Strategic Choice and Evaluation - Case Study Example

Strategic Choice and Evaluation of the Contents Introduction 3 Value Discipline 5 Generic Strategy 6 Grand Strategy 8 Recommendations 10 References 11 Introduction Hilton Worldwide Holdings Inc. (HLT) is an international hospitality firm of America established in 1919 in Cisco, Texas by Conrad Hilton. It has encompassed 4,112 hotels in over 91 nations. The company possesses, administers and franchises a number of brands like Conrad Hotels & Resorts, Double Tree by Hilton, Hilton Hotels & Resorts, Hilton Garden Inn, Homewood Suites by Hilton, Hilton Grand Vacations, etc. to name a few. The company has its headquarters in Tysons Corner, Virginia, since 2005. Christopher J. Nassetta is the Chairman and CEO of the company. It has sponsored the United States Olympic Team since 2005 (Bohdanowicz, Zientara & Novotna, 2011). The essay tries to explain the alternatives that the organization must consider to realize growth. For that, it is essential to understand how strategic management helps the company to accomplish their mission. The set of actions and decisions that helps in the formulation and execution of plans constructed to obtain the objectives of a company is called strategic management. According to the Strategic Management Model, strategy formulation skills can be enhanced to analyze the given case study (Fenn & Rakino, 2013). Figure: Strategic Management Model (Source: Fenn & Rakino, 2013) Value Discipline Value discipline is a model that evaluates three generic value disciplines that companies can stick to. Harmon (2015) categorises the value disciplines into Customer Intimacy, Operational Excellence and Product Leadership. In this model, the organisation is required to select any one discipline and work on it consistently and vigorously as its main value principle. Operational Excellence indicates excellent operations and implementation of strategies that provide reasonable quality at low price. This focuses on efficiency, supply chain management, reforming operations, etc. It basically implies best total cost (Harmon, 2015). Figure: Value Discipline (Source: Harmon, 2015) Product leadership is characterized by the presence of very strong brand marketing and innovation strategy that the company operates in dynamic market. The main motto of the firm is to offer best product period. In customer intimacy, the companies concentrate on fulfilling market demands. Firms adopting this discipline excel in consumer service. This is referred to as the best total solution (Lindgreen & Wynstra, 2005). Generic Strategy To recognize a range of probable attractive opportunities for investment, assessment of both firm’s profile and the external environment are required. However, they must be aligned with the company’s mission. The screening procedure gives rise to a number of options from which a strategic choice is required to be made (Magretta, 2013). By analyzing the competitive orientation of a company in the marketplace, its management implicitly or explicitly accepts one or more generic strategies. Porter suggested four generic strategies that the Hillary Worldwide Holdings Inc. is advised to follow in order to achieve competitive advantage. The theory argues that Hillary Worldwide Holding’s strengths can be categorized into one of the two headings viz. Differentiation and Cost advantage. By the application of these strengths in either a narrow or broad scope, three generic outcomes are generated namely differentiation, cost leadership and focus. These strategies are implemented at the business unit level (Shahzad, Bajwa & Zia, 2013). Porter’s Generic Strategy (Source: Shahzad, Bajwa & Zia, 2013) Cost Leadership Strategy: According to Magretta (2013) this strategy suggests the company to become the low cost producer in hospitality industry for a specified level of quality. The company should set the fares at average industry price in order to gain more than its rivals or it can also set it below the average industry price to achieve market share. The low cost leadership strategy enables a firm to excel at cost declines and efficiencies. The firm gains the ability to optimize its economies of scale, apply low cost technologies and volume sales methods to increase its revenue earnings. The advantage it gains is that it can enjoy higher profit margins by using its cost advantage to set lower prices (Lindgreen & Wynstra, 2005). Differentiation Strategy: This strategy allows the company to provide unique service or products to the customers so that they can differentiate the company’s service from others in the industry. For this strategy, the company needs to recognize the demands of its customers so that they get clear reasons to prefer its service over others in the industry (Magretta, 2013). Hilton Company should charge a premium price for its service and goods to reflect its extra value-added features. This strategy needs substantial market investment. Both cost leadership and differentiation search for competitive advantage in a wide range of market sections (Magretta, 2013). Focus Strategy: This strategy focuses on narrow segment and helps a firm to obtain either a differentiation or cost advantage within that segment. The advantage that the company can get is high level of customer loyalty and this discourages competition from other firms. In Cost focus strategy, the company desires for a low cost advantage in small number of market sections. In differentiation strategy, the company intends to differentiate itself from small number of target market sections. This strategy can be referred as the typical niche marketing strategy (Shahzad, Bajwa & Zia, 2013). Due to its sole concentration on narrow market, the firm has low bargaining power with its suppliers. Grand Strategy The grand strategies are considered as major strategies that shape and structure the course of a business. They focus on accomplishing the long-term goals of a company. Firms like Hilton Worldwide, which has multiple industries, customer groups and businesses generally mingles various grand strategies because any one of these plans can provide the basis for obtaining major long-run missions of the firm. Some of the approaches that the company can undertake are growth, stability and retrenchment (Wood & Brotherton, 2008). Figure: Categories of Grand Strategy (Source: Wood & Brotherton, 2008) Wood and Brotherton (2008) advocated that growth can be distinguished into internal and external growth. Internal growth is associated with the development of new and improved products and services. Product development strategy focuses on innovation and exploration. Hence, it calls for heavy investments in Research and Development. External growth can be explained in terms of diversification in the current product line or opening a new line of products. Other growth strategies are market and product development, innovation, vertical and horizontal acquisitions, concentric and conglomerate diversification (Wood & Brotherton, 2008) Stability strategy is adopted by the company when it desires to sustain its status-quo with existing stages of efforts. A firm is believed to be satisfied with small improvement or growth by changing its business marginally. As a result, it focuses on its resources and where it can develop competitive advantages in the narrowest possible market segment. It is also marked by the absence of any major change. Retrenchment Strategy is undertaken by a firm when its performance is declining overtime and it decides to advance its performance by contracting its activities (Thomson, Strickland & Gamble, 2001). The retrenchment strategy can be implemented in the following methods: Concentrating on operational improvements with extra emphasize on decreasing cost or Dropping the number of business operations by becoming a captive firm. Reduction in the number of market, customer base and products or As a last alternative, choosing liquidation of business. Replacement of retrenchment strategy is turnaround strategy. Actions such as modification in the product mix, selling of useless assets which have ceased to generate any profit for the company, closing down of the plants, etc. are included in turnaround strategy. Divestiture and bankruptcy are the extreme situations that may arise in case a company fails to grow (Wood & Brotherton, 2008). Recommendations In today’s environment of global competition, growth strategy is the most profitable strategy for any enterprise. The first thing recommended to Hillary Worldwide is the implementation of expansion strategy. However, only one strategy cannot succeed in providing an all round growth to the company. Keeping in mind all the dimensions of a business, a number of strategies are suggested. Since, hospitality industry extensively deals with customers, so it is advised that Hilton Worldwide should focus on Customer Intimacy. However, other value decisions must not be completely ignored. It is also recommended that Hilton Company should opt for cost leadership strategy as it needs to target a broad market. Market development and penetration and joint ventures are other growth strategies that Hilton Worldwide can select with the aim of growing its business activities. Horizontal merger will also work for the company since it will provide the company an opportunity to increase its consumer base by introducing an expanded product line. References Bohdanowicz, P., Zientara, P. & Novotna, E. (2011). International Hotel Chains and Environmental Protection: An Analysis of Hiltons we care! Programme (Europe, 2006–2008). Journal of Sustainable Tourism, 19(7), 797-816. Fenn, J. & Rakino, M., (2013). Mastering the Hype Cycle: How to choose the Right Innovation at the Right Time?. Boston: Harvard Business Press. Harmon, P. (2015). The Scope and Evolution of Business Process Management. Handbook on Business Process Management 1. New York: Springer Berlin Heidelberg. Lindgreen, A. & Wynstra, F. (2005). Value in Business Markets: What do we know? Where are we going?. Industrial Marketing Management, 34(7), 732-748. Magretta, J. (2013). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Boston: Harvard Business Press. Shahzad, K., Bajwa, S. U. & Zia, S. A. (2013). Competitive Strategy: Techniques for Analyzing Industries & Competitors. South Asian Journal of Management, 20(3), 194. Thomson, A., Strickland, A. J. & Gamble, J. E. (2001). Crafting and Executing Strategy. New Delhi: Tata McGraw Hill. Wood, R. C., & Brotherton, B. (2008). The Sage Handbook of Hospitality Management. California: Sage Publications. Read More