Strategic Management for the Hospitality and Tourism Industry

Developing a Competitive Advantage

Vincent Sabourin

• Publisher: Apple Academic Press
• Year: 2021
• ISBN:
  9781000216103
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Hostelería, viajes y turismo

Thisvital volume clearly explains cutting-edge theories and views on strategic management in applied management fundamentals in the hospitality and tourism industry. The author discusses the latest in strategic thinking and provides information on implementing models within specific contexts, such as culture and profit and nonprofit organizations. He also looks at the political, economic, social, and technological changes that significantly affect tourism and hospitality. The volume is distinguished by its thoughtful analysis and review of related hospitality case studies and the management approaches employed and sheds light on ever-the emerging management and operation issues in the tourism and hospitality sector.

The book employs an abundance of case studies that illustrate the concepts and models discussed, with examples from such heavyweights in the industry as Disney and Euro Disney, Aer Lingus, British Airways, Four Seasons, Holiday Inn, Marriot, Sofitel, Starwood Hotels, and more. Key features of the book include:

• Cutting-edge approach: Applies advanced and recent strategic management views to the tourism and hospitality field.
• Critical treatment: Provides critical discussions about whether and how strategic models/theories can be applied in the hospitality and tourism field.
• Sensitive to specific contexts: As the tourism and hospitality industry has become one of the largest industries worldwide, discusses how strategic management concepts can be applied in different cultures and profit and nonprofit tourism organizations.
• Extensive case studies: Provides supporting case studies related to the strategy content, context, and process from international industries such as Aer Lingus, Accor, Marriott and Ryanair.
• Organization of the book: Each of the chapters within the case study sections employs a thorough pedagogic structure consisting of a concise introduction, examples and case analysis, discussion points, exercises, and further reading.

This book is designed to provoke thought and debate about strategic management and myriad other issues. It will be valuable for students, academics, universities offering hospitality and tourism, and hospitality and tourism professionals.

CHAPTER 1STRATEGIC CONCEPTS AND PERSPECTIVES IN THE HOSPITALITY AND TOURISM INDUSTRY

ABSTRACT

A strategy must be adequately designed and consistently executed at the company’s various levels. There are three broad strategy levels: corporate strategy, business strategy, and functional strategy. Two perspectives could be found to develop a strategy in the tourism and hospitality industry: strategic positioning schools and school resources. A strategy is a deliberate act, a set of actions stemming from company executives’ will and intentions and could also be described as an emergent phenomenon.

1.1 INTRODUCTION

The first chapter introduces key concepts and perspectives relevant for strategic management for the hospitality and tourism industry. The chapter discusses key concepts highlighting different ways to develop of strategies. In this chapter, we present different concepts to design a business strategy for a company that wishes to outperform the competition. It is predominantly based on a major perspective commonly known as the “traditional perspective.” We also draw attention to the interplay between different concepts in the development of a competitive market strategy. Practical orientations to real-life experiences in the tourism and hospitality industry are also introduced in this chapter.

1.2 THE TRADITIONAL PERSPECTIVE OF STRATEGIC MANAGEMENT

As the field of strategic management began to emerge in the 1960s and 1970s, scholars and academicians heavily borrowed from different disciplines but mainly from the field of economics. For several years, strategic management had been actively studying various topics coming from economics such as the competitiveness of industries (Evans, 2003). Other topics included topics such as industry concentration, diversification of products, services and customers as well as markets, product differentiation, and market power. However, much of the economics research focused on industries as a whole, and assumed that individual company differences did not matter or were limited to price. Other fields also influenced early schools of strategic management thought, including marketing, finance, psychology, and management. Academic progress was relatively slow to integrate these contributions and this is the large consulting firms that develop their own framework and models to better understand the strategy of a corporation. After a decade of latency, several scholars and academics adopted many of these models in their research leading to books used by practitioners today. As a general principle, empirical evidences in the field of strategic management suggest that the ability to align the skills and other resources of the corporation with the needs of the market needs represent a source of competitive advantage and the foundations of a strategy.

1.3 DEFINITION OF STRATEGY

The strategy typically entails setting priorities and goals, determining actions to get the objectives, and mobilizing assets to execute the activities. There-fore, a strategy details the ends (goals) attained by the means (resources). Several definitions of what a strategy is there. Whittington (2001) describes “strategy” as the way by which a firm fulfills its mission and attains its objectives. Strategy could be taken to be is a pattern of resource allocation that enables firms to maintain or improve their performances.

According to Black (1994), a good strategy neutralizes threats, exploits opportunities, capitalizes on strengths, and/or fixes weaknesses.

In the opinion of Michael Porter (1996) published in the famous article “What Is Strategy? (1996),” Porter presents the concept of strategy in three distinct ways:

• Strategy is the creation of a unique and valuable position involving a different set of activities.
• Strategy is making trade-offs in competing.
• And finally, strategy is creating fit among a company’s activities.

Essence of strategy lies in creating favorable asymmetries between a firm and its rivals. Michael Porter mentioned in his book entitled Competitive Strategy (1980), a company can outperform rivals only if it can establish a difference that it can preserve. Without resources, strategies exist in name only and without strategies resources exist only in picture. Therefore, resource allocation is requisite of strategy formulation, planning, and implementation (Porter, 1980).

As described by White (2004) is a set of intentions and a plan for using available resources, especially economic and human resources, in the near term, to achieve goals for the future. According to White (2004), resource allocation is the most critical activity that allows the design and the execution of a strategy. Strategies enable resources to be allocated according to priorities established by the corporation. He argues that “nothing could be more detrimental to strategy formulation and to organizational success than for resources to be allocated in ways not consistent with priorities indicated by approved annual objectives.”

For its part, Grant (2002) argues that strategy can be thought of in either of two ways: (1) as a pattern that emerges in a sequence of decisions over time or (2) as an organizational plan of action that is intended to move a company toward the achievement of its shorter-term goals and, ultimately, its fundamental purposes. He mentions that in some organizations, particularly those in rapidly changing environments and small businesses, strategies are not planned in the formal sense of the word. Instead, managers seize opportunities as they come up, but within guidelines or boundaries defined by the firm’s strategic direction or mission. In those cases, for Grant (2002), the strategy reflects the insight and intuition of the strategist or business owner, and it becomes clear over time as a pattern in a stream of decisions.

1.4 WHY IS “STRATEGY” RELEVANT FOR THE MANAGEMENT?

A strategy is a roadmap to support a company gets from point A to point B. It permits to improve the quality of decision-making, creates consistency and unity. The strategy is critical to an organizational success and effectiveness. Some of the benefits of strategy, as outlined by Jones Gareth (2002) include:

1. Strategy acts as a decision support analysis. Having a quality decision-making process is possible if a proper strategy is put in place. Thus, the strategy improves the quality of decision-making.
2. Strategy acts as a communication and coordination tool. Without proper channels of connection within an organization, some ineffectiveness and inefficiency are bound to ensue. Thus, strategy creates consistency and unity among business functions.
3. Strategy also acts as an organizational set of targets. There are measures for a consistent performance. In that regard, strategy improves performance by setting high aspirations within the organization.

1.5 IS STRATEGIC MANAGEMENT USEFUL IN THE HOSPITALITY AND TOURISM INDUSTRY?

In order to answer this question, we have to better understand the fundamental roles of strategic management, which include the following:

1. Decision-making: Strategic management improves decision processes in the hospitality and the tourism industry but does not necessarily give answers. Though strategic analysis is useful in the decision-making process, managers should conduct independent analysis on the applicability of the formulated decisions. Strategic analysis requires critical thinking and assessment supported by facts.
2. Strategic analysis: Strategic management assists the company to identify and understand the main issues in the hospitality and tourism industry. Without identifying and understanding the main issues, an organization may allocate it resources in the wrong products or markets.
3. Management of complexity: Strategic management supports the company to manage complexity in the hospitality and the tourism industry. Management complexities tend to arise with the diversification of the number of products, markets, but mainly geographic locations. With proper strategic analysis, managers are able to underscore areas that deserve attention.

1.6 LEVELS OF STRATEGY

To be properly designed and implemented, a strategy has to be consistently designed and executed at the various levels of the company. There are three broad strategy levels: corporate strategy, business strategy, and functional strategy.

1.6.1 CORPORATE STRATEGY, BUSINESS STRATEGY, AND FUNCTIONAL STRATEGY

Corporate strategy defines the scope of the firm in terms of markets in which it is competing. Corporate strategy wishes to answer a fundamental question: in which markets should we serve and compete? The corporate strategy is a broad-level strategy where the company is viewed as a whole. A corporation is viewed as a portfolio of business units. The difference of the business units strategies needs should be in alignment with the objectives of the corporation. Resources should be allocated to each SBU. To ensure a corporate synergy, we need to have coordination among the different business units. In the case of a large company, a corporate strategy relates to various forms of diversification, and vertical integration in regard with the allocation of resources among the different businesses of the corporation.

The corporation is a portfolio of units with a strategic scope of activities. The business-level strategy could be summarized as a comprehensive outline that contains a company’s or a strategic business unit’s policies, objectives, and activities, emphasizing how you can provide value to clients while keeping a competitive advantage.

A business-level program is an integrated and coordinated set of actions that the firm uses to obtain an edge by exploiting core competencies in the marketplaces. It indicates the options the firm makes about the way it intends to participate in the market.

In the case of a functional strategy, it refers to the actions taken by specific management functions such as operation, finance, or marketing, and human resources.

1.6.2THE PERSPECTIVES FROM THE SCHOOL OF POSITIONING VERSUS THE SCHOOL OF RESOURCES

For developing a strategy, two perspectives could be found for a company are available the hospitality and tourism industry: the one of the strategic positioning school and the one of the resources school.

The positioning school provides a systematic way to the formulation of strategy based on the market. It centers the strategic formulation on the market, and also competition, with a perspective that is, its perspective “outside-in.” By focusing on external context (mainly market growth, and opportunities), in this case, the strategic development is most often completed by acquisitions of competitors, talents, and resources rather than internal development. The corporate mantra is, “tell me where the market is going, and I will tell you where the company shall go.” To facilitate managers in assessing their position, the positioning school generally focuses on answering the following questions:

1. For which market do we have growth?
2. For which markets do we have weak competition?
3. Could we enter quickly with an acquisition?

We notice this perspective is often used in a majority of cases by North American companies. The risk with this approach is to neglect the depth of competencies to succeed in the market. For instance, several foreign hotels entered the Chinese market aggressively with an international expansion to discover they did not have the competencies, the cultural fit and resources to adequately serve the Chinese market’s requirements.

The second perspective is the resources school. This second perspective focuses on the resources and the competencies of the company. According to this perspective, the strategic development of a corporation is most often completed by internal development rather than by acquiring competitors, talents, and resources. The corporate mantra is, “tell me what our unique and distinct resources are, and I will tell you where the company shall go.” Its focus relied on an “inside-out perspective.” The relevant questions from this perspective are the following ones:

1. What are our unique and distinct skills (lower cost, higher perceived value of our products)?
2. How could we leverage resources such as plants and equipments, skills, competencies, and skills, and also culture, structure, and staff profile to develop competitive advantage?
3. How could we stretch out internal development to build our competence and develop a competitive strategy?

According to the perspective of the school of resources, internal factors such as competencies, organizational culture, skills, and know-how are key factors to determine the formation of a strategy. This second perspective is more often used by Japanese and European companies. This approach requires more time to develop a market than the perspective of the positioning but might as being more sustainable in the long term. The risk of this strategy is to suffer from market myopia....