Marriott International: Current and Future Situation - Case Study Example

Outline Introduction………………………………………………………………………… Prevailing global economic condition……………………………………………… Human resource aspects……………………………………………………………. Marriott marketing strategy………………………………………………………… Production………………………………………………………………………….. Marriott internalization strategy……………………………………………………. Marriott competitive advantage……………………………………………………. Survival of Marriott in the current economic situation…………………………….. Conclusion………………………………………………………………………….. Recommendation…………………………………………………………………… References………………………………………………………………………….. Introduction This report aims at showing an in- depth examination of how the prevailing global economic and political conditions may affect the wellbeing of the Marriott International’s current and future strategic situation. The objective is to demonstrate and evaluate information on the organization’s current and future strategic management concepts, ideas, theories and comprehending a brief understanding of its strategic situation and direction so that they stipulate the feature of strategic directive the goal that the existing planning cycle will focus on. The rapid increase of Marriott International is in line with the fast growing economy of hospitality industry, especially, after its entry global market mainly through a successful market analysis. Prevailing global economic conditions Economic downturn is one of the four stages that make an economic cycle. It is a time when an economy starts leaving boom and start moving down the cycle to recession. Economic down turn is a situation that is faced by many countries of the world. A country like Russia is faced by economic down turn. This is evident in the situation that is faced by the Moscow theatre due to the cutting of budget. It has called off the opera premier and a ballet tour of Mexico. Around the whole world countries have been threatened by the experience of economic down turn (Jones 1991). Countries like Ireland, Spain and South Africa have experienced their real estate prices going down. In addition the collapse of U.S. automakers has brought a tremendous effect to plants in Canada, Mexico and Germany. The condition has affected many global corporations, forcing some to shut down their activities. The international monetary fund has made a prediction that by this is the first time that the whole worldwide economy will contract. There is fear in the whole world that there will be no more new productions. This is highly influenced by the increase in oil and gas prices that have risen and affected the economies of the whole world. The country had canceled productions before because we were not satisfied with the artistic value. Productions in the theatre as well as the hospitality industry around the world have been cancelled due to financial crisis. This is as a result of swift economic disorder that is hitting hard to the national standards. It is difficult for Russia to cope with the prices of oil that are going up everyday and the popular Book berry bookstores is going insolvent. Human resource aspects Marriott International, labor contracts were introduced since its incorporation was among the reforms that were experimented in different regions and were found out to be more efficient. This let to immediate replacement of conventional centralized labor allocation system. Throughout experimental phase a greater number of company’s branches were given a higher degree of autonomy in managing their business operations and were also seized answerable for their personal returns or losses. In 1995 a Labor Act was amended which formalized the current labor agreement system. Under the new law all employees regardless of their employers’ status were to be hired on contract basis. Since that time, a formal centralized designed employment has been increasingly changed Marriott International into a further market oriented, widespread labor contract structure this has promoted its business operation. The most commonly three channels in recruiting new employees in Marriott International are; External labor markets, for example various job market. Advertisements in local media Campus recruitment It’s only in recent years where beginning labor markets have emerged on the market, which has offered a given joint venture for hospitality firms a larger scale of freedom in selecting production workers. Advertisements by reputable multinational firms have attracted numerous competent applicants for Marriott International. Marriott International business activities have also developed rapidly because of their incorporation of new blood in the industrial system. Graduates from local leading universities are visualized as the best candidates for high-tech enterprises. Marriott marketing strategy In most hospitality firms the implementation of marketing strategy perspective should be done on a firm by firm basis because it’s considered that what works for one locale may not necessarily succeed in another. In Marriott International the specific steps of marketing approach is often dictated by the overall strategic plan which in turn is based heavily on marketing analysis done globally. In most occasions the company has used marketing analysis to meet customer needs. Marriott International itself has provided a good example of how the marketing process works, for instance its operation has followed a strategy of first building its market share at home and driving out imported products (services and goods). Then the firm moves out into a newly established market in the developing countries. Later, the firm can now move fully to developed countries ready to compete with the best available hospitality firms. Moreover, the Marriott International has gone to invest in developed and developing countries because its home market is very small and also to build international image of its products. The implementation of marketing strategy of Marriott International in the global arena is built around the well known ''four Ps'' of marketing; promotion, product, price and place. As noted earlier, the firm often develops and sells the product in the local market before expanding to major overseas targets. In the case the product is made to meet the overseas market demand the process will seem to be more direct (Wansink & Marie 1999). Price has been seen to be the function of market demand, for instance Marriott International has found that Europe market is price sensitive hence by introducing lower price products, the company has been able to make a progress especially in its products. The remaining two Ps; promotion and place are most of the time controlled by local conditions and often left in the hands of the hands of those operating subsidiaries. Local management may implement customer sales incentives or make arrangements and salespeople who are helping to make the product locally. Production Despite the fact that marketing usually dominates strategy implementation, the production function also plays a role. Lynch (2003) argues that if a company is going to export products to foreign market the production process traditionally has been developed through domestic operations. In recent years Marriott International has found that whether they are exporting or producing the goods locally in the host country, consideration of the worldwide production is more important. For instance some goods may be produced in foreign countries for export to other nations. In the production of labor intensive products the company has been able to produce the product out to low cost sites such as in developing countries, where the cost of labor is relatively low and the infrastructures is sufficient to support production. This kind of operation has seen Marriott International advance in its international business with other multinational hospitality corporations all over the world. Marriott internationalization strategy a) Focusing on foreign direct investment. This is seen to have a positive impact on human resource management practices in Marriott. The size of the firm is expected to have a bearing on organizational inertia influencing the speed and extent of change. Moreover the location of some international firms like Marriott is seen to have effect on the pattern of human resource of those particular firms in those regions. b) Move towards a market oriented economy The company has continued to bring both the production facilities and the software human resource management and systems within its market. More Marriott market has been and is still oriented management practices. c) Incorporations of equity joint ventures This is the channel of absorbing foreign technology. This is one way Marriott has used to achieve the economic growth and development since the new technology tends to ease things and make the industry to be competitive in its production activities. d) Social stability This has been achieved by Marriott international so that, the growing opposition to policies of pushing forward the reforms could be minimized and hence moving into globally free trade. e) Managerial innovation The management of Marriott has made it possible for coming up with innovative management practices which are geared towards achievements of organizational goals plus those of the country. The internationalization of Marriott Corporation has imposed materialistic measures such as competitions to other firms because of the international systems for instance technological advancements and trade expansion. Some of the benefits that the Company has benefited by going international include: a) The market size of Marriott international increases as the many members of the bloc, that is World Trade Organization(WTO), all culminate into a single economic region with favorable trading policies b) The company has been able to gather vital information about other firms or competitors’ activities in the bloc. This information has always been of importance since it has been used to strategize on how to improve their services hence conquering the market. c) The creation of free trade, common policies, and elimination of trade barrier in addition to enhancement of mutual cooperation among the hospitality industry. This has tried to minimize the costs of the company in terms of tax or custom duties. Marriott Competitive advantage Competitive advantage refers to the ability of a nation of a firm to produce at low cost and sell at a fair price. It emanates from a low cost structure of the business. In other words, it is the low cost enjoyed by a firm than its rivals thus enabling it to sell less or make greater profits at the same price level as its rivals because of large sales. Competitive advantage for Marriott has been gained through many ways but it is important to note that it is the company’s business strategies laid down that gives a firm this advantage. Thomas Stewart once said, “Intellectual capital is the sum of everything everybody in a company knows gives competitive edge”. Thus intellectual power is one of the greatest sources of competitive advantage for any firm. Marriott Corporation has gained competitive advantage in the following ways; a) Having a large size as well as many outlets for delivering its services and goods to the right people and at the right time. The large size in itself is a source of economies of scale which enables the firms to produce at a low cost as well as sell at a low price if it wishes to do so. b) By raising themselves high above others in the same industry in matters to do with hospitality issues. The firm has portrayed themselves as being more responsible than the rivals and by so doing they have been able to win the hearts of many people they deals with for example by designing products in such a way that they are user friendly and focused towards making the environment healthy for example using biodegradable wrappers. Intellectual capital is one of the most vital constituents that a firm needs in order to gain competitive advantage; lack of the same will seriously affect the ability of the firm to gain competitive advantage over the others. The way in which market segmentation has benefited Marriott Company globally Marriott international has tried to segment their market, which has been seen as the way to advance in business. Businesses that consume a firm’s commodities have been put in groups depending on how the management of the firm has decided to classify its segments. Business segmentation refers to the division of the market of a business into division that has related characteristics. It is also called market fragmentation and it entails dividing a market for a product or service into groups of customers with identifiable needs and characteristics. This process of segmentation will highly depend on various things, namely quality of information available in the company-that’s companies own abilities and technology and also the type of decision a company wishes to make. This is a clear show that Marriott Company’s segmentation could vary with the way company view the market and whether this involves the present or future offer (Lynch 2003). The first level of service verses good shows the macro segment. Moreover it can be found out that competitors in the hospitality market could produce different market segmentations. Also segmentation in the market will try to show closely related groups of customers. This has been possible in the provision of catering services in other countries. Macro segmentation refers to the division of the market into very broad groups those have general characteristics that are related. Such grouping can be based on the region, country of the customer or any other general characteristic. Usually Marriott segmentation does market division based on whether the business is a customer of a good or service. Therefore macro segmentation is based on the nature of the prime good or service dealt in. Survival of Marriott International in an economic downturn Many multinational organizations are already in recession and are not expected to rise in the near future, unless they put sound financial devices in place. Recession within an organization or a country could be fought through the availability of finances to customers, by ensuring that there is low unemployment in a country and giving lower interest rates. Consumer spending is expected to collapse and this will lead to a severe recession in the country. In order to prevent this Marriott interest rates are expected to fall by at least 0.5% to 4% while in go down to a maximum of 2%. The suicide hijack attacks that happened in the U.S were responsible for the downturn. However, with the benefit of lower interest rates and increased public spending would be a solution to the organization economy as a whole to avoid recession. Conclusion Marriott International doesn’t have that planned organization economy of many multinational companies but it has tried to copy them the one which is directly geared towards the market (Bob 1997, p.3). Currently Marriott International’s economy are experiencing tremendous successive influence of reforms due to their recent internationalization which in turn has made its management panel to change and become accustomed to the latest challenges. The firm has gone through so many changes since that time it was incorporated. The Central Bank should implement sound monetary policies which are expected to work harder to achieve the objectives of improving economic growth by curbing inflation. The monetary policies are also anticipated by Marriott International to improve the economy’s productive capacity by reducing the growth in consumer spending. Monetary policy will reduce the growth in government expenditure which will bring down the increasing inflation (Jones 1997). It will also enhance reductions in taxes that will act as an incentive for improved productivity growth which is a key condition required for non inflationary growth. Monetary policy will also enhance the competitive environment in order to maintain a down ward pressure on prices. It will also encourage increased immigration which is of benefit to the country through economic and cultural benefits. The government is aimed at improving Marriott International savings culture and monetary policy will help in reducing the spending by consumers through reduces interest and exchange rates. Monetary policy will improve the growth of productivity in the Marriott International economy which improves the economies capacity for non inflationary growth. Recommendations a) Organization structure Marriott International structures should be designed in a manner to enhance power and reflect vital roles in addition to relationships in a hierarchical structure emphasizing on strategy from the management as well as establishing co-ordination, and communication in employees. The control system should focus on monitoring the policy and procedures in the organization. (Johnson et al., 2005). It is also important for the management to comprehend the cultural web of the organization since this could help in positioning itself culturally and becoming more creative, innovative and in repositioning to deal with external competitions. b) Global economic downturn Hotel growth is linked to the state of the economy – The travel industry has been shaken by the global economic down turn with major airlines experiencing a 9.47% drop in domestic passenger miles travelled domestically and internationally. The threat could be seen as the third-quarter profit fell 28 % at Marriott International. The purchasing power for the citizens is highly affected. From this we can note that consumer spending power has a great impact on the Marriott’s as due to less personal disposable income the spending is low. The economic downturn is causing difficulties for the Marriott’s due to credit crunch impacts and which are taking steps to help the growth of its subsectors by offering low price offers. Factors such as economic slumps, unemployment and interest rates affect the spending power and businesses and can have impact on the nature of competition in any industry. (Haberberg et al., 2001) The management of Marriott International needs to take the action of getting ideas of dealing with the current recession conditions from relevant agencies. This decision has high possibilities of improving the performance of the business. The management should also enlighten its employees on managing their debts. This helps the employees to ease the pressure created by falling earnings. It is important for the manager to take precautions and be good in financial management at the time economic down turn. There is need for the manager to create security concern for the employees of a company. This is a way of motivating employees during an economic down turn without adding to the outcome. Managers help employees cope with the economic down turn effects through increasing their wellness. This can also be managed through good communication skills between the manager and employees in the organization. This helps employees have the time to the job uncertainties to re-evaluate their work and personal lives to balance for the long-term crisis that is hitting the whole world. Employees are found to perform several jobs at their time of rest. This helps them to multitask to get more money the can be used to cater for increased need of cash during economic down turn since products are expensive. c) Travel discount Marriott hotels should improve their skills on marketing more heavily to travel discount programs like those of the AARP and AAA as well as to government travelers on per-diem allowances which could instigate people to travel. Nevertheless Marriott has to make extra effort to remain distinct from other competitors like Hilton in providing quality, value and efficiency in their services to retain in the business or else this could limit operating margins, diminish market share and reduce the earnings. (Marriott, 2008). The profitability of Marriott can be affected by increases in wages, labour costs, energy, healthcare, insurance, transportation, fuel, and other expenses central to the conduct the business. d) Social trends Analysing social trends can be beneficial for the businesses as it widens societal influences to create opportunities. For example societal interest in health has given Marriott a specialized feature to have exotic health relaxation clubs. (Harrison et al., 2005). Positive image among the stakeholders such as customers and suppliers gives opportunities to business, hence they is need for Marriott International to invest heavily in this. The impact of aging population is a great threat for the hotel as more people would be inclined towards staying at home and it could result into less working force. As aging population the government increases in spending more on elderly people which results into giving high taxes to the government creating a base for inflation. So by understanding demographic forces will help Marriot International to direct its activities in planning and forecasting the demands (current and future) (Altman et al., 2002) e) Environment management process With increasing concern for the environmental impact is a growing issue for the hospitality industry as traveler’s fear of exposure to contagious diseases, such as Swine Flu and Severe Acute Respiratory Syndrome (“SARS”); the occurrence of natural disasters, such as earth quake, tsunami or terrorist activity are all these natural related disasters that can reduce the demand for lodging, which adversely impacts the revenue earned. The desirability to visit a location can change the travel patterns. Hotel industries are competing with one another aggressively and in this situation and hence locations and environmental conservation is a wining factor in terms of competitiveness level, which can be counted as an opportunity and hotel like Marriott should be inclined towards adopting an environment management process. If there is no natural environment this is the biggest threat a hotel could face. Marriott should be environmental friendly and focus on special programs on conserving natural resources that reduces its environmental footprint, and recycling waste. f) Technology Marriott International needs to undertake many transformations in technology change to compete ahead. It has to develop its increasing power of internet usage, barcode usage, electronic cards and mobile communications to meet the current needs of consumers. These developments could enable it to keep more data records and make it feasible to share information quickly and at a low cost. This will also be advantageous to Marriott since it could lead to mass marketing, understanding the consumer psychology, habits and preferences (Haberberg et al., 2001) For example; Marriott should communicate its ideas with young customers on improvising the hotel through blogs. Technological advance is an added cost which is a threat as many people may be uncomfortable paying extra for it. References Altman, SH & Shactman, D 2002. Policies for an ageing society. JHU Press Bob B 1997. Metro; PART-B; Metro Desk. Los Angeles Times, Calif.: pg.3. Carey, J., Holden, D., & Gershkovich, T 2008. The real question: should oil be cheap? Business Week, Academic Search Premier Database. Carey, J., Holden, D., & Gershkovich, T 2008. The real question: should oil be cheap? Business Week, Academic Search Premier Database. Deborah, H C 1997. Case Study-Introducing Business Risk Management, Global Council on Risk Management. General Motors Corporation Evans, N, Campbell, D & Stonehouse, G 2003. 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