Club Med Case Analysis

1. Club Med has developed a competitive advantage by being the first to develop the concept of the "all-inclusive" vacation. By pioneering the industry Club Med developed a strong bargaining position with respects to buyers, suppliers and the labour market. Overall Club Med has low rivalry simply due to the nature of the business. Large start-up costs, and economies of scale make it difficult for rivals to enter, and the companies 30 years of experience, favoured political status and recipe for Club Med "magic" keep those that enter from being successful. Perhaps their greatest competitive advantage is this "magic" or unique "family spirit" that draws in their customers. The other competitive advantage Club Med has is operating efficiency. Since capacity is determined by vacant beds singles are assigned room mates, keeping costs low and furthering the unique vacation experience.

2. The Club Med experience is not very defensible. Their growth and sales have largely been attributed to the fact that they were a pioneer in the industry and thus monopolized it for years. Recently competitors have found ways to enter and thrive in the industry by offering higher end luxury resort experiences compared to Club Med. The industry structure now resembles an oligopoly as market saturation continues. The company's ability to adapt and remain innovative is vital to its survival, along with restructuring its hiring and training practises to minimize turnover.

3. Club Med has been very successful in the resort business as a pioneer in the all-inclusive vacation package concept. In 1984 about 25% of subsidiary shares of Club Med were sold in a public offering on the New York Stock exchange. By 1985 Club Med had 108 resort villages throughout the world and hosted 820 000 vacations annually. The company benefited from strong negotiating positions in regards to buyers suppliers and labour. Its favoured political status, years of experience and strong brand identity made it a competitive rival. Sales nearly doubled from 1981 to 1986 with ROE exceeding the industry standard.

4. New Competition is a serious threat for Club Med in the future. With competition growing at an alarming rate in a once monopolized industry, Club Med must take competition, pricing strategies, and customer preferences into account when planning for the future. Club Med is at risk of being exceeded by competitors that are more aware of their market, consumers and the industry. Competition not only includes other all-inclusive resorts but cruise lines, offering single-price packages with an increasing variety of amenities. Although competitors are not currently operating in Club Med destinations, they may do so in the future. With competitors like SuperClub producing luxury resort packages that beat Club Med's pricing and better target specific audiences like singles, couples, or families, Club Med must decide what strategies