Business Strategy for Marriott Inc.
Business Strategy for Marriott Inc.
Introduction
Marriott Inc. is the world’s leading American based lodging company. Its head office is located in the Maryland Unites States. Marriott Inc. operates in more than 87 countries/territories, where it owns more than 4400 properties. Geographically, most of the Marriott hotels are located in the United States; around 13% of the properties are based internationally, i.e., UK, Middle East, Ireland, Asia, Africa, Continental Europe and Australia. The company manages its diversified brands like Ritz-Carlton, Delta Hotels, and Gaylord Hotels, etc. The company is founded by Alice Marriott and J Willard. The Marriott family leadership gave their valuable assistance in the business operations for nearly around 90 years. Marriott's vision is to become the top most hospitality company of the world on attaining their core values, i.e., putting people first, acting with excellence, integrity and managing change effectively.
Marriott’s growth rate depicts that it achieves its strategic goals; in 2015, the estimated revenue is around $14.22 billion. Marriott financials also depict its robust business expansion; in 2013, its hotel rooms were around 675,623, which augmented to 714,765 in just a year. The strategic business model of Marriott Inc. depicts that it emphasizes more on franchising and managing hotels than owning them. The figure depicts that nearly 50% of Marriott hotels are being managed and operated by its franchisees. Marriott Inc. is more inclined towards mergers and acquisitions. It is acquiring Starwood Hotels and Resorts, and the deal will be finalized by mid-2016. The acquisition deal helps in expanding business operations and properties of Marriott Inc. specifically in Latin America, Europe and Asia (Williams, 2009, 10; Lynch & Lynch, 2008, 55; Jeffs, 2008, 45; Birkinshaw, 2004, 55).
Through PEST analysis, companies formulate proactive strategies that help in accomplishing strategic goals. As Marriott Inc. is operating in different countries and territories, so it faces serious threats like international relations, terrorism, and political instability. The terrorist acts and political instability affect business as tourism activities reduce in the affected areas. For instance, Marriott hotel business adversely affected by the terrorist attack in Karachi, Pakistan. Marriott faces huge loss in those countries where economic growth slows down, for instance, the time when the stock market collapsed in China and debt crisis faced in Europe. The economic crisis affected the buying power of people and their itinerary trend. Sociocultural changing trends actuate people to become more brand conscious, so they travel internationally and prefer to stay in top-notch hotels. Technological factor has a direct threat towards hotel business; due to technology, the online rental services are becoming more famous. The online rental service like Airbnb is not only cheap but it also reduces the operating cost by avoiding fire regulations and hotel taxes (Jacobs, 1996, 15; Jacobs & Jaques, 1990, 25; Hunt, 1991, 14; Hogan, Curphy & Hogan, 1994, 504; Huber, 1991, 88).
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Strategic Direction with Theoretical Framework
Internal Analysis
The strategic tool PEST does not depict the internal situation of Marriott Inc. and without analyzing the internal and external business environment; it is not possible to develop a strategic direction for the company. The other strategic tool that is used in this study is SWOT analysis. SWOT depicts the internal situation of the business; it stands for strengths, weakness, threats and opportunities. Marriott Inc., strength lies in its strong financial condition that helps the management in taking risky business expansion decisions.
Marriott Inc. is enjoying high brand recognition in all the countries and territories it operates. Technological innovation is another competitive advantage through which company ameliorates and strengthens customer experience with the delivered products/services; through technological advancements, business processes are upgraded on a constant basis. Marriott Inc. strengths depict that the implemented strategies are best aligned with strategic business objectives. By evaluating business weakness, the company will be able to develop a strategy that helps in overcoming loopholes exist in the business, as well as, augments profitability. Marriott Inc. one of the weaknesses is competition from top-notch hotel chains which limits its market share. The other weakness is its global business expansion through mergers, franchises, and acquisitions, which may cause brand dilution. Marriott Inc. is catering the niche market, and it does not focus on low-cost products and services.
Marriott faces serious threats in the form of economic and political instabilities, terrorism and unfavorable changes in state laws of the host country/territory. Marriott is confronting the more challenging situation in the Asian countries regarding competitors because real estate conditions are more favorable there, which actuates competitors to start their hotel business. As Marriott Inc., business is towards expansion, so numerous opportunities exist in the markets. Marriott has high potential to enter into the emerging markets, as well as, attract more customers by offering strong customer services. As Marriott has a strong brand image, so it has the opportunity to grab more market segments by offering a home like atmosphere at a comparatively low price (Anslinger & Copeland, 1996, 126; Barton & Sandy, 1995, 305; Rohit & John, 2000, 109; Kelly, 2000, 262). The strategic plan can be formulated by using different strategic tools like SWOT and PEST and multiple strategies. These strategies are as follows:
Cost Leadership Strategy
The cost leadership strategy helps the organization to become a market leader by reducing the cost and maximizing the quality of products/services. In every Marriott hotel, quality human resources are recruited which helps it to become a cost leader in the hospitality industry.
Strategic alliances
Marriott has strong strategic alliances with different organizations for the betterment of society. Strategic alliances help in strengthen brand image, which may lead to augmentation of market share and customers retention. Marriott has strategic alliances with WPEC, AFB, and HRC AFB. However, there is a need to have more alliances with different organizations that have mutual goals.
Value-Based Strategies
Marriott has formulated and implemented some value-based strategies; these strategies focus on the following areas:
Provision of the attractive remuneration package that helps in attracting and retaining quality human resources.
Marriott has formulated proactive strategies to deal with day-to-day issues
It has formulated and implemented strategies which help in providing a safe and secure workplace to their employees
Although, Marriott has implemented strategies for the prevention of any health issue occur due to poor or unhygienic working conditions. However, still hospitality industry faces a serious threat in the form of high medical costs.
Market Segmentation
Marriott target market is a business class because it provides luxurious products and services. It has targeted the primary market segment as business class and leisure demanded business class as a niche market. Marriott aims to target another market segment called individual market shortly.
Developing employees competencies
Marriott Inc. human resources department has a systematic yet clear hiring and selection process. In which, all the effective hiring and selection tools are used for filtering out the best candidate for the required position. Marriott has a proper system that helps in recruiting the required candidates. Once the candidate is onboard, Marriott management provides proper training to utilize the maximum output. The training is also given to new, as well as, existing candidates. To improve the skills and develop the capacity of the existing employees, on-job and external training opportunities are given to them.
Benchmarking
Benchmarking is the most effective way of formulating strategies, which may lead an organization towards lucrative returns. Benchmarking is the process where one company compares its business process with the other best-performing company in the same industry. There are three types of benchmarking: operational processes, strategic benchmarking and performance benchmarking.
Marriott in the past did not follow benchmarking tool but recently Ritz Carlton hotel using this tool for strategy formulation. Ritz Carlton through benchmarking formulated strategies that help in strengthen customer and employee’s loyalty, outperforming the competition and creating sustainable change (Johns, 1999, 973; Chaffey, Mayer, Johnston & Ellis, 2000; Buttle, 1996, 45; Brodie, Coviello, Brookes & Little, 1997, 383; Bharadwaj, Sundar, Rajan & John, 1993, 99; Berry, 1995, 236; Barnes & Howlett, 1998, 23).
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Strategic Management theories and Marriott Inc.
Marriott Inc. believes in to strengthen its strategic position worldwide. For that, it is not just evaluating its internal and external environment but also formulating strategies, that holds the most suitable strategic position over its competitors. There are different strategic management theories, which are used by Marriott Inc. during formulating its strategies. These theories are as follows: innovation theory and quality product theory.
Innovation Theory
According to the innovation theory, any company can take a competitive edge over others by applying innovative features in the business processes. Although, innovation disturbs the market equilibrium, so there are few researchers who are against applying this theory in the business. However, many researchers believe that it is eminent to bring change in the business processes and products/services to compete in the dynamic market. However, risks and uncertainty are high in applying innovation theory. Marriott Inc. is one of the leading corporations that consider innovation theory as its key to success (Macmillan & Tampoe, 2000, 13).
Marriott believes that hotel industry needs to adopt changes and innovate its products/services to best meet customers' changing demands and needs. For Marriott Inc., profitability is directly related to innovation. Marriott Inc. unique products and services maximize business profitability. However, it is not necessary that company needs to change its product/services and business processes completely to bring change and innovation. A slight change in the product features and business process can be helpful in taking competitive advantage over others. Marriott Inc. brings slight changes in its processes, products, and services that help it in attracting and retaining customers, as well as, taking a competitive edge over others.
Product Quality Theory
The quality product theory focuses on product quality, as well as, service quality. Innovation theory and product quality theory are dependent on each other. Businesses that focus on the quality of the product may lead to taking an edge in the market. Marriott Inc. believes in focuses on delivering best quality products and services to the customers. Product quality affects the business demand curve; the more superior the product quality is, the more demand increases. Marriott Inc. implements strategies by considering product quality and innovation theories. Marriott Inc. offers quality focused and innovative products and services that positively affect its market share.
Marriott Inc. is considered as the market pioneer because it brings innovation in the business process and products/services. Marriott Inc. being a market pioneer develops innovative business strategies to overcome the existing and unforeseen challenges, as well as, ameliorate the business processes (Anderson, Erin & Barton, 1992, 18; Anderson & James, 1990, 42).
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Gaps and Issues
There are different issues that are faced by Marriott Inc. like ethical issues, property issues, automobile issues, employee safety and compensation issues. As Marriott Inc. is towards its expansion phase, so it owns property at different places, which itself is a threat to the business in case of any uncertainty. The situation would become less risky if Marriott Inc. prefers to lease the property instead of owning it. As Marriott Inc. provides commuting services to their employees and esteemed customers so it may lead to high accountability towards employees and customers safety. Marriott is required to verify its drivers profile before hiring them. As Marriott is the leading hotel company, so employees possess an eminent role in the success of the business. It is highly important to satisfy employees to get maximum output. Hotel management is responsible to provide safe and healthy working environment to its employees. The more employees are satisfied with their jobs, the more output they give. Marriott Inc. needs to constantly evaluate the working conditions and proper strategies must be implemented to make sure that the workplace meets all the hygienic standards (Hunt, 1991, 14; Anslinger & Copeland, 1996, 126).
Businesses conclude to bring new product and service in the market after they identify the prevailing gap. Marriott Inc. does not much launch new products and services; it focuses on altering the existing processes after scrutinizing the internal and external business environment. The following gaps have been identified in this report through internal and external analysis:
Need to implement strategies for rendering better security services;
Introduce new products and services
Enter into new market segmentation
Recommended Strategic Objectives
The analysis depicted that Marriott Inc. enjoys a strong position among their competitors. There is a need to adopt fully product quality and innovation theories in the business processes to take a full edge over others. Marriott Inc. should do benchmarking of its business processes; Ritz Carlton is the only hotel that is following benchmarking and gaining a competitive edge. Marriott Inc. is required to implement strategies for benchmarking so that it can attain maximum customer-employees loyalty, innovation and competitive advantage over others. Marriott Inc. needs to focus on introducing comparatively affordable products to capture the large market segments. Marriott should formulate and implement effective strategies for managing employee/customers safety. As Marriott Inc. is towards business expansion, to strengthen its brand image, it is eminent to create more strategic alliances with those organizations that already have a strong reputation.
It is evident that the top management formulates strategies, which are followed by the middle and low-level management. Marriott Inc., although implements strategies which clearly communicate without any hindrance to the middle and low management. Many problems arise when middle and low management level are not aware of the business issues, which ultimately may lead to operational conflicts. The problem can be reduced by provision of proper training to the HR department; who is responsible for communicating the formulated strategies to all management levels. The HR department must be trained to effectively handle any conflict arise in accepting the set strategy from the middle and low management level. The internal and external environment analysis depicts the following strategies to be formulated:
Marriott must focus on formulating strategies on proper property management
Leasing the property is more effective than owning it
The investment decision must be made based on stakeholders’ value
Proactive strategies must be implemented to create safe and secure working environment
Online internet medium must be used effectively to satisfy customer needs and demands.
Web page must depict all the pricing details without any ambiguity
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