In what situations can strategic management help hospitality and tourism organizations? And how can they help out? This essay discusses the hospitality planning process.
Introduction
A strategy is an action plan that a given organization comes up with to achieve its business goals. This is based so on how different engagements will be linked together to achieve success (Berry, 1995, p. 7). A good strategy helps the organization in achieving unrivalled growth that enhances sales, profitability and market leadership in the long run.
Strategic management is supposed to assist in decision making that will enhance the achievement of long term objectives (Heskett, 1986, p.12). In other words, strategic management is the only way that an organizations goals, missions and visions are specified mostly in programs and projects so that the set objectives are fully achieved. In the course of embarking on strategic management, resources are supposed to be well allocated to help in achieving the set programs and projects.
After programs and projects have been set, there should be a scoreboard that will be used in evaluating if the anticipated targets have been achieved (Kotter, 1982, p.9). Strategic management more so provides the overall direction that an organization should take in a bid to ensure that there is unrivaled success. Those in the management level are supposed to come up with good tactics that will enhance the achievement of the set goals.
This is necessary because a proper framework on how this will be achieved will ultimately be enhanced (Gladwell, 2000, p. 6). It will only be consistent when those actions go in line with what the management expects to get as a result of this process. For a strategic management to be effective and achieve what it was set to, it must follow a process that will enhance this. This is because it is an ongoing process that will have a long term effect on the business and industry as a whole.
Steps
Develop strategy, vision and mission
This is the first step in a strategic management process as there is need to develop a strategy, vision and mission that will give direction on how the whole process will be undertaken. This will ultimately guide and give a roadmap that makes its execution easy (Christensen, 1997, p. 13). The strategy should be in line with the short term and long term objectives. The mission will explain the role that the industry is likely to play in the market. With this in mind it will be easy to achieve the set objectives.
Analyze the internal and external environment
It is important to do an analysis of the environment under which the strategy will be carried out (Hamel, 2002, p. 5). The environment plays an important role in determining if the strategies will be successful as planned. It is vital that both the internal and external environments be looked at to know where to improve on and achieve the set objectives.
In this case, there is need to do a self evaluation so that the internal environment is well understood (Gladwell, 2000, p. 4). To cater for the external environment, competitor analysis should be done to know what to expect. This is also necessary in telling whether the strategies will be successful.
Refine options and choices
Obviously one should have options and in the process make choices in coming up with good strategies in strategic management (Traverso, 2000, p. 15). This is necessary in coming up with the best alternatives that will work in favor of the industry. In refining options, it will be easy to look at the various weaknesses that each option has. After this has been done it will be easy to choose the best amongst the various options.
Plan
A plan is necessary in giving a road map that the whole process will undertake. This will provide details on how the set objectives will be achieved (Cokins, 2004, p. 17). The plan will keep the whole process of strategic management organized. This will help in knowing what to do next as the plan stipulates. In the process they will be ahead of time in implementing strategies. This is necessary for success in the long run.
Implement
After all this has been done it is necessary to implement what is set out in the plan. It is only through implementation that one can tell if the whole process will be successful. Implementation will be done systematically so that all the steps are carried out as this is necessary for success (Lynch, 2009, p. 17). Proper implementation will lay a good ground for strategic management. In addition, it is only through implementation that the management will be able to know the hurdles that have to be overcome in carrying out strategies.
Evaluate
Evaluation helps in measuring the effectiveness of the strategy that had been put in place. This is in terms of telling if what had been set out was ultimately achieved (Morgen, 2003, p. 17). Proper evaluation can be done by looking at the strengths, weaknesses, opportunities and threats in place. On the other hand, evaluation can be assessed on how suitable the strategy was in achieving its objectives. Feasibility is necessary to tell if the resources were enough in successful implementation of the strategy.
Importance of strategic management in a hospitality business
The hospitality industry needs to have a strategic management process. Strategic planning lies in the value of planning ahead of time so that the industry can perform well. This is because in event that they fail to plan they are planning to fail (Heskett, 1986, p. 9). The industry needs to have a strategic management process for unity, direction and a sense of identity in achieving business goals. Strategic management will help the industry to achieve their organizational goals in an efficient and effective manner.
This is because there is a mission and vision that need to be attained in both the short term and long term. The industry is ultimately continuing to grow and needs direction. With strategic management in place the industry will be able to come up with more complex management structures that are necessary to facilitate its growth and development (Cokins, 2004, p. 13). This can be effectively done with a well laid out plan that has a future outlook.
For the industry to communicate in one voice it needs to have a good strategic management outlook (Christensen, 1997, p. 9). This is necessary in ensuring that the environment that they operate in is favorable to sustain the businesses. The industry is interlinked in many ways and needs to communicate in one voice in a bid to reinforce their position in the market.
It is also necessary as it helps in decision making as there will be well laid down avenues for efficiency (Kotter, 1982, p. 7). Decisions that are made will help in reassessment and implementation of changes that will positively transform the industry in a broad perspective. In addition, the management from various players in the industry will have an opportunity of accessing their performance.
Discussion
Hospitality firm
Compass group has grown from a small UK firm to be become one of the worlds leading contract caterer. The company has been growing from 1991 when its value was £250 million (Compass group, 2010, p. 2). It was formed in 1987 after a management buyout. Later on, in 1988 the company was able to float its shares on the London stock exchange market. 1992 saw it launch a client-driven driven strategy. This focused on subsidiaries and food service branding.
The company was able to enter into the US market by acquiring canteen vending. In a bid to grow further it acquired SHRM of France. 2005 saw the company yet in another management buyout in European in-flight catering operations (Compass group, 2010, p. 4). Ever since 2005, the company has been increasing its market position by acquiring other firms and engaging in business strategic moves.
It has a mission in ensuring that it delivers superior services in the most appropriate way. This will be done in the interests of customers, shareholders and employees. Through this, the company believes that it will be able to achieve what it wants to be in the industry. Compass has a vision of being a world class provider of contract catering services (Compass group, 2010, p. 3).
In achieving this, the company has laid out good strategies for service provision with an emphasis on results. This is set to give it a good market outlook as a company that cares for its customers as a whole.
Current strategic effort
To become a world class leader in the provision of food and support services the company has some strategic outlook. Currently the firm has a strategic effort in place for sustainability. Its strategic effort is in setting high standards for responsible business practices (Compass group, 2010, p. 12).
This is in terms of business conduct that involves safety, health and environmental practices. The company plans to be a low cost and efficient service provider to give it a good market outlook. In addition, the company seeks to develop the existing expertise and strength in contract food services.
Environmental elements
The company operates in many markets and as a matter of fact is exposed to different business environments. Internally, it has put in place the right management practices to ensure that its employees play an important role in delivering business goals and objectives (Compass group, 2010, p. 5). That is why they value the diversity and individuality that each employee brings in the company.
More so, it operates in an environment of trust which has cultivated good management practices in the group. Through proper management of assets entrusted to them by investors, the company has ensured that it generates active rates of returns. By doing this, the company has always received support from investors in all its expansion strategies.
The external environment has played a role in shaping how the company carries out its activities (Compass group, 2010, p. 6). This environment is important in determining the overall success of its global ventures. Compass has respected the legal frameworks (in countries it operates) by abiding to them. Although there have been some legal constraints, it has soberly engaged governments in ensuring that there is a level playing field.
There have been some economic factors that the company has faced in executing its operations (Compass group, 2010, p. 6). Different countries have different rates of economic growth and the company has factored these in its expansion plans. Exchange rates have varied; this has affected its revenues in a broad way. The company has a good conversion mechanism in place for continued sustainability.
Social relations have been well analyzed by contributing positively to the communities that the company operates in (Compass group, 2010, p. 10). In a more definitive role, the company respects traditions and cultures of the countries it operates in. Whenever the company has had conflicts in relation to this, employees have been well guided on the right code of conduct.
Because technology has been changing, the company has ensured that it conforms to be best technological ways of carrying out its business (Compass group, 2010, p. 8). This has been in all perspectives that business should be carried out for efficiency. Technology should be embraced because failure to do so may end up being costly.
The company has been committed to doing business in an environmentally friendly manner (Compass group, 2010, p. 15). This has been by setting standards on waste reduction, recycling and conservation. It has strived as much as possible to minimize environmental impacts as a result of its operations.
Weakness and threats of the company
There are many weaknesses that the company is exposed to as it strives to continue operating favorably in the market. These weaknesses are very critical for the company to achieve its set goals and targets. The company has been facing a declining market share in the sector and industry as a whole (Compass group, 2010, p. 10). On the other hand, the company has a limited operating margin. Another weakness is that it has a limited liquidity position in place (Compass group, 2010, p. 5).
In addition to these weaknesses, the company has also faced some threats in the course of doing business. The US economic slowdown is a threat to the company’s business. Political stability and regulations have also been seen as a threat to the success (Compass group, 2010, p. 9). A shift in the eating preferences of consumers has also been a threat.
Strategies
In a bid to ensure that these weaknesses and threats do not interfere with the company’s performance it has come up with the right strategies to correct this.
To correct its declining market share the company has been involved in extensive customer research to know the changing tastes and preferences in the market (Compass group, 2010, p. 22). This has been achieved through proper research and development to ensure that it doesn’t loose its market share. It has also increased its product base to include untapped markets that it did not cover before.
To correct operating margin and liquidity problems the company has had a strategy of turning to investors to finance its operations like expansion programs. It has also reviewed its business activities and operations in a bid to ensure that it returns maximum profitability for effective operations.
The US economic slowdown has affected business as it forms an integral part of its market. As the US economy is slowly picking up it has decided to diversify to other markets. It has mainly focused on acquisitions in the Asian market because it has many opportunities in the hospitality industry (Compass group, 2010, p. 17).
Some countries have had political instability and this has affected its business. In addition, some regulations have also had an impact on its operations. In cases where a country becomes politically unstable for long, the company has opted to end its operations and move to another peaceful country (Compass group, 2010, p. 5). To ensure that regulations are favorable for business it has always negotiated with the government and various industry players to reach an amicable solution and conclusion.
Eating preferences have also been changing and the company has invested a lot in customers care to know what customers want. This has enabled them to serve these customers well depending on what their preferences (Compass group, 2010, p. 21). In the long run, it has innovated new tastes that have helped to serve different tastes.
Results after these strategies were implemented
Implementation of these strategies has helped the company improve on its performance. This is because the company has achieved a 0.9% revenue growth in the first quarter of 2010 (from £6,927m in 2009 to £7,104m in 2009). Operating profit has on the other hand increased by 10% to £504 million from £455 in 2009 (Compass group, 2010, p. 23).
After having problems with operating margin this was corrected and the company has seen a 50 basis point increase in its underlying margin. This was from 6.5% in 2009 to 7.0% in 2010 (Compass group, 2010, p. 24). Free cash flow has also increased by 46% to £354million.This has been achieved despite the challenging economic times that have continued to be manifested over time.
What has led to these results?
These results have been achieved because of a good strategic outlook that was put in place by the management to ensure that the company continues growing on a good profitability path (Compass group, 2010, p. 26). The group has maintained a good operational discipline that has generated momentum in profitability in recent years. It has also used infill acquisitions to ensure that it covers a wide market area.
On the other hand, there has been a significant growth in the food and support services market. The management has relentlessly focused on efficiency as a way of improving its performance and results. The company came up with its own MAP program that has given it a framework to deliver new business (Compass group, 2010, p. 9). With good strategies in place it has won new contracts like Wells Fargo in the US and Deutsche Postbank in Germany. MAP program as their strategy has driven consistent performance across the group.
Opinion
Yes
These strategies have been effective in ensuring that the company moves ahead as its performance has continued to grow consistently. Revenue has grown by 0.9% meaning that its market share has grown consistently (Compass group, 2010, p. 23). It came up with a good program that it has used to ensure sustainability. Strategic management theory has a plan of ensuring that the set objectives and goals are planned well to achieve results and this is what the company has undertaken to be where it is.
The company has involved shareholders/investors in coming up with the right decisions that have made it acquire new businesses in other markets thereby increasing its market position. Strategic decision making has enabled it to gain a competitive advantage over other competitors in the market. Through strategic management the company has come up with the right direction to follow in executing its operations.
Conclusion
Challenges
There are many challenges of strategic management in hospitality. The first major challenge has been the overestimation of resource competence. Processes put in place to handle the new strategies have in most occasions not been able to handle this. For instance, the process of implementing the company’s MAP program has not been open enough to take off as the management had anticipated in the first place.
This has been manifested from failure to develop new employee and management skills that are necessary to ensure that this strategy achieves its objective as set out in the strategic plan. There has been resistance and reluctance from employees more so in cases where the new strategy is not well explained to them. The hospitality industry relies so much on customer care and experience and in cases where employees are not involved in strategy formulation, they have not been able to participate in its implementation as expected.
Challenges that Compass will be facing in the near future
Compass is involved in contract catering and providing food to the education sector that has specific responsibilities that the company needs to meet. This is a challenge that the company needs to take care of for it to succeed in the highly competitive contract catering market.
Another challenge is the ever changing market dynamics in relation to tastes and preferences. Customers are more informed of their needs and will always demand for new experiences. In addition, the company is involved in so many sectors with many operating companies. This can be challenging in coordination of its activities.
Recommendations to these challenges
These challenges need to be dealt with for the company to continue enjoying unrivalled growth. To deal with many responsibilities from the education sector, the company should develop a healthy diet and good eating habits by involving all stakeholders. This will be achieved through provision of information and promotional activities focusing on a school approach.
Because customers are more informed about their tastes and preferences, the company needs to be innovative in increasing its product range through extensive market research to know what customers want. This means that the group will have to invest in research and development with a good strategic plan in place.
To solve the problem of coordinating its ventures, the company needs to develop an action plan that will help in management and continual monitoring of progress. This should be done against agreed key performance indicators. Monthly monitoring will be necessary for comparison and business review.
Reference List
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