Strategies and Tactics Implemented by Hospitality Service Delivery Strategy of Four Lines Hotel - Case Study Example

A Critique of the Strategies and Tactics Implemented By Hospitality Service Delivery Strategy of Four Lines Hotel Executive Summary The ultimate goal of the paper was to critique the strategies implemented by four line hotel. The paper acknowledges the fact that there are numerous ways and approaches of analysing business strategies based on theoretical and normative constructs. The paper employed SWOT analysis and porter’s five forces model to analyse the strategic decision made by Four Line Hotel and reflect on the same. Based on the SWOT analysis, the strengths that emerged out of the first decision of targeting business travellers by being Four Star Hotel was prudent decision as it allows them to target unique segment which has not been adequately catered for. The second strength comes from their decision to offer low prices/ affordable prices with the quality of a four star guaranteed. This is multifaceted decision that allows them to undercut other competitors, create barriers to entry and lock in customers. The last is the ability to differentiate thus, allowing them to attract and also support other lines of business during low seasons. The weaknesses that emerges out of their decision is the overspecialisation and restriction of services offered in the guise of tranquillity. The reality is that business travellers like associated with luxury and so limiting such services would not be prudent. Moreover, if they would have made it possible for people to come with their families this would have broaden their income base. The essence would have been to separate the two under one roof. The third was on the opportunities that can be derived from their decisions and the emerging one was the possibility to broaden the services offered to the business travellers since they have identified unique cadre of clients. Lastly the threat emanating from their decision was tied to the fact that new competitor with enough financial power can come in and offer differentiated services more than they offer to this unique market segment they have identified. The next unit of analysis was the porter’s model. The reflection based on this approach emerged in the areas of pricing, differentiation, market segmentation and quality offered. The significance of the decision to be low pricing entity is seen in the view that it allows them to attract customers since they offer same services at lower price. However, some might perceive this approach as wrong as they believe low priced services are of poor quality. The low pricing can enable them undercut competitors, create barriers to entry for prospective entrants. The next beauty of this strategy is that low pricing lowers the switching cost in their favour while create higher switching cost against their competitors. The next point was on service differentiation and porter’s model. This too has worked in their favour even though they should extend it so as to rope in more customers who are business travellers, but would like to be accompanied by their families. The differentiation is cushioning them against seasonal fluctuations. In addition, this allows them to be ahead of their competitors. Table of Contents Executive Summary 1 Table of Contents 2 1.0 Introduction 1 2.0 Strategic Decisions of the Firm 1 3.0 Analysis and Reflection on the Business Strategies Adopted by Four Line Hotel 2 3.1 Strength, Weakness, Opportunity and Threat Analysis of the Strategic Decisions 2 3.1.1 Reflection on Strengths of the Strategic Decisions 3 3.1.2 Reflection on Weaknesses of the Strategic Decisions 3 3.1.3 Reflection on Opportunities of the Strategic Decisions 4 3.1.3 Reflection on Threats of the Strategic Decisions 4 3.2 Porters Five Forces Model and Four Line’s Hotel Strategic Decision 5 3.2.1 Threat of New Entrants (Medium) 5 3.2.2 Bargaining Power of Buyers (High) 6 3.2.3 Threat of Substitution Products or Services (Low) 7 3.2.4 Bargaining Power of Suppliers and Partner 7 3.2.5 Rivalry among Existing Competitors (High) 8 4.0 Conclusion 8 References 10 1.0 Introduction Every business organisation is unique with regard to how they craft and execute business strategies, as well as how they operate their business activities. Every business organisation has a specific and unique value chain which is the potential sources of their competitive advantage. Moreover, for an organisation to stay afloat it has to churn out product and services that creates value to consumer through various means at their disposal. This will determine their market leadership or not. This paper presents personal reflection about strategic decisions made by Four Line Hotel management. The strategic decision to be reviewed and reflected on is the decision to focus on business travellers, low cost strategy and business reputation. In order to present the same, the paper will use SWOT analysis and porter’s five model forces to show if strategic decisions were made correctly and what would have been done better in situations that decisions were not made correctly. 2.0 Strategic Decisions of the Firm Every organisation needs to thrive and grow in its business operations. This is realised through its ability to meet the demands and expectations of the customers. Here, it means that an organisation has to do things better than its rivals (Thompson & Martin, 2010). A strategy has to be viewed from three perspectives. These include opportunity, capability and competitiveness. These three, plus the company aspirations and values are what drives an organisation to succeed and reach greater heights. Their importance can be seen in the fact that they ultimately affect choices made within organisations, as well as the overall organisational performance (Thompson & Martin, 2010). According to Michael Porter, there are two basic types of competitive advantage, which include cost advantage and differentiation advantage (Porter, 1998, p.46). This implies that strategic decisions have to be made in tandem with the later points. Strategic decisions can be regarded as taking advantage of organisations strengths, internal resources, capabilities and core competencies. It is these strengths that enable Four Lines Hotel to create and maintain competitive advantage against competitors in the market place (Ireland & Hitt, 2005, p.68). The aim of this section is to show what the firm identified as strategic decision and explain if they were the most appropriate. The strategies that can be derived from the plan are three and include marketing segmentation & services to be provided henceforth based on that segments need, product differentiation, low pricing and corporate image of being of the highest reputation. The strategies illicit mixed reactions since some were successful while others were not. 3.0 Analysis and Reflection on the Business Strategies Adopted by Four Line Hotel 3.1 Strength, Weakness, Opportunity and Threat Analysis of the Strategic Decisions SWOT analysis of an organization involves evaluating both internal and external factors which have either beneficial or detrimental impact on the ability of an organization to effectively compete in the market place. Organizations strengths are internal resources and capabilities and regarded as an organization’s core competencies. It is these strengths that enable organizations such as Four Line Hotel to create and maintain competitive advantage against competitors in the market place. Weaknesses on the other hand are those factors internal to an organization that jeopardize business performance and competitiveness in the market place. It is the mandate of business management to craft and execute business strategies that turn an organization’s weaknesses into resources and strategic capabilities (Henry, 2008, p.117). 3.1.1 Reflection on Strengths of the Strategic Decisions The strengths of the strategic decision made can be analysed in their ability to propel the business forward. in relation to focus on business travellers by offering tranquil environment without mixing with other leisure that attract families is a prudent move as they are able to focus their energies on delivering services based on this group needs. The ultimate belief is that this group requires appropriate environment for conducting business deals. The next prudent decision that is strength is the low pricing versus high value. This allows them to attract and retain customers. In addition it creates low switching cost in their favour and barriers to new entrants. The last is the decision to diversify and not rely on single service or product. This has empowered them to attract and lock in customers. 3.1.2 Reflection on Weaknesses of the Strategic Decisions The first concern that emerges is how one would want to try and separate business class from associated luxury in the context of offering tranquil environment. The basis would have been to integrate the two and place them where the conference room is far from other entertainments like swimming pool. This argument is short since they offer alcoholic drinks. The other concern which would have irked the decision makers would have been based on the fact that it is this business traveller who can afford associated services and if they are to add their competitive power then they will have to invest in the same. Investing in business travellers hotel has also proven to be an expensive affair as some of their value added services like internet are not performing well, they are spending a lot on recurrent expenditures and maintenance. The low pricing strategy is not also serving them well. The essence would have been competitive pricing or high pricing for high value. One shortcoming of this is how to cushion themselves against season fluctuations as already attested by them. Their need for alternative segment that is complementary with this segment like conference facilities and board rooms. This will cushion them on few numbers that is associated with business travellers. The next would be to make it exclusive and charging higher prices as per the value to cover for off peak seasons. 3.1.3 Reflection on Opportunities of the Strategic Decisions There are opportunities that can be derived from these strategic decisions and if well combined can spur Four Line Hotel to greater heights. The opportunity to be tapped is to combine the services offered so as to attract large base of clients. With the focus of tranquillity and eliminating other services that would make one who has boarded their comfortable, they are not likely to attract those who combine business and leisure. The pricing that they should is that of competitive pricing and not affordable as affordable is debateable. 3.1.3 Reflection on Threats of the Strategic Decisions One source of threat that emerges out of their decision to have low pricing is the inability to recoup investment made. They have invested in a four star hotel yet the returns is not tallying with the investment. They need to readjust the pricing to high value high price or widen their differentiation strategy so as to guarantee income throughout the year especially during the peak hours. Targeting business travellers only has diminished their customer base. They would have had provisions for combining other services while maintaining that business environment required by their initial target. The threat of all this is that if a new competitor comes in or an existing one readjust to this realities, they are likely to suffer as the clients would prefer a more diversified services. 3.2 Porters Five Forces Model and Four Line’s Hotel Strategic Decision It is imperative that business organizations analyze their environment in order to be able to be able to effectively take advantage of prevailing business opportunities and achieve competitiveness. With this regard, Porter’s five forces model is a significant analytical tool available for business organizations to understand where such business opportunities lie in their industry and business environment. Goymer (2004, p.209) notes that Porter’s five forces model is essential for business organizations such as Four Line Hotel in understanding both the business current competitive position and the strength of the position the business is perceived to move to. 3.2.1 Threat of New Entrants (Medium) While barrier to enter hospitality industry is low as result of the fact there is diverse market with unique needs, the entry barriers to business travellers market remain relatively high. Investing in a 4 star hotel is not an easy venture as it requires large capital outlay and patience to build reputation. Nevertheless there are still potential entrants who can compete in this sector with Four Line Hotel. 3.2.1.1 Reflection The decision made by the company to invest in business luxury hotel was a prudent move since it has created high barrier to other prospective entrants. The reason behind this thinking is based on the fact that investing in a four star hotel requires huge amount of capital investment and returns are not recouped immediately. This is evident in the net income of the company where they have been recording negatives. However with the trend, they will start recouping profits from the sixth or seventh year. The next is the concept they have brought is of targeting business travellers. However, this decision might not also work in their favour thus, allowing new entrants to come in and compete with them. The reason behind this is because most business travellers have the capability in terms of financial power to afford leisure. Thus, the best would have been to combine leisure and business instead of focusing on business alone. Moreover, their strength lies in the knowledge they enjoy as result of operating in other markets like in America. This makes it easier as they are not new in the field, but only needs to adjust to market trends in Australia. 3.2.2 Bargaining Power of Buyers (High) Customers have high bargaining power due to low switching costs since there are numerous competitors with the same services or even advanced. However, the bargaining power for business travellers who seek hotels that offer services strictly for them without other distractions the bargaining power is low because there are limited players. It is as one of the reasons that prompted Four Line Hotel to invest in the same. 3.2.2.1 Reflection While the bargaining power of the buyers are high as a result of numerous suppliers (hotel industry), there are few players offering services purely for business. This subsequently implies that to access to such services is limited and such the bargaining power of buyers will be low. In addition, Four Line Hotel made some prudent strategic decisions that can help cushion them against bargaining power of buyers. The first is to employ affordable prices while guaranteeing quality for business travellers as offered in other four star hotels. This means that it is not easy to be undercut in terms of prices thus, they are able to lock in customers as the switching cost to another competitor would be high. 3.2.3 Threat of Substitution Products or Services (Low) Threat of substitution can be understood in this context from two perspectives. The first is the market segment and services offered as a whole by other players and secondly the individual product offered by the hotel. In terms of services targeting business travellers, the substitution threat is low as there are few service providers of such. The only threat comes from hospitality industry as whole in that either one or two of the services offered by Four Line Hotel are offered by them and the prospective business travellers can resort to those. 3.2.3.1 Reflection There are various services offered that can attract business travellers. These include sports clubs, 6 star hotels, and cruise ships among others. However, none of these is likely to come close in offering that tranquil environment needed by business people while they are connecting and making deals. Considering this, it is less likely to be substituted by other players in current stage. Moreover, Four Line Hotel has a highly differentiated list of services. These include food, liquor and rooms. On the other hand, over specialisation might not work for them well especially for those who need to combine business, leisure and tranquillity. The decision to diversify so as to cushion them from substitutes is paying off. For instance, the most important activity the hotel is selling their rooms. The next outstanding feature in the decision to offer high quality services at affordable cost is the ability to create low switching cost. It is easier for buyers to move from the already existing competitors to Four Line Hotel because of the later. 3.2.4 Bargaining Power of Suppliers and Partner How the company is relating with suppliers is not documented. However it would be prudent if Four Line Hotel develops a robust supplier partnership program and supplier assessments to collaborate and maintain good rapport with suppliers so that the suppliers be highly dependent on them as their main purchasers. Thus, suppliers will have relatively low bargaining power. 3.2.5 Rivalry among Existing Competitors (High) In most industries, businesses have to experience competition. The strength of Four Line Hotel in combating competitors lies in three factors: pricing, quality and differentiation. The company offers high quality at affordable price. In addition, they have diverse products to meet the needs of business travellers. 3.2.5.1 Reflection The significance of the decision to be low pricing entity is seen in the view that it allows them to attract customers since they offer same services at lower price. However, some might perceive this approach as wrong as they believe low priced services are of poor quality. The low pricing can enable them undercut competitors, create barriers to entry for prospective entrants. The next beauty of this strategy is that low pricing lowers the switching cost in their favour while create higher switching cost against their competitors. 4.0 Conclusion The aim of this paper was to look at strategic decision made by the Four Line Hotel and reflect on the same by showing what would have been done differently. The method adopted by the paper as means of critique is porter’s model and SWOT analysis. The strategic decisions identified relates to pricing, differentiation, segmentation and quality. the paper found out that these approaches in certain circumstances serves them well and in certain circumstances they are hindrance. For instance the low pricing strategy allows them to lock in customers, create barriers to entry for other competitors and create high switching costs. However, this at a time might not work well with business travellers who perceive low priced services as of low quality. the decision segment is good. The only weakness is eliminating other supporting services which would have made it even more luxurious; widen their client base and reputation. The reason behind this is that business travellers go out to seek areas outside their formal; office settings so that they can have leisure and do business. So it is not prudent to have the same office setting in the hotel. In a nutshell the decisions were good, but they need to review them and add more services and have a pricing mix to cater for different classes of business travellers. References Goymer, J. 2004. BTEC National E-Business. Oxford: Heinemann. Henry, A. (2008). Understanding Strategic Management. Oxford: Oxford University Press. Ireland, R. D. & Hitt, M. A. (2005). Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership. Academy of Management Executive, 19 (4): 63-77. Porter, M. E. (1998). Competitive Strategy: Techniques for Analysing Industries and Competitors. New York: The Free Press. Thomson & Martin, F. (2010). Strategic Management. Hampshire: Cengage Learning EMEA. Read More