BHHT 3223

 Understand the different categories and sub-categories of Hospitality

and Tourism industry
 Understand the need of strategic management for the Hospitality and
Tourism industry
 Describe the key elements in the strategic management process.
 Discuss the three different perspectives or approaches used in
understanding strategy, including the traditional perspective, the
resource-based view, and the stakeholder view.
 Understand strategy formulation at the corporate, business, and
functional level.
 Explain the difference between strategic thinking and strategic planning.
 Characterize and explain the key players in the lodging and foodservice
industries.

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Note:
H&T Industry = Hospitality and Tourism Industry
H&T Industry encompasses:
 Travel  Entertainment
 Accommodation  Recreation
 Food services  Conventions
 Clubs
 Gaming
 Theme parks
 Attractions
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 H&T industry can be grouped according to:
- Primary activities
- Size
- Profit motives
- Geographical coverage

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In terms of their primary services, organisations
can be categorised as follows:
SUB-SECTORS
 Travel and transport
 Accommodation
 Food and beverages
 Entertainment and recreation
 Tourism offices or destination management
organisations
 Non-governmental tourism organisations

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Each sub-sector can be further broken down into sub-
grouping.
Example (according to primary activities):
Under accommodation, there are hotels, motels,
chalets, guest houses, hostels, villas and time-shares.
Further sub-grouping is possible.
Example (according to size) :
Luxury hotels, boutique hotels, mid-market hotels and
budget hotels or…
five-star (diamond), four-star, three-star, etc.
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Each sub-sector can be further broken down into sub-grouping.
Example (according to profit motives):
Majority H&T companies aim to make and profit and achieve
financial objectives.
Non-governmental tourism organisations, associations, tourist
destination management do not look into profit at their primary
objective but instead they are focussing on protecting the
environment, achieving sustainable tourism development, etc.
Example (according to geographical coverage) :
Local – city and country
Regional – Europe, Asia, Middle East, etc.
Global – Intercontinental, Marriott, Hilton, KFC, McDonald’s 7
Some closely related, unique characteristics of
H&T organisations:
1. Inseparability

2. Simultaneity

3. Perishability

4. Tangible – Intangible Continuum

5. Heterogeneity

6. Cost structure

7. Labour intensiveness
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Some closely related, unique characteristics of
H&T organisations:
1. Inseparability
 Customers need to be present and participate in the service
delivery process.
 Separation of the production and marketing functions is not
possible.
 Attract and bring in customers by putting extra efforts on
location, brand image, transportation, and ongoing marketing
and promotional activities.
 Functional departments need to work closely with each other.
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Some closely related, unique characteristics of
H&T organisations:
2. Simultaneity
 Manufactured goods eg. Refrigerator can be tested first before
putting it on the sales floor for the customers to buy but
services at H&T organisations are created and consumed
simultaneously which may make the application of quality
control mechanism difficult.
 Due to the above, H&T organisations need to rely on other
measures such as investing in Human Resource, use of
technology, building desired physical facilities, and decorations
to ensure quality services are delivered.
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Some closely related, unique characteristics of H&T
organisations:
3. Perishability
 As production and consumption are simultaneous
in H&T organisations, services become perishable
if not sold and their value is lost forever.
 For example, an airline seat or a hotel room will
perish if it is not sold to the customer at the time of
production and offering. Another example is theme
park tickets if not sold when consumers demand is
high (eg. During school holidays) then it will perish
after that time period. 11
Some closely related, unique characteristics of
H&T organisations:
4. Tangible – Intangible Continuum

 H&T organisations offer a combination of both

tangible and intangible products and services.
 For eg: a hotel room or a meal in a restaurant
has tangible qualities (including the actual
products offered) and intangible qualities
(relating more to service and the overall
experience)
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Some closely related, unique characteristics of H&T
organisations:
5. Heterogeneity
 Services in H&T organisations will be diverse
(heterogeneous) and variations in service delivery from
customer to customer often occur.
 Customer-to-customer interaction can be important aspect of
the total service delivery process (for eg. In pubs and clubs)
 The service delivery process may be affected by external
factors (for eg. Weather affecting the services at at theme
park)
 H&T organisations need to provide some degree of balance
between standardisation and differentiation in meeting the
demands and expectations of their customers. 13
Some closely related, unique characteristics of H&T
organisations:
6. Cost Structure
 It influences their managerial and resource allocation
decisions.
 For eg. Luxury H&T organisations are capital-, labour-, and
energy-intensive. It may be difficult for them to reduce
some of these fixed costs even when demand is low. They
need to maintain a steady flow of customers in order for
them to maintain a steady flow of profit for their investors
and owners, leading often to creative marketing and
product development strategies as well as pricing
strategies.
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Some closely related, unique characteristics of H&T
organisations:
7. Labour Intensiveness
 Personal interactions and experiences are important parts
of services, and employees play a key role in this process,
hence H&T still require employees.
 H&T organisations need their team to deliver memorable
and positive experiences for their customers can result in
repeat customers.
 Even though many H&T organisations have also used
machines and consumers in their service delivery process,
the human factor is still crucial in this industry.

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 H&T industry operates in a dynamic and complex
environment. Many changes
 Macro trends include changes in legislation,
regional and global economic and political crises,
social-cultural trends, sophistication of
customers, stiff competition, terrorism, security,
global warming, multiculturalism, globalisations,
mergers and acquisitions, labour shortages, and
advanced technological developments.

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 Strategic management is a process through which:
 Organizations analyze and learn from their internal and
external environments,
 Establish strategic direction,
 Create strategies that are intended to move the
organization in that direction, and
 Implement those strategies
 All in an effort to satisfy key stakeholders

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 Mission, Vision, Values,
Goals, and Objectives

Strategic Analysis
External and Internal

Strategy Formation (Corporate

level, Business level, and Functional
level)

Strategy
Implementation

Strategy Control
 Mission, vision and values statements

 Goals and objectives that are linked to the mission and

vision

 Strategies and tactics that help achieve the goals and

objectives

 Strategic analysis provides the firm with a clear picture of its

situation, which includes internal and external analysis.
 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.

 The corporate mission statement for Shangri-La Hotels

and Resorts is “To delight our guests every time by
creating engaging experiences straight from our heart.”

 Hilton Worldwide defines its mission as “creating heartfelt

experiences for Guests, meaningful opportunities for
Team Members, high value for Owners and a positive
impact in our Communities.”
 The vision describes where the organization wants
to go from where it is at present.

 Shangri-La’s vision is “To be the first choice for

guests, colleagues, shareholders and business
partners.”

 Hilton Worldwide defines its vision as “To fill the

earth with the light and warmth of hospitality –by
delivering exceptional experiences – every hotel,
every guest, every time.”
 Goals are more specific compared to vision in terms of
what the organization aims to achieve in a definite
period of time.
 Increase revenues
 Reduce labor turnover
 Goals are planned over the short and long terms.
 Short-term goals are set for a period not exceeding one
year.
 Long-term goals are set for a period of time exceeding
three to five years.
 Goals need to be linked to objectives.
 Note that goals are more abstract than objectives.
 Objectives need to be definite, quantifiable, and
measurable.
 Increase sales revenue by 15% compared to last year
 Reduce our annual labor turnover ratio this year to 22%
 Strategies clearly identify how the objectives will be met
in terms of the plan.
 Tactics are the actions that operationalize the strategy,
those that lead to the attainment of goals and objectives.
 Internal analysis pertains to strengths and weaknesses
analysis.

 External analysis pertains to opportunities and threats

analysis.

 Internal and external analyses are 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.

 Strategic decisions are based on pros and cons

analysis of the various alternatives.

 These decisions have an effect on the firm’s long-

term orientation and direction.
 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.

 This 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.
 Strategy implementation is the process of putting
strategy into action.

 This includes designing the organizational structure

and related systems.

 This 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.
 Strategic control refers to monitoring how the strategy
implementation process is progressing and whether the
intended outcomes are achieved.

 It helps the organization to monitor the process and take

any corrective actions.

 Strategy control is linked back to both strategic analysis

and strategy implementation.
TRADITIONAL PERSPECTIVE

RESOURSE-BASED VIEW

STAKEHOLDER VIEW

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 analyse the internal and external environments of the
company to arrive at organizational strengths,
weaknesses, opportunities, and threats (SWOT).
 develop missions, goals, and strategies from the
results of this “situation analysis,” as this process is
sometimes called.
 After strategies are formulated, plans for implementing
them are established and carried out.
Note:
A company should select strategies that
(1) take advantage of organizational strengths and
environmental opportunities or
(2) neutralize or overcome organizational weaknesses and
environmental threats
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1. The environment is the primary determinant of the best
strategy. This is called environmental determinism.
2. Supported the view that managers respond to the forces
discussed thus far by making decisions that are consistent
with a preconceived strategy. In other words, strategy is
deliberate.

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 Believes that organizational success can be explained in terms
of the resources and capabilities possessed by an organization.
 Views an organization as a bundle of resources, which fall into
the general categories :
(1) financial resources, including all of the monetary resources
from which a firm can draw;
(2) physical resources, such as plants, equipment, locations, and
access to raw materials;
(3) human resources, which pertains to the skills, background,
and training of managers and employees, as well as the way
they are organized;
(4) organizational knowledge and learning; and
(5) general organizational resources, including firm reputation,
brand names, patents, contracts, and relationships with
external stakeholders.

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  Source of Competitive Advantage
 Possession of resources, skills and abilities
that are valuable, rare and difficult to imitate by
competitors.

 Superior resources are those that have value

in the market, are possessed by only a small
number of firms, and are not easy to
substitute.
NOTE:
 A sustainable competitive advantage may lead to
higher-than-average organizational performance over
a long time period.
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 General Organizational
Resources
•Firm Reputation
•Brand Names and Patents
•Contracts
•Stakeholder Relationships

Financial Resources Physical Resources

•Internal and External Organizational •Plants and Equipment
Sources of Financing Knowledge •Organizational Locations
•Financial Strength and Learning •Access to Raw Materials

Human Resources
•Skills, Background and
Training of Managers and
Employees
•Organization Structure

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  Views a firm as a network of relationships among the
firm and its stakeholders
 Analysis of the economic power, political influence,
rights and demands of various stakeholders

NOTE:
Source of Competitive Advantage
 Superior linkages with stakeholders leading to trust,
goodwill, reduced uncertainty, improved business
dealings and ultimately higher firm performance

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 Focuses on company’s responsibilities towards its internal and
external stakeholders
 the firm has frequent interactions with its internal stakeholders in
what is called the operating (or task) environment. The firm and
stakeholders in its operating environment are both influenced by
other factors such as society, technology, the economy, and the legal
environment.
 External stakeholder analysis involves identifying and prioritizing key
external stakeholders, assessing their needs, collecting ideas from
them, and integrating this knowledge into strategic management
processes such as the establishment of strategic direction and the
formulation and implementation of strategies.
 stakeholder management includes communicating, negotiating,
contracting, and managing relationships with stakeholders, and
motivating them to behave in ways that are beneficial to the
organization and its other stakeholders

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 Activist Competitors
Local
Groups Communities

The Organization
Owners/Board of Directors
Suppliers Managers Customers
Employees

Unions The Media

Financial Government Agencies

Intermediaries and Administrators

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 Process
 Firms conduct external and internal analysis (situation analysis),
which include analysis of stakeholders. On the basis of
information obtained, they create strategic direction, strategies,
tactics for implementing strategies and control systems
 Origin
 Traditional, resource-based and stakeholder perspectives
 Adaptation vs. Enactment
 Influence the environment when it is economically feasible to do
so. Take a proactive stance with regard to managing external
stakeholders. Monitor, forecast and adapt to environmental
forces that are difficult or costly to influence.

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 Deliberate vs. Emergent
 Firms should be involved in deliberate strategy-
creating processes. However, they should learn from
past decisions and be willing to try new things and
change strategic course
 Source of Competitive Advantage
 superior resources, including knowledge-based
resources, superior strategies for managing those
resources and/or superior relationships with internal or
external stakeholders (which are another type of
resource)
 Creation of Strategic Alternatives
 Develop strategies to take advantage of strengths and
opportunities or overcome weaknesses or threats.
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 Traditional View
 Environmental determinism
(the best strategy is determined
by the environment)
 Firms should adapt to the
environment
 Strategy is deliberate (intended)
 Contemporary View
 Enactment (firms can
influence their
environments)
 A firm should pursue actions
to make the environment
more hospitable
 Strategy emerges from a
stream of decisions as firms
learn
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 Entire Corporation
(Corporate Level:
Domain Definition)

Business 1 Business 2
(Business Level: (Business Level:
Domain Direction/Navigation) Domain Direction/Navigation)

Marketing Finance Operations Research Human Resources

(Functional Level: Implementation and Execution)

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 The strategic planning process is often
rigid and unimaginative, with detailed
instructions pertaining to every aspect of
the process
 Strategic thinking leads to creative
solutions and new ideas
 The best firms use both!

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 Intent Focused
 Strategic intent--a managerial vision of where the firm is going
 Comprehensive
 A “systems” perspective. Envisions the firm as a part of a larger
system of value creation.
 Opportunistic
 Seizes unanticipated opportunities
 Long-term Oriented
 Looks several years into the future at what the firm will become
 Built on Past and Present
 learns from the past and builds on a foundation of the realities of the
present
 Hypothesis Driven
 Creative ideas are then critically evaluated. Takes risks
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Explain why the best firms use both strategic
thinking and strategic planning.

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