Strategic and non-strategic decision making process for Hilton Worldwide
Introduction
The aim of the report is to critically assess the strategic and non-strategic decision making process of any international business organisation and analysing the maturity and desire towards the management of risks and proposing significant strategies that the organisation can adapt for further development.
For the attainment of these objectives, Hilton Worldwide has been a target and the paper has been outlined into four major segments. The first segment presents the theoretical perspective on strategic management and strategic decision-making and the implementation of the concepts of the targeted organisation. The second section describes the concepts of non-strategic management and decision-making and the approach of Hilton Worldwide towards non-strategic management. The third section discloses the diverse concepts regard to risk management and then presents the risk management approach used by Hilton worldwide. However, the fourth section proposes recommendations for future implementation.
Overview of the organisation
Hilton Worldwide was found in 1919 by Conrad N. Hilton, headquartered in Texas, the United States. The organisation is internationally known for providing tourism and hospitality services, Conrad Hilton is a pioneer of hotels and recognised for its worldwide services. The hotel was started with 40-rooms, but now the hotel chain is known one amongst the top leading brands of hospitality companies. The company is growing rapidly with more than 4,440 hotels, timeshare properties, and resorts in rural roadsides, world capitals, vacation destinations, trade centers, and everywhere in between. The total properties comprise more than 730,000 rooms in 97 countries and territories (Hilton Worldwide, 2016a; 2016b).
Strategic decisions
Definition
The term “Strategic management” does not contain any particular definition. Practices and definitions of management vary widely with industries and governments; therefore, there is no commonly accepted description of the term. However, according to some definitions, strategic management is a purposeful attempt of progressing from the current situation to the other that is improved one. It is about analysing the alignment of current activities of the organisation with perspective, recognising the change that will occur in the long run, and it is about successfully managing change (Tyndall, Cameron & Taggart, 1990).
The term “decision”, refers to the act deciding on the settlement. Observable actions are the driver of decisions, in other words, decisions are taken after having empirical research. According to Sadler (2003), strategic decisions are fundamentally important for the long-term success of the businesses, but it is not necessary that they proved to be successful in some considerable time. These decisions are not reversible and if, then bring the considerable cost to the organisation (Sadler, 2003). However, Mintzberg & Lampel (1999) explain strategic decision as any decision that is critical to the business. They further added that the resources’ substantial commitment and required patterns in decision-making clearly highlight the strategic aspects of the strategic decision. These decisions reflect the association between business and environment. For example, whenever businesses find any threat or any opportunity posed by the external environment, they decide accordingly to respond those circumstances (Portaleoni et al., 2013).
As theorist has no concession on the definition of strategic management and strategic decision. Therefore, all definitions are being considered for the application in the case of Hilton worldwide.
Examples of Hilton Worldwide strategic decisions
As strategic decisions are important for the long-term success of the organisation and followed by the external environment; therefore, they include innovation. Service companies make a strategic decision with the aim of having a competitive advantage over rivals so they can sustain for long. Hilton hotel is involved in constant strategic initiatives, for example, the hotel is involved in constantly innovating the design of its hotel business lounges that is backed by intensive global feedback and research. The hotel chain recognised the demand for corporate social responsibility posed by the external environment; Hilton took a strategic decision to gain this opportunity. The example of its strategic decisions includes the reduction in the utilisation of energy, food waste, and focus on water stewardship (Hilton Worldwide, 2016a). These decisions of making innovation in business lounges and adapting corporate social responsibility strategy are strategic because these are backed by research, has an association with the external environment, has been taken to improve the long-term sustainability of the organisation, and critical for business success.
Analysis of Hilton Worldwide strategic decisions
Hilton Worldwide is a recognised brand in the hospitality industry, and its strategic decisions are not limited to any single strategy. The hotel chain uses the generic approach in making a strategic decision and holds 12 brands that are best for any occasion and serve the needs of people associated with every lifestyle (Hilton Worldwide, 2016b). Through this strategic decision, the chain differentiates itself from its rivals that make the brand successful. Companies have several options in making strategies, but to focus on few is important for success. The grand strategic decisions of the Hilton Worldwide include market development (international expansions), product development (an example is 12 brands of the company), and concentrated growth (acquisitions and franchises) (Lewis & Bohaker, 2015).
Amongst the most important strategic decisions, the one is related to the allocation of resources, most specifically to the allocation of capital. The most obvious case is making the choice between supporting the acquisition growth and funding growth organically (Leading Strategic Initiatives, 2011). The history of Hilton hotel is full of a strategic decision taken to make an acquisition for the success of the organisation. In 1943, the company with the acquisition of the Roosevelt and Plaza hotels based in New York secured the position of being a first coast-to-coast group of hotel in the United States. In 1949, Hilton purchased the New York based original Waldorf Astoria called “the greatest them of all”. In 1954, the hotel acquired Statler hotel for dollar $111 million and the list continued with such strategic decisions (Hilton Worldwide, 2016b). Recently the Hilton Worldwide has agreed to acquire four properties and parc 55 property of San Francisco for $ 1.76 billion. All these strategic decisions are of non-organic growth. These decisions are said strategic because these acquisitions contributed immensely to the profitability of the organisation and enhanced its market share (Mulholland & Yu, 2015).
Non-strategic decision
Definition
According to Chester Barnard (1938), non-strategic management is an intuitive, informal, two ways communication based, and non-routinized process. It is not about sensing the business as particular or any specific situation relevant to it (sensing the business as whole, and the total situation is relevant to it). It surpasses the ability of simply intellectual methods, and the methods of discriminating the situation’s factors. However, non-strategic management is defined as the activities that involve developing network working relationships, offering specific and general insights for making strategic. Non-strategic management is based on intuitive decisions rather on systematic planning (Liqui Serach, 2016).
Non-strategic decisions are short-term decisions and have short time effect. Decisions like direct mail campaigns, seasonal price discounts, advertising channels, and product enhancements all are the examples of non-strategic decisions (Fleisher & Bensoussan, 2015). Non-strategic decisions are small in nature, more routine as compared to strategic decisions, and do not require substantial resources implementation. Making a distinction between the strategic decision and the non-strategic is not easy always. However, decisions that do not demand huge commitments and make little impact on the result of failure are non-strategic in nature (Haberberg & Rieple, 2008).
For the application to the case of Hilton Worldwide, the definition of non-strategic management proposed by Chester Barnard is considered to use as it covers the wider aspects of non-strategic management or decisions.
Examples of Hilton Worldwide non-strategic decisions
The competition in the hospitality industry is intense, and every organisation is trying to give the best in making the customers experience better because it is among the factors that contribute immensely to the profitability of hotels. Serving customers with top-notch experience is a challenge for hospitality organisations. For overcoming this challenge, Hilton Worldwide recognised the success factors and implemented the decisions regarding succession and development, compensation, and learning. These decisions were the examples of non-strategic decisions that served the organisation with considerable benefits. Such as in the result of these decisions, the hotel chain was able to deliver a better intuitive experience to online users, gained the alignment in its worldwide operations, and avoided the investment of development resources to the people soft platform (SAP Success Factors, 2016). The hotel realised that the employees are the key to exceptional customer service experience; therefore, they decided to rewards their top performers, the company has an intuitive dashboard that demonstrates HR standard metrics so to management is known with the information needed to make improvements (Galer, 2014). The hotel chain for enhancing the awareness of its brand constantly works on its advertisements techniques. All these decide that are related to advertisements, workforce, and technology deployment with the aim of improving performance are non-strategic decisions because these decisions after some time may require improvement as they lose their efficiency in generating returns. These decisions do not require huge capital commitments and the decision to do not continue these practices may not make a huge impact on the organisation.
Analysis of Hilton Worldwide non-strategic decisions
Before having analysis, it is crucial to define again that all short-term decisions that so not have gigantic effects on the organisation come under the headers of non-strategic decisions. In other words, decisions regarding workforce, quality, planning of material, operations, and organisation such as structural changes and initiatives to support activities are non-strategic. Therefore, all decisions of Hilton Worldwide taken regarding the structural changes, quality control, operation, material, and workforce will count as non-strategic decisions (Waters & Waters, 2006).
It has been analysed that the hotel chain for maintaining its competitive advantage has been involved in several product related decisions. For example, for improving the quality of customer services, the Hilton Worldwide negotiates with hundreds of global suppliers. The hotel chain uses precise methods of ordering (Hilton Worldwide, 2016a). The company has decided on some particular stringent product standards that help the company in maintaining reliability and good quality. Hilton Worldwide decision of deploying the information technology with the aim of streamlining the operations for better service quality is a non-strategic decision. The company in 2012, with the aim of forming more unified approach towards talent management, hired Dottie Brienza, for overseeing the performance management, recruitment, diversity, leadership and executive learning and development. Hilton Worldwide also restructured its human resource strategy and turned its learning towards the virtual platform. The Hilton Worldwide develops its training content in the house such as revenue management, brand training, leadership developments and sales development. Even for the development of internal curriculum, the company makes partnerships with suppliers. Hilton Worldwide uses a diverse range of training methods that are beneficial for the business. Such as the hotel chain adapts blended approach towards the training of employees and offer them independent virtual learning, weekly-based program to hourly-based program, and all that exist in between. The hotel chain is committed to offering its employees with opportunities that can improve their performance. The Hilton Worldwide supports, advices, and trains its employees on branding as well (Eggleston, 2012). These are the non-strategic decisions as they are related to the workforce, do not require huge investments, and if the organisation make any changes, then they will not affect the organisation negatively. To better meets the needs of Hilton Worldwide, the hotel restructured its implementation and sales teams (Setili, 2013). All these are the non-strategic decisions because they are more frequent as compared to strategic ones and taken with regard to the organisation as a whole, the overall situation of the organisation is relevant to it.
Risk
Definition
Risk management is the procedure for identifying the risks systematically, assessing and responding to them throughout the organisation (Waters, 2011). Risk management is a proactive approach to identifying risks, analysing them, and designing appropriate techniques to respond these identified risks. According to Kraus (2000), risk management is a sequence or series of functions and tasks that are performed by the organisation for reducing unexpected or unplanned financial loss to the business.
Several definitions with the “risk are associated”, the basic definition of the risk is that “it is an opportunity of happening something bad”. However, the risk is defined as “the objectified insecurity regarding the happening of an unwanted event” (Webb, 2003). According to this definition, the term risk includes four elements (Webb, 2003): that is not subjective, but de facto reality, uncertainty exists about it, the result is unwanted or undesirable, and it can occur. According to the Merriam Webster dictionary, the risk is the possibility of happening something unpleasant or bad such as loss. Risk also refers to the uncertainty about divergence from the outcome or earnings that are expected (The Economic Times, n.d).
The risk management definition proposed by Kraus (2000) is considered for the implementation in the case of Hilton worldwide. However, the risk definition presented above is considered for the implementation in the case.
Analysis of Hilton Worldwide attitude to risk
The hospitality industry is going through intense competition. Therefore, for securing competitive advantage and enhancing the resilience of business, it is important that businesses are rather reacting and responding to emergency and crisis and identifying the risks proactively. Proactively identifying and analysing risks allow organisations to prepare the business strategies in advance to deal with potential risks. The external environment poses most of the risks that hospitality organisations face. To manage such risks, Hilton Worldwide adapts proactive approach. For example, the hotel chain analysed the collected feedback and data from more than 40 million honourable members, from social media, review sites, and guest surveys. They realised that customers want greater control and choices. Hilton Worldwide realised that risk that if they do not take any initiative in this regard, they may have to face losses as they will lose their competitive advantage against the rivals such as Marriott. The hotel allowed the option to its guests through which they could they can select the room of their choice, could check-in, and even could unlock their rooms. The approach of` Hilton to turn the Smartphone into the keys of the hotel room was a proactive approach to potential risk posed by technological environment and known as organic growth strategy (Stassi, 2015). Under the definition of risk proposed by Webb (2003), risk delivers unwanted results and can occur. Hilton Worldwide determined that by the year of 2050, approximately 67 percent of the population of the world would be living under the water stress condition. This risk will result in loss of natural resource and hurt the organisation indirectly as well. For dealing with this unwanted outcome of the utilisation of water, the organisation has taken a proactive initiative. Since 2009, the chain has reduced the water utilisation in its operation up to 14.1 percent and saved enough water for filling 4144 swimming pools of Olympic. This is a proactive risk management approach because the organisation took this initiative to deal with an unwanted outcome that can occur in future (Hilton Worldwide, 2016a).
Recommendations for future strategies
The analysis revealed that Hilton Worldwide is a well-recognised and growing brand, but the brand growth is mainly driven by acquisitions. Such strategic decisions bring immense uncertainty with it and cause risky situations. Therefore, it is recommended to the organisation that is rather making acquisitions and investing huge amount of capital on inorganic decisions, the hotel chain should adapt organic growth strategies that will allow the organisation to expand based on its own resources and energy. Building on internal capabilities will serve the firm with the sustainable competitive advantage that would not be imitable easily by competitors. Hilton Worldwide has an opportunity to make further innovations in customer service and make better use of advanced technology.
It has been determined that Hilton Worldwide is making constant efforts for improving the services of its hotel chains. However, the major focus of the hotel is on improving the operational and tactical capabilities of staff. It is recommended to the organisation that it should focus on training employees regarding customer service. For example, they should guide employees that how the customer should be handled in case of any complaint. Employees are the face of the organisation in the hotel industry; they must know that techniques to please customers and to make their service experience exceptional.
Conclusion
It has been determined that Hilton Worldwide has made several considerable strategic and non-strategic decisions regarding the growth of the business and for gaining competitive advantage, the business has great appetite towards managing risk. However, for growth, the major focus of the organisation has been on funding the non-organic growth of the organisation. In non-strategic terms, the major focus of the organisation has been on improving the capabilities of upper level management. Therefore, some recommendations regarding future strategies have been made. The overall paper describes substantial analysis on the strategic and non-strategic decision-making and management of Hilton Worldwide and discloses its approach towards risk management.
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