Strategic Management: Strategy Implementation and Evaluation on Case Study - Assignment Example

Strategic Management: Strategy Implementation and Evaluation on Case Study Economic Macroeconomic factors includesocietal values and lifestyle, government regulations, population demographics, general state of the economy and technology (Hiriyappa, 2013). The unemployment rate as of Sept. 2014 in UK was 6.0% while in US it stood at 5.9% and 4.6% in China. The GDP per capita by 2013 were US 53.142.89 USD, China 6,807.43 USD and UK 39, 336.91 USD (Hitt et al., 2014). The 2013 GDP growth rate in UK was 1.9%, US 2.4 % and in China was 7.7%. 2013 demographic groups in the target countries are as follows: China; 1,357 billion, US; 316.1 million and UK 64.1 million (Hiriyappa, 2013). Majority of the residents live in urban areas, and more people will continue moving to urban areas in the target countries (Bloomfield, 2013). Although all markets have potential for growth AG should focus more on China because of it growing demographic and GDP growth rate. It was for this reason that the AG market grew from 20% in 2013 to 22% in 2014 (Vogel, 2012). Also, the company should identify new market in other countries to compensate for the declining UK and US market. The target market of China UK and US are technologically advanced and are well connected with communication and transport infrastructures (Stiving, 2011). For this reason, operating business in those countries is much easier because it is easy to link to clients through the Internet and other communication channels. Also, clients can easily access the business the hotel because of efficient communication and transport facilities. The rate of inflation in UK, China and US is fairly stable (Stiving, 2011). The Governments intervention is inevitable during inflationary periods. In China the political risk facing business includes conflicts between the government and the local authority that have conflicting regulations. In addition, it is possible for business confiscation in China because the laws allow the governments of the Republic of China to confiscate private property at will (Stiving, 2011). Social factors The emerging class of wealthy people enjoys interactions and engages in group activities such as hunting (Liebowitz, 2012). The wealth class of consumers in urban areas enjoys living a healthy life and socializing with others. For this reason, having luxury hotels to offer high-quality services and hygiene foods can improve performance of the business in the target regions. The growing population especially in the China market offers AG with an opportunity for growth (Steinberg & VanDeveer, 2012). There is an issue of corporate social responsibility, and the company should ensure their operations do not have harmful effects to the society than good. The hotel business will create employment opportunities for the local community and provide quality and affordable services to the consumers. For this reason, establishing a hunting ground for recreation can attract the local community and get support from the national and local government (Vogel, 2012). Political and legal factors Land Reform Act 2003 offers the land owner right to use the land for recreational purposes, right to carry out commercial activities to generate income and right to carryout educational activities such as fostering understanding of cultural heritage (Crwon, 2003). The right to land use is exercised on the surface, below and above the ground. In UK, all businesses dealing with food must comply with food safety by ensuring the food is safe from chemical, physical and biological contaminants (Liebowitz, 2006). They must ensure the food is safe for consumption. The local council is responsible for food inspections in accordance with Food Law Code of Practice. The hotel has created job opportunities for the local community working as managers and waiters, suppliers, etc. (Steinberg & VanDeveer, 2012). All workers are required to work for a maximum of 48 hours in a week unless they decide to opt-out at their will, rest for 20 minutes each day and 11 hours resting time between consecutive working days. (Bloomfield, 2013). The minimum wage rate is £6.5 per day (Steinberg & VanDeveer, 2012). The working hours and minimum wage rate affects business activities. The company uses price differentiation strategy to reach out various clients based on product differentiation. They offer discounts on block bookings, those making wedding bookings, during low seasons in order to attract more clients. The hotel will improve the living standards of the people by offering employment opportunities and high-quality products. Industry Attractiveness The hotel industries in UK are receiving support from the UK government through National Trust Organization with an aim of maintaining national heritage and culture, as well as increase employment. Porters five model Threats of entry: Since many investors have the perception of growth of hotel industry various players have declared their interests of venturing in the industry. For example, Kimps Hotel Groups and Turner Hotels are intending to open up boutique hotels and ancestral homes. The entry into the industry is open due to government support hence the industry is likely to become less attractive in the future. Substitute products: The products offered by AG can be easily substituted because the clients incur no additional cost to switch to other services. For example, the ancestral homes offer alternative recreational services. Buyer’s power: Buyers have strong bargaining power because AGs products are not differentiated hence demand for its products are below the target. This has forced the company to offer discounts and low prices during off peak seasons. Suppliers bargaining power: Suppliers have weak bargaining power because the quality of products offered by the hotel industry can be controlled internally (Hitt et al., 2008). Rivalry among competitors: The hospitality industry is highly competitive because the hence AG experienced reduced growth between 2013 and 2014 in the target market apart from China market. Question 2 a Amana is the hotel manager of AG hotel. Her CEO has set a target of 90% occupancy both during the high and a low season. The overhead cost is allocated to the various profit centers based on the number of employees in each center (Hitt et al., 2014). However, hotel has the highest number of employees thus it is allocated the greatest cost. She can use various costing strategies. For example; Target costing This is what the cost price is allocated to specific profit center. Value-based pricing This involves pricing the products according to the value consumer attach to each of the product (Crwon, 2003). This could be appropriate because customers pay according to the quality of services they get from AG. Price discrimination strategy This is where the company charges were varying prices to different clients for the similar products (Hitt et al., 2014). Question 2b The AGs objective is to create customer experience through pricing and non-pricing marketing strategies. Pricing strategies are marketing strategies used by marketers and involves adjusting prices upwards or downwards to achieve greater sales or other objectives (Garrett, 2008). The non-pricing strategies refer to approaches used by marketers other than adjusting pricing in order to sway buyers. An example of non-price marketing strategy is advertisement that aims to familiarize consumers with the products and convince why the products are expensive than competitors products (Liebowitz, 2007). Valued-based pricing strategy could contribute immensely towards achieving the management’s objectives. Advantages of Value-based costing The method is advantageous because it helps the company to maximize its profit. This is because the business can set high prices for its products in order to increase profit margin (Crwon, 2003). The pricing strategy creates marketing relationship with the clients hence despite charging high prices for the products the clients remain loyal to the company. Disadvantages of Value-based Costing Value based pricing strategy is risky because it creates a room for the competitors who may decide to offer their products at a lower price and expand the market (Meehan, 2011). Another disadvantage of value-based pricing is that it does not effective in large organizations where the employee skills are not very high. It works better for smaller organizations with highly skilled employees (Crown, 2012). Finally, the strategy creates market gap because only a few customers remains loyal while the rest cannot afford to purchase the product at high price (Meehan, 2011). Advantage of Price Discrimination Price discrimination enables the firms to increase revenue through continued business operations during peak and off peak seasons by attracting clients even during off peak seasons (Vogel, 2009). Disadvantage of Price Discrimination The consumers paying higher prices may be opposed to price discrimination strategy because they perceive the trader is extracting consumer surplus. For this reason, price discrimination may discourage the consumers of peak period from acquiring the products because they feel cheated (Vogel, 2009). Advantage and disadvantages of advertisement as a non-pricing strategy Advertising helps the AG to increase room occupancy by increasing popularity of their services and familiarizing consumers with new products introduced in the company (Steinberg & VanDeveer, 2012). Also, it enables the company to obtain feedback from the consumers regarding certain products based on experience. However, advertising the company’s products increases the overhead costs hence the company may not be able to achieve its desired profits (Rao et al., 2009). In addition, there is no assurance that the advertisement can reach the targeted clients and should that happen the company may not be able to increase sales. Amana should use price discrimination such as advertising in order to increase the revenue target of 90% occupancy. They can lower the cost of advertisement by using internet marketing such as social media because it is cheap and more effective to reach the target groups (Davies, 2012). Question 2c Total revenue (TR) is determined by the product of total products sold and the price at which the products are sold (PQ) 1. Queen Ann suites: During high season = [(1*5*31*900*0.95) + (1*3*30*900*0.95)] = 132,525 + 76,950 =£209,475. During low season: [(2*31*800*0.8) + (1*30*800*0.8)] = 39,680+19200 = £58,880. Total: £268,355 2. Kennedy Suite High Season: [(1*5*31*800*0.95) + (1*3*30*800*0.95)] = 117,800 + 68,400 = £186,200. Low Season: [(1*2*31*700*0.8) + (1*1*30* 700*0.8)] = 34,420 + 16,800 =£51,220. Total: £237,420. 3. Double Room: High season: [(25*5*31*500*0.95) + (25*3*30*500*0.95)] = 1,840,625 + 1068750 = £2,909,375. Low season: [(25*2*31* 350*0.8) = (25*1*30*350*0.8)] = 434,000 + 210,000 =£644,000. Total: £3,553,375. 4. Twin Rooms: High season: [(20*5*31*400*0.95) + (20*3*30*400*0.95)] = 1178,000 + 684,000 = £1,862,000 Low season: 3 months (20*275) = [(20*2*31*275*0.8) = (20*1*30*275*0.8) = 272,800+132,000 = £404,800. Total: £2,266,800. 5. Studio Accommodation High season: [(30*5*31*300*0.95) + (30*3*30*300*0.95)] =1,325,250 + 769,500 = £2,094,750 Low season: [(30*2*31*175*0.8) + (30*1*30*175*0.8)] = 260,400 + 126,000 = £386,400 Total: £2,481,150 Total revenue = £8,807,100 Stakeholders The main stakeholders of AG include customers, local community, managers, golf club members, Local authority, National government, employees, suppliers and shareholders. Most clients are from Europe, UK, USA, and China. Improving quality of services and expanding future business opportunities will benefit more international clients. On the other hand, poor business performance denies international clients from access better and affordable services of the company (Vogel, 2009). Employees of the AG get their income from the company. Increase in room occupancy improves the earnings of the business and increase employees’ activities. However, it could also result in overworking and reduced resting period due to overtime work (Vogel, 2009). On the other hand, decline in room occupancy can result to retrenchment of some employees and long unpaid leaves. As the company target to expand its operations and improve performance the company they may require specialized workers and those incapable of meeting the company’s requirements may lose their jobs (Morden, 2012). Increased room occupancy increases earnings return on equity for the shareholders (Crown, 2012). In 2014 there was an increase of 4% profit margin of £8,807,100 (£352,284). Reducing profitability of the business could be detrimental to the shareholders because they will lose some part of their investments (Morden, 2013). In 2014 the revenue from Queen Ann Suite increased from £268,355 to £288,973 (an increase of £20,618 or 7.68%) due to increase in room occupancy. Similarly, the other rooms’ occupancy increased which resulted to overall increase in revenue. Increased room occupancy can result to more job opportunities for the local community, but it can also result into increased pollution. Also, if they invest in high-speed off-road driving course, the local community may have to up with a noise and air pollution (Morden, 2012). The managers are interested in knowing that their efforts are bearing fruits. The 4% profit margin is an indication that the business is performing well. Also, the increase in room occupancy is due to better managerial strategies (Schaffer et al., 2011). Investing the £500,000 effectively can increase returns for the business. Finally, the suppliers enjoy improved performance of the company in order to continue with contracts to supply materials to the business (Schaffer et al., 2011). Bibliography Bloomfield, S. (2013). Theory and Practice of Corporate Governance. Cambridge University Press. Crown, (2012). Trees and woodland: management and conservation. Department of the Environment, Food & Rural Affairs. 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Trading Up Consumer and Environmental Regulation in a Global Economy. Harvard University Press. Pp. 1-336 Read More