Generally, competitive strategy refers to a game involving actors who aim at the same object independently. However, in a market setting, competitive strategy occurs when many market actors are aiming to reach the same destination from strategically different settings. As a result, a competitive organization is portrayed inexpensive in terms of cost, very differentiated when offering products, more efficient during transacting, restructuring when transacting according to market demands, and maintaining a good relationship with its agencies (Giovanni, 2012).
Companies of current times are transforming their competition using the information to beat their competitors (Kaplan and Norton, 2007). Consider Hilton Hotels & Resorts, which operates in the travel and tourism industry. Its market environment over the years has become dynamic and competitive. Every day, the firm experiences new things like a new hotel opening, a new product for holiday being launched, and promotions for the new products (Hilton Canada, 2012). Moreover, in the same industry there occur differences in individual firms’ performance in terms of size, products offered, people, organization, location, and history (Gordon, 2004). Hilton Hotels & Resorts apply this differentiation strategy to attract customers from different locations and who love different products by observing customers’ preferences and tastes.
According to Grant, Halldorsson, Kotzab, and Teller (2009), significant challenges faced by organizations in their environment of operation, lowering of the product volumes in the market, technology which is becoming sophisticated daily, shortening of product life cycles, increase in consumer demands and competition from other firms is forcing firms to cut back on cost. For instance, over the years, with the emergence of other firms in the status of the Hilton Hotels & Resorts, the operations in the hotel have been improved, rated according to social status, and the general cost reduced (Hilton Canada, 2012). This cost leadership strategy has enabled society in the lower classes to be able to access facilities offered by Hilton Hotels & Resorts. In doing so, the organization increases its profit margins.
Moreover, to remain competitive enough, firms have to introduce new products in the market at the right time, make a change in their channels of distribution, and increase their product marketing according to shifts in competition and regulation in the organization (Akhter, 2003). This has seen Hilton Hotels & Resorts offer the chance of franchising with other hotels at a cost and hence its focus on specific targeted markets in different parts of the world is acquired (Hilton Canada, 2012).
Competitive strategy adopted by the organization associates with a market in which a firm operates. The term market structure describes how buyers and sellers interact. To illustrate the differences in various market structures, we have the table below.
Differentiating Between Market Structures Table
|Perfect competition||Monopoly||Monopolistic competition||Oligopoly|
|Example of organization||Truck farming||Local telephone company||Computer industries like dell||Auto industry |
Such as Ford
|Goods or services produced by the organization||Vegetables, tomatoes, corns|| || ||Vehicles and vehicle parts|
|Barriers to entry||None|| || |
|Number of organizations||Many||One||Several||Few|
|Price elasticity of demand||Not influenced by individual firms||Determined by the company||Different between industry products||Colluded by sellers|
|Is there a presence of economic profits?||Yes||Yes||Yes||Yes|
The competition in the hotel industry, especially among those of equal ratings such as Hilton Hotels & Resorts and Marriott Hotels, is an oligopoly. Every hotel in the same rating considers the other in its rating a powerful competitor with great influence on what the customer chooses. Hence, for the business to succeed, they offer to work together through colluding prices of products without knowing. Mostly, price collusion occurs to keep off the competition (Gray, 2008).
As a result, rarely do hotels and resorts in the same oligopoly market experience price wars, and on their occurrence, those price wars survive for a short time. Mostly, these hotels and resorts follow the action of their competitors towards charging prices. It is from the result of their pricing dependence these firms tend to compete in product offers, brands, and special services to win the heart of customers (Gray, 2008).
Contrary, when hotels are rated according to their size and facilities, monopolistic competition market sets in. For example, Hilton Hotels & Resorts are five-star hotels and when compared to other hotels in lower ratings, the market is monopolistic competition. This is because whether one star or five hotels, they offer the same products in different packaging or branding at varying prices. Besides, the hotels are in different locations to their competitors, use different payment formulas, and have unique designs of their hotels. As a result, no firm can influence the prices of brands in a different rating. Moreover, there arises a time when the production in the hotels is higher than the demand and with a high range of ratings between hotels, customers stand to benefit (Gray, 2008).
Below monopolistic competition hotels market, similar products are sold at a narrow price range usually because, if the hotel in higher ratings raises their brand prices too high, the consumer will drop the services of the hotel for lower-rated hotel service. In addition, when these hotels are maximizing their profits, they ensure that they produce when their marginal cost is equal to marginal revenue (Gray, 2008).
However, the Hotel industry can never be classified under monopoly and perfect competition markets. This is because, in a perfectly competitive market, it involves a large number of well-informed buyers and sellers. As a result, they buy at shops offering the lowest price and on the other hand, sellers match the product prices to lower prices to avoid losing customers. This is opposite to the hotel industry. Furthermore, there is no individual buyer or seller who is considered to have any power of influencing prices, quality among products is similar and no brand names or advertising is needed. This set-out competition for the buyers money by sellers and buyers are set to compete for the lowest prices (Gray, 2008).
In the case of a monopoly market, the market structure has one seller, which is impossible in the Hotel Industry. Mostly, monopolies in this industry have been fought through government initiatives on tourism that offers new chances to compete alongside the possible monopoly. In monopoly, the seller does price determination and customers follow it out of no alternative. However, in the hotel industry, on affecting prices, something must happen to customers’ behavior (Gray, 2008).
Akhter S. H. (2003). Strategic Planning, Hypercompetition, and Knowledge Management. Business Horizon, 2, 19-24.
Giovanni B. D. (2012). Handbook for Research on Competitive Strategy. Cheltenham, UK: Edward Elgar Publishing Limited.
Gordon W. (2004). Modern Competitive Strategies. New York, USA: MacGraw-Hill International.
Grant D. B., Halldorsson A., Kotzab H., & Teller C. (2009). Supply Chain Management and Hypercompetition. Logistic rest.,4, 5-13.
Gray E. C. (2008). Economics: Principles and Practice. New York, USA: MacGraw Hill.
Kaplan R. S., & Norton D. P. (2007). Using the Balanced Scorecard as a Strategic Management System. Harward Business Review, 5, 1-10.