Strategic Management: Analysis and Evaluation of Aber Gardens - Case Study Example

 Strategic Management of Aber Gardens 1. Environmental Analysis of Aber Gardens Hotel The environmental analysis of Aber Gardens (AG) has been discussed in this section using PESTLE analysis. Political influence: The business operations of AG hotels are influenced by the political structure of the region. The UK government has allowed the National Trust Organization to buy shares of heritage hotels like AG. This as a result allows the expansion of the hotel industry as well as the improvement of the national heritage and promotion of its culture. This regulation has increased the attractiveness of this industry, and more companies are in talks with the government to open boutique hotels and heritage homes. The company targets customers from various overseas locations like US, China, Europe, etc. Thus, the political relationship between the UK and these countries act as a major determinant for the company’s success in attracting overseas customers. The improved international relationship with the UK is being reflected in the increased number of visitors from across the world (case study). Economic influence: The economic structure of the UK has significantly influenced the business operations of AG Hotel. The weak recovery from the European economic crisis has influenced certain financial decisions of the company (BBC, 2012). The company initially decided to invest £500,000 to buy an additional 40 hectares of land adjacent to the plot of AG hotels. However, on closer inspections it has been revealed that the poor economic condition may not be favourable for such investments. Moreover, it has also put pressure on the internal operations of the company. Due to the slow growth of the company’s profitability, the CEO has decided to increase the occupancy level to 90% for both high and low seasons. The occupancy level of AG hotel is directly proportional to the GDP of the country. It can be seen that with the rise in GDP from January to September, the occupancy level has also increased proportionately from 80% to 100% (case study). Social influence: The AG hotel essentially targets the niche customers with extremely high disposable income. The increased trend of arranging business meeting and conferences in the high end hotels and resorts has eventually increased the consumer preference of AG hotel. According to BBC (2011) the increasing number of upper elite class of the society is also responsible for the increased popularity of the boutique hotels and heritage homes. AG hotel targets the extremely rich business owners, entrepreneurs, celebrities, etc. The hotel acts as a holiday destination for tourists as well as a business site for conferences and meetings. Technological factors: AG hotel uses the most advanced technological tools and equipment to create value addition for the customers. The company is best known for its conference center known as “The Meet”. It is accommodated with all the necessary technological facilities required for business conferences. It can comfortably house 30 people for a conference or business meeting. Moreover, the AG hotel also maintains extremely high quality of security and hygiene. The customer base of AG hotel mostly consists of high net worth individuals, who require high security. Thus the company has employed advanced security and monitoring system to ensure that the customers are satisfied and content. Legal factors: Legal factors involving land acquisition and hospitality standards also influence the business activities of AG hotel. The company had decided to buy an adjacent land of 40 hectares. However, the adjacent land being woodland, it cannot be cleared completely for commencing business activities (case study). According to the Land Use Act 2003, only fifty percent of woodland can be cleared. The company had also decided to transform the woodland into an off road racing track, but due to safety measures and commercialization laws, the company needs permission from the local government. Moreover, the company also decided to convert the woodland to a hunting ground to attract adventure loving customers. However, the local laws prevent hunting certain endangered species, which may pose as a hurdle to this venture. Environmental: The environmental condition dictates the high and low season of the hotel and tourism industry. Due to unfavorably low temperature during the winter, the number of customers deceases significantly. Thus the low season for AG hotel is from November to January, which is the peak of the winter season. On the other hand, the high season corresponds to the pleasant summer and spring seasons. As a result, the month of March to October is the high season. As a result, it can be stated that the environmental factors also influence the business activities of AG hotel. It can be advised to the CEO, Graham Seghmas about the strategic implication of the hotel that it is highly influenced by the external environmental factors as mentioned above. Hence, the company needs to devise its strategies in such a manner that it stays compatible with the external factors. Any decisions which are in direct or indirect conflict with the external environment are likely to fail and lead to reduced revenue generation and brand image of the firm. 2a. Recommended Pricing Strategy The pricing strategy should be flexible in nature and should offer a wide range of price deals for the customers. This flexibility in pricing strategy will add more value to the customers and will result in increased consumer preference. Moreover, Amana can introduce certain packages for the customers which will provide discounts for the golf club membership and other entertainment activities. The flexibility should be dependent on different customer types, so that every individual who visits the hotel has something to offer to them. 2b. Advantages and disadvantages of pricing and non-pricing methods AG hotel has incorporated two types of pricing strategies based on the seasonal ups and downs. During the high season, the company offers its Queen Anne suite at £900 a night, whereas during the low season the same suite costs £800 a night. Due to lower foot fall in the low season the hotel offers a lower price to attract customers. The dual pricing strategy allows the company to keep the business running during the low season and generate higher revenue during the high season. However, the dual pricing strategy also affects the brand image of the AG hotel (Aaker, 2011). It reflects the slow business and the company’s attempt to recover revenue by offering lower prices. Rather than offering direct price discounts, Amana can offer more value addition at the same price. The studies have shown that the month of October to December is the time of lowest occupancy. Amana can target these two months and offer attractive deals to the customers. The deals can include package for tourists by offering discounted prices in the dining outlets. Thus offering more value for money will attract more customers in the low season. Furthermore, the company can position the AG hotel as a best holiday and adventure destination during the winter, with the best value offering. Thus, Amana can increase the occupancy of the hotel in both high and low season. 2c. Calculation of revenue of AG hotel Figure 1: Rooms Division prices High Season (£ per night) Low Season (£ per night) Queen Anne Suite 900 800 Kennedy Suite 800 700 Double rooms 500 350 Twin Bed rooms 400 275 Studio Accommodation 300 175 AG hotel houses one Queen Anne Suite, one Kennedy Suite, 25 double rooms, 20 Twin rooms and 30 studios. The hotel is open for 11 months, and is closed in the month of February. The following chart shows the revenue generation of the rooms division. Figure 2: Revenue Calculation (All revenues are in £) Months Occupancy Queen Anne Revenue Kennedy Revenue January and March 80% (800+900) x30 days 40800 (700+800) x30 days 36000 April, May and June 96% (900x3) x 30 days 77760 (800x3) x 30 days 69120 July, August and September 100% (900x3) x 30 days 81000 (800x3) x 30 days 72000 October, November and December 75% (900+800+800) x 30 days 56250 (800+700+700) x 30 days 49500 Total 255810 226620 Months Occupancy Double Revenue Twin Revenue Studio Revenue Total January and March 80% (350+500) x 30 days x 25 rooms 510000 (400+275) x 30 days x 20 rooms 324000 (175+300)x30 days x 30 rooms 342000 April, May and June 96% (500x3) x 30 days x 25 rooms 1080000 (400x3)x 30 days x20 rooms 691200 (300x3) x 30 days x 30 rooms 777600 July, August and September 100% (500x3) x 30 days x 25 rooms 1125000 (400x3)x 30 days x20 rooms 720000 (300x3) x 30 days x 30 rooms 810000 October, November and December 75% (500+350+350)x30 days x 25 rooms 675000 (400+275+275)x30 days x 20 rooms 427500 (300+175+175)x 30 days x 30 rooms 438750 Total 3390000 2162700 2368350 8403480 Source: (Created by Author) The total revenue of the rooms division as calculated in the above chart is £8403480 for the year 2014. The profit margin is 4%, which accounts to £336139.2. 3. Stake holders of AG hotel and their interests The stake holders of AG hotel include the shareholders, the customers, the employees, the government, the business partners and the society. The business activities of AG hotel will directly affect these entities. Any decision taken by AG Hotel should be in line with the interest of the stake holders. Moreover at the same time any decisions made by the stakeholders will also affect the business activity of the company. Thus the stakeholders and the business firm are mutually symbiotic in nature (Dev, Brown and Lee, 2009). The AG hotel has several stakeholders and all of them bear different perspectives towards the company’s success. The decision making of the company needs to be done based on the stakeholders’ interest. The AG hotel decided to buy an adjacent land of 40 hectares, which can be utilized as different revenue generating purposes. This land acquisition needs a financial consideration of £500000. Different stake holders bear different suggestions for the proper utilization of the capital. The company decided that the adjacent land can be used as a hunting ground which would attract adventurous visitors. From the customer’s point of view it would create an more value addition for them (Kasim and Minai, 2009). On the contrary, from the society’s perspective hunting activities can be considered unethical and it can be challenged by the local wild life activists. AG hotels also decided to turn the land to an off road car racing track. This decision may have added value to the customers, but from the investors’ point of view, the return of investment would be low. The F and B outlet on the other hand has decided to utilize the money for improving the kitchen equipments. However, some of the investors believe that owing to the weak economic condition, the allocated capital should be kept as a deposit. Thus, it can be stated that the different stakeholders hold different perspectives in respect to the company’s success. Reference list Aaker, D. A., 2011. Building Strong Brands, 5th ed. USA: Global Professional Publishing BBC, 2011. The Rise of the Victorian Middle Class. [online] Available at: [Accessed 19 January 2015] BBC, 2012. Eurozone crisis explained [online] Available at [Accessed 19 January 2015] Dev, C. S., Brown, J. R. and Lee, D., 2009. Managing marketing relationships: Making sure everyone plays on the team. Cornell Hotel & Restaurant Administration Quarterly, 41(2), pp. 10-20. Kasim, A. and Minai, B., 2009. Linking CRM strategy, customer performance measure and performance in hotel industry. International Journal of Economics and Management, 3(2), pp. 297 – 316. Read More