Competitive Strategy in HospCompetitive Strategy in Hospitality businessitality business

Steven LeeSteven Lee

September 10, 2007 September 10, 2007

Learning OutcomesLearning Outcomes

To understand the way in which organizatioTo understand the way in which organizational strategies are developed and implementnal strategies are developed and implemented. ed.

To understand why strategies succeed or faiTo understand why strategies succeed or faill. .

To prescribe better ways of formulating and iTo prescribe better ways of formulating and implementing new strategies in the hospitalitmplementing new strategies in the hospitality business industryy business industry

The Five Forces ModelThe Five Forces Model

How industry change?How industry change?

What trends, events and competitive strateWhat trends, events and competitive strategies created the current industry structure?gies created the current industry structure?

How will current trends, events and competHow will current trends, events and competitive strategies alter the industry structure iitive strategies alter the industry structure in the future?n the future?

What strategies can your firm undertake to What strategies can your firm undertake to make the industry more attractive?make the industry more attractive?

Winner Take AllWinner Take All Many industries have a ‘winner take all’ dMany industries have a ‘winner take all’ d

ynamic that pits different (often incompatiblynamic that pits different (often incompatible) technologies or standards against one ane) technologies or standards against one anotherother

Particularly true in network markets where cParticularly true in network markets where consumers value compatibilityonsumers value compatibility

Here we tend to see ‘positive feedback’, Here we tend to see ‘positive feedback’, ‘bandwagon effects’, or a ‘virtuous circl‘bandwagon effects’, or a ‘virtuous circle’ e’

How does one ‘win’ a standards war?How does one ‘win’ a standards war?

Assets in Network WarAssets in Network War

Control over installed user baseControl over installed user base Intellectual property rightsIntellectual property rights Ability to innovateAbility to innovate First-mover advantagesFirst-mover advantages Manufacturing capabilitiesManufacturing capabilities Strength in complementsStrength in complements Brand name/reputationBrand name/reputation

Resource Based ViewResource Based View Looking inside for competitive advantageLooking inside for competitive advantage The cornerstones of competitive advantaThe cornerstones of competitive advanta

gege Asset stock accumulationAsset stock accumulation

Looking insideLooking inside The famous ‘VRIO’ modelThe famous ‘VRIO’ model How is it different from Porter?How is it different from Porter? What does it mean to be:What does it mean to be:

– ValuableValuable– RareRare– InimitableInimitable– OrganizedOrganized

I would add ‘N’ non-appropriableI would add ‘N’ non-appropriable

The cornerstones of competitive aThe cornerstones of competitive advantagedvantage

The cornerstonesThe cornerstones– HeterogeneityHeterogeneity

Ricardian rentsRicardian rents Monopoly rentsMonopoly rents

– Ex post limits to competitionEx post limits to competition Isolating mechanismIsolating mechanism

– Property rights, causal ambiguity, lags, inertiaProperty rights, causal ambiguity, lags, inertia– Imperfect mobility (non-tradeable)Imperfect mobility (non-tradeable)

Quasi-rents (no incentive to leave)Quasi-rents (no incentive to leave)– Ex ante limits to competitionEx ante limits to competition

Strategic factor marketsStrategic factor markets

Asset Stock AccumulationAsset Stock Accumulation Resource picking vs. capability buildingResource picking vs. capability building

– What is a strategic factor market and why is it importWhat is a strategic factor market and why is it important?ant?

– What is an (in)complete or missing market?What is an (in)complete or missing market? Non-traded resources are accumulated over timNon-traded resources are accumulated over tim

e (flows build stocks)e (flows build stocks)– Reputation, trust, goodwill, know-how, brandsReputation, trust, goodwill, know-how, brands– Natural barriers to imitationNatural barriers to imitation

Time compression diseconomies, asset mass efficiencies & inTime compression diseconomies, asset mass efficiencies & interconnectedness, slow asset erosionterconnectedness, slow asset erosion

Asset stocks are vulnerable to substitutionAsset stocks are vulnerable to substitution

Blue ocean strategyBlue ocean strategy

Red vs. BlueRed vs. Blue Value innovationValue innovation Value curveValue curve Unique and surpriseUnique and surprise Focus and simplicityFocus and simplicity Compelling and smileCompelling and smile

Brand strategyBrand strategy

Brand strategy is business strategyBrand strategy is business strategy Uncommon practice vs. best practiceUncommon practice vs. best practice DNA vs. MBADNA vs. MBA Customer experience vs. customer serviceCustomer experience vs. customer service

Strategic changeStrategic change Leading changeLeading change Cracking the code of changeCracking the code of change Managing strategic changeManaging strategic change

Leading ChangeLeading Change Establishing a sense of urgencyEstablishing a sense of urgency Forming a powerful guiding coalitionForming a powerful guiding coalition Creating a visionCreating a vision Communicating the visionCommunicating the vision Empowering others to act on the visionEmpowering others to act on the vision Planning for and creating short term winsPlanning for and creating short term wins Consolidating improvementsConsolidating improvements Institutionalizing new approachesInstitutionalizing new approaches

Cracking the code of changeCracking the code of change

DimensionsDimensions Theory ETheory E Theory OTheory O CombinedCombined

GoalsGoals Maximimize shareMaximimize shareholder valueholder value

Develop org. Develop org. capabilitiescapabilities

Embrace the Embrace the paradox paradox between value between value and cultureand culture

LeadershipLeadership Top downTop down Bottom upBottom up Direct from top, Direct from top, empower empower bottombottom

FocusFocus Structure and Structure and systems (BPR)systems (BPR)

Culture, peopleCulture, people Seven SsSeven Ss

ProcessProcess Plan and Plan and executeexecute

Experiment and Experiment and evolveevolve

Plan for Plan for spontaneityspontaneity

RewardsRewards Financial Financial rewardsrewards

Intrinsic rewardsIntrinsic rewards Incentives Incentives reinforce not reinforce not drivedrive

ConsultantsConsultants Analyze and Analyze and solve problemssolve problems

Empower Empower employees to employees to solve own solve own problemsproblems

Experts who Experts who empowerempower

Quinn’s philosophyQuinn’s philosophy Any change takes timeAny change takes time

– Information issuesInformation issues Inherent uncertainty about correct course of action Inherent uncertainty about correct course of action Poor information which can improve over timePoor information which can improve over time Inability to predict opportunities and threatsInability to predict opportunities and threats

– People issuesPeople issues Individual psychological resistance or inertiaIndividual psychological resistance or inertia

– Political issuesPolitical issues Self-interested resistanceSelf-interested resistance Political coalitions to be overcome or co-optedPolitical coalitions to be overcome or co-opted

Managing Strategic ChangeManaging Strategic Change Create awareness and commitmentCreate awareness and commitment

– Need sensing: Lead the formal information systemNeed sensing: Lead the formal information system– Amplify understanding and awarenessAmplify understanding and awareness– Changing symbols: building credibilityChanging symbols: building credibility– Legitimizing new viewpointsLegitimizing new viewpoints– Tactical shifts and partial solutionsTactical shifts and partial solutions– Broadening political supportBroadening political support– Overcoming opposition – no lose, indifference zonesOvercoming opposition – no lose, indifference zones– Structuring flexibilityStructuring flexibility– Systematic waiting and trial conceptsSystematic waiting and trial concepts