Examine the Relevance of a Hotel's Strategy and Its Ability to Remain Competitive in Today's Challenging Environment

Examine the relevance of a hotel's strategy and its ability to remain competitive in today's challenging environment

Introduction

The Business environment today is a very complex and turbulent one (Edgar & Nisbet, 1996). Globalisation has increased competition and companies need to adapt quickly and decisively to these changes. The global recession which began in 2008 adds to this already turbulent environment. Companies need to be able to adapt to these situations in order to survive and remain competitive. Strategic management has emerged over the last number of decades as a vital element of mainstream managerial education and as a means to plan effectively to meet these challenges. (Shi, 2010). Originally formulated for the manufacturing industry its significance has been realised by many other fields including the service industry. The Hotel and Hospitality Industry which is complex and dynamic and which is "Changing dramatically in the face of intense competition, increasing customer sophistication, and rapid technological advancement" also requires strategic management. (Tavitiyaman, et al., 2011). Okumus emphasizes the appropriateness for the implementation for strategic management in the hospitality sector by stating that:

"H &T organisations operate in a unique external and internal context, which makes it especially important to understand and follow contemporary strategic management practices and theories" (Okumus, et al., 2010)

One of the main underlying reasons for strategy is to gain a competitive advantage in the market which you inhabit and create profit for all the stakeholders. This essay will endeavour to outline the principles of strategic management and to assess their importance within the Hotel sector and their influence on competitive advantage. In the general discussion some of the more prominent theories will be discussed. These include Porter's Five Forces Principal, Resource Based Theory and other relevant theory. An aspect of each will be taken from each theory and will be discussed giving examples from the industry. It is acknowledged that no one theory in isolation provides the solution but possibly a combination and cross-pollination of the most appropriate ones is the way forward.

What is Strategy: Origins and Definition

Firstly it must be acknowledged that the "taxonomy of strategic definitions and schools of strategic thinking will always remain incomplete" (Costin, 1997). However, it is possible to give an overview of its origins and main theories and theorists in the field. Strategy has its origins in war terminology but made its way into the business lexicon around the time of the second industrial revolution. With the advent of new technology and processes it was now possible to create large mass markets for your products and this also intensivized competition between large industrial organisations. Managers began to realise that there was a need for a formal approach to corporate strategy (Olsen, et al., 2008). Strategic management as a subject of study is in its "adolescence dating little beyond the 1960's" (Stonehouse & Snowdon, 2007). It has also come in and out of vogue during this period, becoming less popular as many planning models failed to reap benefits. However, it regained prominence again in the 90's and is now widely practised (David, 2011). During its development it began with an emphasis on general management perspective with a focus on leadership, became more concerned with implementation during the 1980's and by the 1990's saw the development due to the global environment to strategic alliances (Okumus, et al., 2010). Minzberg one of the leading academics in the field has grouped the many schools of thought which have emerged. He identified 10. The first three are based on the early formulation school, the next six pertain to strategy development while the tenth encapsulates and integrates the other schools. Transformational leadership forms the essence of strategy and bottom up change and top bottom transformation are part of the process.( need to get valid reference for this) Completive advantage is core principal to strategic management and some of the major theories to achieve this will be addressed in the next section which looks at some of the issues in strategic management and it's application in the hotel industry.

Strategy and Competitive advantage for Hotels

The Hotel and Hospitality industry provides a complex case for strategic management. It is made up of generally accepted unique characteristics

* Inseparability - customer participation in the service process

* Simultaneity - consumed and purchased simultaneously

* Perishability

* Intangibility

* Heterogeneity

* Cost structure

* Labour intensive

Although it is quite evident that strategic management is very important to help gain and maintain competitive advantage the issue for many is what strategies to implement from mainstream strategic management. The only discordant voices in the conversation about whether strategic management should be used for the hotel industry come from Edgar and Nisbet who state that there is no place for long term strategic planning in hospitality. Instead they call for a more short term vision centred on innovation and entrepreneurship. Okumus et al give a very detailed summary of the extant literature in hospitality strategic management (Okumus, et al., 2010). They state that research into strategic management in hospitality began a good two decades after mainstream strategic management. Initially it began with an emphasis on strategic planning and was conceptual rather than empirical. This changed during the 1980's and the 1990's with more emphasis on empirical studies. There still seems to be more of an emphasis on the strategic analyses rather than on implementation (Olsen & Roper, 1998).

Theories of strategy in Hospitality

More recently over the last decade the literature is beginning to evolve and there is a realisation that to be truly strategic a company should take account of as many factors as possible that will affect a hotel's performance (Tavitiyaman, et al., 2011). Kim and Oh pinpoint the three most prevalent strategies that a hotel can use and recommend that companies develop a collaborative strategy