SHA551: Strategic Hospitality Management I: Formulating ...Describe the strategic management process...

Copyright © 2012 eCornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 1

SHA551: Strategic Hospitality Management I: FormulatingStrategy


This course includes

One self-check quiz

Multiple discussions; you must participate in two

One tool to download and use on the job

One scored project in multiple parts

One video transcript file

Completing all of the coursework should take about five to seven hours.

What You'll Learn

Formulate a strategic vision and mission for your organization

Communicate your organization's direction

Perform an assessment of the general external environment

Course Description

Welcome to Strategic Hospitality Management I: Formulating Strategy! This course, produced in partnership with the

, is designed to develop your understanding of strategy and strategic management.Cornell School of Hotel Administration

It presents an overview of the entire strategic management process and introduces key aspects of strategy formulation. As

you work through the content, you'll discover how to help your organization establish a clear direction, and learn to

monitor, forecast, and adapt to environmental forces that are difficult or costly to influence.

Focusing on a deliberate strategy-creating process, this course helps you distinguish between strategic and operational

decisions, define your organization's business direction, and assess the broad external environment.

https://s3.amazonaws.com/ecornell/content/SHA/SHA551/SHA551-video-transcript.pdf

http://www.hotelschool.cornell.edu/


Click Play to Listen

Cathy Enz Lewis G. Schaeneman, Jr. Professor of Innovation & Dynamic Management, Schoolof Hotel Administration, Cornell University

is the Lewis G. Schaeneman, Jr. Professor of Innovation and DynamicCathy A. Enz

Management and a full professor in strategy. She served as associate dean for industry

research and affairs and executive director of the Center for Hospitality Research from

2000 to 2003. Enz has published over one hundred journal articles, book chapters, and

four books in the area of strategic management. Her research has been published in a

wide variety of prestigious academic and hospitality journals such as Administrative

, and Science Quarterly, The Academy of Management Journal The Cornell Hospitality

.Quarterly

Start Your Course


Module Introduction: Strategy and Strategic Management

The past two decades have seen a surge in interest in strategic management, possibly as a result of several trends.

Modern transportation and communication have led to increasing global trade and awareness, while technological

development has led to accelerated changes in the global economy. The resulting increase in competition in most

industries has made it more and more difficult for companies to compete.

Are you prepared to compete in an increasingly challenging marketplace? Build your strategic management skills with this

course, starting with an examination of the meaning of strategy. Compare and contrast strategic and operational decisions

and find out why competitive convergence occurs. Begin an exploration of the strategic management process.

When you have completed this module, you will be able to:

Describe a business strategy

Provide examples of how strategies contribute value to the organization

Differentiate between operational decisions and strategies

Explain how a focus on operational effectiveness can lead to a lack of competitive advantage

Define competitive convergence

Describe the strategic management process

List the three levels of the organization at which strategies are formulated

About the Course Project

This course includes a project designed to develop your understanding of how your organization can benefit from a clear,

well-articulated strategy. The project asks you to create or revise a mission statement for your organization, create a

two-minute speech describing your organization, complete a TOWS analysis for your organization, and then use the

TOWS matrix to identify appropriate strategies for your organization.

The project is a valuable component of the course experience. Working on the project helps you absorb and retain the

concepts presented in the course, and the completed project document is a valuable take-away. It serves as a

step-by-step guide to strategy formulation at your organization and will help you learn to monitor, forecast, and adapt to

environmental forces that affect your organization.

How do you get started? If you follow the recommended learning path, you encounter the project for the first time in

Module 2, on the page entitled Course Project, Part One - How Are We Different? You can download the blank project


template there and begin your work. At the conclusion of Module 3, you complete the project's final question and submit

the document to your instructor.

In addition to the course project, the online discussions included in this course present valuable opportunities for you to

deepen your understanding of what you have learned, and your participation in them is good preparation for the work you

will do in the context of the project. Be sure to join these important online discussions.


Watch: Meet Sleep Right

Before taking a detailed look at the strategy process model, consider the meaning and value of a business strategy. Is an

organization's strategy simply a question of positioning, or is it a broader plan? Is the strategy known to every member of

an organization or only to the organization's senior leaders?

An illustrated presentation with audio appears below. This resource provides an introduction to the Sleep Right case study

used throughout this course. After viewing this presentation, explore the other elements of this module to discover an

approach to solving the problems at Sleep Right.


Watch: The Essence of Strategy

An illustrated presentation with audio appears below. Use this resource to enhance your understanding of the definition of

strategy.


1.

2.

3.

Read: The Value of a Strategy

What is the value of a strategy for an organization? Here are a few of the things that a good strategy does:

Strategy

A unified, comprehensive, and integrated

designed to achieve the basicplan

objectives of a company

A of actions that emerges,pattern

unintended, over time

A or a maneuver designed to outwit anploy

opponent

A compared with your competitionposition

A held by managers on the worldperspective

around them

It focuses the organization in a basic, longer-term direction.

It provides guidance for decision making and preparation of short-term plans.

It integrates functional plans into an overall scheme.

It secures a sustainable competitive advantage.

In a general sense, an organization uses strategy to coordinate its resources and to guide its day-to-day decisions.

Leaders in the organization can refer to their strategy when determining the appropriate actions to take to keep the

organization on course. A clear, well-articulated strategy can help the organization avoid inconsistency and conserve

energy. It can reduce the possibility of confusion among stakeholders about steps the organization is taking and its

reasons for taking them.

Strategy helps us secure a sustainable competitive advantage based on our competencies (internal factors). However,

new strategies often arise because of industry changes (external factors). A company's choice of a new strategy must be

driven by the ability to find new trade-offs and to leverage a new system of complementary activities into a sustainable

advantage.

In "What Is Strategy?" Michael Porter outlines three ways an organization can use strategy to create a unique and1

valuable position, each of them involving a set of activities strategically different from those of its competitors. His three

types of positioning are:

Variety-based positioning: the organization offers a variety of products or services

Needs-based positioning: the organization is able to serve particular customer needs

Access-based positioning: customers gain access to the organization in different ways

Whichever approach an organization chooses, positioning with respect to the competition is an important strategic

consideration with a potentially huge impact on business success.


Finally, keep in mind that only sound strategies provide value. A poorly conceived strategy will do nothing for the

organization. A strategy borrowed or adapted from another organization is not likely to impart value to yours. Likewise, a

strategy informed by a misguided view of your competition, plagued by organizational failures, or warped by an obsessive

desire to grow will likely deliver very poor results.

Porter, M. (1996). What is strategy? (6), 61-78.1 Harvard Business Review, 74


Watch: Sleep Right Moves Forward

Why do companies neglect to formulate a strategy? Why do managers avoid making strategic choices, or, having made

them in the past, why do they allow their strategies to blur and decay? Although external changes can be a problem, the

greater threat to strategy often comes from within the organization. Caught up in the race for operational effectiveness,

many managers simply do not understand the need to formulate a strategy.

An illustrated presentation with audio appears below. This resource provides valuable information about the situation at

Sleep Right and the actions under consideration by its senior management team. After viewing this presentation, explore

the other elements of this module to discover an approach to solving the problems at Sleep Right.


Read: Operational Decisions

Let's consider strategic decisions, operational decisions, and the difference between the two. As in other industries, in the

hospitality industry both strategic and operational decisions are critical to business success. Let's look at the

characteristics of each type of decision and how the two influence each other.

Operational decisions are the kinds of decisions that keep the organization running efficiently. The focus of the operational

agenda is to make sure the functions of the organization are in optimal working order. Operations involve continual

improvement, constant change, flexibility, and relentless efforts to achieve best practices.

By contrast, strategic decisions define the mission and overall goals of the organization. The organization makes strategic

decisions to determine what businesses to be in, what businesses not to be in, and how to compete. The strategic agenda

is focused on defining a unique position. Strategy provides cues for functional actions: creating "fit" among a company's

activities and optimizing the ways in which those activities interact and reinforce one another within that unique position

(Porter, 1996).

Both strategic and operational decisions are necessary for business success, but neither is sufficient on its own.

Operational decisions, focused on the organization's skill sets or core competencies, should translate the organization's

strategies into actions. In turn, the organization's strategic decisions are constrained, at least in the medium term, by the

skill sets available-its operations. Strategy demands capability, and capability constrains strategy. 1

Because of their intimate alliance, the distinction between strategic and operational decision making is not always clear.

Constant operational improvement and the incorporation of best practices can result in an efficiently operated hotel, which

would seem to be a desirable state. But let's consider what happens when multiple organizations in the same industry

single-mindedly pursue what is called . The graph shown here illustrates this concept. Notice thatoperational effectiveness

in the relationship of value and cost, there's a limit to the value the hotel can provide given the relative cost required to

operate. This limit is called the . There's a high-value, low-cost zone in which a good balance of valueeffectiveness frontier

and cost is achieved-in the upper right of the graph. Organizations pursuing operational effectiveness gravitate to that

zone. In the graph, many different organizations, represented by dots, have clustered in the high-value, low-cost zone.

In order to be competitive, an organization must achieve operational effectiveness. However, if multiple organizations in

one industry move to the high-value, low-cost position, operational effectiveness alone cannot ensure the success of any

one of them-none of them will stand out. To compete, an organization needs a compelling value proposition. To generate


that value proposition, it must have strategy.

Taken from 1 HCi Journal of Information Development.

http://www.hci.com.au/hcisite3/journal


Read: The Strategic Difference

Strategy involves conceiving "a different set of activities" for your organization. But just what does "different" mean here?

Is there a particular kind of difference that's needed for a sound strategy?

Consider the Heavenly Bed®, an example of one hotel chain's efforts to differentiate itself from its competitors. The

Heavenly Bed consists of a custom-designed, pillow-top mattress set, sheets ranging in thread count from 200 to 250, a

down blanket, a duvet-covered comforter, and five pillows. Unfortunately, as a hotel feature, it was too easy to imitate-in

fact, everyone imitate it. The competitive advantage it afforded was short-lived, so its introduction didn't prove to be adid

sustainable strategy.

In the hospitality industry, the imitation process is dynamic and immediate. The strategic difference provided by a physical

asset such as a bed provides only a temporary advantage. The challenge for the strategic team is to produce something

different and difficult to imitate-something that generates a sustained advantage. One area in which to look: intangible

assets. Intangible assets include the organization's culture, brand, and knowledge.

One way to take advantage of intangible assets is to develop a service culture focused on providing outstanding customer

service to your guests every time they stay at your hotel. Your competition may decide they'd like to imitate what you're

doing, but they'll probably find they can't do so either quickly or easily. After all, you started creating your service culture

years before: you selected and trained employees who possessed the right qualities, developing their customer-service

tendencies. Competitors can steal individual practices, but they can't steal a culture that results from years of nurturance

and planning.

A culture of service is "a different set of activities" that provides a sustainable competitive advantage.


Watch: Competitive Convergence

An illustrated presentation with audio appears below. Use this resource to enhance your understanding of competitive

convergence.


Read: The Strategic Management Process

We will now examine strategic management through the strategy process model. There are many ways to characterize

and carry out this process, but typically it begins with a situation analysis of the broad and operating environments of the

organization, including internal resources and both internal and external stakeholders. This is followed by establishing a

strategic direction, reflected in mission statements and organizational visions. Next, the organization formulates and

implements specific strategies, which includes designing an organizational structure, controlling organizational processes,

managing relationships with stakeholders, and managing resources to develop competitive advantage.

These activities can occur in any order or even simultaneously. For example, it is not uncommon for a strategic direction

to serve as a foundation for the situation analysis.

The strategy process model presented here is characterized by three main activities: strategy formulation, strategy

implementation, and strategy evaluation. Again, these activities can occur in any order. The process may loop back on

itself and transform slightly from one iteration to the next, rather than proceed linearly as the model suggests it might.


Read: Sleep Right Takes Steps

At Sleep Right corporate headquarters, the vice president of finance has questions about the costs for construction of a

new hotel the group is building in Ithaca, New York. He wants to know why the actual costs are so much higher than what

they estimated ten months ago. The vice president of sales and marketing explains that the plan for the new hotel was

changed in the last two months: additional features were included to make the hotel appropriate to the midrange market.

"Since when do we build hotels for the midrange?" the VP of finance asks. "Sleep Right is an economy hotel."

"Well, this is a new strategy. We're moving into the midrange market," his colleague replies.

"Where's the plan for this new strategy, and the projections?" the finance VP demands. But there are no plans or

projections.

The corporate office is in an uproar. Scheduled meetings and phone conferences are cancelled as new, emergency

meetings take their places, and individuals scramble to locate e-mails and meeting notes to support their actions.

Could this situation have been avoided? Yes. Sleep Right could have used a strategy process to create and carry out its

new strategy.


Watch: A Process for Strategy

An illustrated presentation with audio appears below. Use this resource to enhance your understanding of the strategy

process model.


Read: Three Levels of Strategy Formulation

Strategy formulation, a fundamental component of the strategy process model, is one of the basic processes associated

with strategic management.

Strategy formulation, the process of planning strategies, occurs at the corporate, business, and functional levels of the

organization. The level at which the strategy is formulated determines to a large extent the purpose that strategy will

serve. For example, the purpose of corporate-level strategies is to define a company's domain of activity through the

selection of business areas in which the company will compete. Business-level strategies, on the other hand, address how

the business should compete in those areas. (This is why business-level strategies are sometimes referred to as

competitive strategies.) Finally, functional-level strategies fill in the details of how the various functions (e.g. marketing,

product development, and finance) intend to implement business-level strategies through the acquisition, development,

and management of functional resources.

Who makes the decisions involved in strategy formulation at each of these levels? Typically, corporate-level decisions are

made at the highest levels of the organization-by the CEO alongside or independently of the board of directors-although

these individuals may also receive input from managers at other levels. Business-level decisions are made by division

heads or business-unit managers. (If, however, the organization is involved in only one area of business, then

business-level decisions tend to be made by the same people making corporate-level decisions.) Functional-level

decisions are made by functional managers representing organizational areas such as operations, finance, personnel,

accounting, research and development, and information systems.

The levels that characterize a multibusiness firm.

the business level occurs only in organizations consisting of different operating divisions or lines of business.Note:

The Tata Group, one of India's largest conglomerates, provides a useful example of decision-making at three levels. The

Tata Group operates over 96 companies in seven business sectors. One of its companies is the Taj Hotels Resorts and

Palaces, which operates 59 hotels at locations across India and around the world. In this complex conglomerate, strategic


decisions affecting all 96 businesses are made at the corporate level. Business-level strategic decisions concerning, for

example, the Taj Hotels, are made at the firm level by senior management of the Taj chain. Finally, functional-level

decisions are made by functional leaders, such as those who lead human resources, purchasing, and development.


Activity: Explore the Process

An interactive activity appears below. Use this evaluation to enhance your understanding of the strategy process.

Click to download a print-friendly version of the strategy process model.here

https://d31owemgwclw9w.cloudfront.net/content/SHA/SHA551/sha551_134_strategyprocessmodel_en-us.pdf


Module Introduction: Direction Setting

Direction setting is a critical component of strategy formulation. Fundamentally, the organization's direction is its

articulation-often in the form of mission and vision statements-of the purposes for which it exists and operates. Unlike

shorter-term goals and strategies, mission and vision statements are an enduring part of planning processes within the

company, making explicit the organization's longer-term view of itself.

A well-established strategic direction provides guidance to the stakeholders inside the organization who are largely

responsible for keeping it on course toward its goals. A well-defined direction also provides external stakeholders with a

greater understanding of the company and its activities. It is as important to communicate the organization's strategic

direction as it is to define it. This module addresses both challenges.


List three elements of direction setting and describe how they are related to each other

Write an effective mission statement

Explain why it is important for an organization to communicate its direction effectively

Create and deliver an "elevator speech"


1.

2.

3.

Read: Elements of Direction Setting

The question, "What is our business?" should be answered from three perspectives when setting the direction for a

business

Who are the customers we want to satisfy?

What are the needs we want to satisfy? and

How will we satisfy those needs?

The first question refers to the markets that an organization serves; the second question concerns the specific products

and services the organization provides; and the third question refers to the capabilities and technologies the organization

uses to provide those products and services.

In the following pages we consider three elements of direction setting: the vision, the mission, and the goals of the

organization. Though these elements vary in the extent to which they are concrete and specific-vision is abstract and

broad, goals are concrete and specific, and mission is in the middle-all three unite in a common perspective on what the

organization has to offer.


Read: Sleep Right's Direction

President Zvi Estefan of Sleep Right Inns is considering several approaches to increasing the organization's competitive

edge in the markets it serves, including a potential merger with competitor Economy Lodges. Before he undertakes such a

bold initiative, he has decided to revisit and reexamine Sleep Right's direction.

Our Vision

We aspire to be the leading economy hotel provider.

Estefan has asked his team to define Sleep Right's direction. Specifically, he'd like them to reexamine the services and

products Sleep Right provides, the customers and markets Sleep Right targets, the Sleep Right mission, and the Sleep

Right vision.

Here is Sleep Right's current mission statement:

Our mission is for our guests to "sleep right." At Sleep Right we are dedicated to excellence in everything we do.

Everyone on the team agrees this mission statement conveys little information. The process of developing a new mission

statement could provide the preparation they need to take on the big decisions they're facing now-such as whether to

merge with Economy Lodges.

In fact, maybe they need a new vision, too.


Watch: Vision and Management

is managing director of the Montage Beverly Hills Hotel. In this presentation, Mr. Kasciki, who wasAli Kasciki

named Independent Hotelier of the World in 2004, shares his views about strategy and the critical importance of

having a vision.

An illustrated presentation with audio appears below. Use this resource to familiarize yourself with Mr. Kasciki's

position on vision.


Read: Vision, Mission, and Goals

One of the most vital questions a strategic leader can ask about his or her organization is, "Who are we?" This question is

an excellent starting point for direction setting and, in fact, for all strategic planning and management. Answering it

provides a framework for evaluating the effects of planned change and for planning the steps needed to move the

organization forward.

Direction setting is usefully approached by looking at direction's three components: vision, mission, and goals. Each one

answers the question of who we are in a slightly different way. Here are short definitions for each.

Definitions

a broad, abstract statement about the imagined or desired future of the organization.Vision:

a short statement of purpose or intent including information about the products and services offered. The missionMission:

is more of a here-and-now statement than the vision; it is less abstract.

specific desired outcomes. Goals are often developed into even more specific and actionable pieces: objectives.Goals:

Goals are the most concrete and specific of the three elements.

Let's consider the mission statement. An organization's mission statement states the basic scope and operations of the

firm. It answers the question, "What are we here to do?" It should contain information about who the customer is, which

customer needs are being satisfied by the organization, and the organization's distinctive competence. In a well-crafted

mission statement, you can expect to find information about the markets the organization serves, the specific products and

services it provides to customers, and the capabilities and technologies it uses to provide those services.

An organization's mission statement may provide detailed information about the organization itself. It can reflect the

organization's basic beliefs, values, aspirations, and ethical priorities. It can communicate any commitment on the part of

the organization to social, community, or environmental concerns. Finally, the mission statement may express the

organization's view of its own employees-for example, are they considered a valuable asset?

Historic Vision Statements

Ford Motor Company (early 1900s) "Ford

will democratize the automobile"

Sony (early 1950s) "Become the company

most known for changing the worldwide

poor-quality image of Japanese products"

Boeing (1950) "Become the dominant player

in commercial aircraft and bring the world

into the jet age"

Wal-Mart (1990) "Become a $125 billion

company by the year 2000"


Students of strategic management sometimes confuse the terms mission and vision. In general, a mission is what the

organization is-its reason for existing and how it intends to make its profits-whereas a vision is a forward-looking view of

what the organization wants to become or what it can become in time. Of the three elements of direction setting-vision,

mission, and goals-the vision is the most abstract, the mission is more concrete, and the goals are the most concrete and

specific.

A mission statement can include the organization's vision-one statement can cover both purposes. What's important is that

all aspects of strategic direction are included in the statement or statements you have. An organization that understands

what it is, what its values are, and where it is going has a well-defined strategic direction.

To develop all three aspects of direction, you can ask a series of questions such as the following:

What is our imagined future (our vision)?

Given our imagined future and the values inherent in it, what is our mission (the direction we take in common

toward that vision)?

Given our mission, what do we need to achieve that satisfies its conditions and brings us closer to our vision?

Given our goals, what objectives must we have to bring them to fruition?


1.

2.

3.

Read: How to Write a Mission Statement

A good mission statement answers three questions:

Who is being satisfied?

What is being satisfied?

How are customer needs being satisfied?

More broadly, it states what the organization wishes to accomplish.

Primarily, it should address the following areas:

Customers and markets served

Needs addressed by the products and services offered

Distinctive competence

Secondarily, the mission statement may address the following

characteristics of the organization:

Concern for survival, growth, and profit

Philosophy

Self-concept

Concern for public image

Concern for employees

To understand how these characteristics are used as guidelines, let's consider an example.

The Sleep Right Inns' Mission Statement

Sleep Right Inns, the fictional hotel chain used as a case study in this course, has the following mission statement.

Our mission is for our guests to "sleep right." At Sleep Right we are dedicated to excellence in everything we

do.

Note that this provides almost no information about Sleep Right and addresses almost none of the primary and secondary

aspects of an effective mission statement:

Customers NO

Needs NO

Distinctive competence NO

Concern for survival, growth, and profit NO

Philosophy YES

Self-Concept NO


Concern for its public image NO

Concern for its employees NO

The president of Sleep Right asked the executive team to work with marketing and communications to develop a new

mission statement. Here's their revised version:

Our mission is to provide a good night's rest for the value-conscious traveler by offering safe, clean,

comfortable, and affordable accommodations in a warm and friendly environment. We believe in operating

efficiently so that we can pass on those savings to our guests by offering a good value at a fair price.

Note this version does a much better job of addressing the primary and secondary characteristics of an effective mission

statement:

Customers YES

Needs YES

Distinctive competence YES

Concern for survival, growth, and profit NO

Philosophy YES

Self-Concept YES

Concern for its public image NO

Concern for its employees NO

It communicates who is being satisfied (the value-conscious traveler); what is being satisfied (the need for safe, clean,

comfortable, and affordable lodging); and Sleep Right's distinctive competencies (providing a warm and friendly

environment, operating efficiently, and passing savings on to its guests).


Watch: Operationalizing the Direction

We will now address the challenge of communicating direction. While technically an element of strategy implementation in

the strategic management process, we include it here, as a part of our discussion of strategy formulation, to emphasize

that strategic direction must be defined and communicated in order to be effective.

is managing director of the Montage Beverly Hills Hotel, and in 2004 was named Independent HotelierAli Kasciki

of the World. In this presentation, Mr. Kasciki discusses his experience developing and communicating an

organization's vision.

An illustrated presentation with audio appears below. Use this resource to familiarize yourself with Mr. Kasciki's

views on how to communicate vision and mission.


Read: How to Communicate Your Direction

The process of direction setting involves looking at where your organization is today and deciding where it aspires to be

tomorrow. Your organization's vision, a key component of its direction, is its ideal and unique image of the future. It

conveys a sense of the possible, of what might be. It expresses the dramatic difference you offer, and your pride in being

different. The vision, brief and well-crafted, is often a valuable communication tool.

The vision, mission, and goals of an organization represent a progression from the most abstract articulation of that

organization's direction to the most concrete, moving from philosophy to a plan of action. Each level of this

direction-setting pyramid-vision, mission, and goals-must be more than just carefully crafted: it must be clearly

communicated.

Once you have a clear idea of your organization's direction, how exactly will you convey it to your organization and to your

customer? The following are some guidelines for communicating your direction:

Get feedback about your vision statement from people who are key players in its implementation. Get answers to

the following questions: Is your vision statement clear? Does it communicate what you want to say to and about

your organization? Is your mission statement clear about its relevance to the present moment? Do those

individuals who are key to implementing the vision understand what implementation will require of them?

Communicate the vision using every conceivable channel. The vision statement can be featured in

presentations, orientation meetings, and training sessions; it can be printed on paychecks, awards, plaques, and

notices; and it can be included in newsletters, letters, pamphlets, and videos.

Be prepared to present your organization's direction clearly and succinctly. Develop an "elevator speech"

capturing your company's vision of the future and practice presenting it.

Personify the vision. Check from time to time to be sure that your vision informs and reflects the way you do

business. If you find that it doesn't, ask yourself why not.

Elevator speeches

An is a concise, carefully planned, and well-practiced overview and expression of your company's identityelevator speech

and its vision. It should explain who your company is and where it intends to be in the future. Typically, it's about one

minute in length-short enough to be delivered on an elevator ride.

Your elevator speech helps you to be clear and consistent about what the company is and where it is going. The primary

target for your elevator speech is your employees. You want those who have to implement your strategy to have a clear

and simple understanding of where the company is going and what it is all about.


Activity: 1-800-Vision

Download the Tool

Vision Exercise Document

Learn something about communicating vision by calling hotel reservations representatives (for example, those answering

a 1-800 number) and asking if they know what their organization's vision is. You may be surprised by the responses you

receive! Follow the instructions in the vision exercise document, record your findings, and then report those findings when

you visit the discussion board.

You can download that document now from the link above.

https://d31owemgwclw9w.cloudfront.net/content/SHA/SHA551/sha551_224_visionex_en-us.doc


Module Introduction: The External Environment

Strategies are formulated on the basis of a number of factors, including organizational strengths and weaknesses and

environmental opportunities and threats. This module presents an approach to identifying opportunities and threats, which

are aspects of the external environment. It focuses on the four contexts comprising the macroenvironment: economic,

sociocultural, political, and technological. By scanning and evaluating these contexts, the organization determines positive

and negative trends.

Find out about tools you can use to analyze the macroenvironment and create organization-specific strategies based on

internal and external factors.


List the four steps of a macroenvironmental analysis

Explain the importance of trends to strategy formulation

Conduct a trend analysis

Explain the difference between a SWOT analysis and a TOWS analysis.

Use a TOWS analysis to identify strategies appropriate to your organization


Read: Sleep Right's Environment

The organization and its operating environment exist in what is known as the macroenvironment, a context including

sociocultural, economic, technological, political, and legal influences. Although a single organization pursuing its vision

and goals has very little influence on the forces in the macroenvironment, macroenvironmental forces wield tremendous

power over organizations. For this reason, it's imperative that organizations scan and monitor their environments, tracking

and analyzing trends that may present opportunities or pose threats.

Sleep Right Inns obtained an industry report about important forces in the macroenvironment. The report lists current

trends and their likely causes, the impact each trend might have, and the concerns it might arouse.

Not all of these global trends are of concern to the management of Sleep Right. However, after reviewing the report, the

management team added these national and regional trends to the list:

The rising costs of gasoline and utilities

A new, young generation of consumers who expect luxury and are less willing to stay in low-cost hotels

Governmental policies about safety and security that will make it harder for international travelers to visit

Technological advancements that will make the core product less attractive without the addition of extra-cost

items such as free access to the Internet

Emergent technologies that will reduce the cost of marketing and HR operations

The rise of outsourcing to promote efficient and effective asset management

The scarcity and prohibitive cost of new real estate available around existing hotels

The scarcity of affordable real estate around high-traffic locations close to highways

Intense competition from players such as Value Inn and Economy Lodges

The question for the management team is what to do to respond to these trends. Investigate trend analysis and find the

answer to this question in the following pages.


Watch: Analysis Step-by-Step

An illustrated presentation with audio appears below. Use this resource to enhance your understanding of the key steps in

a macroenvironmental analysis.


Read: Analysis Framework

Key Points

An important part of strategy formulation is the external analysis.

Four contexts to consider are sociocultural, economic, political and technological.

An important analytical piece of strategy formulation is the external or analysis. This analysis should include thebroad

following macroenvironmental contexts or forces: sociocultural, economic, political, and technological. (Note: other authors

present additional contexts as part of the high-level framework-for example demographic, competitive, and ecological.)

These forces are interdependent. For example, social forces are sometimes intertwined with economic and political ones.

Let's examine each of them in detail.

Sociocultural context

The analysis of societal and cultural trends is an important part of strategy formulation for a number of reasons:

An awareness of and compliance with societal or cultural attitudes can help an organization avoid problems

associated with being perceived as oblivious or irresponsible.

A positive organizational reputation among stakeholders such as customers and suppliers can increase the

demand for an organization's products or lead to increased business opportunities.

The correct assessment of social trends can help businesses avoid restrictive legislation, which can pose a

threat to organizational success. (The U.S. restaurant industry's strong resistance to the movement to ban the

use of trans-fat illustrates this point.)

Societal influences can create opportunities for organizations. For example, societal interest in wellness has led

to the development of state-of-the-art spas as a differentiating feature in upscale hotels and resorts.

Economic context

The economic context includes economic growth, interest rates, availability of credit, inflation

rates, foreign exchange rates, and foreign-trade balances. Information gleaned from the

economic context often forms the basis upon which strategies are built. In particular, economic

growth can have a significant impact on consumer demand for hospitality services. Hospitality

organizations should consider forecasts of economic growth in determining when to make

critical resource-allocation decisions such as expansion and entry into new markets.

Political context


1.

2.

3.

Political forces, both at home and abroad, are among the most significant determinants of organizational success.

Governments make and enforce the rules-including laws, regulations, and policies-by which organizations operate.

Governments can encourage new-business formation through tax incentives and subsidies, or direct intervention. For

example, a number of cities in the U.S. have directly financed the development of hotels intended to serve local

convention centers. Governments can restructure companies, as in the case of American Telephone and Telegraph

(AT&T), or close firms that do not comply with laws, ordinances, or regulations. Alliances among governments provide an

additional level of complexity for businesses with significant foreign operations.

Obviously, knowledge of applicable laws and regulations should inform any good strategy. Involvement in illegal activities

can result in a significant loss of value, and fines and penalties imposed by government units can run into the millions of

dollars.

Technological context

Typically, technology is defined in terms of such things as machinery, computers, and information systems. However, the

broader technological context includes simple technologies such as those associated with cooking or with cleaning a

room, for which technological opportunities exist.

Though they will find it difficult, organizations should attempt to predict technological change as part of strategy

formulation. An understanding of the three characteristics of innovation can help an organization develop a plan for doing

so:

innovations often emerge from existing technologies

a dominant design will eventually be widely adopted

radical innovations often come from outside the industry group

Technological change is important to strategy because it creates new products, processes, services, and, in some cases,

entirely new industries. Notebook computers, MP3 players, direct satellite systems, and cellphones are technological


innovations that have experienced extraordinary growth in the last decade, creating new industries, influencing the way

many people approach work and leisure, and helping to create an increasingly global marketplace.


Read: A Trend-Tracking Chart

Download the Tool

Trend-Tracking Chart

Where can you get information about broad environmental forces and trends? Industry surveys as well as information

about consumer trends, demographic patterns, economic trends, investment patterns, technological advances, and even

societal views are widely available through published sources and government reports in libraries and on the Internet.

Mintel publications, available in many university libraries, produces over 600 reports covering an extensive number of

industry sectors and focusing on European, British, and U.S. consumer-intelligence reports. Mintel offers a host of travel

and leisure reports that analyze market sizes and trends, market segmentation, and consumer attitudes and purchasing

habits.

As you scan these sources for trend information, ask

questions such as the following to guide your search:

What are the most relevant and important

segments and subsegments of the

macroenvironment on which to focus?

What are the most important current and

emerging industry trends in those

segments?

Which trends could potentially influence the

future success of your company?

Which important or promising trends should

be regularly monitored?

What information do you need to gather to

monitor these trends?

You can think about the trends you observe in terms of the opportunities and threats they present. Opportunities are

conditions in the broad environment that advance a firm's efforts to achieve competitiveness; threats are conditions that

hinder them. Examples of opportunities include the increasing prosperity of a specific population, an increased demand for

a service you can provide, or the availability of low-cost labor. Examples of threats include the emergence of new

competitors in your market segment, poor economic growth in the geographic areas in which you operate, or the

emergence of new technology that could render your product obsolete.

Opportunities and threats are often two sides of the same coin. For example, if your competitor exploits a condition you

noted as an opportunity, then that condition may become a threat. Be wary of this two-sidedness, and be alert to the

possibility that important opportunities and threats could come from unexpected sources.

Below is a chart to help you track trends in the broad environment. You can download a version of the chart in MS Word

from the link above.

https://d31owemgwclw9w.cloudfront.net/content/SHA/SHA551/sha551_314_trendchart_en-us.doc


In the left column, the four environmental contexts-sociocultural, economic, technological, and political-form the main

headings, followed by subcontexts for each. Use these contexts as prompts as you scan the environment for trends.

When you have identified a trend for one of the subcontexts, use the middle column to identify it as an opportunity, a

threat, or as neutral to the organization. The third column provides space for you to list potential actions your organization

might take to respond to an opportunity or threat.

Segments Trends Organizational Response

Sociocultural forces

Attitude changes

Demographic shifts

Sensitive issues

New fads

Public opinions

Emerging public-opinion

leaders

Global economic forces

Economic growth

Interest rates

Inflation

Foreign exchange rates

Trade deficits

Technological forces

New service processes

New product or service ideas

Current process-research

efforts

Current product-research

efforts

Political and legal forces


New laws

New regulations

Current administrative policies

Government instability - wars

and terrorism

International pacts and treaties


Read: Global Context

Sources such as industry surveys and demographic data provide valuable information about the broad environment in the

U.S., but collecting this information in an international setting can pose a significant challenge. Although most

industrialized nations have similar sources of trend data, many developing nations won't. Consequently, organizations

operating or seeking to operate internationally often rely on local firms to provide the kinds of broad environmental insights

necessary for good strategic decision making. Alternatively, they may turn to organizations such as the World Tourism

Organization (WTO), which provides statistics and market reports for an impressive variety of countries and regions of the

world; or to Smith Travel Research and The Bench, two organizations providing hotel-performance information. Likewise,

Hospitality Valuation Services (HVS) makes available a broad array of articles about all aspects of hospitality, including

hotel investments, lending, operations, asset management, sales and marketing, and public relations.

As an organization becomes involved in or even interested in international business opportunities, the amount of data it

must collect and analyze increases dramatically. It is likely that separate sets of data on economic, social, and political

environments will be needed for each of various countries and continents. Consider environmental factors such as the

openness of a country's borders, the tourism infrastructure, and the availability and frequency of airline routes: these

factors are essential to any hospitality organization's strategic plan and are likely to vary from continent to continent, nation

to nation, and region to region.

Of all the elements in the broad environment, societal differences are perhaps the most difficult to analyze, monitor,

predict, and integrate into the strategic plan. For example, Malcolm Gladwell has shown how just one aspect of the1

broad environment, the ratio of the number of people who aren't of working age to the number of people who are, can

shape the social and economic future of a country.

Differences also exist within the technological environment. However, they tend to be a little less severe because of global

information sharing and the standardization of technologies in many industries. The primary differences stem from the fact

that some countries are more advanced in certain technologies than are others. Organizations should try to identify where

the most advanced technologies exist so that they can be understood and applied to internal organizational processes.

One of the best ways to do this is through joint ventures with organizations that possess the best technologies.

Gladwell, M. (2006, August 28). Dept. of human resources: The risk pool. The New Yorker, 32-35.1


Read: Sleep Right's Trend Analysis

Sleep Right used a trend-tracking chart to analyze the current and emerging trends in its environment. After scanning the

broad environment, the members of the strategy team made notes about the trends they observed. They thought about

the implications of those trends. Then they recorded their recommendations in the Organizational Response column.

Here's the completed chart.

Segments Trends Organizational Response

Sociocultural forces

Attitude changes

Demographic

shifts

Sensitive issues

New fads

Public opinions

Emerging

public-opinion

leaders

Sustainable

development/social

responsibility

A new, young

generation of

consumers who

expect luxury and

are less willing to

stay in low-cost

hotels

Internationalization

of travel

(fragmentation,

standards redefined)

Take steps to be more green, and advertise green

lodgings

Expand involvement in local community events and

charitable activities

Increase the type of amenities provided, perhaps

with more attention to technology and practical

simplicity. Represent the influence of contemporary

design in any new building

Expand to locations outside of the United States.

Develop a better understanding of international

locations to better serve guests and better promote

brand awareness overseas

Global economic forces

Economic growth

Interest rates

Inflation

Foreign exchange

The economic

recession and a

devalued U.S. dollar

are slowing demand

Work to lock in reasonable financing for future

expansion


rates

Trade deficits

Position the product to appeal to a consumer base

sensitive to rising price of lodging

Advertise the value provided for the money - "What a

bargain!"

Technological forces

New service

processes

New product or

service ideas

Current

process-research

efforts

Current

product-research

efforts

Technology

replacing the role of

the service provider

Technological

advancements will

make the core

product less

attractive without the

addition of

extra-cost items like

free access to the

internet

New technologies

are emerging to

reduce the cost of

operations in

marketing and HR

Improve presence on Web. Add services on Web.

Enhance online booking and reduce costs of

sales-team staff. Move to automated systems for

purchase.

Add technology-based services at hotel that do not

have staff costs attached to them, such as

automated check-in at a kiosk

Acquire technology to reduce costs

Political and legal forces

New laws

New regulations

Current

administrative

policies

Government

instability - wars

Safety and security

issues as a result of

terrorism concerns

Advertise safety and comfort of lodgings

When building new hotels include architectural and

construction features to ensure safety of guests

Strengthen selection processes and background

checks to assure guests of the high quality of

employees


and terrorism

International pacts

and treaties

Devise a crisis-management strategy to ensure the

safety of customers and staff in the event of an

emergency

You can use a trend-tracking chart to work with trend data, too. Take a moment now to think about the entries you might

make if you were tracking trends for your organization. Are any of the trends and responses in Sleep Right's chart relevant

to your analysis? How would your chart be different?


Read: The SWOT Analysis

We will now extend the analysis of the macroenvironment by bringing internal data together with trend data to create a

SWOT analysis. A completed SWOT analysis enables you to move to the next strategic level, in which you generate

strategies from the information you've gathered. This is accomplished in the TOWS analysis.

The analysis takes its name from its four components: the strengths, weaknesses, opportunities, and threatsSWOT

pertaining to the organization.

are company resources and capabilities that can lead to a competitive advantage.Strengths

represent absences of resources and capabilities that put a company at a competitive disadvantage.Weaknesses

are conditions in the broad and operating environments that enable a firm to take advantage ofOpportunities

organizational strengths, overcome organizational weaknesses, or neutralize environmental threats.

are conditions in the broad and operating environments that may stand in the way of organizationalThreats

competitiveness or of the ability of the organization to achieve its goals and satisfy its stakeholders.

The objective of the SWOT analysis is to identify elements in all four categories and present them in the form of a matrix

so that the strategy team can assess their potential influence on the company's success.

Note: opportunities external to the company are often confused with strengths internal to the company. They should be

kept separate.

It is also important to keep in mind that SWOT elements are not strategies. Some of the confusion that arises around the

purpose of the SWOT may come from its employment of the word "opportunity," which in the SWOT context is better

thought of as an "auspicious condition" than as an uncomplicated call to action. The purpose of the SWOT analysis is

merely to describe conditions; the generation of strategies and the proposal and endorsement of actions are another

matter, and should be facilitated by a TOWS analysis.

SWOT matrix

Strengths and weaknesses are characteristics of the organization. Opportunities and threats are characteristics of the

environment.


The SWOT analysis is the first step of the TOWS analysis.

Sample SWOT results

Strengths Weaknesses

Strong cash flow

Strong brand recognition

Cost advantages

Economics of scale

Visionary leader

Productive corporate culture

Effective distribution

Service-innovation skills

Lack of managerial talent

Weak brand

Obsolete physical facility

Poor marketing skill

Negative cash flow

Unable to service debt

Operating inefficiencies

Weak distribution network

Opportunities Threats

Availability of new

technologies that reduce the

cost of operations

Variety of outsourcing options

that increase efficiency and

effectiveness of asset

management

Growing concern among

consumers about

environmental issues

Increasing demand for safety

and security features from

lodging operations

Limited availability of new real

estate near existing hotels

Increasing demand for

higher-quality products and

extra services

Increasing number of global

competitors entering the

limited-service sector of the

industry

Limited availability of

affordable real estate around

high-traffic locations close to

highways


Watch: TOWS Analysis

An illustrated presentation with audio appears below. Use this resource to develop your understanding of the TOWS

analysis.


1.

2.

3.

4.

Tool: TOWS Tool

Download the Tool

SWOT analysis

TOWS analysis

A TOWS analysis is a tool for creating strategies. It can also be applied to the development of more specific tactics and

actions. To perform a TOWS analysis for your organization, first identify its significant strengths and weaknesses and the

significant opportunities and threats in its external environment. That is, begin by performing a SWOT analysis.

Please download the document set for your SWOT analysis from the link above.

With a completed SWOT analysis in hand, you are ready to begin the TOWS analysis to identify key strategies for your

organization. Copy the lists of your organization's key strengths, weaknesses, opportunities, and threats from the SWOT

analysis, and paste each list into the appropriate cell of the TOWS matrix. Then, consider the items in those lists as you

develop strategies for each quadrant of the matrix-WT, WO, ST, SO.

In the WT quadrant, list strategies that minimize both weaknesses and threats.

In the WO quadrant, list strategies that minimize weaknesses and maximize opportunities.

In the ST quadrant, list strategies that maximize strengths while minimizing threats.

In the SO quadrant, list strategies that maximize strengths and opportunities.

Summarize your strategies in the space provided in the matrix.

Please download the document set for your TOWS analysis from the link above.

https://d31owemgwclw9w.cloudfront.net/content/SHA/SHA551/sha551_323_swottools_en-us.doc

https://d31owemgwclw9w.cloudfront.net/content/SHA/SHA551/sha551_323_towstools_en-us.doc


Read: Sample TOWS

To help you build the skills you need to perform a TOWS analysis at your organization, here is a sample TOWS analysis

developed by an actual organization in the hospitality industry. The strategy team at this organization began with a SWOT

analysis and identified the following key strengths, weaknesses, opportunities, and threats.

Step One: Perform SWOT Analysis

When they had completed the SWOT analysis, the strategy team copied and pasted each SWOT list into the TOWS

matrix as shown here.

Step Two: Begin TOWS Matrix

Then the team took the final step: identifying strategies for each of the four quadrants of the matrix. In the WT quadrant,

they listed strategies that would minimize both weaknesses and threats. In the WO quadrant, they listed strategies that

would minimize weaknesses and maximize opportunities. In the ST quadrant, they listed strategies that would maximize

strengths while minimizing threats. Finally, in the SO quadrant, they listed strategies that would maximize strengths and

opportunities. Here is their completed TOWS matrix.


Step Three: Complete TOWS Matrix


Click Play to Listen

Cathy Enz Jr. Professor of Innovation & Dynamic Management

School of Hotel Administration, Cornell University

Listen: Thank You and Farewell

Hello again. I hope you've enjoyed this course. You should now be prepared to return to your organization with a deeper

understanding of what a strategic vision and mission are and how to prepare your own.

We have also talked about the importance of communicating that direction-keep practicing your elevator speech.

Finally, by knowing how to assess the broad environment, you can continue to look for opportunities and anticipate the

future. As one commentator has said, "There will be more confusion in the business world in the next decade than in any

decade in history. And the current pace of change will only accelerate." As a strategist, you are well on your way to

planning and anticipating this future. Best of luck.


Stay Connected


Supplemental Reading List

The provides focused whitepapers and reports based on cutting-edge research.Center for Hospitality Research

(2000) - Dubé, L., & Renaghan, L. M. "Creating visible customer value."

Center for Hospitality Research Reports and Restaurant Administration Quarterly, 41(1), 62-72.

(2001) - Enz, C. A. "What keeps you up at night?: Key issues of concern for lodging managers."

Cornell Hotel and Restaurant Administration Quarterly, 42(2), 38-45.

(2006, August 28) - Gladwell, M. "Dept. of human resources: The risk pool."

The New Yorker, 32-35.

(2005) - Harrison, J. S., & Enz, C. A. "Hospitality strategic management: Concepts and cases."

Hoboken, NJ: John Wiley and Sons.

(1996) - Porter, M. "What is Strategy?"

Harvard Business Review, 74 (6), 61-78.

(2000) - Ridderstrale, J., & Nordström, K. "Funky business."

London: Pearson Education.

http://www.hotelschool.cornell.edu/research/chr/

SHA551: Strategic Hospitality Management I: Formulating ...Describe the strategic management process...

Documents

Transcript of SHA551: Strategic Hospitality Management I: Formulating ...Describe the strategic management process...