Competitive Strategy in Hospitality business Steven Lee September 10, 2007
Learning Outcomes • To understand the way in which organizational strategies are developed and implemented. • To understand why strategies succeed or fail. • To prescribe better ways of formulating and implementing new strategies in the hospitality business industry
How industry change? • What trends, events and competitive strategies created the current industry structure? • How will current trends, events and competitive strategies alter the industry structure in the future? • What strategies can your firm undertake to make the industry more attractive?
Winner Take All • Many industries have a ‘winner take all’ dynamic that pits different (often incompatible) technologies or standards against one another • Particularly true in network markets where consumers value compatibility • Here we tend to see ‘positive feedback’, ‘bandwagon effects’, or a ‘virtuous circle’ • How does one ‘win’ a standards war?
Assets in Network War • Control over installed user base • Intellectual property rights • Ability to innovate • First-mover advantages • Manufacturing capabilities • Strength in complements • Brand name/reputation
Resource Based View • Looking inside for competitive advantage • The cornerstones of competitive advantage • Asset stock accumulation
Looking inside • The famous ‘VRIO’ model • How is it different from Porter? • What does it mean to be: • Valuable • Rare • Inimitable • Organized • I would add ‘N’ non-appropriable
The cornerstones of competitive advantage • The cornerstones • Heterogeneity • Ricardian rents • Monopoly rents • Ex post limits to competition • Isolating mechanism • Property rights, causal ambiguity, lags, inertia • Imperfect mobility (non-tradeable) • Quasi-rents (no incentive to leave) • Ex ante limits to competition • Strategic factor markets
Asset Stock Accumulation • Resource picking vs. capability building • What is a strategic factor market and why is it important? • What is an (in)complete or missing market? • Non-traded resources are accumulated over time (flows build stocks) • Reputation, trust, goodwill, know-how, brands • Natural barriers to imitation • Time compression diseconomies, asset mass efficiencies & interconnectedness, slow asset erosion • Asset stocks are vulnerable to substitution
Blue ocean strategy • Red vs. Blue • Value innovation • Value curve • Unique and surprise • Focus and simplicity • Compelling and smile
Brand strategy • Brand strategy is business strategy • Uncommon practice vs. best practice • DNA vs. MBA • Customer experience vs. customer service
Strategic change • Leading change • Cracking the code of change • Managing strategic change
Leading Change • Establishing a sense of urgency • Forming a powerful guiding coalition • Creating a vision • Communicating the vision • Empowering others to act on the vision • Planning for and creating short term wins • Consolidating improvements • Institutionalizing new approaches
Quinn’s philosophy • Any change takes time • Information issues • Inherent uncertainty about correct course of action • Poor information which can improve over time • Inability to predict opportunities and threats • People issues • Individual psychological resistance or inertia • Political issues • Self-interested resistance • Political coalitions to be overcome or co-opted
Managing Strategic Change • Create awareness and commitment • Need sensing: Lead the formal information system • Amplify understanding and awareness • Changing symbols: building credibility • Legitimizing new viewpoints • Tactical shifts and partial solutions • Broadening political support • Overcoming opposition – no lose, indifference zones • Structuring flexibility • Systematic waiting and trial concepts