Competitive Strategy for Hotel Industry - MyAssignmenthelp.com

Question: Discuss about theCompetitive Strategyfor Hotel Industry and Airline Industry. Answer: Introduction This is the age of Globalization, digital revolution, Internet of things, cloud computing and disruption. All these technologies and developments have also bring the legends and established businesses quite focused and conscious in this world of startups that have the power of shaking their established business just with their innovative idea. Take the example of taxi aggregator Uber which has provide vary tough competition to local home grown taxi players in various countries and has now been expanded to 85 countries in just nine years of its business operations. Uber does not require much investment of owning plants, machinery, and labor. It has a lean business model but the business idea is quite innovate. Similarly, competitive strategy has become very important in this world where each business must answer the question that how it differentiates itself from the competitors and how it is actually creating the value. Not only this, when there is pressure on cutting the costs and p assing on to the savings on to the customers, each company is trying hard to provide better value to its customers. AAA framework is one such framework that helps the companies to create more value for their customers. First A stands for Adaptation, which means use of local techniques or adapting to local requirements (Ghemawat, 2013). It is opposite of Standardization where the company just provides the same products irrespective of the region. Second A stands for Aggregation, which means exploiting economies of scale, which cut the costs and also increase the revenue of the company. Third A stands for Arbitrage which means exploiting the differences between the currency exchange rate, rate, trading between different countries which makes possible to buy at low value in one market and sell at high value in another thereby earning a profit without much investment. Arbitrage in more general terms can be considered as outsourcing and off shoring strategies (Ghemawat, 2013). The purpose of this report is to discuss about the AAA framework and how is used by the four companies in two industries. This paper aim to study the applications of AAA framework and how the world-class companies to reap the benefits leverage this. The chosen industries are hotel industry and airline industry. Analysis Most of the organizations are seeking to expand their operations in new countries as their markets are already been saturated as well as penetrated by global players. Organizations are also thinking to divert the attention of their competitors by expanding in their nations and let them also diver their efforts over there. This AAA framework works for the companies, which are looking for global expansion to operate in multiple geographies (Ghemawat, 2013). This report will focus on the four companies out of which two belongs to hotel industry and two belongs to airline industry. The organizations in these industries can be mentioned as: Hotel Industry: Marriott International Hyatt Hotels Airline Industry: Qantas Airlines Emirates The concepts of AAA framework are used mostly by global and multinational organizations as they enter and expand in new regions. For example, Marriott Hotels has large number of hotels in different parts of the world. The company also has some level of standardization across its hotels (Harwit, 2013). However, its hotel in Australia and Germany are not similar. There exists some level of local customization in each of the hotel based on number of internal and external parameters like demographics, people preferences, international tourists, government support, spending power of consumers, etc. It is important that the organizations must realize the key benefits of AAA framework. This framework can be considered as a guideline that helps organizations to devise their strategy. In addition to this framework, there are numbers of things that organizations must consider. The discussion for adaptation, aggregation and arbitrage for these two industries and four organizations can be discus sed in detail as: Adaptation Simply defined, adaptation means use of local techniques or adapting to local requirements. In the classical terms, adaptation is opposite of Standardization where the company just provides the same products irrespective of the region. The use of adaptation is high in hotel industry as compared to airline industry. Bharadwaj El Sawy (2013) highlighted that hotels could be personalized thing for travelers and tourists. Therefore, it is important that the organizations in hotel industry should be in a position to provide this customization to consumers. Marriot International has number of hotels in different parts of the world. However, the design of its rooms and hotels is not same for every hotel. Marriot and Hyatt are the big names in hotel industry and obviously there is some level of basic expectations that people have from these hotels. The management is committed to provide and satisfy the minimum requirements. For example, guests would expect a big swimming pool and restaurant s with international cuisine when the visit these hotels. The adaptation is observed in terms of local culture and consumers. For example, some of the Marriott hotels are close to beach side and some are in the heart of city (Leonidou Christodoulides, 2015). The places where business traverse are more have Marriot hotels that suits to business professionals and the places where tourist are more have Marriot hotels that suits to leisure travelers. The use of adaptation is also observed in the airline industry. Emirates operate its flights in more than 100 countries and the company has different facilities in different regions. To highlight a perspective, Emirates specially came with the idea of premium economy to cater to the need of Indian market. The management of Emirates realized that Indian consumers cannot pay as much and as a result Emirates reduced its price in Indian market. Qantas Airways is also an international brand; however, majority of its business comes from Australian market. As compared to Emirates, Qantas has used less level of adaptation. However, as the company would expand it would need to shift its focus from standardization to include more of adaptation or localization in place. Aggregation It would be correct to say that aggregation is a key concept for organization to improve their bottom lines of revenue and profitability. Aggregation means exploiting economies of scale, which cut the costs and also increases the revenue of the company. Blackburn Hart (2013) highlighted that the organizations would want to focus on aggregation only because they can increase their profitability. The evidence of aggregation is observed in both the industries of hotels and airline (Goerzen Asmussen, 2014). The large hotels like Marriott and Hyatt would always have hundred of rooms in their hotels. This is done to take the advantage of economies of scale. The management of these large hotels realizes that the basic infrastructure like swimming pool, gym, restaurants, security would remain for less or more rooms. Therefore, the hotels would focus to have large number of rooms. This concept is evident in Marriott as well as Hyatt. However, the comparison of these two hotels would reveal that the use of aggregation is more for Marriott as compared to the use of aggregation for Hyatt. The Hyatt Hotel would have fewer rooms per hotel as compared to rooms per hotel for Marriott (Bentley Omer, 2013). The concept of aggregation is also evident in the business operation of organizations in airline industry. The flight of Qantas would have a large option of seats in economy class. In general, the airlines have large number of economy class seats, as the chances of occupancy are high in economy class seats as compared to business class seats. Emirates have some aircrafts where the numbers of business seats are high. Therefore, with respect to aggregation, it can be said that Qantas Airways has more use and implication of this concept as compared to Emirates. It would also be correct to say that the application of aggregation concept is almost similar for the organizations in airline industry and it is expected that the organizations would continue to use this concept (Lee Jeon, 2010). Arbitrage The use of arbitrage is usually high for the organizations that have to manage their operations in global environment. Arbitrage in more general terms can be considered as outsourcing and off shoring strategies. In this era of globalization, organizations would want to outsource their business operations to places of low cost. For example, a lot of companies would outsource their manufacturing in China. The use of outsourcing is not directly evident in the business operations of hotel industry or airline industry. However, the companies in these industry segments use arbitrage in indirect manner (Masli Richardson, 2011). The players in hotel industry need a lot of stuff to manage their operations. The most basic example of arbitrage as used in hotel industry would be the use of things like dental kit, crockery, etc. The large hotels like Marriott and Hyatt would get these things imported from China. This is done to save the cost. These companies are able to save almost 30% of their cost when they get the stuff from outside (O'Grady Rouse, 2010). The same strategy is observed in the business operations of Marriott and Hyatt. However, the comparison of these two companies in this dimension would reveal that the use of arbitrage is high for Marriott as compared to the use of arbitrage for Hyatt. It is expected that the players in hotel industry would continue to use arbitrage to manage their operations. The use and application of arbitrage is also evident in the business operation of airline industry. Emirates have to manage its flights in different countries. The company always prefers to get the stuff from the country where the cost is low. Emirates would have to carry the inventory of things like food, drinks, etc. in its flights (Alvarez Pilbeam, 2010). The company uses arbitrage to get the inventory from the place where the cost is minimal. The same strategy or policy is observed in the business operation of Qantas. However, the use of arbitrage is less for Qantas airways as compared to the use of arbitrage for Emirates as Qantas would usually fill the inventory from Australia only. It is expected that the players in airline industry would continue to use arbitrage to manage their operations. Conclusion The above paper analyzes the use of AAA framework for the organizations in two industry segments of hotel and airline. The paper discusses the application of this framework for Marriott International Hyatt in airline industry and Emirates Airlines Qantas Airways in airline industry. The companies in both the industry segments use arbitrage in terms of outsourcing or procuring the things at minimal cost. The use of adaptation is more in hotel industry as compared to airline industry. The use of aggregation is also more in hotel industry and within the airline industry, it would also be correct to say that the application of aggregation concept is almost similar for different organizations. In terms of arbitrage, the use of arbitrage strategies is almost similar for both the industries. References Alvarez, G., Pilbeam, C., Wilding, R. (2010). Nestl Nespresso AAA sustainable quality program: an investigation into the governance dynamics in a multi-stakeholder supply chain network.Supply Chain Management: An International Journal,15(2), 165-182. Bentley, K.A., Omer, T.C. and Sharp, N.Y., 2013. Business strategy, financial reporting irregularities, and audit effort.Contemporary Accounting Research,30(2), pp.780-817. Bharadwaj, A., El Sawy, O.A., Pavlou, P.A. and Venkatraman, N.V., 2013. Digital business strategy: toward a next generation of insights. Blackburn, R.A., Hart, M. and Wainwright, T., 2013. Small business performance: business, strategy and owner-manager characteristics.Journal of small business and enterprise development,20(1), pp.8-27. Ghemawat, P. (2013).Redefining global strategy: Crossing borders in a world where differences still matter. Harvard Business Press. Goerzen, A., Asmussen, C. G., Nielsen, B. B. (2014). Global cities and multinational enterprise location strategy. InLocation of International Business Activities(pp. 137-180). Palgrave Macmillan UK. Harwit, E. (2013). Chinese and Japanese investment in Southeast and South Asia: case studies of the electronics and automobile industries.The Pacific Review,26(4), 361-383. Lee, S. H., Jeon, R. K., Kim, J. H., Kim, J. J. (2010). Strategies for developing countries to expand their shares in the global construction market: phase-based SWOT and AAA analyses of Korea.Journal of Construction Engineering and Management,137(6), 460-470. Leonidou, L. C., Christodoulides, P., Kyrgidou, L. P., Palihawadana, D. (2015). Internal drivers and performance consequences of small firm green business strategy: the moderating role of external forces.Journal of Business Ethics, 1-22. Masli, A., Richardson, V. J., Sanchez, J. M., Smith, R. E. (2011). The business value of IT: A synthesis and framework of archival research.Journal of Information Systems,25(2), 81-116. O'Grady, W., Rouse, P., Gunn, C. (2010). Synthesizing management control frameworks.Measuring Business Excellence,14(1), 96-108.