Competitive Methods Employed by Multinational Hotel Companies

Defining Strategy

Task:

Entering the new millennium, multinational hotel companies have been tremendously challenged by a very complex business environment. Consequently, they have been increasingly relying on a variety of competitive methods to compete with their global rivals. An in-depth review and summary of those competitive methods is likely to reveal the most recent changes occurring in the global hotel industry and indicate how the international industrial leaders react in an efficient way to gain sustainable competitive advantage. It is hoped that the results unveiled not only shed some light on the practical issues concerning industrial practitioners, but also provide useful contextual information that can be further examined by future researchers. 

This chapter starts by reviewing literature relevant to several important concepts and explaining how they are interrelated, especially in the context of the international hotel industry. The second part of this chapter consists of a comprehensive in-depth content analysis and summary of major competitive methods employed by multinational hotel firms between 2000 and 2007. The chapter concludes with a brief comparison between the summarized results and the competitive methods used in the period 1995–1999 ( Zhao, 2000 ). The relevant implications are also discussed. Strategy and competitive strategy Defining strategy 

Since the 1960s numerous researchers have attempted to define  “ strategy. ” Chandler (1962) described strategy as the process of determining the organization’s long-term goals and objectives as well as the process of adopting a course of action and allocating sufficient resources. Later scholars, such as Mintzberg and Waters (1985) , contended that strategy was more a pattern of action resulting from whatever intended (deliberate) or unintended (emergent) strategies were realized, thus indicating that strategy could be something more than an explicit plan of action ( Mintzberg, 1978 ). Incorporating both the intended and apparent manifestations of strategy in a dynamic and responsive sense and embracing a broad range of participants, Kerin et al . (1990) defined strategy as a fundamental pattern of present and planned objectives, resource deployments, as well as organizational interactions with relevant markets, competitors, and other environmental forces. Over a 40-year span of re-examination and of the business-planning process and the critical mechanism used to align firms with their environments ( Hitt and Ireland, 1985 ). The current literature on strategy is able to provide at least 10 separate schools of thought and a variety of definitions focusing on divergent perspectives ( Fréry, 2006 ).

Overview of competitive strategy 

Nowadays, firms throughout the world are being challenged by both domestic and global competitors. Thus competition is at the core of a firm’s success or failure, and competitive strategy is at the heart of a firm’s performance in the competitive environment. Competitive strategy is a firm’s search for a favourable competitive position in an industry, and its objective is to establish a profitable and sustainable position against the forces that determine industry competition ( Porter, 1985 ). The most significant theoretical foundation of competitive strategy was contributed by Michael Porter, who defined three generic strategies—Cost Leadership, Differentiation, and Focus—which are theoretically thought of as a means of establishing strategic group membership at the business level. 

According to Porter (1980, 1985) , cost leadership indicates that cost reduction becomes the major theme running throughout strategy. The emphasis of this strategy is efficiency. The firms using this strategy hope to take advantage of economies of scale by conducting continuous search for cost reductions in all aspects of the business. By using a differentiation strategy, a firm tries to be unique in its industry along some dimensions that are widely valued by buyers ( Porter, 1985 ). The firm that hopes to maintain differentiation strategy needs to have strong R & D, marketing, and creativity skills as well as good communication with distribution channels and other business alliances. Quality, delivery, flexibility, and innovativeness are all operational objectives that are consistent or fit with differentiation-oriented strategies ( Devaraj et al ., 2004 ). The focus strategy is different from cost leadership and differentiation in that it relies on choosing a narrow competitive scope within an industry ( Porter, 1985 ). Firms using this strategy typically seek to gain a competitive advantage through effectiveness rather than efficiency. Porter (1985) also pointed out the two variants of focus strategy. In differentiation focus, firms ’ base focus on differentiation, targeting a specific segment of the market with unique needs not met by others in the industry, while in cost focus, firms have access to specialized production and operations equipment to save costs.