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05/11/2012

Strategic Management - Case Study Marriott International


Strategic Management - Case Study Marriott International

Introduction

The report focuses on Marriott International putting strategic management at the center core of analysis and discussion that allows Marriott strengths and weaknesses to be known and be evaluated according to such SWOT related strategies, CPM, EFE, IE matrix and many other important points for strategic management recognition of Marriott International. There is important account to the strategic analysis of Marriott International, there implies to external and internal environment of the company wherein critical discussion and analysis is acquired to add up levels of certain market based tools for definite analysis such as, SWOT, matrix like CPM, and Grand Strategy. Marriott is working well with is critical success factors as well as core competencies as provided in their financial flows which involve important ratios and figures in which strategic models are set properly. There has been rapid market dominance in terms of products and services, achieve global breakthrough over its rivals Shangri-La and Mandarin.

Discussion and Analysis

“Marriott International, Inc. is a worldwide operator and franchisor of hotels and related lodging facilities. The Company operations are grouped into five business segments, the North American Full-Service Lodging, North American Limited-Service Lodging, International Lodging, Luxury Lodging and Timeshare. Marriott develops, operates and franchises hotels and corporate housing properties under separate brand names, and it develops, operates and markets timeshare, fractional ownership and residential properties under four separate brand names. Marriott International also provides services to home/condominium owner associations for projects associated with one of its brands” (MSN Money Report, 2010). Marriott International has carried out certain strategy resulted into effective market share and good profitability. Has left other businesses and increasingly focused on hotel industry services and believed in the business process like, Marriott International product process, customer commitment process, and management and support process and performance of the process were measured from several perspectives (Kosonen, 2004) of customer satisfaction, operative efficiency, people involvement as well as strong market position and market share, growth, net profit. Marriott International will have to maintain strong hotel industry operational position, even on Marriott’s profitability shift for revenue maximization. Marriott International’s overall profitability and market position has been stable and operating profit increases such as 8 to 12 percent (Marriott International Annual Report, 2008). Marriott International needs to continue using growth expansion, strengthen customer service and increase Marriott International’s shares within the market. Marriott International prioritizes customer relationship and service offering, growth efficiency and the ability to offer effective customer promotions for hotel industry success (David, 2009 p. 278). The illustrative case of Marriott International showed a kind of strategic shift can be observed in the market behavior of Marriott, the importance of strategic management areas may change which should be taken into account, better signal to Marriott International management for a continuous strategic planning and execution.

(a) Vision/Mission

For mission, Marriott International is committed to the 100 percent satisfaction of every guests and customers inside and out of Marriott and Marriott International is committed to being the best lodging and food service company in the world, by treating employees in ways that create extraordinary customer service and shareholder value.  Marriott International is also well known as a great place to work and for its commitment to diversity, social responsibility and community engagement, named as Fortune’s most admired company, best place to work and top companies for minorities. Marriott’s vision is to be the world’s lodging leader, the intense focus on taking care of guests, extensive operation knowledge, development of highly skilled and diverse workforce, offering best portfolio of lodging brands in industry and enjoy strong customer base, franchise preference and stable growth and prosperity.

(b) External Audit CPM – Competitive Profile Matrix

For Marriott International, competitive profile matrix is essential tool used in strategic management process of the company as there contain imperative critical success factors of the Marriott International strategic commerce as it can vary from Marriott International competitive stature, Marriott, Shangri-La and Mandarin through CPM as being on the scale by considering the same success factor as for the IFE, consider internal strengths and weakness and EFE constraint from Political, legal, environmental, social and technological. The success of Marriott may depend on the importance it of the external or internal environment.

External Factor Evaluation (EFE Matrix) 

Opportunities

Based on Direct Competitors Comparison 2005, Marriott is the largest market capital capitalization - $16.97bil as compare to its closest rival (Accor, Hilton, IHG).

Demand for more lodging supply in Beijing for the Olympic

Not only in main Beijing city, but suburb/surrounding  cities

New property openings in Asia, Middle East, etc…. (refer AR 07)

RevPAR growth from 2003 to 2007, (show chart from AR07) – portraits the highest among its direct competitors

Marriott is the first company in its industry to serve food without any trans fat in its hotels in North America.

As of Sept 2006, all Marriott properties in N. America are non-smoking

Tab into ‘telecommunication’ market

Threats

Travelers fears of exposure of contagious diseases, such as h1N1 Flu, SARS, etc

Competitors (pricing strategies of Marriott’s competitor)

Terrorism (Aug 2003, terrorists attack, at Bali J.W. Marriotts)

Foreign currency exchange rate – fluctuating

 

(c) Internal Audit

Financial Ratio Analysis

Liquidity

Ratios

 

2008

2007

2006

2005

Current Ratio

1.32

1.23

1.30

1.58

Quick Ratio

0.57

0.8

0.83

1.02

 

Marriott International’s current ratio goes beyond the industry standard but Marriott’s quick ratio is less than industry standard. Marriott International maintain a highly developed system of internal controls, policies and procedures, including an internal auditing function, whether management’s financial statements, considered in their entirety, fairly present, financial position, operating results and cash flows in conformity with US accepted accounting principles.

Internal Factor Evaluation (IFE) Matrix

Strengths

Competitive advantages – strong bands and worldwide presence

A proven business model of managing and franchising hotels rather than owning them

Strong team of associates

Portfolio expanded to 114 properties with another 55 in the pipeline

Rich diversity of culture make M stronger, culture more vibrant, business model more flexible and work more meaningful

Award winning guest loyalty program

Brand innovation – will open first two EDITION hotels, its new lifestyle boutique brand

An information rich and easy to-use website, a multi channel central reservations system

Cost saving measures and restructuring in 2008 and 2009 associated with Timeshare segment, hotel development, above-property-level management and corporate overhead

Discontinuation of synthetic fuel business in Nov 2007

Strong management/leadership – Mr J.W. Marriott, Jr with over 50yrs of leadership span in hospitality industry

Brand name recognition, strong tradition in lodging industry; solid branding – promote demand for franchise; franchise fee growth from $296m in 2004, $329m in 2005 to $390m in 2006

Rev growth from $10.1b in 2004 to $12.16b in 2006

For eight yrs in a row, Marriott has been ranked by “Fortune” as among the “100 Best Companies to work for” which well justified its employee satisfaction to the company

Diverse portfolio of 3000 lodging properties, representing 19 brands in almost 70 countries and territories

Weaknesses:

Group CEO has been in tenure for more than 35 years.

Group revenue is too dependent on lodging; not diversified in terms of products and markets, Too dependent on North America

Pricing strategy is comparative high

Limited ability to refinance existing debt

Increased vulnerability to adverse economic and industry conditions, and to interest rate fluctuations

Inflexible to make, or react to, changes in business nature

High debt ratios with less repayment ability; less dividends

Failure to maintain the integrity of interest or customer data could result in faulty business decisions, damage of reputation and/or subject us to costs, fines, or lawsuits

A failure to keep pace with developments in technology could impair our operations or competitive position

Facing reduced coverages and increased costs of insurance.

Reduced in gains on sales of real estate to 10m in 2010 from 14m in 2008 and 39 in 2009

Equity in losses of $66m in 2009 increased by $81m from equity in earnings of $15m in 2008 and primarily reflected a $30m impairment charge in 2009

General administrative costs increased by $30m (4 percent) to $803m from $773m in 2007.

Operating income decreased by $418m (35 percent) to $765m in 2008 from $1,183m in 2007 (2009 operating income??)

Interest income decreased by $14m (36 percent) to $25m in 2009, from $39m in 2008

Group revenue is too dependent on North America, accounting to 62% of total revenue.

the stock price has tumbled from a high of $37.89 in the second quarter of 2008 to $24.14 in the fourth quarter of 2009

M owns very few lodging properties. Unresolved disputes with the owners of the hotels that we manage or franchise may result in litigation

Depend on capital to buy, develop and improve hotels to develop timeshare properties. M or hotel owners may be unable to access capital when necessary

In 2009 the three major credit rating agencies reduced M’s long-term debt ratings to their lowest investment grade level ; further downgrades could increase cost of capital, limit M’s access to the capital markets, permit access only on terms that are Marriot quarterly revenue growth in 2006 is 7.4% compared to Hilton’s margins of 29.4%. IHG’s gross margins at 54% is far exceeding Marriott’s gross margin 13.6%

Synthetic Fuel consisted of four coal-based synthetic fuel production facilities (the “Facilities”) because tax credits under Section 45K of the IRC are not available for the production and sale of synthetic fuel produced from coal after calendar year-end 2007, and because high oil prices during 2007 were expected to result in the phase-out of a significant portion of the tax credits available for synthetic fuel produced and sold in 2007, on November 3, 2007, we shut down the Facilities and permanently ceased production of synthetic fuel. Accordingly, we now report this business segment as a discontinued operation.

More restrictive than those of its current outstanding debt.

 

(d) SWOT Strategies

SO Strategies

Begin to offer customer promotions such as big discounts on online booking and early room accommodation payments for example an additional 5 percent discount when full paid upon check – in at Marriott hotel services.

Give exclusive freebies and souvenir items linking to the country Marriott operates for example, in Hong Kong, customers may have free tickets for two at Hong Kong Ocean Park and Hong Kong Disneyland, it can be depending on the hotel packages/rates customers choose from

Global expansion in the Asia Pacific countries and some others in EU or in US

Offer free snacks for guests entering the hotel premises to delight people to use Marriott services

Introduce innovative menus aside, authentic cuisines

WO Strategies

Consider CEO succession or take over through reliability and performance evaluation and feedback ratings determination

Invest more on customer and manpower services to equally serve all Marriott International operation

Monitor and constant update on group revenues and recognize diversification of Marriott services

Control prices and finance debts

Lower down vulnerability to adverse economic and industry conditions, and be aware of fluctuations

Flexibility towards business nature by application of HRM success

Strategic planning for careful financial assessment and accounts

Create positive environment for global investments  

Create campaign awareness for Marriott team to disseminate properly on issues regarding synthetic fuel, (coal-based synthetic fuel production facilities)

ST Strategies

Giving of manager/employee incentives to the latter wherein performance versatility is recognizable and known in the company

Secure customer safety and health assurance by means of explanation of the status of the country Marriott operates

Training and development seminars and workshops realization (can be done quarterly or annually or as needed)

Long term planning for growth expansion at Marriott International

Impose stakeholder standards and guidelines for the management to follow

Create customer friendly environment by free invites to entertainment or food escapades

WT Strategies

Introduce online inquiries for schedules and bookings, room accommodation and rates, prices as well as services offered in different countries. Also, complete address of Marriott International locations and sites and many others by website updating for possible suggestions and or complaints via telephone or email

Create strong base for market integration and communication through print advertisements and magazines such as those tied up with international airlines like Cathay Pacific and Dragon Air and many others

Introduction and keeping of ISO standards Marriott International team and management for leadership effectiveness and strategic driven option

 

 (e) SPACE Matrix

Internal Strategic Position

 

Financial Strength

 

 

Competitive Advantage

 

Average Points

 

 

4.11

 

-1.43

External Strategic Position

 

Environmental Stability

 

 

Industry Strength

Average Points

 

-4.1552 (y axis - .11)

4 (x axis – 2.4)

 

 

(f) Grand Strategy Matrix

Please refer to power point presentation (grand strategy diagram)

 

 (g) The Internal-External (IE) Matrix

Strengths

Weaknesses

Competitive advantages – strong bands and worldwide presence

Group CEO has been in tenure for more than 35 years.

A proven business model of managing and franchising hotels rather than owning them

Group revenue is too dependent on lodging; not diversified in terms of products and markets, Too dependent on North America

Strong team of associates

Pricing strategy is comparative high

Portfolio expanded to 114 properties with another 55 in the pipeline

Limited ability to refinance existing debt

Rich diversity of culture make M stronger, culture more vibrant, business model more flexible and work more meaningful

Increased vulnerability to adverse economic and industry conditions, and to interest rate fluctuations

Award winning guest loyalty program

Inflexible to make, or react to, changes in business nature

Brand innovation – will open first two EDITION hotels, its new lifestyle boutique brand

High debt ratios with less repayment ability; less dividends

An information rich and easy to-use website, a multi channel central reservations system

Failure to maintain the integrity of interest or customer data could result in faulty business decisions, damage of reputation and/or subject us to costs, fines, or lawsuits

Cost saving measures and restructuring in 2008 and 2009 associated with Timeshare segment, hotel development, above-property-level management and corporate overhead

A failure to keep pace with developments in technology could impair our operations or competitive position

Discontinuation of synthetic fuel business in Nov 2007

Facing reduced coverages and increased costs of insurance.

Strong management/leadership – Mr J.W. Marriott, Jr with over 50yrs of leadership span in hospitality industry

Reduced in gains on sales of real estate to 10m in 2010 from 14m in 2008 and 39 in 2009

Brand name recognition, strong tradition in lodging industry; solid branding – promote demand for franchise; franchise fee growth from $296m in 2004, $329m in 2005 to $390m in 2006

Equity in losses of $66m in 2009 increased by $81m from equity in earnings of $15m in 2008 and primarily reflected a $30m impairment charge in 2009

Rev growth from $10.1b in 2004 to $12.16b in 2006

General administrative costs increased by $30m (4 percent) to $803m from $773m in 2007.

For eight yrs in a row, Marriott has been ranked by “Fortune” as among the “100 Best Companies to work for” which well justified its employee satisfaction to the company

Operating income decreased by $418m (35 percent) to $765m in 2008 from $1,183m in 2007 (2009 operating income??)

Diverse portfolio of 3000 lodging properties, representing 19 brands in almost 70 countries and territories

Interest income decreased by $14m (36 percent) to $25m in 2009, from $39m in 2008

Opportunities

Group revenue is too dependent on North America, accounting to 62% of total revenue.

Based on Direct Competitors Comparison 2005, Marriott is the largest market capital capitalization - $16.97bil as compare to its closest rival (Accor, Hilton, IHG).

the stock price has tumbled from a high of $37.89 in the second quarter of 2008 to $24.14 in the fourth quarter of 2009

Demand for more lodging supply in Beijing for the Olympic

M owns very few lodging properties. Unresolved disputes with the owners of the hotels that we manage or franchise may result in litigation

Not only in main Beijing city, but suburb/surrounding  cities

Depend on capital to buy, develop and improve hotels to develop timeshare properties. M or hotel owners may be unable to access capital when necessary

New property openings in Asia, Middle East, etc…. (refer AR 07)

In 2009 the three major credit rating agencies reduced M’s long-term debt ratings to their lowest investment grade level ; further downgrades could increase cost of capital, limit M’s access to the capital markets, permit access only on terms that are Marriot quarterly revenue growth in 2006 is 7.4% compared to Hilton’s margins of 29.4%. IHG’s gross margins at 54% is far exceeding Marriott’s gross margin 13.6%

RevPAR growth from 2003 to 2007, (show chart from AR07) – portraits the highest among its direct competitors

Synthetic Fuel consisted of four coal-based synthetic fuel production facilities (the “Facilities”) because tax credits under Section 45K of the IRC are not available for the production and sale of synthetic fuel produced from coal after calendar year-end 2007, and because high oil prices during 2007 were expected to result in the phase-out of a significant portion of the tax credits available for synthetic fuel produced and sold in 2007, on November 3, 2007, we shut down the Facilities and permanently ceased production of synthetic fuel. Accordingly, we now report this business segment as a discontinued operation.

Marriott is the first company in its industry to serve food without any trans fat in its hotels in North America.

More restrictive than those of its current outstanding debt.

 As of Sept 2006, all Marriott properties in N. America are non-smoking

Threats

Tab into ‘telecommunication’ market

Travelers fears of exposure of contagious diseases, such as h1N1 Flu, SARS, etc

 

Competitors (pricing strategies of Marriott’s competitor)

 

Terrorism (Aug 2003, terrorists attack, at Bali J.W. Marriotts)

 

Foreign currency exchange rate – fluctuating

 

(h) QSPM

 

 

 

SO/WO

 

ST/WT

 

Strategic Alternatives

Weight

 

Rating

Score

 

Rating

Score

 

 

 

 

 

 

 

 

 

 

Market Share

0.11

 

3

0.33

 

3

0.42

 

Price

0.16

 

4

0.56

 

3

0.48

 

Financial Position

0.16

 

4

0.56

 

4

0.11

 

Product Quality

0.14

 

4

0.56

 

3

0.42

 

Consumer Loyalty

0.11

 

3

0.33

 

3

0.33

 

Brand and image

0.13

 

2

0.26

 

3

0.39

 

People Management

0.03

 

4

0.12

 

4

0.12

 

Global Expansion

0.05

 

3

0.15

 

4

0.20

 

Technology Advancement

0.08

 

4

0.32

 

4

0.32

 

Market Communication

0.07

 

2

0.14

 

4

0.28

 

 Advertising and Promotion

    0.12

 

         4

       0.36

 

         3

        0.11

 

Total

0.15

 

 

0.35

 

 

0.28

 

 

Marriott will be in ample business growth and effective competitive stature and continues to concentrate more on its core business goals and vision and with presence of excess resource, there can use such integration in keeping stable. Marriott need to evaluate strategic approach to the market and identify why several market based strategy is not effective and will adopt grand strategy options accordingly. The implementation of strategic base of Marriott of intensified focus and objectivity upon conveying a lot of information about marketing plan in simple ways, upon application to real life due to limited factors and some complications in the business world. In addition, Marriott’s relationship between market share and profitability differ in the industry Marriott operates and that QSPM tenets were concerned on strategic management issues and value recognition.

(i) Recommendation

The crucial elements have to account for pace and flexibility of Marriott International’s overall team and synergy base, HRM management needs strengthening of job roles and performance to maintain Marriott’s award winning relations with the employees worldwide. For practically driven hotel industry and its strategic business environment, no single company is powerful enough to define market expansion alone but, there should be ample planning and support to stay longer in the business and if possible a lifetime service to people, to the customers believing in  Marriott International’s mission and vision. Thus, without strategic endeavour and Marriott’s collaboration, growth expansion strategies will fall short of its desired objectives and purpose like undeniable entry barriers, restricted expansion laws that government makes into the hotel industry and its operational access and foreign investments consideration. Therefore, Marriott International had to collaborate with the industry guidelines in order to expand markets in other areas in Hong Kong wherein some tacit knowledge to the real financial highlights of the company will be a factor for Marriott International’s growth expansion in many countries. Since, Marriott International has been in the global scenario of strategic business, with access to the hotel industry market, effective planning and execution is imperatively needed for Marriott International to continue leading in the coming years. In addition, Marriott International need to scale its operations to be better prepared for future competition. In comparison with other players, in step with industry demand and adjust to actual industry cycles. Competitors may achieve some streamlining and focus by reduction as dramatic downsizing can do more harm than good. There is a need to focus more on local area expansion before it can go ahead with a much more fulfilling consideration to adhere global expansion, as growth strategies in an instance are for the approval and deliberation of Marriott International board of executives.

 

Conclusion

Therefore, strategic standing and Marriott International’s business strategy competence has been keeping the company on top of its business leadership, and management as well as innovative culture adaptation wherein Marriott team exercise the value of customer services and satisfaction through exclusive promotions and privileges given to loyal customers and high performing employees. There is about Marriott’s way of putting strategic drivers be on the right fit for change and that there can be concerns leading to Marriott’s decision to expand their markets and have a better outsourcing base for Marriott’s unique products and services for hotel operations, being considered to be one of Marriott’s key strategic value and competence factor. The external and internal environment of Marriott serves was ideally a real means of the company’s recent standing in the market particularly, the Hong Kong Market. The growth expansion strategy is a positive and effective option for Marriott International in the coming three years wherein reassessment and reinvention of business strategies and functions matters the most. Marriott International perceived as one of the leading hotel services as of the present time, leading to a long term partnerships with stakeholders and work based collaboration among Marriott executives, heads and employees, the growth of Marriott International for expansion purposes will cling to the volume of better customer service that produces satisfaction and trust among Marriott customers, loyal customers having happy faces.

References

David F (2009) Strategic Management: Concepts and Cases, 12th edition, Pearson Prentice Hall, pages 270-282.

Kosonen M (2004) Driving for excellence in performance – the role of the controller, Paper presented at the Business. Controller workshop, IIR Finland Oy, Helsinki, 27 September

Marriott International Annual Report, 2008, 2009

MSN Money Report (2010) Marriott International Inc. (7/9/2010)

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