Evaluation of relevant strategy level
The merger of Marriott with Starwood hotel is one of the strategic appraisal that is employed by organization to expand their frontier. Starwood hotel and Marriott are leading hospitality brand having presence in major cities. International footprints of Starwood hotel will be fused resulting from merger with Marriott and its strong presence in personalized and luxury services. A changing landscape of hotel industry is depicted by such merger. Core value of Marriott is centred upon providing excellent services, supporting and promoting employees, integrity, innovation and supporting the goal of becoming the leading hospitality chain in the world. It is the goal of Marriott to be number one hotel company that could be done by claiming market share internationally. Merger has brought additional 5700 hotels with 30 brands making it largest hotel in the world (Connell 2016). This strategic approach has led to acquisition of luxury brands of Starwood and inheriting lifestyle brands such as Aloft. Merger would enable the company to help them in achieving long-term goals of becoming number one company in hospitality industry.
Corporate strategy- The corporate strategy of organization is supported by business strategy and the merger would lead to integrate complicated work. A comprehensive portfolio would be created resulting from combined transactions of international footprints and leading life style brands of Starwood with Marriott’s strong presence in service and luxury tiers along with resort and convent segment. The additional value to shareholders of Starwood and Marriott would be unlocked by providing greater opportunities to associates and broader choice to guests. Strategic business unit of Marriott merger of Starwood focuses on representing different division, group and they are the most profitable unit of the group (Yu and Gu 2013). Management of product, maintaining competitive level and expansion of business are the responsibility of strategic business unit. Corporate strategy of the group will be confined with business unit expansion. Objective of Marriott at the end of 2015 was to generate additional 150000 jobs, make $ 50 billion investment in real estate and reaching 1 million room (Gibbs et al. 2016). This expansion plan of Marriott is supported by strategic business unit that led to strategically setting business. One of reason of merger of Marriott with Starwood is expanding their business in Asia. Acquisition of Starwood hotel by Marriott is a part of their corporate strategy and they have been able to derive benefits from such strategy depending upon market environment. Global corporate strategy would help in guiding business units of Marriott despite their own market environment and peculiarities (Wood 2016).
Bowman’s Clock strategy is a model to analyse their competitive position while designing market strategy. Model is represented diagrammatically using framework depicting relationship between prices and customer value. There are eight strategic position as per this model and the implementation of model helps organization in comparing their services and products offered with other company belonging to same industry (Zheng and Zhang 2014).
Bowman’s strategy clock:
(Source: Shakhshir 2014)
There is no dispute in the competitive position of Starwood and Marriott and acquisition has led to development of multitude of possible changes. Adoption of strategic change has led to adoption of differentiated strategy such as having different reward programs. Differential strategy would provide travellers with the option of choosing from multiple hotels. Portfolio of hotel brands are distributed and expanded along with scaling of properties that has helped in realizing the cost efficiency. The members of loyalty programs are offered reciprocal benefits and merger has brought Starwood guest program to stand out of crowd as it provide travellers with lot of access to hotels (businessinsider.com 2016). This particular differentiated strategy created a new wave of innovation in loyalty space. Value in loyalty of special guests program is always believed by people and they tend to compare with their hotels in industry. Therefore, in terms of loyalty programs, the merger of Starwood with that of Marriott is currently in strategic position 4.
Analysis of strategic position using Bowman’s Clock
The reliability and functionality of products is improved by new market and low end disruption. This in turn has led to improvement in performance of company and meeting the customers’ expectation. Customers are provided a convenient hotel stay at lower price due to improved performance of boutique hotel and regional budget hotel chain resulting from such strategy. The attributes that are more demanding to customers in hospitality industry are improved by engagement of Starwood in sustainable innovations (Kowalczyk 2015). In terms of hotel designs, there has been improvement in the front of lifestyle concepts and loyalty programs that resulted in differentiating the brand. There has been improvement in terms of services and products of Marriott beyond the mainstream travellers market who opt for branded budget hotel and cheaper boutique hotel. Adoption of differentiate strategy by Marriott would provide customers with several value propositions (Gardini 2015). Their combined strategies would lead to generate unique value propositions to their customers irrespective of their segments.
Stakeholders are individual or group or any organizations who are impacted by the decisions of an entity. They are either directly or indirectly impacted by business activities and success of business is driven by realizing the stakeholder importance. Stakeholders of Marriott after its merger by Starwood can be classified as external, internal and market under their particular segments.
Internal stakeholders are those who ensures that operational and services are rendered are on request. It is ensured by them that needs of customers are satisfied by evenly distributing the resources and managing day to day resources. The key factors to profitability of business and market share is influenced by market stakeholders (Salvioni 2016). However, there is no control by Marriott on their external stakeholders and their activities are not guided by them. Some of internal stakeholders of the group are listed down as:
- Franchisee and hotel owners of thirty leading brands of Marriott.
- Contractors such as legal consultants, tax consultants, Ventilation and air conditioning experts and heating experts.
- Suppliers such as Furniture, food items and sanitary suppliers.
- Shareholders or investors
- Employees who are service assistant and first point of contact
- Associates such as partners and veterans in the hotel industry
The list of external stakeholders of Group are listed below:
- Government
- Industry organizations
- Non-government organizations
- World economic forum
- Travel agency
- Tourism experts
- Sustainability experts
- Host communities
- Legal and labour regulatory bodies
List of market stakeholders are as follows:
- Customers
- Economy
- Competition
Continuous engagement with relevant stakeholders is the responsibility of management and the stakeholders are engaged through forums, survey and public policy agenda maintenance. Service excellence has been further driven by addressing social and environmental issues such as immigration reforms, racial abuse, discrimination and human rights. Marriott has been able to gain largest share of market by engaging with stakeholders efficiently (Andreu et al. 2016). This led to improved relationship with government and local communities.
The external analysis of acquisition of Starwood by Marriott can be explained by using PESTLE. This particular framework will help in assessing the nature of environment in which Marriott is operating.
Political factors- The operation of Marriott is affected by existing danger of terrorism, political climate and international relations in popular destinations of tourists. Military conflict or terrors attack is one of the threats facing the hotel chain that could create disruption in international air travel. There can be decrease in demand for hotel rooms because of rise on aggressive terrorist organizations such as ISIS. Increasing terrorist attacks on hotels are scaring away the potential travellers and thereby reducing the scope of generating profits. In such circumstances, group is required to make investment in adopting costly security measures. Therefore, for dealing with the political situations in the areas of operations, group is required to implement security measures. Operations of hotel has the certainty of getting disrupted by any conflict in international relations that require them to strategically align legislative requirements. Moreover, Marriott is also required to make investment in labour force for ensuring that they are well equipped with requisite knowledge to serve host countries.
Critical evaluation of key stakeholders
Economic factors- Operation of Marriott is also affected by the economic factors of respective countries. Such factors comprise of inflation, fluctuation in exchange rate. In the current scenario, business of group will be adversely affected by ongoing economic turmoil in Europe and slow down of economy in growth in China. The buying power of individual have been reduced resulting from debt crisis in Europe and collapse of stock market in China as a consequence of which travelling ability have been hampered. Tapering off of the business travel on which the group is depending upon heavily is considerably affected by such crisis (marriott.com 2015). Furthermore, high exchange rate is significantly impact business travellers visiting US and ability of people to travel and stay at hotel is reduced by stagnation of middle class wages and income inequality.
Social factors- The total number of people planning to travel internationally has increased by considerable percentage since year 2013. It is indicated from statistical figures published by regulatory bodies that there is increased intensity in travellers to spend money on travelling. There has been average increase in travel spending from $ 5955 in year 2014 to $ 6906. Due to increased number of Asian and Chinese travellers, the performance of group is also impacted by the cultural change. There is increased demand for certain types of travel experiences such as luxury resorts and packaged tours because of growing older population in Europe and United States (Hudson and Hudson 2017). Therefore, group is required to make changes in services offered in accordance with changed customer preferences.
Technological factors- The hotel business is hugely impacted by technological factors in the form of online rental services. In this technological era, customers are required to be provided services using electronics and computer platforms. Marriott is required to make investment in their research and development team for seeking better ways to provide excellent services to customers (Kang and Lee 2014). For instance, employment of robust reservation system would help in providing seamless services to customers.
Pestle analysis of Marriott-Starwood:
Source: Created by author)
Legal factors- Certain legal factors have the possibility of disrupting future business of Marriott and Starwood. The status of services offered by entity such as Airbnb is likely to impact future business of group. Violations of hotel regulations, safety and healthy laws would create a great hindrance in hotel operations. One of the legal issues prevailing in United States is increased minimum wage. Marriott’s operation would be disrupted resulting from such legal issues as there would be reduction in service and higher cost of labour (theguardian.com 2016). Merger would provide opportunity for dealing with such issues.
Environmental factors- In current scenario, one of the major environmental issue disrupting business of Marriott is increased cost of fuel. Demand for hotel room would increase due to reduced cost of travelling accompanied by falling price of oil. Any abrupt increase in cost of fuel has the potential of hindering hotel business indirectly. Increased electricity cost is one of potential long term environmental impact resulting from increased effort to restraint greenhouse gases. Change in climatic condition such as flooding resorts and rising level of oceans has the likelihood of impacting hotel business by discouraging going to beach.
External analysis
The relevant industry factors impacting the Marriott’s merger with Starwood hotel can be analysed using Porters Five forces.
Suppliers bargaining power- There are over thirty brands of Marriott and all sorts of materials such as bed sheets, sanitary items and food ingredients are supplied by many suppliers. Quality and standard of products are ensured by the control process of group. Regular supply of essential items is ensured by procedures of supply chain and standard procurement. Suppliers does not pose threat to business and low bargaining power of suppliers.
Customer bargaining power- When customers are presented with wide variety of services, then they enjoy an increased bargaining power. Merger of Marriott with Starwood would provide customers with variety of services such as facilities of boutique hotels and branded hotel facilities at reasonable prices. Loyalty programs of Marriott combined with Starwood has enabled locking of customers as it is one the competitive advantage over their competitors (Markham-Bagnera 2016). In this particular program, loyalty of customers are rewarded with appeal to always seek return to services of Marriott.
Industry rivalry- The competition faced by Marriott even after merger with Starwood has generated fierce competition. Traditional hotel companies would have advantage resulting from such acquisition and they would be provided with more power to compete in hotel industry. The customer retention rate has the possibility of increasing due to merging of loyalty programs of both the entities. However, significant threat is emerging from Airbnb. The valuation of this particular entity is same as that of Hilton and Hyatt. Expansion of services rendered to customers by Airbnb would pose a great threat to this strategic positioning (Jang 2014).
Porters five forces of Marriott-Starwood
(Source: created by author)
Threat of substitutes- The acquisition strategy of Marriott would provide customers with wide variety of services and this would help in driving the business profit. This particular strategy has been done to reduce operation cost due to the introduction of combined loyalty programs by the group. Level of amenities and services offered by hotel companies comes with price varieties. Substitute’s threat arises from development of organization technologically as well as services (Hamilton and Webster 2015). There exist possibility of high substitution risks for such organization. However, merger strategy would provide customers with somewhat differentiated strategy that leads to reduction in such threat. Nonetheless, due to emerging market trend, hotels are required to make continuous change in their offerings.
Threat of new entrant- Threats would arise from Airbnb as it continues to stream new digital tools and focuses heavily on providing amenities and services to travellers. Therefore, it is Marriott-Starwood needs to focus on digital offering for competing with new entrants into the industry. It is required by newly merged organization to focus on technology that helps in engaging customers and travellers beyond just booking and providing normal services. It can be explained with the help of an instance, Hilton hotel is providing travellers with amenities that are available at resorts and recommendations for activities using beacons. This would help in driving up the loyalty of customers. Adoption of such technological tool by Marriott-Starwood would assist in directly competing against own travel guide tools of new entrants such as Airbnb (digitaldoughnut.com 2016). There has been increasing trend on part of hotels to adopt digital platform, it is required by the group to adopt e commerce capabilities and omnichannel tools that would help in preventing threat from new entrants.
Conclusion:
The report demonstrate the analysis of relevant external factors impacting the operations of Marriott-Starwood hotel. From the analysis, it has been ascertained that merger strategy of Marriott would provide business with diversified benefits such as reducing the cost of operations and increasing customer retention rate. However, it is well known fact that with expansion, the responsibilities of business also increases along with increased threat from other crucial competitors. Therefore, it is required with merged organization to take formulate appropriate strategies for maintaining their competitive position. Several measures such as technological platforms should be adopted for keeping competitions from new entrants at bay.
References
Andreu, R., Claver, E. and Quer, D., 2017. Foreign market entry mode choice of hotel companies: Determining factors. International Journal of Hospitality Management, 62, pp.111-119.
Connell, L., 2016. Marriott’s big dreams for its future. People & Strategy, 39(4), pp.59-61.
Digital Doughtnut. (2017). Marriott Starwood Merger and Disruptions in the Hospitality Industry. [online] Available at: https://www.digitaldoughnut.com/articles/2016/april/marriott-starwood-merger-and-disruptions-in-the-ho [Accessed 24 Oct. 2017].
Gardini, M.A., 2015. The Challenge of Branding and Brand Management: Perspectives from the Hospitality Industry. In Tourism and Leisure (pp. 247-268). Springer Fachmedien Wiesbaden.
Gibbs, C., Gretzel, U. and Saltzman, J., 2016. An experience-based taxonomy of branded hotel mobile application features. Information Technology & Tourism, 16(2), pp.175-199.
Guardian. (2016). Starwood hotels accepts $13.6bn merger with Marriott International. [online] Available at: https://www.theguardian.com/business/2016/mar/21/starwood-hotels-accepts-merger-marriott-international [Accessed 24 Oct. 2017].
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University Press, USA.
Hudson, S. and Hudson, L., 2017. Marketing for Tourism, Hospitality & Events: A Global & Digital Approach. SAGE.
Intelligence, B. (2017). Marriott-Starwood merger sets stage for intense competition with Airbnb. [online] Business Insider. Available at: https://www.businessinsider.com/marriott-starwood-merger-sets-stage-for-intense-competition-with-airbnb-2016-9?IR=T [Accessed 24 Oct. 2017].
Jang, M., 2014. Boutique Hotels Become Branded: The Impact on the Non-Branded Boutique Segment By Minseok Jang| Cornell University.
Kang, K.H. and Lee, S., 2014. The moderating role of brand diversification on the relationship between geographic diversification and firm performance in the US lodging industry. International Journal of Hospitality Management, 38, pp.106-117.
Kowalczyk, A., 2015. The world’s biggest hotel companies. Old trends and new tendencies. Miscellanea Geographica, 19(4), pp.26-33.
Markham-Bagnera, S.D., 2016. An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market (Doctoral dissertation, Iowa State University).
Marriott News Center. (2015). Marriott International to Acquire Starwood Hotels & Resorts Worldwide, Creating the World’s Largest Hotel Company – Marriott News Center. [online] Available at: https://news.marriott.com/2015/11/marriott-international-to-acquire-starwood-hotels-resorts-worldwide-creating-the-worlds-largest-hotel-company/ [Accessed 24 Oct. 2017].
Salvioni, D.M., 2016. Hotel Chains and the Sharing Economy in Global Tourism. Symphonya, (1), p.31.
Shakhshir, G., 2014. Positioning strategies development. The Annals Of The University Of Oradea, 977, pp.416-437.
Wood, Z. (2016). Starwood Hotels bidding war continues as Chinese offer $14bn. [online] the Guardian. Available at: https://www.theguardian.com/travel/2016/mar/28/starwood-hotels-marriott-anbang-china-cuba [Accessed 24 Oct. 2017].
Yu, L.L. and Gu, H., 2013. THE LODGING SECTOR AND THE GLOBAL ECONOMY: CHINA’S HOTEL INDUSTRY IN INTERNATIONAL CONTEXT. In Handbook of Tourism Economics: Analysis, New Applications and Case Studies (pp. 171-190).
Zheng, Y. and Zhang, Z., 2014. Scandinavian Hotel Chains Globalization and Opportunities in China Market: Country of Origin (COO) Approach (Master’s thesis, University of Stavanger, Norway).
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
