategy with an intention to improve its brand recognition. Likewise, it is focused towards getting recognised worldwide through its brands including Comfort Inn, Rodeway Inn, Comfort Suites, Quality Inn, MainStay Suites, Cambria Suites, Clarion and Econo Lodge brands. From a generalised perspective, it can be observed that this strategy has been the continuation of an existing strategy being used by the company. Correspondingly, from the past few years, the organisation has been using its market development strategies for establishing a strong business model. This strategy has helped it in developing a strong business model owing to which the company was able to develop more than 6,000 hotels functioning across 35 countries. This strategy has also helped the franchisees, functioning under the brand name of Choice Hotels International, to develop its businesses by attracting new customers along with the loyal ones who have grown in confidence in relation to the services offered (Choice Hotels International, Inc, “Develop Your Business with a Global Leader”). Market development strategy has driven the company to change its directions wherein the company has recognised Europe as a potential market for its overall expansion and growth. It is worth mentioning in this context that the company has been more focused towards investing in the infrastructure facilities of its brand, which can be considered as an aspect for change in direction of the company. Subsequently, the applied strategy has brought a change in direction, as the company has introduced a new market development incentive, which has been intended to construct new Comfort Inn and Comfort Suites hotels that would initiate growth in its business portfolio (MarketWatch, Inc, “Choice Hotels to Offer Landmark New Construction Incentive for Comfort Brands”). Furthermore, this development incentive was used as a strategy to unveil next generation hotels under Comfort Inn and Comfort Suites, which has differentiated the company from its competitors to a higher margin. As stated by the Chief Executive Officer and the president of Choice Hotels International, “Last year 67 million people stayed at a Comfort hotel, now were giving them more reasons to keep coming back”, which directly indicates to the focus on the organisation concerning its market development (MarketWatch, Inc, “Choice Hotels to Offer Landmark New Construction Incentive for Comfort Brands”). Concerning the benefits of market development, it can be argued that through this process, the company would be able to reduce the risk related to changing preferences of customers, as the strategy would help the company to influence customer’s preferences more effectively and therefore, build demands for its services within the targeted market segment. In addition, the company would be protected from risks related to operating costs, as market development would eventually result in reducing the overall operating cost of Choice Hotel International and its subsidiaries offering it with enhanced benefits of economies of scale. It would be worth mentioning that market development would provide a competitive advantage to the company when expanding its business and bringing innovativeness in its hotel (Choice Hotels International, Inc, “Annual Report”). Moreover, the market development incentive created by the company would be quite difficult for its competitors to copy, as it has been an innovative strategy developed by the company. It is worth mentioning in this context that Choice Hotel International would be able to measure the success of market development strategy by assessing its demand in the market along with identifying whether the company has been able to retain its loyal customers. Likewise, the success accomplished by the company through the market development strategy can be measured by obtaining the information regarding the potentiality of different markets in which, the company is functioning. Eventually, it can be affirmed that market development strategy would be quite successful for Choice Hotel International, as it would enable the company to expand its business in a new market segment by targeting a new segment of customers. In addition, the strategy would be successful, as the company would be able to enhance its brand value along with an increase in its market share (Choice Hotels International, Inc, “Annual Report”). Related Diversification. The strategy of related diversification is commonly referred as the process through which, the company would expand its business activities in the industry without transitioning entirely from its present functioning frameworks. It is considered as an effective strategy being used by Choice Hotels International from the past five years that has helped it in diversifying the company as a whole. Notably, the company has emphasised on five factors when applying the concept of related diversification that includes diversifying through franchise ownership, diversification in the workplace, diversification in its suppliers who provide different hospitality related products and finally, inculcating diversity in its advertising and marketing processes (IFA Educational Foundation, “Diversity Report and Case Studies”). This in turn has helped the company to reach new heights along with being successful in its global business. Choice Hotels International has been planning to accomplish new opportunities and open new doors by embracing diversification in their business structure. It has been accordingly revealed that the company is pursuing related diversification that will put its business to the right course and help Choice Hotels International in developing a good sense of business. Accordingly, it has been viewed that Choice Hotels International have a different approach to diversity and being primarily focused towards providing a reflection of the communities in which, the company is carrying out its wide ranging business functions (IFA Educational Foundation, “Diversity Report and Case Studies”). The company has been continuing the existing strategy of related diversification since the past few years to grow as a global business unit. Practicing related diversification strategies, the company’s intention has been to improve its market presence that would ensure better comparative advantages to the company in its targeted market segments. Thus, it can be asserted that the existing strategy of related diversification being used by the company has been useful and productive to a huge extent to reward it the currently observed fame. It would be worth mentioning in this regard that diversification has resulted in changing the direction for the company in the hotel industry. Choice Hotels International has gained efficiency in the implementation of related diversification with the initiative of recognising minority owners in the industry and has helped in providing them the required operational support to develop and suffice the growing demands of the customers. This change in direction for Choice Hotels International has provided a great opportunity to the minority group of hotel developers in diversifying their assets along with being a part of the renowned hotel industry (Choice Hotels International, “Minority Incentive Programs”). Moreover, it was revealed that the company became immune to various risks associated to their business with the use of related diversification, as a strategy in their business functioning. In this case, the company has been able to understand the cultural beliefs of customers and accordingly, provide services as per the demand of the customers who belong from different cultural backgrounds. In addition, the financial risks associated with expansion of its business would be mitigated through diversification and eventually, the company would be protected from market risks within its targeted business environment. Furthermore, it can be ascertained that related diversification strategy would provide a competitive advantage to the company by facilitating it to allocate its resources more efficiently and expand its market portfolio to sustain more competitively in the market. Additionally, Choice Hotels International would be advantaged, as it would enable the company understand the customers and accordingly, provide convenient services as per their tastes and preferences. Economies of scale through diversification would also help the company in positioning itself in a competitive situation (Choice Hotels International, Inc, “Choice Hotels Expands Franchise Ownership among Minorities”). On the other hand, it would be quite difficult for other competitors of Choice Hotels International to copy the strategy being followed by them, as it has taken a different approach in its diversification process that is recognising hotel developers, which is smaller in nature and incorporating them in the business to grow globally. Choice Hotels International can measure the success of its related diversification strategy by collecting feedbacks from its customers and understanding whether their preference was actually met in the process of availing the services from the company. Likewise, bargaining power of buyers must be assessed in this field that would help the company in obtaining a succinct idea regarding the success potentials of its applied strategies. Eventually, it can be affirmed that related diversification strategy has already been successful and would continue to be successful in the coming future. The main reason for the company’s success through related diversification can be considered as it has gained experiences in understanding global customers and undertaking its business activities globally (Choice Hotels International, Inc, “Choice Hotels Expands Franchise Ownership among Minorities”). Works Cited “Annual Report”. Choice Hotels International, Inc. 2011. Web. 20 Mar. 2014. “Develop Your Business with a Global Leader”. Choice Hotels International, Inc. 2012. Web. 5 Apr. 2014. “Minority Incentive Programs”. Choice Hotels International. n.d. Web. 5 Apr. 2014. “Choice Hotels Expands Franchise Ownership Among Minorities”. Choice Hotels International, Inc. 2013. Web. 5 Apr. 2014. Gray, Kelly. Living Up to a Name. n.d. Web. 5 Apr. 2014. Hitt, Michael, R. Duane Ireland and Robert Hoskisson. Strategic Management: Concepts: Competitiveness and Globalization. United States: Cengage Learning, 2014. Print. “Diversity Report and Case Studies”. IFA Educational Foundation. 2003. Web. 5 Apr. 2014. Jakle, John A., Keith A. Sculle, and Jefferson S. Rogers. The Motel in America. United States: JHU Press, 2002. Print. “Choice Hotels to Offer Landmark New Construction Incentive for Comfort Brands”. MarketWatch, Inc. 2014. Web. 5 Apr. 2014. Meyer, Klaus E. and Yen Thi Thu Tran. Market Penetration and Acquisition Strategies for Emerging Economies. 2006. Web. 5 Apr. 2014. Read More