Strategic Analysis and Planning

MAIN BODY

Evaluation of the relevant levels of strategy

Merger of Marriott and Starwood organization helped Marriott in creating world’s largest hotel organization. This merger has helped in combining Strengths of Starwood and Marriott hotel which together has helped Marriott in making one of the most powerful product and services portfolio. This merger has also increased value of Starwood and Marriott hotel shareholders.

Strengths of Starwood: Excellent customer relationship management, image of lifestyle brand, international relationship and presence, presence of leisure activities and rooms etc.

Strength of Marriott: Culture, strong owner and franchisee relationship, operating efficiency, proper hotel development etc.

CorporateStrategy: Marriott has always been a leader in hotel industry and its corporate level strategy has helped them to achieve this. Merger of Marriott and Starwood hotel is done in such a manner that alignment of both the company’s strategy has helped Marriott in gaining competitive advantage. Marriott has also focused on not only creating one of the best hotel organization in peer but gain competitive advantage in order to gain more profit. Marriott is not following asset light strategy in which they are focusing on making deals with local investors and expertise in order to enhance their market position and is not focusing on investing or acquiring long terms real estate market. This merger has helped both the organization to set their focus on hospitality industry in order to gain competitive advantage.

Business level Strategy: Both the organizations has used differentiation costing method in order to gain competitive advantage. Merger of both the companies has helped them to deal with all of their service providers and gain advantage of low-cost service. So it can be said that differentiation and negotiation strategies are helping them to decrease their overall operational cost and increase their overall revenue and profitability.

Bowman’s Clock: it is a competitive analysis tool (McLean, 2019). As per this tool competitive position of Marriott after this merger is undisputed and has made Marriott worlds largest hotel Organizations by bring together two world’s largest hotel organizations. This merger has helped Marriott to strengthen their portfolio because of which they can easily provide their customers with different types of services such as personalized services, lifestyle and luxury services. This has also helped Marriott in enhancing their customer segment as now big corporate, middle class and upper scale people will be able to access their services.

Critical Evaluation of Key Stake Holders

• The stakeholders of Marriott merger were having a positive effect on the merging and acquisition on the other small hotel industries and organizations.
• The stakeholders have made many loyalty programmes to check the working capacities and loyalty of the employees working in the hotel.
• This loyalty programme was conducted separately for both Marriott hotels and star wood hotels and resorts. The stakeholders conducted this programme to check where they invest their capital so that the chances of making profit will be higher (Witt and Stahl, 2016).
• The stakeholder wants to make the best image of the hotel so that the consumers visit more and more and to do so they invested in promotional activities and advertisements made by the hotels.
• By this the stakeholder earned only 0.8 % profit in the share market which included the common stock of star wood having value of 21$. This has made a huge loss for the both share holders and stakeholder of the hotels.
• In the month of September 2016, the stakeholders decided to close the deal to integrating and merging of the Marriott and star wood hotels.
• The star wood has earned a lot by the loyalty programme done among the employees so they offered their customer to choose among the 5500 hotels of Marriott and Star-wood running in 100 different countries of the world.
• The loyalty programme started by the stakeholders has helped a lot in doing the expansion of the business of the hotels across the world (Wolf and Floyd, 2017).
• The stakeholders and shareholders of the hotels earned many rewards in the form of points which were known as SPG star points. These points were distributed among the customers who used them to get discounts and other facilities during their stay in the hotels.
• The stakeholders profit was depended on the number of rewards points used by the customers in the hotels. As the rewards were earned by the stakeholders, their commission was fixed which the hotel industry have to pay them if the customer is using the reward points in the hotel.

Internal: Hotel owner, Franchises, suppliers, contractors, employees, shareholders etc.

Market: Customers, Competitors etc.

External: Sustainability experts, government etc.

External analysis-PESTLE Analysis to identify and explore key trends

Mariotte international and Starwood are hospitality organizations that are present globally. There are various external factors that can affect their business and operations (Perera, 2017). PESTLE analysis will help the organization to understand and identify what are the key trend that can affect both the organization’s overall business especially Marriott as it has acquired Starwood hotels. It will also help Mariotte and Starwood hotel to understand the environment in which they operate, key drivers, key trends and many more.

Politicalfactors: Political environment of nations can affect business of Marriott. Political stability of a country can either enhance trust and confidence of both the organization on government and within each other. This stability will also help Mariotte hotels to attract their investors to invest within their business. Different nations have different kinds of legislations as per their legal structure. Merger of both the organizations can also affect their operations. There are various countries that have various kinds of legislations for mergers of companies or organization which can affect operation of Marriott organization. Trade restriction or relation between two countries can also affect business of Marriott as it is an American organization and trade relation between USA and North Korea is not good as a result Marriott cannot do business in North Korea which can affect their merger and way of operating after merger.

Economicfactors: Inflation rate of Venezuela has made currency of the country quite unstable due to which Marriott has limited their investment in the country and has also removed their three properties from their earning numbers (Nandonde, 2019). Other than this Foreign exchange rate of any country will directly affect earning of Marriott. For example, due to low oil price there is shortage of Foreign exchange in Nigeria as their most of the revenue comes from crude oil. Due to this it has become difficult for Marriott to important items such as furniture etc. required by them. Another economic factor that can affect the overall business of the organization is Economic growth of the countries. Despite of political risk most promising areas where Marriott operates is Latin America and Africa as they both have fast economic growth rate. Growth rate of countries also helps in increasing disposable income of their people. This also helps Marriott in increasing their overall revenue as people with higher income or large disposable income prefer to stay in branded organizations like Marriott. Due to this Marriott is continuously focusing in expanding their business in China as China is one of those nations who have large number of middle-class people with higher disposable income.

Socialfactors: According to a recent research year by year number of international travellers are continuously increasing and most of them either invest in food they eat or in hotels they stay (Perera, 2017). In both the ways it is one of the great opportunities for Marriott increase their revenue, sales and overall profit. Merger of Marriott with Starwood hotel has helped them to balance their product and service portfolio. With this merger Marriott can focus on all kinds of customers i.e. people who desire luxury, change in life style etc. they can focus on satisfying their customers in a more accurate and appropriate manner. As population of middle-class people in China is quite high as compared to other nations or continents such as Latin America, Africa etc. this has provided Marriott an opportunity to expand and invest more in this region. Success of companies like Airbnb is increasing competition for Marriott as today customers not only focus on luxury but also focus on immersion as well.

Technologicalfactors: Marriott focuses on using advance technology and focus on building an innovative organization culture. This is helping Marriott in gaining competitive advantage (Malekpour, Brown and de Haan, 2015). They use excellent technology computers, software’s or any other electronic item and also remain updated with new technology entered into the market in order to provide excellent service to their customers. They have excellent customer service system which is helping them to attract a greater number of customers at global level.

EnvironmentalFactors: One of the major environmental factors which is affecting Marriott business is Fuel consumption and prices. This is working as an advantage for Marriott as fuel prices are continuously decreasing which is also affecting travelling cost i.e. is also decreasing (Nandonde, 2019). It is one of the biggest advantages for Marriott as a greater number of tourist will prefer rooms to stay. But if the fuel prices increase then obviously it will affect Marriott business. Increasing electricity cost is one of the major environmental factors that can affect Marriott efforts of reducing greenhouse gases. It can affect business of Marriott at various places especially at places that are near ocean as increasing global temperature is continuously increasing ocean or sea level due to which tourist visit at that place is also decre4asing. Is can also affect their consumers preference of staying in Marriott as most of the people nowadays prefer to stay in sustainable hotels.

Legalfactors: One of the major legal factor that can boost or enhance overall business of Mariotte is current status of organizations like Airbnb. As recently Airbnb was fined due to violation of zoning laws, violation of health and safety regulation etc. Not only this, Airbnb has also been criticized for running some illegal hotels, do not pay lodging tax etc. Due to this overall business and sales of Marriott has increased as many numbers of Airbnb customers are preferring Marriott over Airbnb. Another legal factor that can affect Marriott is increase in minimum wages of employees in US. Due to this increase in minimum wages, cost of labour in US has increased and service has reduced.

These are the factors that can affect overall business of Marriott after its merger with Starwood Hotel organization.

INDUSTRY ANALYSIS

With the acquisition of Starwood Hotels, Marriott is expecting to gain huge benefit, however for achieving goals of this merger organisation must also conduct appropriate industry analysis to develop suitable strategies. The operations and strategical direction of firm depends upon several factors such as choice of customers, cost, societal concerns, life style and attitude as well as efficiency (Mathooko and Ogutu, 2015). With the merger Marriott will be able to provide more services as per the demands of its customers in appropriate pricing which adds more value for its premium customers. However with the merger organisation will also require to address the cyber security and technology based issues driving the hospitality industry. Further Marriott is also required to analyse the impact and analysis of five forces influencing industry or market. These five forces are analysed as follows:

Five force analysis

Bargaining power of buyers

Buyers have ability to drive prices lower as number of customers, significance of every customer and cost of adding new buyers to organisation can influence the success of hotel. For huge profitability hotel require high occupancy rate and thus it has high and fixed operating costs. Thus for gaining competitive advantage demand of rooms and other services provided by Marriott is important. This demand can be created only when customers or the potential buyers have enough resources to purchase the services (Takata, 2016). As a result of this national average income and recessions can also influence the revenues and hotel stay.

Hence for the hotel buyer's power is high. As a result of this buyers can force organisation to lower the prices which in turn gives low revenues. High bargaining power for customers is not attractive in terms of revenue and success of organisation as it make customer price sensitive and negligence of it can also cause backward integration of the potential buyers. The hotel industry has sufficient number of service providers and thus people are price sensitive and higher power leads to low revenue.

Threat of new entry

The lower threat of new entry is beneficial for long term success as well as high revenues for the organisation. When there is high risk of new entry threats then it may become challenging for the organisation to retain or protect it customers from diverging (Croain, 2017). If it is very easy for a competitor to enter market at low cost and less amount of time then it can even weaken the market position of highly established organisation.

Hospitality industry is fragmented and thus it is very easy to enter in this market. However managing such hotel chain requires huge capital investment in the beginning as well as in operational tasks. It also involves economies of scale and thus merger of Marriott will have lower degree of threat from new entry. Similarly the location of hotel also plays great role in influencing revenues (Carraher, 2018). The merger has allowed Marriott to serve to more number of locations, giving it more opportunity to weaken threat of new entrant by acquiring customer loyalty and efficient services.

Bargaining power of suppliers

The extent up to which the suppliers can drive or affect the input cost is also one of the force in industry analysis. It depends upon number of suppliers, their uniqueness and value proposition. The limited number of supplier makes organisation completely depends on them and thus they can increase the input cost (Rothaermel, 2017). Hence it is not cost and performance effective for the hotel to provide high bargaining power to its suppliers.

For the Marriott hotel supplier bargaining power is weak which is beneficial for the hotel. Marriott hotel also have approach to customers through travel and online booking agencies but the major supplier power remains in the hands of its staff members and personnel who contribute in operational activities. However Marriott hotel have high quality standard and monitoring system to ensure that its employees are efficient and trained to provide quality and satisfactory services. Due to this reason for Marriott hotel bargaining power of suppliers is weak force and has very limited role in influencing the competitiveness in industry.

Substitution threat

High substitution threat is considered to be very risky for the organisation. When organisation have close substitutes which can replace their services then customer have easy options to shift from the organisation. It will directly influence the customer loyalty and profitability targets of the hotel.

Marriott hotel has average level of substitution threat which is quite common for all the hotels. Though Airbnb are not exact and perfect substitution for the international travelers or customers but it can act as one of the substitution (Mathooko and Ogutu, 2015). These Airbnb and hotels have same target customers but the low cost of Airbnb can attract more people than Marriott. The services of organisation can also be substituted by motels, hostels and residential houses of friends or relatives. These choices brings significant differences to the cost which is an important factor for the cost conscious consumers, especially during economic instability. However these types of threat does not act as consistent threat for the organisation.

Competitive rivalry

Intense or strong competition in the industry is not considered as profitable for the success of organisation. With increasing number of competitors there are more choices for the customers which serves similar products and services. Thus both buyers and suppliers seek out competition if they receive the same quality or types of services at low cost (Rothaermel, 2017). On the other hand when competitive rivalry is low then hotel has high power to increase their prices or to set the conditions and terms for achieving desired level of profits and sales.

Hospitality organisations such as Marriott which have high fixed cost tend to have strong competitive rivalry. For enhancing the profits and customer hotels offers discounts and additional service benefits particularly in off season. The strong rivalry also encourages the price wars, demand of huge investments in terms of innovation or new products and intense promotional activities affecting operational cost in negative manner.

CONCLUSION

The report can be concluded by comparing the Marriott mergers with the star wood hotels. The hotel used many business strategies which helped them in making earning the profit and making an different identity in the market. The hotel also focused on attracting more and more customers by applying marketing and technical strategies in their business. The key stakeholders played an important role in the in hotel industries. The stakeholders conducted the loyalty activities among the employees of the hotel by which thy and a huge amount of profit in the market. The PESTLE analysis was don to measure those external factors which were effecting the business of these two hotel industries. These external factors were the political, economic, social, technical, legal and environmental factors. The porter's five model analysis was also don which showed us their competitions in the market, launching of new product or service in the market, powers of both customers and suppliers and the threats occurred for the substitute products produced in the hotel industries.

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