International Financial and Risk Management Strategies Applied by Marriott Corporation - Case Study Example

International financial and risk management strategies applied by Marriott Corporation. Introduction Marriott is an international company extending its branches in 1475 hotels based in different countries. It contains about 6000 asset in recent 10-K states. Its management is conducted in a way that it is aimed in maximizing on more investments of its revenues so as to surpass other hotels in the globe. The objective of the paper is to analyze the existing international strategies and risk management strategies in Marriott and their recommendations. Existing International strategies in Marriott International strategy refers to business actions that occur in multinational corporations in the private firms. They include the following: i) Complying with the political laws The private corporations based in different countries have to abide by the laws and culture outlined by the government in that state. Marriott Corporation is allowed to operate in different states simply because it insures its associates from different risks. The company also gives room for culture diversity and tolerates different cultural values among its clients (Go & Pine, 2011). ii) Increasing the market size In order to outrun other companies worldwide the corporation increases the number of new hotels in different states. The new hotels are managed under the same goals with the central hotel located in the USA. Marriot Corporation reported total revenue of $10.17 million in the 3 quarter of 2016 which increases year by year (Go & Pine, 2011). Compared to its competitors, the company had 4.13 % more revenue the same quarter. iii) Licensing the enterprise A license is a basic requirement in a business enterprise since it permits the organization in performing its services. Marriott Corporation always renews business license from the relevant authorities during its operation (Johnson & Vanetti, 2005). The renewal of the license ensures that the hotels operated under the corporation continue in their performance. iv) Location advantages Business location is another key factor that determines the effectiveness of business operation. Basing its branches in different countries, Marriott Corporation always chooses a suitable environment to locate its structure. Hotels such as; Luxury International Management in Nigeria, Luxury Hotels International Management (Oman), Marriott International Services, Ltd. (Panama Branch) are located on a very conducive topography, away from both noise and air pollution (Johnson & Vanetti, 2005) Existing risk management strategies in Marriott a) Financial risk management Financial risks in Marriott include access to loans and loans default, cash flow management and investment strategies. Marriott Company primarily manages the financial risk by owning designers who builds and maintains properties in the hotel (Porter, Goold and Luchs , 2014). By doing this, the company reduces the cost of purchasing new assets from other expensive markets. Marriott has many sub-branch hotels that run under its permission. The company then uses the earned revenue from these branches to buy shares in different companies. This puts the organization on an ample position to earn more profit and access loans from different institutions (Porter, Goold & Luchs, 2014). b) Hazard risks management Hazard risks include natural problems such as floods, fire outbreaks, hurricanes and winter storms. Technical hazard include power failure, computer software failure, gas leaks and transportation accidents. The need for hazard risk management greatly arose after Carolyn Mangham, a worker in one of the hotels (Westin Peachtree plaza) downtown Atlanta was found dead in large freezer. This made the institute call for new safety measures in order to curb such harms. Currently, devices are placed in the large freezers and help to detect trapped and injured bodies in the large freezers then sends an alarm to the security officers in the hotel. The improvement was mainly to avoid the $12500 penalty that was proposed by Occupational safety management in the U.S based on the death of Mangham. The company is still extending its effort to combat the loss associated with adverse weather condition and it does this by ensuring that its enterprises are well insured against such risks. (Godfrey P.C, 2005). c) Increasing-cost risk management Inflation and high tax from the government affects the profit margin of the company. Inflation result in increase in the cost of raw food materials in the market. Marriott hotel needs to deliver higher quality products to its consumers. Though the cost of these food items increases, the company still purchases the planned amount for the welfare of its clients. The value of sale for its final products fails to comply with the expected profit margin (Godfrey P. C, 2005). The management is however trying to collaborate with agricultural firms so as to access the resources at a lower price. d) Associate/employees risk management Marriott is under high competition with other companies that that have well trained personnel. If the company could at a point fail to employ most talented workers or rather fail to train its workers, then the company may experience declined guest satisfaction, high associate turnover, inefficiency and low morale among workers. To outfit the other companies, Marriott employs competent workers who are business oriented. The company also extends in giving random training to its associates in line with updating them on the moves happening in the technological field. (Bowen & Lawler, 2012) Recommended new international strategies to be applied by Marriott Corporation (corporate level) i) Multi-domestic strategy Multi-domestic strategy is an approach applied by companies to customize both their product presentation and the market strategy with an aim to meet the local conditions of different nations. At this level, the pricing of the goods is not a concern. The major apprehension is to make the products locally available on affordable price so as to attract customers. In order to outpace other local hotel firms Arne M. Sorenson who is the CEO at Marriott International in America need to maximize on this strategy. The CEO together with the managers can cooperate with the retailers and sell their finished products like pizza and other foodstuffs to the retailers at reduced prices. The local consumers who cannot afford the expenses at the hotel can as well access some of these products from the retailers at a fair price (Porter, Goolds & Luchs, 2014). ii) Global strategies This strategy is based on globalization of the services available in Marriott International. The corporation so far is viewed as the best in hospitality management. This is based on the high quality and satisfactory services the customers receive. However there is still a room for improvement in this area. The company needs to run scholarships for students pursuing hospitality and management from third world countries. After completion of the training, the organization can opt to employ these trainees. This can be an effect method in making the company be known worldwide resulting to increased profit margin (Godfrey P.C, 2005). iii) Transnational strategy This strategy helps the business in conducting its operations globally through cooperation, coordination and interdependence of the center institution along with its constituent branches. Through this strategy the companies both the local and international expands into new markets through the use of internet, competitive pricing trends and international distribution of the products. In order to be more persuasive to its customers, the new branches of Marriott international needs to use more of online, billboards, social and mass media advertisement on their areas of locations and the distinct services offered. This can be effectively done by employing talented IT officers who will ensure effective pass of information across the globe (Go & Pine, 2011). Risks associated with the new international strategy a) Political instability risk management Having located its branches in different countries, political wars in some countries may result in destruction of the facilities. Hotels based in political unstable countries such as Pakistan are more endangered. Marriott hotel in Islamabad, Pakistan, received a bomb explosion in 20th September 2008 killing hundreds of people and destroying properties in wide radius. Such risks can be controlled by putting more emphasis in the security operation by increasing security devices and officers as well (BBC News). The following is a photograph showing the bomb explosion. b) Commercial risk management Commercial risks include company’s inability to provide the required quantity and quality of goods. This may be as a result of customers’ failure to pay for the products due to financial limitations. Marriott is based in different countries with different economic stands. Those hotels located in poor economic countries tries to lower the prices of their products in order to retain their customers. This reduces the profit margin of these hotels since the cost of production is very high (Porter, Goold & Luchs, 2014). Conclusion Marriott international is expanding globally due to its proper practice of international financial and risks management strategies. Frequent training and evaluation of its associates helps the company in delivering high quality services to its clients thus appearing at the top rank in hospitality and management field. References Porter, M. E., Goold, M., & Luchs, K. (2014). From competitive advantage to corporate strategy. Managing the multibusiness company: Strategic issues for diversified groups, 285, 285-314. Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of management review, 30(4), 777-798. Bowen, D. E., & Lawler,E. E. (2012). Empowering service employees. Sloan management review, 36(4), 73. Johnson, C., & Vanetti, M. (2005). Locational strategies of international hotel chains. Annals of Tourism Research, 32(4), 1077-1099. Go, F. M., & Pine, R. (2011). Globalization strategy in the hotel industry. Routledge. www.bbc.com/news/world-asia-35312794 Read More