Competitive Strategy Dynamics

Introduction

Competitive strategy dynamics can be applied to a variety of situations in the hotel and hospitality tourism industry. Essentially, strategic resources drive performance within the industry from all facets from the highest management to the entry level employee. For the majority of firms in the industry, their strategic history is highly relevant to the development of future performance with regards to short and medium-run. Rather than simply one relationship, as is common with such descriptive examples, three will be outlined in the following as comparative examples to the discussions given by Warren in Competitive Strategy Dynamics. The key differences between Warren’s companies and the ones selected for this analysis are mostly due to the economy, however the overlying principles are the same. The economy has played a role in creating hardships across the world and across the majority of all areas of business. Industries of all types selling both products and services have experienced a significant decline in business, as the upper to lower classes in society are forced to think more wisely and make premeditated decisions with regards to how they spend their money.

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While the upper class have of course been the least affected, as the recession is the worst in decades it makes even the rich think twice before letting their funds go from their savings back into the economy. The lower and middle classes have been challenged to the point where they are either severely limited or even destitute, with only a small percentage of exceptions for specific industries unaffected by the recession. Competitive strategy dynamics takes on almost an entirely new meaning with regards to such economic conditions, and thus the management of firms within the hotel and hospitality tourism industry must face this fact and plan around the unique conditions which present themselves in the current economy. The following first considers three cases of a restaurant, a mid-size hotel without a variety of internal services, and a large-size hotel with a variety of internal services. The cases are analysed with regards to how their basic functions are affected by the economy, and then analysed with regards to the same underlying principles which must be applied to all cases for such companies to succeed both among competition and among the economy as it is. These discussions will also encompass additional strategic information not yet discussed in the initial analysis. The following will illustrate the newly realised effects of the economic crisis as well as the universal importance for competitive strategy dynamics (Warren, 2002).

Case scenarios: basics in competitive strategy

The first case will discuss a top retail restaurant (Red Lobster) facing the difficulties in rationalising a local branch facing customer loss and decreased sales. Like traditional branch restaurants in many nations, the company is losing so much business due to the declining economy. The second case will discuss a hotel (Days Inn) as it also sees an attack to its business due to the economic conditions. This case is more challenging to managers as the unstable economy does not allow for accurate planning condition and thus strategic methodologies cannot be precisely applied.

The third case is another hotel (Marriot,) significantly larger than the other case, with their efforts to survive in the current economy using competitive strategy dynamics. All three situations raise significant concern for the teams of management involved. The managers are forced to ask themselves what their prospects are under the current policies and conditions, what they can do to attempt to improve their prospects, and what resources and lessons can be brought to bear on the on the problems from any experiences in the past. The three cases can also be used to show why robust tools for comprehending and directing the dynamics of competitive strategy are needed desperately in the current economic situation (Warren, 2002).

In each case there is a significant scale of issues or opportunity which needs to be addressed, while the difference between failure and success is also considerable. Red Lobster has seen high losses and may continue to see further losses still (Newton, 2003). The management of the Days Inn faced losing the majority of their profits in tourist locations while their market reputation and normally motivated lower management have also suffered (Hoffman and Bateson, 2006). Mid-size companies such as Days Inn are at a high risk to succumb to the economic pressures and face a complete collapse.

The opportunity available to the Marriot still exists, however the losses faced by diminishing tourism makes any further expansion investments all the more risky. Precision strategy would be required for building confidence and credibility in seeking additional opportunities. Each of these cases also involve a specific time that which the competitive strategy issues will evolve as the achievement of haste in this manner is also critical. Days Inn has likely experienced most of its loss, though it is possible it will become worse. The opportunity for Days Inn to expand is lower than the Marriot’s, and thus even more risky to the point of being unwise. While Red Lobster does not expect for its pre-recession customer base to return any time soon, it must decide to close certain locations and reorganise its staff for any such measures (Warren, 2002).

Each case also shows a path that will not begin and end at specific points in time but will rather evolve and an unpredictable and varying rate. Red Lobster initially lost a large fraction of its customer base then saw additional further losses as it was forced to close a number of locations. Closing these locations before necessary leaves it uncompetitive levels of cost. Closing too fast may make the same issues leading it to closing worse still. The exact same judgments apply to the case of transferring as well, as is reskilling staff and maintaining a decent service support in the remaining open locations (Newton, 2003). Days Inn expected the performance of similar rivals to target certain tourist audiences first and foremost, and thus it chose how to react to price and marketing efforts based on the rival efforts (Warren, 2002).

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The Marriot overall did not experience a similar kind of competition as its high-class reputation was still noted by the wealthy unaffected by the crisis, however was still affected by the absence of a large portion of its middle class base (USA Today, 2005). If it pushed too fast for any type of expansion in attempt to make gains, it would win considerable interest only from specific audiences, while enthusiastic support would at least come from advertisers (Hoffman and Bateson, 2006). However, it would also raise the expectations at the same time while it would be depleting the very same resource that is powering this opportunity, so thus it may put itself into the position of having driven up expansion to a rate that it cannot sustain in the current economy (USA Today, 2008). On the other hand however, if it was too careful in releasing notice onto the market with any expansion, audiences, TV and radio broadcasters, and various advertisers may not take the required notice to develop for the continuing demand (Warren, 2002).

These accounts of the strategic issues confronting the firms are succinct as well as nicely emphasising the core of the issue, whether it be an issue or potential opportunity. However, as they are concerned with the overall scale and basic timing of performance, they are not enough and as such they must express them dynamically (and numerically) if they are truly to understand and hope to steer their performance in the future (Warren, 2002).

The challenge facing Red Lobster are largely due to the middle class not being able to afford as much semi-luxurious dining, which also illustrates three critical characteristics of any well defined dynamic issue: a clearly defined numerical scale, a timescale over that which the dynamic is expected to occur over, and the overall time-path of more specifically how far and how rapidly the situations may changes over the timescale (Warren, 2002).

These cases overall are a highly simple summary of key numbers involved. For example, they ignore the critical issues of the size of customer accounts that have been lost or retained (Warren, 2002).

Generally there is a very large difference between completely losing a profitable account and losing a low-income consumer. However, nevertheless, it does provide a focus for the issue, while additional considerations can be added at some later time. The cases focus on the critical resource at stake customers instead of on any indirect financial implications (Hoffman and Bateson, 2006). They also focus on the absolute numbers rather than on ratios, such as market share for example. This is important in any case for competitive strategy since the organizations’ response will thus act upon the resource itself and not on some pre-derived arithmetic ratio (Warren, 2002).

The Red Lobster case also shows why it can be critical to understand the time path of history, as firms frequently have some kind of inside or around them the specific conditions that thus are driving their trajectory in the future already. Specific branch rationalisation in cases such as this have already caused a large number of customers to desert the company, even many loyal visitors that had regularly visited, sometimes for a significant portion of their lives. Even if the company immediately halts its branch closure, customer losses will still continue as they are driven not only by the current state of the economy but by competitors’ new offerings (Warren, 2002).

Dynamics in competitive strategy

While this will not get into any sort of semantic debate about the meaning of “strategy”, it will adopt a single simple position-strategy as the set of policies that any organisation may adopt in a pursuit of medium-run to long-time performance objectives, whether these policies are explicitly or implicitly used (Hoffman and Bateson, 2006). The issue is strategic if it has a significant and specific impact on that likely performance or one closely related. On this criterion, the Days Inn incident is thus most certainly of a specific kind of strategic importance (International Listing of Company Histories, 2003; Warren, 2002).

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This division ultimately provides a substantial share of the company’s cash flows, while this sole product makes a substantial share of that contribution as a whole. The loss of even a small portion of this market not only impacts these cash flows but also it threatens the morale and performance of the company personnel, not just on this specific product but also on others of the division (Warren, 2002).

The potential gains to any one competitor will enhance the cash flows and sales force performance, and boost its resultant reputation within the sector, all of which will cater to enabling it to build further in the areas of products, sales, and cash flows. This one specific event could actually reduce the division’s contribution to shareholder value by over 50 percent (Warren, 2002).

Concluding remarks

The companies in the case are faced with making the most of how their resources are developed through stages, and how each of these contribute differently to performance in some way (Grant, 2005). Disloyal customers versus loyal customers can only be so evident by definition because in this situation of economics money plays a major factor. In these conditions all staff have seen more pressure to be experienced, while less experienced staff are not considered for hiring. Companies such as these are normally able to manage resources before they can become an active part of the system of business and may be required to do so (Hoffman and Bateson, 2006). For example, they may make potential customer aware of or interested in their services. Resources sometimes continue to have an influence even after they leave an organisation’s system, such as when former employees recommend other to join their staff (Warren, 2002).

Cases that are especially widespread and powerful are concerned with the efforts the company puts forth in gaining awareness and choice of customers, and to hire experienced and further train and keep staff while developing and promoting new services or service locations (Porter, 1980). Red Lobster, Days Inn, the Marriot, and all other related companies faced with the same challenges of the current economic system must all learn where in their development process staff, customers, products, equipment and other resources lie (Hoffman and Bateson, 2006). They also must realise how to quantify the impact of the variety of factors affecting the development of resources, including how managerial decisions affect their movement so that differences over time can be measured in terms of performance (Warren, 2002).

The hotel and hospitality tourism industry is faced with the main challenge of a worldwide recession. Competitive strategy is as relevant as ever, and while this may be true more so in the current economic state, the factors of the economy present greater challenges than the typical challenges of competition. Analysing staff hierarchies, research and development pipelines, the framework of “AIDA” and other models of customer development, a sales pipeline, “PEST” analysis of economic, political, social, and technological factors, and the experience curve of dynamic of industry innovation and cost reduction are all critical to the development of the companies discussed and most others with regards to the dynamics of their competitive strategies (Warren, 2002). These are also the key strategic resources, and must be used properly by any company wishing to excel in today’s economy.

References

International Directory of Company Histories (2005) Vol.72. St. James Press.

Grant, R.M. (2005), “Contemporary Strategy Analysis”, Blackwell Publishing Ltd., Oxford.

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Hoffman, K. and Bateson, J. (2006). Services marketing: concepts, strategies & cases. Forth Worth: Dryden Press, 4th ed

Newton, B. (2003). “All-you-can-eat was too much”. St. Petersburg Times.

Porter, M.E. (1979). “How competitive forces shape strategy”, Harvard Business Review.

Porter, M.E. (1980). “Competitive Strategy”, The Free Press.

Porter, M.E. (1985). “Competitive Advantage”, The Free Press, New York.

USA Today.”Financing the inauguration”. 2008-05-25.

USA Today “Some question inaugural’s multi-million price tag”. 2005.

Warren, K. (2002) Competitive strategy dynamics. Chichester, England: John Wiley.

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