International Hospitality Industry - Coursework Example

Introduction: The Galleria Group represents a chain of hotels that have a considerable presence in the United Kingdom. The company began from humble establishments, with only one hotel, and now it runs and operates over 22 hotels in the United Kingdom alone (Barrows, Powers and Reynolds, 2012). The company normally purchases or acquires hotels operating in main tourism centers, or hotels that are slightly away from offbeat locations that are nearer to major tourism centers. This strategy by Galleria Group is highly successful, and effective. This is because the company manages to acquire hotels that are in rural settings, and thereby minimizing the costs of developing the hotel (Dev, 2012). This is because the institutions are normally bought as a going concern, and all that is needed is to modernize the hotels that are purchased. It is important to understand that Galleria Group operates mainly as a property development agency, as well as a hotel group. This was the vision of its founder, Davis Simpson, who is now acting as the Chief Executive Officer of the company. A hospitality organization that can form an alliance with Galleria Group is the Q chain of hotels. The hotel has a similar size with that of the Galleria group. This is in terms of the number of hotels that the two organizations are operating. Q chain of hotels runs and operates 21, hotels, just 1 behind the Galleria Group (Lieberman and Nissen, 2005). The company also runs a series of Four Star hotels, and they are located throughout the United Kingdom. It is important to denote that the main locations of Q Star hotels are in urban and town centers, as opposed to the rural set up of hotels that are operated and managed by the Galleria Group. This paper is an analysis of the reasons as to why Galleria Hotel Group should form an alliance with Q star hotels. Types of Alliances Available: There are five types of alliances that Galleria Group can decide to engage in with Q Star hotels. One such alliance is the sales alliance. Under a sales alliance, the two companies can decide to promote and market their complementary services and products together. However, looking at the services of Galleria Group, and that of Q Star hotels, it is important to denote that they all provide a similar (Nykiel, 2011). The target market of Q Star hotels is the tourism sector, and the same applies to the target market of Galleria Group. However, it is important to denote that hotels belonging to the Galleria group are on most occasions found in the rural set up. On this basis, Q Star hotels can always refer guest willing to explore the country side to these hotels. On the other hand, hotels operating under the Galleria group can also refer customers willing to explore the urban centers to the Q star hotels. It is important to denote that the sales strategy will help these organizations to penetrate their respective markets, and hence leading to an increase in their market share (Cassiman and Colombo, 2006). However, the sales strategy is not a convenient method of alliance that Galleria group and Q star hotels should engage in. This is because this strategy will not help the two organization to create and penetrate into new and emerging markets. The strategy will only limit the two organizations to the markets where they are found. On this basis, there is a need of exploring another method of forming an alliance. Another type of an alliance that these two organizations can form is the solution specific alliance. This type of association would help the two organizations to come upon with a solution for purposes of solving a particular problem that affects the hospitality industry (Cassiman and Colombo, 2006). Take for instance when there is an issue that might reduce the number of visitors in the United Kingdom, like terrorism. The two organizations might decide to cooperate together, for purposes of coming with a solution that might help in solving the problem of terrorism (King, Funk and Wilkins, 2011). However, the solution specific alliance won’t help the two organizations penetrate into a given market. It would still make them competitors, competing for the tourism market share. Another type of an alliance that Galleria Group, and Q Star hotels might engage in is the geographic specific alliance, this involves jointly marketing their products in a specific geographic position (Cassiman and Colombo, 2006). However, this cannot occur between the two organizations (Cooper, 2006). This is because the two organizations operate in different localities, one in the urban settings, that is Q Star hotels, while Galleria Group operates in semi-urban regions, and rural set ups. One is an acquisition or merger, and another strategy is a joint venture. A joint venture is an alliance strategy whereby the business organizations agree to undertake their economic activities together. It is important to denote that a Joint Venture would only be successful, if the companies under consideration have complementary and different products that they engage in. Companies forming a joint venture must excel in product diversification (Unoki, 2013). However, the Galleria Group and Q Star Hotels have a similar strength in terms of the resources they control, and products they sale. That is services in the hospitality industry. On this note, entering into an alliance through a joint venture is not conducive, and cannot work for the two organizations. Based on this fact therefore, the best alliance, that Galleria Group, and Q Star hotels can engage in is a merger/acquisition (Cooper, 2006). Under this strategy, the two organizations will join their resources, both financial and physical resources, for purposes of engaging in business. A merger/acquisition will increase the market share of the two organizations, and they will also benefit from the advantages that come with the economies of scale. Merger/ Acquisition as a strategy for the alliance: It is important to denote that acquisitions and mergers are they type of alliances that are gaining shape in the current century. Companies operating in most industries are involved in acquisitions, or even mergers for purposes of improving their competitive advantage (Cassiman and Colombo, 2006). Take for instance in the air line industry, there have been a series of mergers experienced, and this includes the merger of Delta Airlines, and North West airlines in 2010, the merger of the American airlines, AMR, and US airways in 2013, which resulted to the American airlines. In the hotel industry, major brands are involved in the acquisition process of hotels. Take for example, the leading hotel groups in the world, such as the Inter Continental Hotel Group, and the Wyndham Hotel Group (Sheppardson and Gibson, 2011). These two organizations, in their bid to increase their market share, and hence revenues, are involved in expansion strategies. Another organization is the Aimbridge international, which is a hospitality investment group, with numerous chains of hotels all over the world. This company involves itself in acquiring hotel chains, for purposes of expansion, and entering into a given market (Hayes and Miller, 2011). These strategies include buying of lesser hotel chains, and transforming them into their brands. On this basis, hotel chains, such as the Galleria Group, and Q Star hotels are vulnerable to the acquisition strategies of hotel chains such as Inter Contintal, and Wyndham group. On this basis, to protect themselves from acquisitions, there is a need of these two organizations to merge. It is important to denote that the hospitality industry is characterized by these mergers and acquisitions, and on this basis, it is positioned enough to manage and respond to such kind of a recession (Jackson and Kwansa, 2011). Through a merger, the two organizations will enjoy a number of benefits, and this includes market consolidation, product and market development, diversification, and their internal development. Take for instance, when the Galleria Group merges with Q Star hotels, then chances are high that they will be able to consolidate the markets of their operations (Jackson and Kwansa, 2011). This is because the companies will be enjoying the benefits that come with economies of scale, which are lower prices in supply, effective and efficient management, and ability to access cheaper credit from financial institutions. When the two companies effectively use the benefits associated with economies of scale, then chances are high that they will gain a competitive advantage over their rivals. This will in turn, result to the consolidation of their markets of operation. When these two organizations merge, Galleria Group will bring in its 22 chains of hotels, while Q Star hotels will bring in its 21 chains of hotels. In total, these companies will be controlling 43 hotels, situated all over the United Kingdom (Cassiman and Colombo, 2006). It is important to denote that as a result of these changes, chances are high that the organization will manage to increase the number of visitors, seeking to use their services. Since the hotels of the new outfit formed from the merger will be located in rural and urban centers. This of course is a very large organization, and it will be a lucrative market for suppliers, who will aim to capture and contain this market. On this basis, suppliers will be forced to offer discounts, or supply their products at an affordable rate (Jackson and Kwansa, 2011). Another important advantage that these organizations is the development of the services and products that they offer. Due to the benefits that emanate from economies of scale, the two organizations might be able to improve their services; this includes the quality of their hotel rooms, the quality of food that they serve, and the quality of employees that the two organizations attract, and employ (King, Funk and Wilkins, 2011). It is important to denote that apart from the economies of scale that the organizations will enjoy leading to their improvement in services, Q Star hotels have a very high level and standard of service. This is because all the hotels under the ownership of Q Star are rated as 4 starred, as opposed to the hotels under the Galleria Group, which most of them are rated as 3 starred (Ginsburg, 2013). On this note, Galleria Group will learn so much from the manner in which Q Star hotels manages to offer high quality services. On this basis, the merger between these organizations will improve the ratings of their services, since they will learn from each other, and use the skills learnt to improve on their services. Galleria will also benefit from the resources of the Q Star hotels, such as its research and development department. Q Star hotels have a very good research and development department that always carries out a research on new menus, and how to prepare them (Unoki, 2013). This is an essential requirement in the hospitality industry, and this is because the company will be able to prepare a menu that satisfies its customers. On this basis, Galleria will benefit from these resources, and hence improve on the quality of food substances that they produce. It is important to denote that satisfaction of the needs of a customer is the key element that might make an organization to achieve growth. Research and Development will also enable the company to develop strategies that might help it penetrate new markets (Boella and Turner, 2005). Due to fierce competition in the hospitality industry, most companies normally look for new and emerging markets, and they diversify the products that they offer. On this basis, through research, the companies might know the dynamics of a given market, and hence develop an entry strategy into the given market. Galleria will therefore use the research and development department of Q Star hotels to identify new markets for the alliance, and this will help in achieving growth. It is important to denote that the two companies might be unable to attract the necessary capital in investing in the emerging markets, when they are operating individually. This is because the capital required is high, and they must always pass through vigorous vetting processes from the governments of these new emerging markets (Goldberg, 2013). Through a merger, Galleria and Q Star will be able to achieve easily attract credit from financial institutions, who will be willing to finance their initiatives. On the other hand, the two companies might also manage to diversify their operations. Q Star hotels will remain in the business of providing hospitality services, while Galleria Group will embark on the business of buying and acquiring hotels, for refurbishment, and absorption into the alliance (Walker and Walker, 2012). This will help to improve the quality of products that the two organizations offer, and their efficiency. It is important to denote that through diversification of the products and services of the two organizations, chances are high that they may compete effectively and efficiently with other multi-national organizations responsible for providing hospitality services. Diversification of services also helps the organization to increase its revenue stream, and this is because the organization under consideration gets other channels of making money (Ginsburg, 2013). Chances are also high the internal structure of the organization will improve. This is because with a merger, new offices are formed; other offices are combined, for purposes of increasing efficiency. Take for instance, the sales department of the two organizations will be merged into one, and on this basis, the organization will benefit from a diverse pool of skilled workers (Nyheim, McFadden and Connolly, 2005). This will most definitely improve the manner in which an organization conducts its own affairs. It is important to denote that in as much as mergers are a very important aspect of a business, most mergers and acquisitions are not always successful. This is because there are a variety of factors that will ensure whether a merger is successful, or not. One of the important factors that play a role in ensuring whether a merger or an acquisition is successful is the culture of the company. By looking at these organizations, their cultures blend together. The target market of these two companies is the tourists, and they are also involved in expansion strategies (Nyheim, McFadden and Connolly, 2005). This is a common factor that ties these organizations together, and hence, chances are high that their merger will achieve results. However, mergers are never easy to manage. This is because they may face resistant from employees, who are afraid that their jobs will be taken away. Others include it is always costly for a merger to occur, and this costs normally emanate from legal fees, and taxes that the organizations are supposed to pay (Walker and Walker, 2012). However, if well handled, then chances are high that the business organization will manage to increase its revenue, and market share. Conclusion; In conclusion, a merger is the best alliance strategy for these two organizations. The two organizations will benefit from the resources that each control and it will also help them gain the capability of attracting capital. With the merger of these two organizations, chances are high that they will achieve growth, and hence, increase their market share. On this note, it is highly recommended that Galleria, and Q Star hotels follow this line of building an alliance. Bibliography: Barrows, C. W., Powers, T. F., & Reynolds, D. E. (2012). Introduction to Management in the Hospitality Industry (Tenth ed.). Hoboken, New Jersey: Wiley. Boella, M. J., & Turner, S. (2005). Human resource management in the hospitality industry: an introductory guide (8th ed.). Oxford: Butterworth-Heinemann. Cassiman, B., & Colombo, M. G. (2006). Mergers & acquisitions: the innovation impact. Cheltenham, UK: Edward Elgar. Cooper, C. L. (2006). Advances in mergers and acquisitions. Amsterdam: Elsevier JAI. Dev, C. S. (2012). Hospitality branding. Ithaca, N.Y.: Cornell University Press. Ginsburg, M. D. (2013). Mergers, acquisitions, and buyouts: february 2013.. S.l.: Kluwer Law International. Goldberg, R. A. (2013). Mergers & acquisitions 2013: trends and developments. New York, NY: Practising Law Institute. Hayes, D. K., & Miller, A. (2011). Revenue management for the hospitality industry. Hoboken, N.J.: Wiley. Jackson, L. A., & Kwansa, F. (2011). Digitizing Financial Reporting: A Profile of Early Hospitality Industry XBRL Adopters and Implications for the Industry. The Journal of Hospitality Financial Management , 19(1), 27-50. King, C., Funk, D. C., & Wilkins, H. (2011). Bridging the gap: An examination of the relative alignment of hospitality research and industry priorities. International Journal of Hospitality Management, 30(1), 157-166. Lieberman, K., & Nissen, B. (2005). Ethics in the hospitality and tourism industry. Lansing, Mich.: Educational Institute, American Hotel & Lodging Association. Nyheim, P. D., McFadden, F. M., & Connolly, D. J. (2005). Technology strategies for the hospitality industry. Upper Saddle River, NJ: Prentice Hall. Nykiel, R. A. (2011). Marketing in the hospitality industry (5th ed.). East Lansing, Mich.: American Hotel & Lodging, Educational Institute. Sheppardson, C., & Gibson, H. (2011). Leadership and entrepreneurship in the hospitality industry. Oxford: Goodfellow Publishers. Unoki, K. (2013). Mergers, acquisitions and global empires: tolerance, diversity, and the success of M&A. Abingdon, Oxon: Routledge. Walker, J. R., & Walker, J. T. (2012). Exploring the hospitality industry (2nd ed.). 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