Introduction
The Ritz-Carlton, Dubai International Financial Centre is one of the leading hotels in Dubai. According to Morgan, the hospitality industry in the United Arab Emirates has experienced massive growth over the past few decades (56). The government has invested heavily in promoting trade and tourism as a means of diversifying the country’s economy. Asher explains that the government has also liberalized its business environment to allow foreign investors to start a business in the country (34). The city of Dubai has benefited a lot from these governmental initiatives. It is currently one of the leading global tourist destinations and a major business center. It also has one of the world’s busiest airports. These factors have attracted numerous hospitality companies from around the world keen on tapping into the growing market. Some of the world’s top hospitality brands are currently operating in this city. They have to compete against some of the local brands, which also offer superior products. In such a highly competitive business environment, the ability of a firm to achieve success depends on the strategies it embraces. The management of the Ritz-Carlton hotel must come up with ways of meeting customers’ needs uniquely. The researcher seeks to discuss principles, theories, and practices that the company should embrace to achieve success in this market.
Analysis of the Firm’s Past Performance and Issues
Firm and Industry Performance
The Ritz-Carlton Hotel Company, LLC is a luxury hotel chain founded in August 1983 and operates under the brand the Ritz-Carlton. The brand can be traced back to 1913 when Ritz, a Swiss hotelier, started two hotel businesses, Ritz that was located in Paris, and Carlton that was based in London (Asher 67). During that time, luxurious ocean liners were keen on having some of the best hotel services for their rich clients. World War I and World War II significantly affected the business (Morgan 78). Several years later, the brand name emerged when John B. Coleman bought it and several other small hotels operating under the same name. The next step was challenging for the company as the management focused on restoring its lost glory. The goal was to ensure that the hotel becomes one of the best luxurious hotels in the European market and North America. The company has achieved massive success over the past three decades. It currently has 101 luxury hotels spread across 30 countries, with 27,650 rooms for its clients.
The Ritz-Carlton, Dubai International Financial Centre is the firm’s branch in Dubai. The company decided to enter the UAE market because of the booming tourism industry. The city of Dubai had also become a major global business hub and transit route for people traveling to other parts of the world. The hotel is currently located in a 14-stories building within the city, offering a wide range of hotel services. The market has become very competitive given the legal environment created by the government that allows firms from different countries to establish a business in the country. Despite the stiff competition, Morgan notes that Ritz-Carlton is still one of the best brands for both the local and international customers looking for luxury hotels (90). The management has been keen on understanding the emerging needs of its customers based on the changing market forces. The financial performance of this firm has been impressive.
External Environmental Analysis
When in the United Arab Emirates, the Ritz-Carlton, Dubai International Financial Centre should be ready to deal with various external environmental forces. According to Kumar, external forces within a country may have both positive and negative impacts on a firm (34). A critical analysis of this environment is important in enabling a firm to define strategies that would enable it to achieve success. The analysis is specifically important for a company that operates in the global market. Lasserre explains that external environmental factors in the United States are significant from those in the United Arab Emirates (57). The difference in the political, social, and economic systems means that strategies that work in the United States may not be effective in the United Arab Emirates. As such, each firm would need to conduct an environmental assessment in every country and develop unique strategies to define its local operations but in a way that would enable it to achieve its global objectives. The Ritz-Carlton is a global brand operating in different countries, but the management has to assess its external environment. PESTEL analysis is one of the effective models that identify different forces that the analysis should focus on during such an assessment.
PESTEL Analysis
The model identifies the political, economic, social, technological, ecological, and legal forces that may affect the operations of a firm. Ansoff explains that the model outlines external forces that affect all firms in equal measures irrespective of their size or financial capacity (42). In most cases, a single company may not have the capacity to influence these forces. They also affect companies irrespective of the industry within which they operate. As such, the management of Ritz-Carlton should focus on streamlining its operations based on these external environmental factors. The benefit of using this model is that it identifies both the benefits and challenges associated with the external environment, making it possible to plan on how to operate in the country. In this section of the report, the researcher discussed each of these environmental factors.
Political Environment
The political environment has a significant impact on the operations of Ritz-Carlton, Dubai International Financial Center. According to Zdanyte and Bronius, the activities of the political class have a direct impact on the stability of a country and the environment within which companies operate (113). In a country, that lacks political stability, peace and safety of the business community may not be guaranteed. Normal business activities would be disrupted in cases of civil war, such as those that have been witnessed in the region. Many businesses were destroyed in Egypt, Libya, Syria, and Yemen during the civil war (Peppard and Ward 57). The failure of the political leadership in this country caused a lack of peace and security. The civil strife created a lawless nation where people looted or destroyed the business premises of various companies without being subjected to any legal consequences. Such factors often make it impossible to conduct business in a given country. The unfair involvement of political leaders in the business environment may also have serious negative implications on a firm.
The political environment in the United Arab Emirates has remained stable despite the massive civil strife in the region following the Arab Spring. The political leadership of the country has demonstrated that it understands the needs of its people hence the country remained peaceful. The city of Dubai is one of the safest urban centers in the region for both the locals and foreigners (Ansoff 31). These factors have been of great benefit to the Ritz-Carlton Hotel. A significant number of its clients are foreign travelers from Europe and North America. They prefer visiting this country because of political stability. They are assured of their security, a factor that has led to the improvement of the tourism sector (Hill et al. 41). The political class has also been keen on avoiding any political action that may affect the business community. Rothaermal reports that leadership has been keen on promoting business growth as a way of diversifying the economy (51). The political class has been protective of both local and foreign investors in the country. The company will benefit because of the enabling political environment in the UAE.
Economic Environment
The economic environment is another factor that has a direct implication on a firm’s performance in the country. Ritz-Carlton Hotel is operating in the hospitality industry that is very sensitive to the economic forces. Sharpley notes that during a recession, people tend to regulate their expenditure to meet the tough economic conditions. One of the areas that many often consider avoiding is unnecessary travel (230). Such financial decisions often have a direct negative implication on companies operating in the industry. On the other hand, during an economic boom, the hospitality industry often benefits a lot as people spend on tours and travels. It means that the success of Ritz-Carlton, Dubai International Financial Centre is significantly influenced by the economy of the United Arab Emirates.
According to Wheelen and Hunger, the UAE has registered impressive economic growth over the past ten years (25). It was one of the countries, which were significantly affected by the 2008 global economic recession. However, it has made an impressive recovery since then. During the drop of the global oil prince that started in 2014 and lasted several years, the economy of many major oil exporters was affected. However, the UAE is one of the few major oil exporters that were not significantly affected by the trend. Ahmed explains that the UAE has been successful in diversifying its economy (48). It has spent billions of dollars to improve different sectors as a way of reducing its reliance on the oil and gas sector. Dubai is currently only of the top global destinations for tourists. The city is also the leading business hub in the region, with one of the busiest airports in the world. In such a booming and diversified economy, Ritz-Carlton, Dubai International Financial Centre is assured of having visitors throughout the year. It does not have to rely solely on tourists. It also benefits from the increasing flow of business executives and travelers who pass through the city on their way to other parts of the world.
Social Environment
The social environment is important in defining the ability of a firm to achieve success in a given country. Ritz-Carlton, Dubai International Financial Centre offers hospitality services, which makes it critical for it to master the social forces in the country. Cultural forces define customers’ buying behavior. The food industry is one of those, which are heavily dependent on the local culture. In Spain, where Ritz-Carlton has another branch, pork is one of the popular dishes that locals prefer. However, this product is considered haram in Islamic culture. Ignoring local cultural forces may have devastating consequences on a firm. It may not only result in low sales but also negative publicity when society realizes that a company is operating contrary to standard cultural practices (Thorvaldur 160).
The city of Dubai is currently the most diversified in the Middle East and North Africa (MENA) region. The city has been attractive expatriates from Europe, North America, East Asia, Africa, and other parts of the world. Diversity means that people from different cultural backgrounds can easily fit into the social system. However, that does not mean it compromises on its Islamic cultural background. The management of Ritz-Carlton, Dubai International Financial Centre must be ready to operate within the cultural confines of the local society. Pork may be a popular meal among visitors from Europe and North America (Mohammadi et al. 11). However, it would be prudent for the firm to find alternative products that society finds acceptable. Some of the socio-cultural limitations may hurt the performance of the firm, especially when trying to meet the diversified needs of its customers. However, the increasing level of diversity in the country, especially in the city of Dubai, makes it easy to overcome most of these challenges.
Technological Environment
The technological environment has become one of the most important external factors that a firm cannot ignore in a given market. According to Kang et al. (128), companies in the hospitality industry have come to rely heavily on technology. Large hotels such as Ritz-Carlton, Dubai International Financial Centre, and Sheratons currently rely on online bookings. The traditional brick-and-mortar model of business is currently becoming less common and less effective in this sector (Chytas et al. 465). Technology is also redefining the way large hotels manage their records from the moment they receive their visitors to the time of checkouts. Issues of security have also become dependent on emerging technologies. Kaplan warns that technology also poses threat, especially the emerging problem of cybercrime that has become common in major cities around the world (24).
The United Arab Emirates has invested heavily in information and communication infrastructure. Many companies currently rely on digital data instead of physical files. Ritz-Carlton Hotel is one of those companies that currently rely on online bookings as a way of reaching out to both local and international customers. The technological infrastructure such as high-speed internet and the availability of techno-savvy employees has been of great benefit to the company. It is important to note that Ritz-Carlton, just like many other companies, which have embraced digital data in the UAE, is struggling with constant attacks by cybercriminals. They try to have access to confidential data of customers that may compromise their financial security and trust in the company. Technology has also created a highly competitive business environment. Many firms can reach out to both local and international customers with ease through the internet. Remaining conspicuous in the online space is expensive, but it is the only way of achieving competitiveness in this country.
Ecological Environment
The ecological environment is one of the most ignored yet very important external forces that define the ability of a firm to achieve success in the market. According to Morgan, ecology is one of the three main pillars of sustainability, the other two being people and profitability (43). Unfortunately, many companies often ignore the need to protect the environment, only focusing on the need to make profits. The emerging concerns of climate change, global warming, and general environmental degradation have forced many countries to enact laws that would help protect the environment. Hill et al. observe that it is unethical for a firm to pollute the environment deliberately even if it can circumvent the law (67). Such practices may be unsustainable, especially if numerous companies are not protecting the environment in their normal operations.
The government of the UAE has been keen on protecting the environment. According to Rothaermal, the country has made a massive investment in the renewable energy sector to help reduce the emission of greenhouse gases (117). Ritz-Carlton has the responsibility of ensuring that its activities do not pose any threat to the environment. The country has strict regulations that define the code of conduct that companies are expected to follow when managing waste products. Industry effluents must be treated before being released into the sewer system. The local authorities in Dubai often conduct a frequent investigation of waste management systems within various companies to ensure that there is compliance.
Legal Environment
The last factor in this model, but equally important as the others discussed above, is the legal environment. Kumar explains that a company cannot operate successfully in an environment that is not controlled by clear legal systems (56). Laws set within a country define how easily a foreign company can operate in a given country. Lasserre explains that some government often introduces deliberate bottlenecks to limit the ability of foreign firms to achieve success in the local market (72). Such strategies are often meant to protect local firms considered incapable of competing against major global players. Other laws may be too restrictive in terms of taxation they impose on companies. A firm needs to analyze the legal environment in a country to determine how it can operate successfully.
The United Arab Emirates has created an enabling legal environment for both local and foreign companies. The desire to promote economic diversity has made the government enact laws that allow firms to start a business in the country with ease (Peppard and Ward 12). A company would only need to follow few simple steps to get business permits in the country, a fact that has made it one of the most attractive business destinations in the region. However, such an enabling legal environment causes some challenges that Ritz-Carlton, Dubai International Financial Centre has to address. The ease of starting a business in the country has attracted major global hospitality companies into the local market. As such, it has created a highly competitive business environment where firms have to find unique ways of product delivery to attract and retain customers.
Internal Analysis
After conducting a detailed analysis of the external environment, it is necessary to look at internal environmental factors that affect the ability of this company to achieve success in the market. According to Hill et al., internal analysis helps the management to analyze its core competencies are areas of weakness that need to be addressed to realize the level of success that would be desired (87). Business analysis models such as VRIO Framework, 7-forces model, critical assessment of strategy, and TWOS matric can help in understanding the internal environment of this company and what the management can do to address the identified challenges. Table 1 below summarizes the factors as identified in the model.
Table 1: PESTEL Model.
VRIO Framework
The VRIO framework has emerged as one of the most effective strategic analysis tools that can be used to assess the internal environment of a company. It helps a firm to identify and protect its resources and capabilities that give it a sustained competitive advantage in the market (Hill et al. 34). As shown in figure 1 below, the systematic analysis focuses on four main factors that may enable a firm to achieve a competitive advantage. It would help the management of Ritz-Carlton Hotel to determine if it has a competitive edge over its rivals in the market. When using this model, the management should try to answer specific questions at various stages of the model. The first question is whether the firm offers resources or products that add value to its customers. This company’s products add value to the life of its clients. When they visit the hotel, they get to relax and enjoy their time in this city. The company is also able to exploit the opportunity in the market. In case the company’s products do not offer value to customers, then it lacks any competitive advantage in the market. In this case, the analysis will move to the next stage because it is evident that Ritz-Carlton has a competitive advantage in this industry.
The second step focuses on the rarity of the resources of a firm. When a company has control over unique resources or capabilities, it would have an edge over its rivals. Ritz-Carlton has managed to have control over some of the most talented employees in this industry (Peppard and Ward 73). Its attractive remuneration package and conducive work environment have enabled it to retain its top chefs and employees working in other departments. The third factor focuses on the inimitability of the resources or capabilities of a firm. When rivals in the market can duplicate a firm’s products or ways of offering its services, then it will be a temporary competitive advantage over its market rivals. It is a temporary advantage because as soon as they imitate the product, then the firm will move back to competitive parity.
Ritz-Carlton has been keen on ensuring that it achieves rare abilities in its customer service. It has developed a culture that seeks to treat every customer as uniquely as possible based on culture and personal preferences. It explains why the hotel has remained the favorite in Dubai despite its high price (Kumar 86). As such, the analysis would move to the next phase would be to determine if the firm has an organized management system, culture, processes, and structures that can enable it to capitalize on its unique resources. If it lacks such levels of coordination, it would be considered to have an unused competitive advantage. Ritz-Carlton has highly sophisticated systems and structures with effective management that can take advantage of its unique resources. As such, the company can be considered to have a sustained competitive advantage in the market. Figure 1 below summarizes the information provided above.
As shown in the discussion above, Ritz-Carlton has a competitive edge over most of its competitions in the market. It is one of the most preferred luxury hotels in Dubai. Table 2 below summarizes the analysis of the company based on various products it offers using the VRIO framework.
Table 2: Analysis of Ritz-Carlton’s products using the VRIO framework.
7-Forces Model
McKinsey’s 7-S (strategies) framework is another common model that helps in understanding the capacity of a firm to achieve success in a highly competitive market. It identifies three hard elements (strategy, structure, and system) which define the company’s long-term goals and four soft elements (shared values, skills, style, and staff), which focus on core competencies and daily practices expected of employees and the management. Table 3 below identifies the seven elements.
Table 3: 7-S model elements.
Porter’s Five Forces Model
Porter’s five forces model is one of the common models that are often used to analyze the industry forces to help a firm determine how it can manage various challenges that might exist. This model identifies five factors that a firm should analyze and understand. The first factor is the level of rivalry within the industry. Ritz-Carlton operates in an industry with a high level of rivalry among the players. The firm has to compete against some of the top brands in this market. Some of the major players in this industry include the Burj Al Arab, the Palm Dubai, Jumeirah Beach Hotel, Raffles Dubai, and Armani Hotel Dubai. Some of the top international brands operating in this market include Four Seasons Resort Dubai, Palazzo Versace, Kempinski Hotel & Residence Palm Jumeirah, and Fairmont the Palm (Hill et al. 112). The market has numerous other hotels and resorts offering a wide range of products, from luxurious hospitality services to basic accommodation needs.
The threat of entry into the market is another issue that the management of Ritz-Carlton has to manage when operating in Dubai. According to Rothaermal, the government of the United Arab Emirates has been keen on promoting economic diversification (121). As such, it has created a legal environment that allows firms to enter the local market with ease. It is also easy for local firms to start their operations in the country. It means that the current level of competitiveness can even get stiffer as new companies enter the local market to tap into the existing opportunities. The company will need to find ways of protecting its market share from such new market entrants.
The bargaining power of buyers can be a major concern for a firm seeking to control terms of trade. Kumar believes that when a firm is operating in an industry where the bargaining power of clients is strong, its profitability may be compromised (68). Such customers would demand the best quality products at the lowest price possible. Ritz-Carlton is facing the exact problem in the Dubai market. As explained above, the city has attracted numerous global hospitality brands because of the booming trade and tourism industry. It means that whenever tourists or business travelers visit the city of Dubai, they have several options to make when choosing the right hotel where they want to stay. They have the power to dictate terms they consider ideal before purchasing these products.
The bargaining power of suppliers is a critical issue that the management of a firm cannot afford to ignore. When a supplier offers unique products, which are not readily available in the market, it may have the power to dictate terms of trade (Peppard and Ward 88). In most cases, such a supplier would set terms favorably to it because it knows its clients have no option but to buy the product from it. On the other hand, the power of the supplier can be significantly low if its products can be obtained with ease from other companies. Most of the supplies that Ritz-Carlton uses can be obtained from different suppliers. The company does not have to deal with suppliers with strong bargaining power.
The final factor that the management of Ritz-Carlton has to address is the threat of substitute products. When products that a company offers can easily be substituted, then a firm would lose its competitiveness in the market. Although there are no perfect substitute products that can replace hotel services, some travel agencies are currently offering tent accommodation for their clients who are not willing to stay in luxurious hotels. Some of these clients consider such services unique and more adventurous than the standard practice of having to spend time in luxurious hotels (Hill et al. 98). This firm will need to find ways of protecting its market share from such firms. Figure 2 below summarizes the five factors that a firm has to consider when analyzing industry forces.
Critical Assessment of Strategy
When the management has selected an appropriate strategy, it is important to conduct an assessment to determine if it can help it achieve specific goals. A critical assessment of a strategy focuses on determining the ability of a specific plan to achieve certain goals (Rothaermal 61). Implementing every plan involves spending time and financial resources. Before committing such resources, it is appropriate to take measures to avoid any wastage of the resources. A team of experts should be involved in determining whether a given strategy leads towards a specific goal, the capacity of the firm to implement the strategy, the time it will take for its implementation, and any issues that might emerge in the process of implementation. The steps are taken to ensure that when necessary, the team can redefine the strategy to meet the company’s needs. It should also be aligned with the skills of the employees.
Internal Environment Analysis
After analyzing the external environment of this company, it is important to review its internal environment to understand its capacity to deal with various challenges in the market. According to Lasserre, analyzing the internal environment makes it possible to understand how the firm can use its strength to overcome different issues in the market (69). The TWOS Matrix identifies strengths, weaknesses, opportunities, and threats that the firm faces while operating in the United Arab Emirates. Table 4 below summarizes the factors.
TWOS Matrix
Table 4: TWOS Matrix.
SO Strategies
The management of Ritz-Carlton should use its strengths to maximize the opportunities in the market. The Dubai Expo 2020 offers a unique opportunity for the hotel as it has enabled it to demonstrate to the international community the quality of its services. The expo will also increase the number of clients for firms in the country. The firm should consider embracing diversification as a market strategy.
ST Strategies
Ritz-Carlton should consider using its strength to overcome market threats. A strong brand can enable it to deal with the problem of stiff competition. Its financial capacity can be used to enable it to sponsor market research projects that would improve its services in the market. In this context, it is recommended that the firm should embrace differentiation to achieve market success.
WO Strategies
The company has to take advantage of the existing market opportunities despite the identified weaknesses. The coming Dubai Expo 2020 provides the firm with the opportunity to increase its room occupancy despite the major weakness of not having products meant for various segments of the market. The researcher recommends that this firm should embrace cost leadership to overcome these weaknesses.
WT Strategies
It may be challenging when a firm is trying to manage market threats from the point of its weaknesses. It makes it necessary for the firm to start by managing the internal weaknesses for it to overcome threats within the industry. Focus strategy is considered the most appropriate strategy in this context. Ritz-Carlton should focus on delivering the best quality products for the chosen market segment.
Key Lessons Learnt from the Past
The analysis of the internal and external environment of this company shows that it can achieve success despite the challenges that exist. Based on the past lessons, the company must strengthen its position in the market. Ritz-Carlton has selected the luxury market as the most attractive segment it seeks to pursue. However, this segment has other players such as Kempinski, Burj Al Arab, Palm Dubai, and Jumeirah Beach Hotel, which also offer luxury products in the hospitality industry. Instead of pursuing other market segments, this company should use its experience in the market and find ways of improving its product delivery. It should consider creating additional value for every product that it offers to the customers as long as it would not significantly inflate the overall cost of production.
Analysis of the Firm’s Current Performance and Issues
The hospitality industry in the United Arab Emirates has been expanding rapidly over the years because of government initiatives and the perceived growing demand in the market. As such, numerous local and international companies have been trying to start their operations in the city of Dubai. Kumar explains that when a country has a friendly business environment, it may have unintended harm to the current players in the market (61). In this section, the researcher focuses on analyzing the Ritz-Carlton Hotel’s current performance and the main issues that it is facing. The chapter will assess market forces that limit the capacity of the firm to achieve the desired level of success.
Defining the Current Issue(s) and Problem Statement
The Ritz-Carlton, Dubai International Financial Centre operates under the umbrella of Marriott International. When analyzing the financial performance of this company, it would be necessary to use the records of Marriott International, which are publicly available. As a private entity in the UAE, the company is not bound by law to release its financial performance to the public (Hill et al. 119). As shown in Table 5 below, the company has been registering impressive financial performance over the past ten years. The revenues of the company have doubled over the same period. The asset value has tripled from 2009 to 2018. Such impressive performance is attributed to the firm’s commitment towards its customer and the ability to understand and meet customers’ needs. The growing population and the number of visitors coming to Dubai have also enabled the company to register consistent growth in its revenues.
The impressive financial performance of this company may indicate that the company is destined for greater success, but the market has numerous challenges that this company will have to overcome. One of the issues that Ritz-Carlton Hotel has to face in this market is the oversupply of hotel services (Kumar 98). Numerous companies have started their operations in this city and that has led to a situation where the supply exceeds demand. In such a situation, customers are empowered. They know that they can demand improved services at a lower cost knowing that they have several choices in the city.
The growing competition in the local market means that the company has to improve the quality of its products to the best levels possible to attract and retain customers. The reduction in the average price of products in the market forces this company to lower its charges to remain competitive. In some cases, Ritz-Carlton may not reduce its costs in tandem with the reduced prices because such a step may compromise the quality of its products. As such, the profitability of the company will drop. The emerging cheap lodging in the city also poses a threat to this company, especially when a customer is keen on spending a little time in the city. The fluctuation in the number of visitors coming to Dubai is another major concern that the management is currently trying to address.
Analyzing Information
The challenges that Ritz-Carlton faces in the market are not limited to the external environment. The company also has some internal problems that it needs to address to achieve success in the market. According to Kumar, understanding internal weaknesses within the firm is one of the critical steps towards improving the performance of a firm (62). It enables a company to identify weaknesses that it should manage to strengthen core competencies and internal skills within the organization. In this section, the researcher focused on strategic direction, issues of competition, marketing efforts, sustainable business practices, high service rates, and customer satisfaction as factors that define the success levels of a firm in the market.
Strategic Direction
Strategic direction establishes structures for internal responsibilities for each department and employee within an organization (Peppard and Ward 118). It explains the role of every employee. At Ritz-Carlton, the management would need to define the responsibility and expectations that each department should achieve within a given period. For instance, the customer care unit should have a clear program of how they need to handle customers’ needs, complaints, and concerns to ensure that they are always satisfied with the services offered to them. An individual employee should also set a standard they have to meet when attending to customers in the company. The management of this company has been struggling to introduce strict new standards among its employees, demanding a high level of accountability. Such steps may be challenging to implement, but they will have a positive impact on the progress of a firm.
High Competition
The hospitality industry in Dubai has been growing rapidly over the recent past, and currently, it is one of the major urban centers with the highest number of hotels per square mile in the region (Hill et al. 42). In such a competitive business environment, achieving sustained growth may be a major challenge. Any issue that taints the image of the company may result in a situation where customers avoid its services within a very short period. Lasserre warns that hotels are often at risk of losing customers within a short while because the contracts do not last long (20).
When it emerges that the company is involved in any malpractice, its clients may easily find alternative companies offering the same services. Ritz-Carlton has been able to deal with the problem of stiff competition in the Dubai market by selecting a niche that it can serve in the most effective way possible. It has identified the luxury segment of the market. Although this segment also has competitors, the level of competition is not as high as it is in the rest of the market. Rothaermal believes that, sometimes, such a high level of competition is good for a firm (39). It enables a company to redefine its products to ensure that it offers the best to its clients. In such a situation, it becomes almost impossible for new firms to survive in the local market.
Marketing Efforts
When competition is high in the market, the ability of a firm to achieve success is defined by its marketing efforts. In a market where Ritz-Carlton has to compete with some of the best international hotel brands such as Kempinski, the level of the conspicuousness of a firm’s brand defines its ability to manage competition in the local market. According to Peppard and Ward, when operating in a highly competitive business environment, marketing efforts should focus on strengthening the brand and informing clients about the superiority of products it offers (81). On the one hand, customers need to know the brand and form a personal relationship with it. They should be proud of using the brand name Ritz-Carlton. Such a strong relationship helps a lot because it has the potential of transforming customers into brand ambassadors. They can influence their colleagues to consider buying from the company.
The second approach would be to promote the products it offers. Customers should know what to expect when they visit Ritz-Carlton. The management may consider expanding its product line to ensure that clients can get all the services they need without having to contract a different company. The promotional message should also explain the availability of all the products that customers may need (Hill et al. 80). A visitor who might have considered using another company may change their mind when they realize that they can have access to all the services they need when they come to Ritz-Carlton. The promotional strategies that this company uses have enabled it to create a pool of loyal customers. They know what to expect every time they visit this firm.
Sustainability Business Practices
The sustainability of business practices is important for a firm operating in a competitive business environment. According to Zdanyte and Bronius, when focusing on sustainable practices, one should focus on the three pillars of sustainability (31). As shown in the figure below, the first pillar of sustainability is social factors or people. The management should not ignore the need to meet the social needs of its employees, customers, and all the other relevant stakeholders. This pillar is important because it helps to ensure that the practices receive the support of all the stakeholders. Kumar notes that employees should feel respected and valued in the workplace (23). They can only be supportive of a business practice if they know their interest will be protected.
The second factor is the economics of the practice. When introducing a new practice within a firm, it is important to ensure that it remains profitable. A firm can only remain sustainable if it can fund its activities. When starting a business, there is always, the need for the owners to inject the capital needed to start operations. After that, the shareholders will expect the operations of the firm to be self-sustaining for them to support its continued existence (Peppard and Ward 43). The management of Ritz-Carlton will need to ensure that its practices yield enough profit that can sustain the firm’s operation. Revenue-generating activities should not be ignored in favor of socially responsible practices. The two need to be treated as equally important practices.
The third factor focuses on the environment. Issues of climate change and global warming have become major concerns, especially in coastal cities such as Dubai. The global community has come up with various measures that encourage the reduction of the emission of greenhouse gases. The government of the United Arab Emirates also has policies that regulate waste management by various companies, especially industry effluents. The management of Ritz-Carlton needs to ensure that its operations adhere to environmental policies and practices. Failure to follow government policies regarding waste management may have a serious implication on the firm. It may face legal consequences in the market. Lasserre also notes that constant pollution of the environment may have serious negative consequences on the firm (37). As a firm that operates in the hospitality industry, it is essential for this firm to keep its environment clean at all times. Figure 3 below identifies the three pillars of sustainability that this company should take into consideration when defining its sustainable business practices.
High Service Rates and Customer Satisfaction
One of the common issues that firms in the hospitality industry face are the high service rates. Companies offering premium services to their customers have to spend a lot to ensure that they offer the best value. Ritz-Carlton has a policy that seeks to treat every customer as uniquely as possible in terms of the food they offer and customer services they make available. It forces them to transfer the high cost of production to its customers (Kumar 40). Some of the clients may not afford to pay the high service rates, inhibiting their capacity to afford the services of this firm. However, there is the issue of maintaining high levels of customer satisfaction. The dilemma that this company often faces in the market poses serious challenges.
On the one hand, there is a need to offer the best products to its clients in the best way possible. On the other end, the firm must lower its service rates to accommodate more customers, which means compromising on the quality that the firm offers. It is not possible to achieve both. The firm cannot afford to lower its service rates if the primary goal is to offer premium services. It has to choose to lower its prices to attract more customers who have to be contented with low-quality services, or maintain the quality at the current standards and continue to charge premium prices. As a brand that is known for its luxury products, it would be prudent for Reitz-Carlton to maintain its current qualities and protect its current niche.
Implementation and Evaluation of Strategies
The market has numerous challenges that this firm can only overcome if it embraces effective marketing strategies. The management must evaluate and understand market forces. It should be clear what it seeks to achieve within a specific period. The firm can then come up with an effective strategy that would enable it to realize its market goals (Hill et al. 52).
Corporate Level Strategies
At the corporate level, the management of this company has to make decisions that would have a positive impact on its performance within a given period. According to Kumar, corporate-level strategies define the long-term plans that a firm has towards its vision (49). In the current competitive and highly dynamic business environment, a firm must ensure that it remains flexible. When new trends or opportunities emerge in the market, the management should be capable to realign its strategies to meet the emerging needs. Such levels of flexibility help in eliminating cases where short-term or unexpected opportunities are missed. Porter’s generic strategies can help explain the options that Ritz-Carlton has in its effort to achieve a competitive edge over its market rivals. Figure 4 below identifies the three strategic options that a firm can use to improve its competitiveness in the market.
Cost Leadership Strategy
When using cost leadership, a firm would be expected to reduce the overall cost of delivering a unit product to lower its price in the market. This strategy aims to make the product affordable to a large customer base, increase sales, increase revenues, and enhance the profitability of the company. When the management of Ritz-Carlton Hotel decides to use this company, it would need to focus on increasing economies of scale, standardizing its products, and embracing innovation. It should also strive to put into maximum use all its assets within the country. The goal would be to lower the overall cost of production as much as possible.
With the reduced production cost, it will be possible to charge lower prices hence attract more customers. However, it is important to note that the market niche that these firm targets make the strategy less relevant. This company targets the rich with luxury products and services. These clients need tailor-made products based on their specific needs. As such, strategies such as standardization may not work well with them. Economies of scale may also be inappropriate when targeting these customers. As Kumar observes, when dealing with the rich, a firm must understand that quality should be given priority over cost (86).
These clients would be willing to pay more if the services meet or exceed their expectations. Although this strategy is irrelevant to Ritz-Carlton, some of its principles such as process innovation are still relevant. When offering customized products, the firm can make an effort to lower the cost to increase its profits and enhance efficiency.
Focus Strategies
The second strategy is the focus group. According to Peppard and Ward, this strategy involves targeting one or more customer segments/niches whose needs a firm can meet in the best way possible (75). The strategy requires the management to start by classifying its customers into different segments, especially based on their buying capacity. The firm would then conduct an internal assessment to determine the segment that it can meet its needs in the best way possible. When selecting a niche, Lasserre advises that it is important to take into consideration the size of the market (114). A firm should avoid a small market that cannot sustain its expansion plans. Focus is one of the strategies that Ritz-Carlos has been using in the global market.
In Dubai, this company targets the rich who are visiting the country as tourists or business executives. It offers high-end products for these customers at premium prices. One of the biggest challenges of serving the rich is that they are very keen on details. The firm has a pool of highly skilled chefs and workers who are keen on offering various products based on clients’ specifications. The size of this market has been growing, as the city becomes one of the most preferred destinations for the wealthy. Although it charges premium prices for its products, the company has managed to attract and retain a pool of loyal customers who believe in the quality it offers. The management should continue to give this strategy a priority because it helps the firm to stand out as one of the best luxury hotels in the country.
Differentiation Strategies
As its name suggests differentiation focuses on finding a unique approach to offering products and services to customers. The primary focus of a firm would be to make its product different from others in the same market. In the hospitality industry, differentiation is one of the most common strategies that companies often employ. Ritz-Carlos has been using this strategy in the local market to attract customers. It has been keen on ensuring that it has a wide variety of food products with unique tastes depending on the customers’ needs. A chicken at Ritz-Carlton can be prepared in over ten different ways to help a client enjoy the taste they are used to back at home. It means that a client from New York, another from London, and the third from Nairobi would be served chicken prepared in three different ways.
Differentiation is also achieved in the hospitality industry by how employees present themselves to customers. Ritz-Carlos has a unique dress code for its employees working in different departments. The waiters have a different dress code from that of chefs. The housekeeping employees also have a different dress code to reflect the nature of their job. It becomes easy for the customer to differentiate the employees by simply observing their dressing. The company should continue using this strategy to ensure that its products and services stand out above the rest in this competitive industry. Kumar warns that differentiation may be an expensive strategy because it involves providing unique services to each customer (41). However, it is suitable for Ritz-Carlton that targets the rich in the market.
Corporate Social Responsibility
When analyzing the firm’s corporate-level strategies, it is important to take into consideration corporate social responsibility (CSR) because of its significance in the modern business environment. According to Rothaermal, large corporate entities are currently under pressure to participate in various social responsibilities as a way of giving back to the immediate environment (28). Ritz-Carlton Hotel has always remained committed to serving its immediate community through various programs. One of the main areas that the company has invested a significant amount of resources is environmental protection. One of the main concerns in the United Arab Emirates is environmental degradation. The influx of tourists and business executives into the city of Dubai has had a significant impact on the number of wastes generated. Ritz-Carlton has a program that focuses on the collection of plastic wastes in the country.
The company has collaborated with various local organizations to help in the collection and recycling of plastic wastes. Given that the firm does not get directly involves in the recycling of plastic materials, it has been funding organizations involved in the program. The move has helped in improving the level of cleanliness in the city. Tree planting is another area where the firm has been making a significant investment as it works with other stakeholders to protect the natural environment in the country. Ritz-Carlton has supported organizations such as The Green Planet by Meraas to plant trees in the city of Dubai as a beautification strategy. According to Zdanyte and Bronius, one of the common corporate social responsibilities is direct financial support for the education system (124).
The company has supported various students to further their studies both locally and in foreign institutions of higher learning. Some of these students often come back to work for the company after their graduation. Other proceeds to work for the government and other private sector players. Such initiatives help in improving the quality of the workforce in the local labor market. The reports of the company also show that it has been actively involved in improving the local health sector. It has funded various healthcare institutions through a donation of cash in their different projects. The company understands that enhancing the well-being of members of this society has a direct impact on its performance.
The Secrets to Successful Strategy Execution
At the corporate level, the management of Ritz-Carlton should understand specific secrets to the successful execution of strategy. For instance, when the decision is made that the firm should pursue differentiation as a way of achieving a competitive advantage over market rivals, the firm should understand how to execute the strategy in the most effective way possible. Kumar explains that a firm may have an impressive strategy in the market, but if it lacks an effective execution strategy, it may not be possible to realize the intended goals (80). As such, it is critical to start by planning on how the strategy would be executed. The management should select a team of employees who will be directly and indirectly involved in the execution. They should have the right skills and capability to execute different activities with great precision. Lasserre explains that decisions made when implementing the strategy and the level of motivation have a direct impact on the level of success of new strategy execution (53). It is important to analyze the secret behind the two factors and how they can be applied to enhance the ability of Ritz-Carlton to achieve success when implementing new strategies in the current competitive business environment.
Right Decision
The decision that the leadership of a firm makes during the implementation of a strategy has a major impact on the success rate of a new strategy. The first decision that the management of Ritz-Carlton has to make is when to implement the strategy. Timing is one of the most important factors when implementing a new decision. Rothaermal says that timing has to be right in teams of the readiness of the market to accept it, the ability of the firm to execute the strategy effectively, and the level of unpreparedness of the competitors to respond (71). The market rivals should be caught unawares and unable to devise effective response plans. Another major decision is the team that will be involved in implementing the strategy. Kumar explains that when introducing a new system in an organization, a firm should involve those who are committed to the change (35). As such, the management should not just focus on the skills and experience of these employees. It should also consider their willingness to ensure that the introduced system is a success.
Engaging all the relevant stakeholders about the new strategy is another right decision that should not be ignored. Resistance to change is a common problem that often arises when employees and other relevant stakeholders are not adequately informed about it. The management has the responsibility of explaining the strategy to employees, shareholders, business partners, and even its customers to ensure that they do not get surprised with the new system (Zdanyte and Bronius 110). The stakeholder engagement initiative will help eliminate cases of change resistance caused by unfounded fears among different stakeholders. The right investment decision should also be made when planning to introduce the new system. The management should understand goals that will be achieved when the strategy is executed successfully and the nature of investment that should be made. The resources needed for the project should be made available to avoid unnecessary delays in the process of implementation.
Motivators
The ability to have a team of highly motivated employees is another major secret when trying to execute a strategy. The output of an individual employee defines the overall success rate of any given project. It means that when working with a team of highly demotivated workers, it may take longer to complete a given task, and in many cases, the level of success desired may not be realized. As such, the management must find motivators that would help improve the performance of the employees. Lasserre believes that one of the greatest motivators is the elimination of fear (53). Many people often have fear of change for different reasons. Some feel that the new system may render their skills irrelevant while others fear that they may be transferred to other departments they would not want to work in within a given period. The shareholders may have the fear that the new strategy may require heavy investment, which may lower their earnings. Addressing such fears is critical because it frees all the stakeholders of their concerns. Employees will remain committed to its implementation knowing that they will not be subjected to any negative forces soon after its completion.
Explaining the benefit of executing the strategy is another major motivator that the management of the Ritz-Carlton Hotel should take seriously. Employees often want to understand why a new system or practice is introduced in the company. When explaining the benefits of the new system, the management should not ignore how employees will also benefit either directly or indirectly. They will be motivated when they realize that a given strategy would make their work easier than before, reduce working hours, eliminate threats and improve occupational therapy, and enhance their productivity without threatening their position within the company. Sometimes it may be necessary to introduce financial incentives as a way of motivating employees when executing a new strategy (Hill et al. 79).
The management can come up with a plan where the performance of individual employees would be measured when introducing a new strategy. Those who register impressive performance during the period of assessment should be rewarded. Such financial incentives should not jeopardize the financial position of the company. According to Kumar, in some cases, public recognition is enough to make employees register impressive performance (19). Just letting everyone within the company know that a certain employee has been considered the highest performing worker may encourage workers to improve their performance. The management of Ritz-Carton can pick two or three of these motivating factors to help improve employee morale when introducing a new strategy.
Evaluation and Control
The management of the Ritz-Carlton Hotel will need to embrace regular evaluation and control to ensure that its activities are geared towards achieving specific goals in the market. According to Zdanyte and Bronius, in a highly competitive business environment, new practices and technologies emerge very often as firms struggle to achieve a sustainable competitive edge over their rivals in the market (81). The management of this company should be keen to understand such changes and focus on ways of improving its service delivery to its customers. The goal of assessment should be to determine whether the current practices within the firm are in line with the industry’s best practices and steps that can be taken to improve the firm’s performance.
KPI and Balanced Scorecard
Key performance indicators (KPI) and balanced scorecard are some of the common tools often used in such evaluations and control. Key performance indicators help in determining how effective a given firm is achieving specific objectives. It helps the firm to determine how successful it is towards achieving specific goals in the market. Table 5 below identifies specific goals that this company should achieve, objectives aligned to these goals, and indicators that would define whether this firm is currently making positive progress towards their realization. In this study, the researcher has identified four main goals that the management of Ritz-Carlton should focus on when using this model. They include internal processes, financial factors, customer satisfaction, and continuous learning and growth within the company.
Table 5: Balanced Scorecard and KIP Table.
The balanced scorecard can be used alternately with key performance indicators. This model also enables the management to assess the performance of a firm to identify areas of weaknesses and find ways of fixing them. The model identifies perspectives or approaches to the identification and measurement of the progress of implementing a strategy as discussed below.
Customer Perspective
This perspective focuses on what is important to customers. When using this model, the management of Ritz-Carlton should find practices its main customers consider valuable. Kumar explains that it is important to prioritize customers based on the frequency with which they visit and the number of bookings they make per visit (10). Clients classified as very valuable to the firm should be offered the best value based on their specific needs. It does not mean the firm should ignore other market segments. Using a customer feedback system can help the management to determine if it is doing the right thing.
Internal Perspective
Internal perspective focuses on what the firm believes it can excel in to achieve the greatest success in the market. It focuses on the core competencies of employees in the firm. When identifying what the firm can excel in, it is important to select processes critical in enhancing the success of the firm. For instance, the firm can focus on identifying what it can do best to satisfy its customers. Ritz-Carlton should consider issues such as delivering the best dishes for its clients based on individuals’ needs. It can also improve its customer service practices to ensure that every concern that a visitor raises is addressed effectively and within the shortest period possible.
Innovation and Learning Perspective
Continuous improvement is the only way through which a firm can achieve a sustainable advantage over its rivals in the market. According to Lasserre, a firm needs to have a clear system that enables it to create value and innovate (50). In the hospitality industry, product delivery methods continue to change and it is the responsibility of the management to keep up with the changing market trends. Regular training of the workforce empowers them enough to develop innovative ways of service delivery. Ritz-Carlton has an elaborate program that facilitates regular training of employees.
Financial Perspective
The management should be committed to providing value for the shareholders in the market. This goal can only be realized if the company has an attractive revenue stream. The management of Ritz-Carlton Hotel should find ways of increasing its revenue through diversification of its products or attracting more customers. As Kumar suggests, it is necessary to ensure that the profitability of the firm is not compromised in its effort to increase sales (64). Strategies that may help lower the overall cost of operation should be embraced.
Strategy Map
The intended goal and objectives of Ritz-Carlton Hotel, as discussed using key performance indicators and the balanced scorecard can be illustrated through a strategy map in table 6 below. The map shows the current position of the firm and the goal that the firm should realize after a specific period.
The Ritz-Carlton, Dubai International Financial Centre is one of the leading hospitality firms in the city of Dubai. The decision by the government to promote the growth of tourism and related industries has created stiff competition because of the ease with which firms can enter this market. The massive investment in infrastructural development and a stable political environment are the other factors that have propelled the growth of this industry. The analysis of the external environment shows that although this firm faces stiff competition, there are opportunities that can enable it to achieve greater success in the market. Ritz-Carlton has selected the luxury market as its main area of focus when providing hospitality services. It offers premium services to some of the rich travelers who come to Dubai as tourists or business travelers.Conclusion and Managerial Implications
The report shows that although this segment is also competitive, this firm has come out as one of the top brands that understand customers’ diversified needs and offer quality products that meet them. The researcher recommends that the company should remain innovative in the market as the only way of overcoming numerous challenges that emerge in the market. Continuous training of employees is one of the best ways of promoting innovation at the firm. Workers should understand how they could deliver the best service to the customers in their respective places of work. The ability of this firm to remain competitive depends on its capacity to remain dynamic and capable of understanding and addressing emerging needs in the market.
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