CTH ADVANCE DIPLOMA IN HOTEL MANAGEMENT

STRATEGIC MANAGEMENT ASSIGNMENT

Submitted To: Ms. Rama Prabha Mani Submitted By: Harish Fernando CTH Membership No: 27500 Date of submission: 31/08/2011

Table of Contents

Introduction

Page 3

Porters Five Forces Model

Page 3

Introduction to Hilton Hotels

Page 5

Strategic Analysis Mission Vision Objectives

Page 6 Page 6 Page 6 Page 7

Organizational Structure Internal Factors External Factors

Page 7 Page 7 Page 8

Porters Five Forces Model for Hilton Hotels

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Reference

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What is Strategic Management? Strategic management can be used to determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc. Strategic planning is a management tool, period. As with any management tool, it is used for one purpose only: to help an organization do a better job - to focus its energy, to ensure that members of the organization are working toward the same goals, to assess and adjust the organization's direction in response to a changing environment. In short, strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it, with a focus on the future. In this assignment we will be focusing on Porters Five Forces Model and its application for Hilton Hotels Corporation analyzing, discussing and evaluating of concepts.

Porters Five Forces Model

Porter's Five Forces is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Porter's framework focuses on a business' core competencies those assets that tip the competitive balance in a business' favour and provide advantages over the competition. While on its face, the framework merely determines whether a business or industry is "attractive" or "unattractive," depending on how they fair in an assessment of each of these forces, it also provides a useful tool for strategic business planners in helping a business to refocus and strengthen areas where a company may have exposure and potential weakness and exploit those areas where they have a competitive strength. An attractive industry is one which offers the potential for profitability. The company can elect to enter that industry or market. Or, if the company is already competing in that industry or market, it can use the competitive forces Porter created to determine its optimal position within the marketplace.

An unattractive industry is one which does not offer the potential for profitability. The company may choose not to enter that industry or market. Or, if the company is already competing in that industry or market, it can use Porter's 5 forces model to find the best possible strategic placement in it. The first three of these forces focus on an analysis of a business' competitors within the sector. The last two forces focus on the business' vertical integration with the suppliers and customers. Below is a graphical representation of the Porters Five Forces Model:

Porter also refers to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. To describes Five Forces Model briefly: y Competitive rivalry within an industry, including product differentiation, price of substitutes and a buyer's ability to switch to a substitute. y Threat of new entrants, such as barriers to entry (i.e. patents, and other intellectual properties rights), brand control, government regulation, capital requirements. y Threat of substitute products, such as the number of competitors, firm growth rates, economies of scale, diversity and depth among competitors, and information complexity.
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Bargaining power of customers, such as concentration of marketing channels, buyer volumes, prohibitive "switching" costs to buyers, and availability of competitive substitutes.

Bargaining power of suppliers, such as prohibitive "switching" costs, availability of alternative suppliers, degree of labour solidarity, and the sensitivity of selling price to supply costs.

Introduction to Hilton Hotels

Hilton Hotels & Resorts (formerly known as Hilton Hotels) is an international chain of fullservice hotels and resorts founded by Conrad Hilton and now owned by Hilton Worldwide. Hilton hotels are either owned by, managed by, or franchised to independent operators by Hilton Worldwide. Hilton Hotels became the first coast-to-coast hotel chain of the United States in 1943. The company places marketing emphasis on business travel, but also owns and operates a number of resorts and leisure-oriented hotels in popular vacation destinations around the world. The company's Hilton HHonors guest loyalty program is one of the largest of its kind and has numerous partnerships with airlines and car rental companies. As of July 2011 Hilton brands encompass 3,750 hotels with over 600,000 rooms in 84 countries. Hilton is ranked as the 36th largest private company in the United States by Forbes. The company owns, manages, and/or franchises a portfolio of brands which includes Waldorf Astoria Hotels and Resorts, Conrad Hotels & Resorts, Hilton Hotels & Resorts, Doubletree (DoubleTree by Hilton), Embassy Suites Hotels, Hilton Garden Inn, Hampton Inn and Hampton Inn & Suites, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations. Conrad Hilton founded the original company in 1919 with one hotel in Cisco, Texas. The Hotel's name is Mobley Hotel.

Strategic Analysis
In this part it is mainly focused on Hilton hotels intervening conditions-internal and external environment explaining the mission & vision, values and objectives of the Hilton Hotel. Secondly will discuss organizational structure, internal and external factors. Finally will discuss about market trends, PESTEL, life cycles, Porters 5 forces.

Mission Hiltons mission is to become the leader in the hospitality sector.

Giving the team members consistent, quality training is critical to this mission. To overcome this problem Hilton established Hilton University, an online learning portal which is accessible to all Hilton employees.

Vision The Vision of Hilton Hotel is to be the luxury hotel choice for discerning travellers, creating a world that celebrates individuality in every sense. They offer Luxury as unique as every guest. As the most modern luxury hotel, they created a proud & prestigious heritage with a very contemporary attitude. At its heart, Hilton is all about offering unique experiences for discerning travellers.

Objectives Hiltons Hotels Strategic objectives which are central to its overall business plan are; Definition of Hilton brand; How central people and organization are to the business; Having a balanced score card and Driving the business forward.

Organizational Structure
Organizational structure of Hilton Hotel is very flat. Any special request is need to go through the management. It has also adopted a much decentralized organizational structure.

Regional Division:

Hilton International is divided in four global regions:

1. UK and Ireland 2. Europe, Middle East and Africa 3. Asia Pacific 4. Americas

Each region has its own presidents and executive team, and the decentralized Organizational structure means that Hilton depends on a clear brand direction.

Internal Factors

1. Financial resources which includes all of the monetary resources from which a firm can draw. 2. Physical resources such as land, buildings, equipment, locations, and access to raw materials. 1. Human resources who pertains to the skills, background, and training of managers and employees, as well as the way they are organized 2. Organizational knowledge and learning 3. General organizational resources including the firms reputation, brand names, patents, contracts, and relationships with external stakeholders

External Factors Political Environment: Political situation play a vital role in any Hotel business decisions. The existing definitions of political risk focus on the concept of political risk from two different perspectives (Carbon, 1979). One group views political risk in terms of governmental or sovereign interference actions. The second group identifies political risk as occurrences of any political events imposed upon the firm. The examples are violence, terrorism, and guerrilla groups. A hotel like Hilton is unusually vulnerable to political risk due to substantial investments in fixed assets.

Economic Environment: Hilton Hotel is now going through a challenging Macroeconomic environment partly because of the going financial crisis and partly because of going trend of swung flue that adversely affected the hotel business. In addition to the week worldwide economic condition the emergence of this diseases corporate travel as well as leisure travel reduced significantly which made the hotel business down, hurting this giant chain. Because of these two reasons their revenue has reduced substantially.

Social Environment: Hilton Hotel owns, manages, develops and/or franchises hotels, hotel-casinos, resorts, and vacation-ownership resorts. In addition, it enjoys worldwide recognition thanks to its many overseas facilities and gaming operations. And through its various subsidiaries, it also has interests in designing and furnishing hotels and providing computer reservations for both hotel rooms and rental cars. These activities create lots of job opportunity as well as economic progress for a social community.

Technological Environment: Hilton is a technologically developed corporation. Hilton made its recruitment process more effective by making it available online. It facilitates its traditional learning and classroom training by an alternative flexible method of e-learning which is available at all location and for all team members. They has 24*7 reference ware, online coaching and
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mentoring, virtual classroom environment and Hilton University discussion forum. They offer more than 100,000 online courses. The potential customers of Hilton can get any information or booked for Hiltons services online. Hilton hotel offer technologically facilitated room for their customers.

Legal Environment: Hilton Hotel Corporation recently joined three major strategic alliances with the intention to create 15 more hotels in the Caribbean and Central America, 25 in Russia, and at least 15 hotels in UK throughout the coming years. These strategic alliances made the legal environment quite complex but still it will reinforce their position as the premier global hotel company. Apart from these alliances Hilton already involved in many other strategic alliances and also involved in franchising which complicated its legal environment but favourably affected its revenue.

Porters Five Forces Model for Hilton Hotels

Risk of Entry by potential Competitors (LOW)

Bargaining power of suppliers (MODERATE)

Rivalry among existing established Firms (HIGH)

Bargaining power of buyer (HIGH)

Threats of substitute products (MODERATE)

Risk of Entry from potential Competitors The risk of entry from potential competitors is relatively low because of the high initial cost of establishing a hotel business and the fierce competition among the existing hotel corporations. Threats of substitute products Services that can alter the choice of the consumers against Hilton Hotels are Small lodges, Business hotels, Boutique hotels, eco friendly hotels. But as Hotel Hilton holds a strong competitive advantage of wide range of branches this threat can be considered as moderate.

Bargaining power of the suppliers This can be considered low in terms of hotel Hilton as they have a number of available suppliers for the resources to operate their business.

Bargaining power of the Buyer Hotel Hilton has diversified consumer segment. As the global hotel companies expanding their business rapidly, consumers are getting more opportunities to choose their desired services from different hotels. So the bargaining power of the buyers is quite high. Rivalry among the existing competitors of the market Hilton Hotels are now facing hardship to win the battle against its competitors in the global hotel business. Marriott International, Starwood Hotels & Resorts Worldwide, Wyndham Worldwide, Four Seasons Hotels, Accor S.A, is some of the names of competitors of Hotel Hilton. So we presume that Hilton has high rivalry with its competitors.

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Reference

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Books: Michael D. Olsen, Joseph J. West, Eliza Ching Yick Tse (2008), Strategic management in the hospitality industry. Olsen, M., Tse, E., and West, J. (1998), Strategic Management in the Hospitality Industry, 2nd edn. New York: John Wiley & Sons. Charles W. L. Hill, Gareth R. Jones (2008), Strategic Management: An Integrated Approach, Cengage Learning Inc.

Word Count = 1914 + 66 = 1980

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