International Business and Economics of Hotel
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Hospitality industry is considered as one of the major service industries that renders different services to the traveler and visitors so that they may enjoy their pleasant stay. However, in the contemporary scenario, the ratio of travel and tourism has been increasing since it also contributes in the development of economy (Dunning, 2012). Moreover, hospitality industry possess broad range of services that are provided to customers and visitors such as lodging, accommodation, food and beverages. Hospitality sector mainly depends upon the accessibility of leisure time and customers disposable income. With the increasing hospitality sector, it increases the number of visitors and travelers and simultaneously it also outcomes in developing and growing of economy.
Whereas, in the contemporary scenario, organizations are engaging in international business as it provides ample of opportunities so that they can easily serve the needs and requirement of large market, adopt new advanced technology and support in overall development to sustain in the new marketplace (Wild, Wild and Han, 2014). Main motive of hospitality industry is to expand business activities, acquire resources and reduce the level of risk that is being faced by the organization in the current scenario. With the help of economic integration process, firm can easily save its future as different opportunities are being present with the help of which company can become famous in worldwide.
With the increase in globalization, it also outcomes in increasing the level of competition in the hospitality industry as many firms and organizations existing in this industry deliver homogeneous services to the customers (Cantwell, Dunning and Lundan, 2010). There are certain key factors which support hospitality organization to focus in the international business so that they may increase their market coverage as well as it also support them to sustain in the competitive global marketplace. However, there are certain opportunities and trends that support hospitality organization to focus on international business that are economic integration processes, global economic developments, international dimensions of R&D and innovation etc. All these factor effectively contribute in successful resolution of the international business (Folsom and et. al., 2012).
Present report focuses on one of the renowned hospitality organizations that is Marriott International that organizes and manages wide range of portfolio of hotel that are engaged in rendering services related with lodging, accommodation etc. However, organization has more than 4087 properties in different countries and territories that support it to render services in the broad marketplace. Marriott international is considered as a premium organization that renders premium quality services to high income customers (Demirkan and Demirkan, 2014).
Therefore, in the competitive environment, Marriott has potential opportunities to target all income customers by modifying their services and pricing strategies. It has been stated that Marriott International is highly dependent upon their luxury brands in US market. Thus, it lacks low cost life style brands which is now popular in developing nations. Therefore, there are several opportunities for Marriott International to expand their services and hotels in the emerging markets like China and India. According to the geographical research, it has been stated that travel and tourism is growing at the fast pace within Chinese and Indian economy (Beaverstock and et. al., 2010).
By adopting technique that is entering in emerging markets will affect the business of Marriott in a positive manner as with this, company gets opportunities to tap or expand business into the new market area around the world. However, globalization has a positive impact on the international business that results in raising the level of competition. The competition may be related with the services as well as cost and price of the services (Hovhannisyan and Keller, 2010). With the help of entering in the emerging market, Marriott International will target all segment customers so that they should satisfy the requirement of all the customers and contribute in rising economy of emerging markets.
Although, international business will also impact on the organization through enhancing the level of innovation as well dimensions of R&D so that they must have opportunity to innovate their customer service so that they might target all segment customers who are related to lower, middle and upper class.
Furthermore, this report will also assess different conceptual frameworks as well as models that would assist Marriott international in identifying and assessing the internal and external factors that act as the major challenges for them in order to engage in the international business (Hynes, 2010). Different models and frameworks are SWOT analysis, Ansoff matrix, PESTLE analysis etc. These frameworks and models support the senior management of Marriott International in providing strategic insight that helps them in taking effective decision making so that they may successfully engage in the international business.
The analysis and evaluation for Marriott hotel can be done by applying several kind of tools and techniques. It facilitates corporation to expand business in the marketplace and deliver good quality of services among customers. It consists of several tools like SWOT, PESTEL and Ansoff matrix (Aggarwal, Berrill and Kearney, 2011). All these framework and models are proved to be effective in determining long run success of company with the increased rate of return. These are explained as follows
It is an internal analysis which provides detail information related to internal as well as external environment of corporation. By using this information, company can easily operate at global marketplace with the increased rate of return. It has been applied as follows
ANSOFF matrix mainly focuses on the organization's present situation as well as their services and markets to whom they mainly target. However, with this framework, manager of Marriott International can easily identify their current market position as well as their existing services that they provide to their existing customers (Condry, 2013). The matrix also supports senior manager in determining four combination that may be used by Marriott International so that they may grow their business activities through inventing new services for their customers. The matrix mainly suggests four growth strategies for Marriott International so that they may easily expand their business activities in the international region (KHO, Stulz and Warnock, 2009).
In order to increase the market share as well as profitability ratio, Marriott International focuses on market penetration strategy. Under this strategy, organization seeks to accomplish growth with their existing services in the current marketplace. For instance; there are different strategies that Marriott may use while penetrating the market that is related to adjust prices of their room according to the needs of customers (McAusland and Millimet, 2013). However, Marriott brand portfolio seems to penetrate the various markets by providing broad range of services in low price so that they can easily target all the segment of customers and satisfy their leisure needs. Products include the rewards, benefits and other facilities that are provided in all the hotels.
It is another strategy that is focused on product development. Under this strategy, Marriott hotel seeks growth by developing or focusing on new services in the existing marketplace so that they can easily attract their target customers (Rodrik and Subramanian, 2009). For instance; with the increase in technological advancement, Marriott International should focus on rendering online services to customers so that they can conveniently book the hotel rooms and other services. Another example is that by using product development strategy, Marriott International may also enable new services to attract customers such as Spas facilities. It will benefit company as it mainly targets high income customers that are always keen to consume leisure and luxurious services of the hotel.
Market development is an effectual growth strategy that must be adopted by Marriott International in order to succeed in the competitive environment (Chen, 2010). Through using this strategy, firm can grow their market by enabling existing services in the totally new marketplace. This growth strategy is effective for Marriott International as at the time of entering in the emerging market like India as well as other Asian market, they should focus on different strategies like new packaging of products and new distribution channel so that existing services can easily render in the new market.
The last strategy of Ansoff matrix includes diversification under which Marriott International can develop new services in the totally new market so that they may easily target new customers (Folsom and et.al., 2012). This is considered as one of the most risky strategies as it mainly possess to introduce new services in the totally new marketplace that would attract more customers.
It is the most important external analysis which provides detail information with regards to uncontrollable factors of environment in the respect of Marriott hotel. It enables management of corporation to bring modification in the current work environment and accordingly assists to gain competitive advantage in the marketplace (Hamilton and Webster, 2015). It has been done as follows
It is the most important factor which affects the business of Marriott hotel to a great extent. This is because of danger of terrorism, international relations and political climate at the tourist destinations. For example, military conflict is the main issue through which international air travel cannot work effectively. In June 2015, 39 people were killed at hotel beach in Tunisia. Such kind of incident frightens people who access services of Marriott (Stephan and Roin, 2010). Marriott operates in 70 countries like India, Malaysia, Germany and UK as well as US. Also, Marriott has its existence in Syria as well and in turn this affect operation of company to a great extent (PESTLE Analysis of Marriott International, 2015). Furthermore, in 2014 downing of Malaysian Airlines Flight which was fired from the Ukraine. Owing to this, scope of tourism has decreased to great extent.
Economic factor affects the business of organization very badly due to economic crisis and adverse condition for the overall country. Here, slow growth of China and India affects the operation of Marriott because of low spending limit of buyers. Owing to this, organization cannot pay attention on its growth and expansion because of low profitability and high cost of production (Hussain Rizwan and Latif, 2013). Furthermore, high exchange rate for US dollar is other factor which serves as a barrier in the growth and expansion of Marriott hotel. Apart from this, because of slow economic growth, stock market in China is collapsed and this is the reason that organization cannot cope up with the changing scenario. It is the fact which needs to be kept into mind by management of Marriott hotel. In addition to this, income inequality and constant growth of middle class people do not allow them to visit across other countries and access good quality of services that are rendered by hotels (Taylor, 2012).
Social factors are the other factors which affect the performance of company through changing the preferences and taste of buyers. For example, willingness of people to visit other countries and pay more for the products and services aid to enhance sales turnover. Furthermore, cultural changes and effect of population bring positive changes on the performance of hotel (Cadle, Paul and Turner, 2010). This is because of increasing number of Chinese and Asian travelers. Not only this, but now days people demand for certain kinds of travel experiences like luxury resorts and packages tours. This in turn increases the demand of hotel services in the marketplace by which Marriott hotel can create its competitive edge in the marketplace.
This is one of the most imperative aspects which reduces barriers related to distance and helps company to attract more buyers. Here, upgraded technologies like social media, internet and several other factors have made it easy to promote services across the globe (Guay, 2014). It is the only fact that hotels work with integrity and approach buyers effectively. For example, Marriott hotel ties up with the travel agencies so that promotion plan can be made effectively through understanding current market trends. At this juncture, customers or visitors find effective holiday packages in affordable prices.
A counter argument might be that Marriott operates only in premium segment by which low and middle class do not feel comfortable to access its services. This is the reason that hotel has opportunity to fulfill the need of such kind of people by providing good quality of services at less prices. Apart from this, use of updated technologies help organization to cut down cost at the initial stage and support hotel to increase overall rate of return (Bartle, 2002).
All organizations which are operating in different country need to follow the rules and regulations that are imposed by government. For example, Marriott needs to consider status of service like Airbnb. Furthermore, organization needs to follow the country specific rules with regards to employment, health and safety as well as other related regulations. On the other hand, different rate of taxes reduces the level of profitability. Similarly, high cost of labor is also a barrier in front of hotel management. For example: regulations related to minimum wage in different countries are different. This increases financial burden of Marriott hotel (Mason, 2007).
This is another potential factor which could affect organization by increasing electricity cost and conducting sudden changes in the environmental conditions. Furthermore, global warming and high temperature influence Marriott to close some of its beach resorts because of too hot environment.
According to above frameworks and models, it can be said that Marriott hotel needs to formulate effective strategies in order to target low cost segment. However, it has also been seen in SWOT analysis that hotel has low market share just because of its center focus on the premium segment (Dudovsky, 2014). Owing to this, it can be said that company can expand itself in the developing market like China and India for targeting lower class people. However, it is very important to bring innovation in services. Furthermore, hotel is operating at different places where legal aspect and social trends are kept on change. At this juncture, organization can emphasize on expand itself at international level in order to grab available opportunities. It facilitates to increase market share so as to increase customer base. However, some of the factors also need to be decided which are explained as follows.
Cultural issues are always faced by every organization when it expands itself at global space. Here, it is important for the management of company to assess uncertainties and plan accordingly. For example, Marriott hotel plans to expand in India so issues can be faced by it while hiring workforce (Wakeam, 2003). This is because they belong to different region, race and ethnicity and work culture of India is slightly different from others. Owing to this, issues may be faced at the time of hiring personnel as they cannot adjust in organization in less time span. However, Marriott hotel has its own strong work culture which motivates employees and enables them to provide long term services on behalf of hotel.
Marriott has its strong reputation at the global level which assists company to expand itself in the marketplace with the increased rate of return (Hospitality industry & Marriott International, n.d). It is the only reason that hotel has its operation in approximate 70 countries. In this regard, corporation is getting support from EU policies and legislation so that it can operate itself in the global marketplace with the less entry barriers. Furthermore, corporation can easily cope up with changing scenario. However, because of center focus on premium Segment, company is facing barriers in its expansion (Conteh-Morgan, 2006). This is the reason that it should focus on low cost segment by which customers of India and China can be attracted towards the brand of Marriott hotel.
Marriott hotel operates in several countries with high exchange rate like Dollar and Pound. It makes difficult for company while expanding in the countries like India and China. However, financial growth of Marriott hotel facilitates to determine its competitive growth at international level. In addition to this, management of Marriott hotel has capability to integrate with challenges so as to expand business at the marketplace. Apart from this, national policies and procedures are complied by Marriott hotel (Gunter and Hoeven, 2004). However, it is the policies and procedures of Marriott hotel through which organization can integrate itself at international level and operate business in an effectual manner.
With the increasing level of investment and international business, horizon of economic integration process between two or more nations or country also get deepen. The foremost example of economic integration process includes EU (European Union), NAFTA (North American Free Trade Agreement) etc. Marriott International mainly earns revenue by focusing on their brand portfolio that are located within UK region. Therefore, with the increase in globalization, UK government integrates with EU agreement so that hotel management can easily expand their business activities in the new market (Demirkan and Demirkan, 2014). European Union (EU) is a union that mainly has 28 member states of Europe whose main motive is to enable free transfer to products and services as well as capital.
Socio-political union mainly defines numerous rules, policies and statute laws that are abided by the member state to have free flow of goods and services. Through adopting EU policy, Marriott UK can easily import the ingredients or any food items from the EU states without any barrier. In order to negotiate and keep lawful practice within the firm, trade free regulations are pleased by EU. In aspect of this, some major policies that support Marriott is international policy (Dunning, 2012). However, government plays a lead role in increasing the import and export ratio and thus standards of EU assist business organization of UK to trade efficaciously within the international market.
For instance; in case of Marriott International, this policy is highly suitable for reducing trade barriers from the international trade perspectives (Cantwell, Dunning and Lundan, 2010). Thus, through adopting this policy, businesses can maintain corporate relationships with other business clients. Therefore, hotel needs not to undergo with international policy barriers. Therefore, EU has develop free trade free regulations practices with the purpose to organize and manage international duties and hence this is also constitutional for constructing or expanding business in the different state.
In order to sustain in this competitive environment, there are certain strategic recommendations for the Marriott International so that they can easily enter in the international market. As per the above analysis of Ansoff matrix, Marriott International mainly focuses on market development growth strategies under which Marriott will seek growth through rendering their existing services in the totally new market so that it can result in increasing and growing their market share (Cadle, Paul and Turner, 2010).
With the existent opportunity that is related to enter in the emerging market is an effective strategic option that should be focused by Marriott International so that they may expand their activities and business in the emerging economy such as China and India.
According to the research it has been assessed that China and India are considered as the fastest growing economies. Thus, opening hotel chain in both the economy will be feasible for the organization (Taylor, 2012). There are different entry modes that can be recommended for Marriott International so that they can easily enter into the emerging market without any problem or issue that are.
It is one of the effectual strategic options for Marriott International that can support them to enter in the emerging economy. Under this entry mode, hotel must focus on entering into an agreement with the other organization of the emerging market so that they may render services with the help of other independent organization (Cadle, Paul and Turner, 2010). Implication of strategic alliance to Marriott results in reducing the extra cost of operations as hotel is already existing in China or India. However, another implication of alliance involves the transfer of technology that supports them to survive in the new market and it also results in sharing the expenses as well as risk associated in the emerging market (Guay, 2014). Furthermore, strategic alliance will also benefit Marriott International as they do not have to form new entity as they may collaborate with the existing low budget hotel so that they may serve the needs and requirement of customers.
Another strategic option available for Marriott International is related to establish a new hotel in the emerging market. Setting up a new hotel premise in the market is also an impressive option for Marriott as it will support in directly targeting to the customers (Dudovsky, 2014). In order to sustain in the emerging market, Marriott should focus on effective pricing standard for their services so that they may target all the segment customers and provide them adequate facilities. Here, organization will lay emphasis on promotional activities as well pricing strategies at the initial stage. However, market growth and corporate strategy will be applied in order to give upward direction to business.
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