STRATEGIC MANAGEMENT IN TOURISM AND HOSPITALITY.pptx

STRATEGIC MANAGEMENT PROJECT FOR
TOURISM AND HOSPITALITY

The Great Eastern hotel, a privately owned, independent, five-
star deluxe hotel located in Hong Kong’s commercial district, is
faced with a turbulent external environment owing to the
current financial crisis. Since its inception six years ago, the
hotel has grown in prominence during the bustling economy from
2003 to 2007, and it has been one of the top performers in the
upscale and luxury market segments over the four years
preceding the economic crises. The hotel’s main target market
segment is the business traveler (75 percent of room bookings)
who has no problem with paying USD 350 per night for a room.
During the past six months, however, the hotel has been a victim
of the severe economic upheaval, which has led to a significant
reduction in room bookings from the business travel segment.
This has reduced profits significantly to the extent that the hotel
is no longer able to cover fixed costs. The owner, Jerry Kong, has
called an executive committee meeting to discuss the future
direction the company should take in the immediate term and in
the long term to sustain its competitive advantage.
TMT 4002 Strategic Management Project for Tourism

 1. What issues should Jerry and the executive committee
address? Why? (Hint: Make assumptions where necessary,
including mission and vision statements, as well as goals,
strategies, and objectives.)
 2. Given the preceding information, what are Jerry’s
options? How should they be evaluated? Make assumptions
where necessary.
 3. What should the hotel do in the short term and in the
long term? Make assumptions where necessary to arrive at
your decisions.
 4. Why is it difficult to answer the preceding questions? Do
we have clear answers for issues and challenges in real
life?
 5. Do managers and executives in hospitality and tourism
organizations always have sufficient and reliable
information to make decisions?

 Why do some firms succeed while others fail?
 A central objective of strategic management is to
learn why this happens.
 What is strategy?
 An action a company takes to attain superior
performance.
 What is the strategic management process?
 The process by which managers choose a set of
strategies for the enterprise to pursue its vision.

1. Where are we now?
2. Where do we want to go?
• Business(es) to be in and market positions to
try and achieve?
• Buyer needs and groups to serve?
• Outcomes to achieve?
3. How do we get there?

 A strategy is a long term plan of action
designed to achieve a particular goal.
 Strategy is concerned with deciding what
business an organization should be in, where
it wants to be, and how it is going to get
there.

 Strategic Management:
 relates to the future of the enterprise
 Is about taking action now to secure the future
 The future is uncertain
 Decision about the future are made on
incomplete and wrong information
 Prepares an organization for future success

 Strategy:
 is knowing the business you propose to carry
out (Xenophon)
 defines what a business is in or is to be and the
kind of company it is or is to be (Andrews)
 is a rule for making decisions (Ansoff)
 The way in which a corporation endeavours to
differentiate itself positively from its
competition (Ohmae)
 Ideas and actions to conceive and secure the
future (Macmillan & Tampoe)

 Companies lacking clear strategies may achieve
some success in the short run, but as soon as
competitive conditions stiffen or an
unanticipated threat arises, they usually “hit the
wall” and fold.
 In today’s global competitive environment, any
business, large or small, that is not thinking and
acting strategically is extremely vulnerable.
 Every business is exposed to the forces of a
rapidly changing competitive environment, and
in the future small business executives can
expect even greater change and uncertainty.

 Analysis (External and Internal
Environments)
 Decisions (Formulating Strategy)
 Actions (Implementing Strategy
An organization undertakes in order to
create and sustain competitive advantages
and satisfy its multiple stakeholders.

Strategic Management is about how an
organization adds value and competes in its
environment.

1. What good or service do we really sell?
2. How will we produce our goods or deliver
our services?
3. Who will buy our goods or services?
4. How will we finance the operation?
5. How much risk are we willing to take?
6. How will we implement our strategy?

 Strategic management can be defined in various
ways. According to Wheelen and Hunger (2006, 3),
strategic management is a set of managerial
decisions and actions that determines the long-term
performance of a corporation. It involves
environmental scanning (both external and internal),
strategy formulation (strategic or long range
planning), strategy implementation, and evaluation
and control. They emphasize the analyzing and
evaluating of external opportunities and threats in
terms of an organization’s strengths and weaknesses.
(Wheelen & Hunger 2006, 3.)
 From the perspectives of Dess and Miller (1993),
strategic management is a process that combines
three major interrelated activities: strategic analysis,
strategy formulation and strategy implementation.

Strategic Management Defined
Set of managerial decisions and actions
that determines the long-run
performance of a firm.
It includes environmental scanning,
strategy formulation, strategy
implementation, and evaluation and
control.

 Lamb (1984) states that strategic management is
an ongoing process that evaluates and controls
the business and the industries in which the
company is involved; assesses its competitors
and sets goals and strategies to meet all existing
and potential competitors; and then reassesses
each strategy annually or quarterly to determine
how it has been implemented and whether it has
succeeded or needs replacement by a new
strategy to meet changed circumstances, new
technology, new competitors, a new economic
environment, or a new social, financial, or
political environment.” (Lamb 1984.)

Strategic management is a field of study
that involves the process through which
firms define their missions, visions, goals,
and objectives, as well as craft and execute
strategies at various levels of the firms’
hierarchies to create and sustain a
competitive advantage.

 Historic origins of strategic management
have been linked to the military.
 The word strategy comes from the Greek
strategos, which means “general.” In literal
terms, it means “leader of the army.”
 Military strategy deals with planning and
execution in a war setting, while taking into
consideration the strategy and tactics
required to implement the plan.
 Outmaneuvering the enemy in a “chess-like”
situation requires a wellthought-out plan
with emphasis on the plan’s execution.

 In the 1950s and 1960s, strategic management
was viewed from a general management
perspective, with emphasis on the role of the
leader. (the focus on leadership, interpersonal
relationships, and the systems, processes, and
structures in an organization, the top-down
approach, the top management at the core of
the decision-making process)
 During the late 1960s, the 1970s, and the early
1980s, firms adopted the strategic planning
approach with an emphasis on analysis and
formalized planning, with special teams assigned
to develop plans.

 In the 1980s, scholars emphasized more on
strategy implementation as a process.
 There was a shift in emphasis from the leader to
the development of organizational culture and
its role in defining and implementing strategies.
 Some scholars focused on firms’ competencies to
explain strategy, which led to the emergence of
the resource-based view of the firm.
 In the hospitality and tourism domains, strategic
management emerged as a field of study in the
mid-to late 1980s.
 Most of these efforts aimed at confirming
theories related to the contingency, strategic
planning, and competitive strategies.

 In the 1990s, globalization led to the emergence
of network strategies, and strategic alliances
became the focal point around which
researchers developed the literature.
 More efforts from a resource-based perspective
led to the conceptualization of characteristics
related to the firm’s internal competencies that
enabled them to sustain competitive advantage.
 The shift toward internal competencies also saw
a shift in perspective toward the knowledge-
based view and learning at the core of strategic
competitive advantage in the late 1990s.
 Progress continues using the knowledge
perspective from the 2000s, with increased
emphasis on corporate social responsibility.

 From a historical perspective, many schools of
thought have emerged in the strategic management
domain.
 Mintzberg and colleagues (1998) described the
domain as consisting of ten schools/perspectives
(Table 1.1) that pertain to design, planning,
positioning, entrepreneurial, cognitive, learning,
power, cultural, environmental, and configuration.
 As Mintzberg and his colleagues explain, the first
three schools are more prescriptive, with an
emphasis on strategy formulation that developed
from the 1960s to the 1980s.
 The next six schools are less prescriptive, while
emphasizing how strategies are developed.
 The tenth school conceptually combines and captures
the other nine schools into an integrative whole.

A firm is in business to create value for its stakeholders.
Since value is created if firms have a competitive edge over their
market rivals, it is imperative that a definitive and formalized
approach that falls within the realm of strategic management is
at the core of the process.
Creating a competitive advantage, and subsequently sustaining it
over a period of time, requires a formal approach in terms of
strategy formation and implementation.
The firm should engage in constant evaluation of its market
position, including benchmarking, that enables it to develop a
strategic perspective to the value creation process.
Since factors in the firm’s external and internal environments are
constantly changing, the complexity and variability associated
with creating and sustaining competitive advantage are high.

 At the corporate level, strategy is about
asking questions about what business the
firm is in or would like to be in, the firm’s
potential to create value by being in the
business or expanding into a new line of
business, and the resources and capabilities
the firm already has or needs to get to
sustain/create competitive advantage in its
business or businesses.

 At the business level, firms need to ask
themselves the following questions: How can we
create competitive advantage in our product-
market domains in each strategic business unit
(SBU)? How can we continue to be an overall
cost leader or a broad differentiator, or, for that
matter, have a cost focus or be a focused
differentiator in our market domain?
 Note that SBU is defined as a unit within a given
corporate identity that is distinctly different
from other units within the corporation in terms
of products and services, as well as the markets
it serves with a distinct profit-making capability
of its own.

 At the functional level, the firm’s objective
is to sustain its advantage by focusing on
efficiencies related to production,
operations, administration, marketing, and
other support functions.
 It also engages in constant innovation to
ensure new product/service development
rollout, while ensuring that the service and
product qualities, as well as the customer
satisfaction related to them, are at the
highest level.

 The framework includes mission and vision statements,
goals, and objectives that are linked to the mission and
vision, as well as strategies and tactics to achieve the
goals and objectives.
 Strategic analysis provides the firm with a clear picture of
its situation, which includes internal and external analysis.
 Internal analysis pertains to strengths and weaknesses
analysis, whereas external analysis pertains to
opportunities and threats analysis, which is also referred
to as SWOT analysis.
 The analysis enables a firm to engage in strategic decision
making. Strategic decisions pertain to choosing an
alternative among a set of alternatives that leads to
strategy-related success.
 These decisions have an effect on the firm’s long-term
orientation and direction.

 Strategy formulation is typically not a
regular, continuous process but is often
initiated by generating events, such as a new
CEO or a performance gap.

Basic Concepts of Strategic Management
4 Phases of Strategic Management
• Firms evolve through the following
faces of strategic management:
1. Basic financial planning
2. Forecast-based planning
3. Externally-oriented planning
4. Strategic management

1. Basic financial planning: initiate some
planning when they requested to set up
their budgets; considers activities for one
year.
2. Forecast-based planning: consider projects
for more than a year. The time horizon is
usually 3-5 years.
3. Externally-oriented planning: conduct
strategic planning by top management and
they leave implementation to low level.
4. Strategic management: planning by forming
a team from all levels in the company.

Highly Rated Benefits
• Clearer sense of strategic vision
• Sharper focus on strategic importance
• Improved understanding of changing
environment

Not Always a Formal Process
• Where is the organization now? (not
where do we hope it is)
• If no changes are made, where will
the organization be in 1,2,5 or 10
years?
• What specific actions should
management undertake?
• What are the risks and payoffs?

Basic Elements of the Strategic Management
Process

Environmental Scanning Defined
Monitoring, evaluation, and
disseminating information from
external and internal environments –
to key people in the firm

Environmental
Variables

Environmental Scanning
SWOT Analysis
• Strengths – Weaknesses
• Opportunities - Threats

 Strategic management includes two distinct
phases: the strategy formation phase and the
strategy implementation phase.
 Strategic formation is the process of defining
the direction of the firm’s futuristic course
of action, which would enable the firm to
allocate resources in order to achieve the set
goals and objectives.
 An internal and external environment
analysis is part of the assessment before
strategy is formulated at the corporate,
business, and functional levels.

 On the other hand, strategy implementation
is the process of putting strategy into action,
which includes designing the organizational
structure and related systems.
 This process leads to effective resource
allocation processes, including programs and
activities such as setting budgets, developing
support systems, recruiting, hiring, and
training, as well as designing performance
evaluation and rewards systems that lead to
the attainment of set goals and objectives.

 Vision
 Mission
 Objectives
 Financial
 Strategic

 An inspiring, long-term “dream” about what
the organization will achieve in the future
 Represents a destination driven by and
invoking passion

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 Provides more specifics for the vision
 Includes such considerations:
 Identification of products offered and customers
served (What business are we in?)
 How the company will compete (low price,
innovation, service)
 Ethical values of organization
 Relations with employees and other stakeholders

 Proceed always with ambition and
youthfulness.
 Respect sound theory, develop fresh
ideas, and make the most effective use of
time.
 Enjoy your work and always brighten your
working atmosphere.
 Strive constantly for a harmonious flow of
work.
 Be ever mindful of the value of research
and endeavor.

 Provides more specific direction on what the
organization must do to achieve its vision
and mission—interim steps toward achieving
the vision and mission.
 As interim steps, objectives are
 Long-term
 Short-term

 Strategic
 Outcomes focused
on improving long-
term competitive
position of the
organization
 Financial
 Outcomes focused
on improving
financial
performance

 Increase firm’s market share
 Boost firm’s reputation with customers
 Strengthen presence in international markets
 Become leader in new product innovation
 Attain lower overall costs than rivals
 Surpass competitors in quality or product
performance

 Increase sales growth 6 to 8% per year
 Cut costs by 5% per year every year
 Increase annual dividends to shareholders by
5% per year
 Achieve highest Return on Investment (ROI)
in industry

Specific: precisely what needs to be
achieved
Measurable: at least one indicator that
measures progress toward fulfilling objective
Appropriate: consistent with vision and
mission statements
Realistic: must be achievable
Time-based: must have a deadline for
achieving the objective

 Concluding points
 Set a philosophy and direction for strategy
development and organizational action
 Should represent permanent principles for the
organization, but adaptable to changing
circumstances—beware changes that reduce
ambitions.

Strategy Formulation
Development of long-range plans for
effective management of
opportunities and threats in light of
corporate strengths and weaknesses

Strategy Formulation
Mission Statement
• Purpose/reason for organization
• Promotes shared expectations
• Communicates public image
• Who we are; what we do; what we
aspire to

 The organization must first define its
mission, goals, and objectives.
 The mission is a brief description of the very
purpose of creating the organization.
 The mission statement includes a clear
purpose and states why the organization is in
existence.

 A sound mission statement needs not to be
lengthy to be effective.
 What are the basic beliefs and values of the
organization? What do we stand for?
 Who are the company’s target customers?
 What are our basic products and services? What
customer needs and wants they satisfy?
 Why should customers do business with us rather than
the competitor down the street (or across town, on
the other coast, on the other side of the globe)?
 What constitutes value to our customers? How can we
offer them better value?
 What is our competitive advantage? What is its
source?
 In which markets (or market segments) will we choose
to compete?
 Who are the key stakeholders in our company and
what effect do they have on it?

Four Seasons is dedicated to perfecting the
travel experience through continual
innovation and the highest standards of
hospitality. From elegant surroundings of the
finest quality, to caring, highly personalized
24-hour service, Four Seasons embodies a
true home away from home for those who
know and appreciate the best. The deeply
instilled Four Seasons culture is personified
by its employees – people who share a single
focus and are inspired to offer great service.

 The vision, however, describes where the
organization wants to go from where it is at
present.
 For instance, Hilton Hotels Corporation defines
its vision as “Our vision is to be the first choice
of the world’s travelers.”
 The purpose of any vision is the same: to
focus everyone’s attention on the same
target and to inspire them to reach it.
 The vision touches everyone associated with
the company – employees, investors, lenders,
customers, and the community.

 Vision provides direction. Managers who
spell out the vision for their company
focus everyone’s attention on the future
and determine the path the business will
take to get there.
 Vision determines decisions. The vision
influences the decisions, no matter how
big or how small, that owners, managers,
and employees make every day in
business. This influence can be negative or
positive, depending on how well defined
the business is.
 Vision motivates people. A clear vision
excites and ignites people to action.
People want to work for a company that
set its sights high.

 A mission statement
focuses on current
business activities --
“who we are and
what we do”
 Current product
and service
offerings
 Customer needs
being served
 Technological and
business
capabilities
 A strategic vision
concerns a firm’s
future business path --
“where we are
going”
 Markets to be
pursued
 Future technology-
product-customer
focus
 Kind of company
that management is
trying to create

 Goals are more specific in terms of what the
organization aims to achieve in a definite period
of time so it would be able to accomplish its
mission and vision.
 Goals are planned over the short and long terms.
Short-term goals are set for a period not
exceeding one year, whereas long-term goals are
set for a period of time exceeding three to five
years. This very much depends on the
characteristics of the business.
 Goals need to be linked to objectives.
 Note that goals are more abstract than
objectives.

 Goals are the broad, long-range attributes
that a business seeks to accomplish; they
tend to be general and sometimes even
abstract.
 Goals are not intended to be specific enough
for a manger to act on but simply state the
general level of accomplishment sought.
 It is determined that one of the factors that
set apart successful from unsuccessful ones is
the formulation of very ambitious, clear, and
inspiring long-term goals.

 Objectives need to be definite and quantifiable,
strategies clearly identify how the objectives will be
met in terms of the plan, and tactics are the actions
that operationalize the strategy—those that lead to
the attainment of goals and objectives.
 For instance, in a game of chess, a tactic may be
employed to corner the opponent’s rook by making a
series of moves. Another set of tactics could be
geared toward weakening the queen. These tactics in
combination may be part of the strategy to gain an
advantage, which ultimately would lead to winning
the game.
 Note that tactical decisions, which can be immediate
or very short term in terms of scope, impact the
implementation process at the functional/operating
level.

 Objectives are more specific targets of
performance than goals.
 Common objectives concern profitability,
productivity, growth, efficiency, markets,
financial resources, physical facilities,
organizational structure, employee
welfare, and social responsibility.

The King Hotel is in business with a mission to create value
for its stockholders. To accomplish the mission, the firm
has set goals for the current year of increasing the
business segment productivity. The objectives that are
linked to the goals include increasing the business segment
revenues by 10 percent and increasing repeat clientele for
this segment by 15 percent. The strategies include
marketing and operations-related plans and tactics,
including increasing sales calls in the business district of
the city, increasing promotional campaigns for the
international and domestic business markets, and creating
an amenities package for business travelers that includes
free airport transfers, a free welcome drink on arrival,
free Internet access in the room, and free use of business
centre secretarial services for three hours a day. Note that
the goals are linked to the mission, the objectives are
linked to the goals, the strategies are linked to the
objectives, and the tactics are linked to the strategies.

1/24/2023 1-75
Population ecology: established organizations are
unable to adapt to change
Institution theory: organizations adapt by imitating
successful organizations
Prentice Hall, 2012

1/24/2023 1-76
Strategic choice perspective: organizations adapt to
change and have the ability to reshape their
environment
Organizational learning theory: organizations adapt
defensively and use knowledge to improve their
relationship with the environment
Prentice Hall, 2012

Organizational Adaptation
Strategic flexibility
• Demands long-term commitment to
development of critical resources
• Demands firm become a learning
organization

Learning Organizations
An organization skilled at creating,
acquiring, and transferring
knowledge and at modifying its
behavior to reflect new knowledge
and insights

Hierarchy of
Strategy

 A large corporation tends to have three
levels of strategy (corporate, business, and
functional) which form a hierarchy of
strategy.

Hierarchy of Strategy
–Corporate strategy
–Business strategy
–Functional strategy

Corporate Strategy
–Stability
–Growth
–Retrenchment

 The first hierarchy is corporate strategy. It
describes a company’s overall direction in
 light of its general attitude toward growth
and the management of its various businesses
 and product lines base on Dess and
Miller‘s(1993) statement.
 Three main categories can be used for
corporate strategy which is stability strategy,
 growth strategy and retrenchment strategy
respectively (Dess & Miller 1993).

Business Strategy
–Competitive strategies
–Cooperative strategies

 The second hierarchy is business strategy.
Business strategy usually happens at the
business unit or product level and it
emphasizes improvement of the
competitiveness, positions of a corporate
products or services in the specific field or
market segment served by that business unit.
(Dess & Miller 1993.)
 There are two main categories in business
strategy: competitive and co-operative
strategies (Dess & Miller 1993).

Functional Strategy
–Technological leadership
–Technological followership

 The third hierarchy is functional strategy. It
is the approach taken by a functional area in
order to achieve corporate and business unit
objectives and strategies by means of
optimizing resource productivity. (Dess &
Miller 1993.)
 In a word, there is metaphor to describe the
relationship between corporate strategy and
business strategy. If corporate strategy is like
a big family, then the business strategy is like
many children of it.

Strategic
Decision-Making
Process

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