Research Topics: Ansoff Matrix Samples

Logistics Strategy: the case of Tesco

Logistics Strategy: the case of Tesco               Operating in a global market requires the formulation and implementation of effective strategies to establish and sustain competitive advantage. Logistics is among the most fundamental aspects that every organization should effectively manage because it includes the essential flow of goods, information, and other resources. Many empirical and theoretical works acknowledge its all-purpose role in accomplishing tasks in all industries by supporting the integration of information, transportation, inventory, warehousing, material handling, and packaging of products and services (Dennis et al. 2004; Fernie and McKinnon 2003; Harris and Dennis 2002; Vernon 2002; Calkins et al. 2000; Smaros et al. 2000). In the retail grocery industry, logistics do not only function in terms of its usual applications but also an important factor that is integrated in the overall business strategy. Meanwhile, the retail grocery industry particularly in the UK was challenge by various changes for the past decades that affect every organizational operation and other relevant aspects. It is believed that “noticeable issues concerning the development of new forms of competition (discount firms), the increased use of information technology in the management and logistics of groceries, and the diversification of the operating activities of various firms (high proportion of non-food sales)” (Athanassopoulos 2003, 932-33) prompted strategic shift towards alterations of the traditional business strategies employed by the leaders of this industry segment.             Meanwhile, Tesco is among the leading international retailers with a total of more than 3,000 outlets and approximately 600 planned store openings in more than 10 countries (Kumar 2005). Its remarkable expansion since its establishment in mid 1920s from a diversity of formats, markets, and sectors resulted to its satisfactory industry position. Tesco is committed to its long term strategy for growth as based on its four key parts: Core UK, International, Non-food, and Retailing services. According to Tesco’s corporate website (www.tesco.com 2008), their employees accounted to over 450,000 in all its stores around the world. They aim for a consistent delivery of “a strong customer offer on every visit and every transaction by focusing on the Group’s core purpose: to create value for customers to earn their lifetime loyalty”. Furthermore, “this core purpose is delivered through the Tesco values: no-one tries harder for customers and treat people how we like to be treated”. With the current market status of Tesco, this paper intends to explore its strategic position in terms of logistics context. First, this paper reports on the importance of logistics in organizations. After which, Tesco’s current logistics strategy is evaluated. The development of a suitable logistics strategy follows using the findings of the prior evaluation. Also, SWOT and Porter’s Value Chain Management Analyses of Tesco are included.   Importance of logistics in organizations             Logistics plays major strategic roles in organizational operations as well as the environment of the business. Over a number of years, it has been a fundamental component in coming up with a competitive business strategy resulting to a similarly competitive profit edge (Whittington 2001; Heskett 1977). According to Vernon (2002), logistics is a major management task involving the most effective management of the flow of goods and services from origin to the point of delivery particularly to the purchasing outlets and the consumers. Specifically, it consist of a systematic process from inventory holding to product distribution including the aspects of the financial and human resource, which are considered as among the building block of a successfully functioning business (Vernon 2002). Earlier researches found out that increased attention on logistics and its management can contribute to the improvement of an organization’s competitive position particularly among those that operate globally (e.g. Andraski and Novack 1996; Morash et al. 1996; Fawcett and Gloss 1993) like Tesco having stores in other European and Asian countries. In relation to competitive advantage, logistics provide competence in the excellent delivery of products and services through speed, reliability, responsiveness, and low cost distribution (Morash et al. 1996). While organizations exhaust research and development (R&D) efforts in attempting to look over strategic issues such as a close scrutiny and tightening of operational concerns particularly logistics (Vernon 2002), the integration into its operations or even into overall corporate strategy offers considerable impact on customer value as compare to any other process related to operations (Andraski and Novack 1996). Williams and colleagues (1997) identify the benefits of integrating logistics into overall corporate strategy. According to them, the usual costs of operations are reduced, opportunity for new markets is present, customer service is enhanced, and competitive advantage is eventually established and sustained if logistics works in harmony with the overall business strategy. Furthermore, the fundamental role of logistics in both organizational strategy and organizational environment (Kohn and McGinnis 1997) supports the marketing and customer service relationship strategies implemented by managers (Sautter et al. 1999). It must be understood that logistics is a supportive and complementary element to the marketing function of any organization (Sauter et al. 1999; Lambert and Stock 1993; Rinehart et al. 1989). For example, some businesses like Wal-Mart, another retail grocery business and Levi Strauss, a clothing business pay special amount of attention on their distinctive logistics capabilities with the purpose of maintaining their marketing and customer service aspects as a part of their competitive advantage (Lynch et al. 2000). In terms of marketing particularly on electronic retailing or e-tailing that is also being used by Tesco, the effective in application of logistics is considered as a competitive weapon to survive the unstable environment of online marketing (Dvorak and Van Paasschen 1996). E-tailing or online grocery retailing still uses the standard functions of logistics with the addition of the convenience of the Internet in terms of automation of many – if not all – processes and operations and creates a wide-reaching, 24-hour/day presence at a very reasonably low cost (Guttman 2002; Castells 2001). Logistics in online grocery retailing is a tool for increased efficiency and convenience (Dennis et al. 2004). It augmented the growth of retailer power to control their supply chains (Boyer and Hult 2005). The physical involvement of retailers is reduced but the supply chain management become more effective with the use of modernized equipment for operations (supplier and retailer linked) (Dennis et al. 2004). In customer service, the Internet contains profound effect on strategic thinking because of its expected ability to transform organizational cost structures and modify communication patterns with customers (Boudreau and Watson 2006). In general, logistics plays a strategic role in many companies (Mentzer et al. 2001; Mentzer and Williams 2001). Marketing and logistics must work in tandem for the customer to be satisfied particularly in both physical service factors (logistics) and intangible service factors (marketing).   Strategic position of Tesco: an evaluation from a logistics context             It must be considered that businesses respond to various conditions that occur and affect their immediate niche market and environment. There common responses include the modification of business competencies including their internal capabilities and linkages with suppliers and associates and the distinct ways in which they position themselves in relation to their competitors specifically on the case of strategic direction. The value chain also is useful in retailing decision-making. Understanding the linkages between activities can lead to more optimal make–or–buy decisions that can result in either a cost advantage or a differentiation advantage. The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit (Del Vecchio 2000). In the case of Tesco, the entire operation of the business should be examined and evaluated in relation to the current trends in the UK as well as global retail grocery market. According to Gurdjian and group (2000), it is important to understand local market conditions especially consumer behavior, competitive environments, management styles, and legal regulations because there are different variations across Europe and also globally. Considering Tesco operates in other European countries and Asian regions, understanding contributing factors help in determining the service delivery processes that strengthen as well as weaken the entire business operations. This will result to managerial options to eliminate the liabilities that detract the business or the need to developed and intensify some aspects of the operations.    SWOT Analysis Strengths   <li class="MsoNormal" style="text-align: justify"> Its management provided its historic stay in the business is tantamount to having a wide knowledge of the retail industry that makes Tesco a market leader. </li> <li class="MsoNormal" style="text-align: justify"> Tesco has its distinctive long term growth strategy focused on four key parts: Core UK, International, Non-food, and Retailing services. </li> <li class="MsoNormal" style="text-align: justify"> Tesco’s competent top management and orderly rank and file for operation and maintenance support its entire business in all levels. Tesco’s Board comprises six Executive Directors and seven independent Non-Executive Directors plus a Non-executive Chairman. </li> <li class="MsoNormal" style="text-align: justify"> Considering its long stay in the retail industry, it has its existing customer base and a market leader in five countries. </li> <li class="MsoNormal" style="text-align: justify"> Financial investment backing is substantial. </li> <li class="MsoNormal" style="text-align: justify"> Tesco is also among the most frequently visited online retailers as supported by strong returns of investment through building sales in internet shopping. </li>   Weaknesses <li class="MsoNormal" style="text-align: justify"> With almost over 3,000 stores operating internationally and for more than 500 planned store openings, low supervision on international market is perceptible. </li> <li class="MsoNormal" style="text-align: justify"> There is a high turnover of employee that could be possibly attributed to their inability to manage human resources. </li> <li class="MsoNormal" style="text-align: justify"> Since Tesco is an international retail business, it requires the presence of local partners. </li>   Opportunities <li class="MsoNormal" style="text-align: justify"> Tesco is able to extend its target market in relation to their more than 500 intended store openings last year up to now. </li> <li class="MsoNormal" style="text-align: justify"> It is considered that Tesco is given the opportunity to have a healthy market environment like any other business and industry. </li> <li class="MsoNormal" style="text-align: justify"> The opportunity to come up with the most effective resource-based strategy to compete with its rivals is always at hand. </li>   Threats <li class="MsoNormal" style="text-align: justify"> Economic restructuring is always a threat in any other business and area of industry. </li> <li class="MsoNormal" style="text-align: justify"> Operating in the most competitive marketplace especially in the retail industry, Tesco faces the inevitable threat of rapid and hyper competition. </li> <li class="MsoNormal" style="text-align: justify"> Tesco faces the threat of variation and compliance to government regulations especially that there are stores in other countries in Europe and Asia. </li>   PEST Analysis Political Tesco’s case in compliance with the existing government regulations and relevant legislations is unquestionable. Most Tesco store outlets within UK operate under specific national legislative and entrepreneurial provisions and same us true to other store outlets outside UK. The intended business expansion on other locations, however, is crucial provided that the senior management must be able to evaluate national environment particularly on the case of political systems, security, and stability (e.g. China). For example, Tesco cannot easily open up a store in countries that are prone with political risks resulting to economic problems and uncertainty. It is because the political environment of any business plays a significant function particularly in the process of production and generation of revenues.             Economic             It could be considered that all businesses are directed to revenue-making, reflecting that the economic conditions of a business environment are as good as the financial performance of the organization. On the case of Tesco, economic trends influence its operations. The currency rates, inflation rates, and consumer purchasing power are among the trends that the senior management must anticipate and appropriately provide remedies. This applies to Tesco’s current markets as well as the intended openings of store outlets in other parts of the world.   Social             Social considerations are related on the aspects that describe the society, people, culture, and circumstances surrounding the organization and might create significant impacts on its operations. For example, Tesco are able to easily relate on environments that are similar to the UK, wherein social conditions and people and their cultures do not differ considerably. It must be considered that some Western brands are prohibited on some regions (e.g. Japan). The social environment is where the business is bound for.   Technological             Technology for Tesco is an indispensable factor in its overall operations. The advancements in technology benefits Tesco especially because Tesco maintains a strong online customer base. Technological innovations create new market opportunities for Tesco to strengthen their current competitive advantage. Technology and innovations are synonymous. This is the reason why Tesco invests on technological infrastructures to stay innovative in all the ways they do business.   Ansoff’s Product/Market Matrix Market Penetration             Tesco perfected its long term growth strategy based on four key parts. The openings on other locations are supported by their purpose of growth in the Core UK, expansion of international retail industry, strong non-food and food services, and outstanding customer services. Tesco uses competitive pricing strategies, advertising, and other sales promotions to sell existing products and services to existing markets.   Market Development             The intention of Tesco to expand beyond its current business environment is supported with coming up with new product dimensions, distribution channels, and other strategies (e.g. pricing) with exclusive purpose of attracting customers to build a new market. On the case of Tesco Malaysia, producers are mainly Malaysians because they understand the needs of the Malaysian market. This is one unique strategy that developed Tesco’s new market for theie existing products and services.   Product Development             The risks of introducing a new product or service in an existing market are countless. For Tesco, their growth strategy on the expansion of non-food is an example. Tesco introduces other services aside from food to their existing market. Like in market penetration, various strategies (e.g. pricing, advertising, and sales promotions) are significantly considered.   Diversification             Diversification is investing on new markets using new products or services. Tesco should understand the presence of risks on this process. The use of intensive research and development (R&D) efforts is necessary.   Porter’s Generic Strategy Analysis – Differentiation             It is acknowledge that Tesco generally uses the differentiation business level strategy. Tesco is always on the look out for new products and services that is characterized as being different in ways that are different to the customers. Value is added in Tesco’s products and services. Accordingly, a successful differentiation strategy are evident on the capability of the organization to come up with matchless  attributes  including design, brand image, reputation, technology, product features, networks, and differentiated customer service. Differentiation is resource-based competitive advantage. The effectiveness of differentiation business level strategy is reflected on the progressive performance of Tesco during the recent years. However, there is a call for integration of differentiation and cost leadership strategies because of various conditions and differences on their markets and customers.   Value Chain Management Analysis Tesco has distinctive characteristics such as more than just a grocery store, strong loyalty Clubcard Programme, growing non-food market share (e.g. Tesco direct), retailing services (i.e. tesco.com, Personal Finance, and Telecoms), cause related marketing, enhancing quality, and efficiency enhancement in products and services. Tesco is not just a grocery but considered as a shopping mall as it offers a wide assortment of products and services to consumers. Aside from grocery products, it sells books, CDs, digital music, videos, flowers, games, gardening, gas, holidays and flights. They also provide financial, insurance, telecoms, and healthy living services. Its Clubcard Programme enhances strong loyalty and stimulates brand awareness. It also allows Tesco to know its customers and comply with their interests and products using card data (Humby et al. 2003). The growing non-food market share (e.g. Tesco direct) supports its financial performance because sales are growing faster than core operations. Similarly, the retailing services (i.e. tesco.com, Personal Finance, and Telecoms) are significant building blocks of its marketing strategy resulting to competitive advantage. In terms of cause related marketing, Tesco have its committed corporate social responsibility to people, organizations, and the environment. Also, Tesco holds the ability of enhancing quality as shown in the daily one and a half hour meeting of top managers to look over that week’s performance statistics. Lastly, efficiency enhancement reflects Tesco’s efforts of doing things the “better, simpler and cheaper” ways for both employee and customer levels. For Tesco, since it uses the differentiation business level strategy, there is a need to change to cost leadership business level strategy. The Value Chain Analysis points out on its primary activities particularly of inbound and outbound logistics. In inbound logistics including material handling, warehousing, and inventory control and outbound logistics including collecting, storing, and distributing products to customers, Tesco uses considerable amount of financial resources to the total cost to produce some goods and services. Achieving competitive advantage through logistics and its effective management creates value when integrated with cost leadership business level strategy rather than on the case of differentiation business level strategy (Lynch et al. 2000). To do this, Tesco must be able to come up with valuable ways to reduce costs particularly on primary activities like inbound and outbound logistics. Superior effectiveness of the computer-controlled logistics schemes is seen in Tesco (Fernie and McKinnon 2003). In terms of its e-tailing, the process of placing grocery orders over the Internet that utilise highly automated centralized warehouses and computerized logistics structures is more efficient as to compare with groceries in the supermarket. On this case, Tesco should be able to establish contact to prospective customer and achieve an exchange of merchandise for payments not always requiring a visit to a physical store (Dennis et al. 2004). Some retailers saved a significant amount of their resources in operations “by replacing electronic-data-interchange (EDI) tools with Internet-based ones that facilitate product comparisons, streamline logistics, and help business-to-business vendors” (Calkins et al. 2000, 140). Tesco’s challenge is to look over the existing strategies in e-tailing in accordance to the varying trends in online retailing, consumer buying behaviors, marketing communications, needs and demands, and so on. In connection, implementing marketing strategies requires the need for continuing optimization or the ability to assess a myriad of possibilities in order to find the best one or near best one (Hoctor and Thierauf 2003). Strategies must be evaluated and improved by integrating other elements of marketing and management. Tesco must reach out to a broader target market and must project an image relevant to every members of the society. Its corporate social responsibility must be defined. Meanwhile, the service delivery is an interactive and dynamic process that from the consumer’s point of view is much more than a passive exchange of money for a particular service. Tesco needs to strengthen its relationship with suppliers and increase market share based on the characteristics of services (e.g., intangibility, heterogeneity, simultaneity, and perishability) (Thompson and Strickland 2003). This effort will result to parallel business interests that will contribute to the beneficial effects to Tesco and its management as well as the suppliers’ business objectives. Contract agreements and other business transactions should present advantages and benefits for both parties. Efficient delivery of products and services through premeditated and tactical supply chain management initiatives should be prioritized. For Tesco, the management is prompted to take means based on current market conditions implied in research and development (R&D). Goal-setting is always elementary and crucial. There is a need to identify the key stakeholders and their priorities, understand and incorporate their perspectives to the future plans of the company. The conflicting interests of various stakeholders are perceived to be barriers for effectiveness and among the most primary management issue. On this case, Tesco should be able to unite stakeholders’ and organization’s interests and wellbeing by having a strong will of central leadership and administration that is supplemental to the overall mechanisms in the workforce. Moreover, Tesco should cultivate growing consumer markets to promote growth and development of the business instead of debating over catering to all the needs of the stakeholders. This action will deliberately provide rationale on the expansion opportunities of the organization to serve not only the current target market and local customers but to a larger target market and customer base. As such, international relations and the overall business practices and trends should be individually investigated so as to make sound decisions that will realize the goals set by the management. Furthermore, Tesco should continue cultivating community relations and environmental efforts to increase market visibility and improve brand strength. The existing cause related marketing should use cost leadership strategy, which targets a broad market and aims to present customers with products at a low cost for a given level of quality (Hitt et al. 2003). Community programs that will advertise the humanitarian causes Tesco, charity and scholarship programs, and advertising messages that translates the environmental concerns of the business will sufficiently stand in support to the overall business strategy. In this case, Tesco may be able to sustain a competitive advantage based on cost leadership strategy when its rivals are unable to lower their costs by a similar amount used to finance these cause related marketing actions. As for the nature of managing Tesco’s financial resources, finance managers face a wide array of challenges, opportunities and options enhance the investing and financing activities of the business as well as the inherent risks and circumstances of the decisions that will be made. Today, the challenge for every company is to explore the options and take advantage of the opportunities while taking caution in managing the risks (Macmenamin 1999). Tesco, with the recommendation of shifting to cost leadership business level strategy, needs to keep its operational expenses within a specified budget allocation in order to devote the necessary financial resources to both exploration and marketing activities of the company. Financial management decisions that will supply for the internal and external business operations Tesco should be closely monitored to be able to control the flow of cash. Investing on profit-generating projects as well as training-specific programs for the human resources will also ensure an extended success. Lastly, Tesco must be able to recognize technological changes and innovations particularly on its e-tailing business. Tesco should enhance marketing campaigns and take advantage of the opportunity to control its defined online customer base. It should initiate efforts to come up with sound advertising and promotional strategies that will bring the people closer. Tesco is required to improve technological infrastructures through innovations to increase efficiency as well as quality of the products and services. This includes investments on machineries and equipment that will necessitate the increased and efficient operation of the business organization’s management system. Financial assistance on human resources particularly to knowledgeable and skilled individuals should be accorded in order to improve the overall business operation as well as the engineering, monitoring, and control aspects of the business. Technology management that is rooted on the idea of effective application of technology to create maximum profitability and performance should be perfected. It is necessary for Tesco to extend its technology management not only on the aspect of technology but also on the role of human labor force and their intervention and most especially in logistics context. All in all, Tesco’s senior executives who think about how to establish and sustain competitive advantage using logistics strategy should consider how to tailor their own logistics. To do so, they will need a sound understanding of the fundamental principles of good logistics as well as exploring new logistics capabilities.   References — (2008) ‘Tesco at a glance’, Tesco Corporate Website [online] (cited o7 May 2008) Available from http://www.tescocorporate.com/page.aspx?theLang=001lngdef&pointerid=A8E0E60508F94A8DBA909E2ABB5F2CC7     Andraski, J and Novack, RA (1996) ‘Marketing Logistics Value: Managing the 5 P’s’, Journal of Business Logistics, 17:1, 23-34   Athanassopoulos, AD (2003, June) ‘Strategic Groups, Frontier Benchmarking and Performance Differences: Evidence from the UK Retail Grocery Industry’, Journal of Management Studies, 40: 4, 921-953   Boyer, KK and Hult, GTM (2005, September) ‘Extending the supply chain: Integrating operations and marketing in the online grocery industry’, Journal of Operations Management, 23: 6, 642-661   Boudreau, M and Watson, RT (2006) ‘Internet advertising strategy alignment’, Internet Research, 16: 1, 23-37   Calkins, JD, Farello, MJ, and Shi, CS (2000) ‘From Retailing to E-Tailing’, The McKinsey Quarterly, 1, 140-147   Castells, M (2001) Internet Galaxy: Reflections on the Internet, Business and Society, Oxford University Press, New York   Del Vecchio, J (2000) ‘Assessing Internet Stocks in 2001’, The Motley Fool Homepage [online] (cited 07 May 2008) Available from http://www.fool.com/research/2000/foolsden001114.htm?terms=assessing+internet+stocks&vstest=search_042607_linkdefault   Dennis, C, Fenech, T, and Merrilees, B (2004) E-Retailing, Routledge, New York   Dvorak, RE and Van Paasschen, F (1996) ‘Retail Logistics: One Size Doesn’t Fit All’, The McKinsey Quarterly, 2, 120-129   Fawcett, SE and Closs, DJ (1993) ‘Coordinated Global Manufacturing, The Logistics Manufacturing Interaction and Firm Performance’, Journal of Business Logistics, 14:1, 1-25   Fernie, J and McKinnon, AC 2003, ‘The Grocery Supply Chain in the UK: Improving Efficiency in the Logistics Network’, International Review of Retail, Distribution and Consumer Research, 13: 2, 161-174   Gurdjian, P, Kerschbaumer, G, Kliger, M, and Waterous, J (2000) ‘Bagging Europe’s Groceries’, The McKinsey Quarterly, Special Edition, 2, 68-75   Guttmann, R (2002) Cybercash: The Coming Era of Electronic Money, Palgrave Macmillan, New York   Harris, L and Dennis, C (2002) Marketing the e-Business, Routledge, London   Heskett, JL (1977) ‘The Coming of the New Organization’, Harvard Business Review, 55: 6, 85-96   Hitt, MA, Ireland, RD, and Hoskisson, RE (2003) Strategic Management: Competitiveness and Globalization, 5th ed., South-Western, Singapore   Hoctor, JJ and Thierauf, RJ (2003) Smart Business Systems for the Optimized Organization, Praeger, Westport, CT   Humby, C, Hunt, T, and Phillips, T (2003) Scoring Points: How Tesco is Winning Customer Loyalty, Kogan Page, London   Kohn, JW and McGinnis, MA (1997) ‘Advanced Logistics Structures Revisited’, Journal of Business Logistics, 18:2, 147-162   Kumar, N (2005, March) ‘The Global Retail Challenge’ Business Strategy Review, 16: 1, 5-13   Lambert, DM and Stock, JR (1993) Strategic logistics management, 3d ed., Irwin, Homewood, IL   Lynch, DF, Keller, SB, and Ozment, J (2000) ‘The effects of logistics capabilities and strategy on firm performance’, Journal of Business Logistics, 21:2, 47-68   Mcmenamin, J (1999) Financial Management: An Introduction, Routledge, London   Mentzer, JT, Flint, DJ, and Huit, GTM (2001) ‘Logistics Service Quality as a Segment-Customized Process’, Journal of Marketing, 65: 4, 82-105   Mentzer, JT and Williams, LR (2001) ‘The Role of Logistics Leverage in Marketing Strategy’, Journal of Marketing Channels, 8: 3/4, 29-48   Morash, EA, Droge, C, and Vickery, S (1996) ‘Strategic Logistics Capabilities for Competitive Advantages and Firm Success’, Journal of Business Logistics, 17: 1, 1-22   Rinehart, LM, Cooper, MB, and Wagenheim, GD (1989) ‘Furthering the integration of marketing and logistics through customer service in the channel’, Journal of the Academy of Marketing Science, 17: 1, 63-71   Sautter, ET, Boberg, K, and Maltz, A (1999, August) ‘A Customer Service Course: Bringing Marketing and Logistics Together’, Journal of Marketing Education, 21: 2, 138-145   Smaros, J, HolmstrÄom, J, & KÄamÄarÄainen, V (2000) ‘New service opportunities in the e-grocery business’, International Journal of Logistics Management, 11: 1, 61-74   Thompson, AA & Strickland, AJ (2003) Strategic Management: Concepts   and Cases, International Edition, McGraw-Hill, New York   Vernon, M 2002, Business: The Key Concepts, Routledge, New York   Whittington, R (2001) ‘What is strategy – and does it matter?, 2nd Ed., Thomson Learning, London   Williams, L, Nibbs, A, Irby, D, and Finley, T (1997) ‘Logistics Integration: The Effect of Information Technology, Team Composition and Corporate Competitive Positioning’, Journal of Business Logistics, 18: 2, 31-41             Credit:ivythesis.typepad.com

Logistics Strategy: the case of Tesco

Logistics Strategy: the case of Tesco Operating in a global market requires the formulation and implementation of effectiv...

Global Marketing Strategies :Case Study of Peninsula Hotel Group

Peninsula Hotel Group: Case Study I.      Executive Summary Marketing is one of the most important processes in any business, because it can be considered as an imaginary line which connects the customers and the firm.  In that case, it will be important to ensure that it is properly planned and implemented. The Peninsula Hotel Groups is considered as one of the most well-known name in the hotel and hospitality industry in the world, not only to its survival in the industry for a long time, but also because of its quality and being classic. This paper will focus on analyzing the different marketing processes of Peninsula hotel which focuses on the corporate, customers and competitors marketing strategies. It evaluates the current effectiveness of the said marketing strategies, at the same time, talk about the connections of the different marketing theories behind the process of strategic marketing planning by using 2 marketing models, which are: marketing strategy triangle and Porter’s generic strategies. The study focus on the current international or global marketing strategies of the company which pertains on its application of technologies such as the Internet and its website which enables the customers to retrieve and access information regarding the hotels, at the same time, enables them to reserve and book their stays. It also focus on the segmentation process which enables the hotels to focus on the specific needs of each and every groups of their common and possible customers such as VIP, business, family, honeymoon, adult and children. The said factor helps the company to have a strong relationship with their customers. In addition, this study also focuses on the company structure, and its connection to the marketing process of the hotels. It shows that the hotels uses an integrated marketing communications which enables one department or individual to plan, manage and control the different marketing resources, which help the group to have consistent standards and results.  In the end of the paper, the author gives the two most important opportunities which can be taken advantage of the company, in order to gain competitive advantage and maintain their position in the industry and market: mobile marketing and offering affordable services. The mobile marketing can help the company to gain more customers, due to the fact that the number of mobile Internet users is increasing and helps to improve and maintain their strong connection and relationship to their loyal customers. At the same time, by offering affordable room services, the hotels will be able to cope with the current global financial crisis and growing number of Mainland Chinese visitors.   II.    Table of Contents    TOC \o “1-3″ \h \z \u I.      Executive Summary. PAGEREF _Toc223775875 \h 1 II.    Table of Contents. PAGEREF _Toc223775876 \h 2 III.       Background of the Company. PAGEREF _Toc223775877 \h 4 IV.       Marketing Effectiveness Evaluation. PAGEREF _Toc223775878 \h 5 A.    Customer Philosophy. PAGEREF _Toc223775879 \h 5 B.    Integrated Marketing Organization. PAGEREF _Toc223775880 \h 6 C.    Adequate Marketing Information. PAGEREF _Toc223775881 \h 7 D.    Strategic Orientation. PAGEREF _Toc223775882 \h 8 E.     Operational Efficiency. PAGEREF _Toc223775883 \h 8 V.    Strategic Marketing Planning and Marketing Strategy. PAGEREF _Toc223775884 \h 8 A.    The Boston Consulting Group Approach (BCG Matrix) PAGEREF _Toc223775885 \h 8 B.    Porter’s 5 Forces Analysis. PAGEREF _Toc223775886 \h 12 C.    Ansoff’s Product/Market Matrix. PAGEREF _Toc223775887 \h 15 VI.       Specific Growth Opportunities. PAGEREF _Toc223775888 \h 17 VII.     References. PAGEREF _Toc223775889 \h 22 VIII.    Appendices. PAGEREF _Toc223775890 \h 24 A.    BCG Matrix Analysis. PAGEREF _Toc223775891 \h 24 B.    Porter’s 5 Forces Analysis. PAGEREF _Toc223775892 \h 24 C.    Ansoff’s Product/Market Matrix. PAGEREF _Toc223775893 \h 24   Table of Figures    TOC \h \z \c “Figure” Figure 1 BCG Matrix. PAGEREF _Toc223775767 \h 9 Figure 2 Porter’s Five Forces Analysis. PAGEREF _Toc223775768 \h 12 Figure 3 Ansoff’s Product/Market Growth Matrix. PAGEREF _Toc223775769 \h 15           III.   Background of the Company             The Peninsula Hotel Group is a subsidiary of the Hong Kong and Shanghai Hotels, Ltd. (HSH), a holding company that is engaged in the ownership and management of prestigious hotel, commercial and residential properties in key destinations in Asia and the USA (HSH 2005). In 1928, the original Peninsula was built in Hong Kong, and majority of its shares was acquired by the Kadoorie family, and still run by their descendants nowadays. The Grande Dame is he only surviving historic hotel in the city. Later on, the Kadoorie family built up a first-class group by acquisition and development in Hong Kong, Shanghai, Peking, and recently in Beijing. As of now, Peninsula Hotels is considered as a brand that is known for its deluxe-plus comfort, with unmatched service, that is represented by 8 properties in Asia and America and soon to be 9th opening in Shanghai (Peninsula Hotel Group 2009). The mission of the group is to set their sights high, their standards higher and aims to always delight their customers, and in many cases, serve the third generation of their loyal guests (Peninsula Hotel Group 2009). The vision of the company focuses on maintaining its unique identity among the leading hotels in the world and operates prestigious luxury properties in other major cities and places in the world (Peninsula Hotel Group 2009).    IV.  Marketing Effectiveness Evaluation In evaluating the effectiveness of marketing initiatives of any company, it is important to focus on 5 factors: customer philosophy, integrated marketing organization, adequate marketing information, strategic orientation and operational efficiency.   A.   Customer Philosophy             The first important factor to be considered in terms of effectiveness of marketing efforts is the importance of designing the company in order to serve the needs and demands of the chosen markets. In that case or aspect, it can be said that the company had been successful in focusing on their marketing initiatives, because of the fact that the company had been able to redeveloped and improved the entire structure of the company in order to cater to the different demands and needs of their customers. For example, the expansion of each and every hotel in different parts of the globe was a movement that was done in order to meet the growing demand of their loyal customers. In addition to that, the plan of the group to focus on the different local cultures and qualities of each hotel in respective country enables the customers to experience the culture of the respective country. It can also be seen in the effort of the group to offer 4 unique services such as: hotels, spas, boutiques, together with academy programmes.             Another important factor is the process of developing offerings and marketing plans that will target different segments of the market. This is because the said process is important aspect together with needs identification and measurement of customer perceptions (Nykiel 2007, p. 282). Aside from that, the idea of dividing up a market into homogeneous segments and targeting each with a distinct product or message is already considered as the heart of marketing theory (Croft 1994, p. 2). The said factor is considered as one of the edges of the group, this is because the company focuses on giving different unique services to different groups, such as business and family. Aside from that, the group also focuses on the different demands of age group: adult and children. For younger guests, the hotel provides car-beds and medley gifts, which include teddy bears etc. Furthermore, the group also offer special treatment for the pet lovers, the pet-friendly hotel offer monogrammed pillows and beds, together with walking services for dogs (Chin 2008). Above all, the company focuses on whole marketing-system view which focuses on the effort and needs of their suppliers, channels, competitors, customers and environment in the process of planning the entire business. B.   Integrated Marketing Organization             The entire marketing process of the group is being managed and controlled by one group and handled by one individual, Ms. Jean Forrest, the General Manager for Marketing. The marketing team is responsible in developing and implementing global marketing strategies for the Peninsula Hotels (Peninsula Hotel Group 2009). In terms of integration the group focuses on integrated marketing communications or IMC. IMC is considered as the process of developing and implementing different forms of persuasive communication programs with the customers and prospects over time. The main goal of IMC is to affect and influence the behavior of the selected audience (Kitchen & de Pelsmacker 2004, p. 6). This can be seen on the effort of the groups in advertising their brand in different prints, such as magazines and newspaper, at the same time, focuses on other media such as television. On the other hand, the company also took advantage of the current development in the field of advertisement, which is the Internet. This can be seen on the effort of the group in placing ads in different websites, which are connected with their line of business, at the same time, launch and maintain their own website, which shows the different information and offer a virtual travel in their hotels, at the same time offers Newsletter which help the customers to be more updated with full details on the group’s latest information. Above all, the company also focuses on online booking which enables their customers to book their visit to their hotels in easy and fast manner (Wong 2002). C.   Adequate Marketing Information Marketing research is considered as one of the most important process in the entire operation of the business, because the data and information gathered from the said process can be used as an initial input in the process of deciding on the different medias and effort to be exerted in the marketing activities. In the case of Peninsula Hotels group, because of the fact that the company is a huge one with different hotels, restaurants and other businesses in other parts of the earth, the company is using external organizations in order to manage the marketing research as well as media buying and planning. Thus, it helps the company to have updated and precise information, which comes from reliable resources. D.   Strategic Orientation In terms of strategies orientation, the company is connected to an external marketing expert, which enables the company to gather updated and reliable information are the right time, thus, the said information can be used in the process of decision making, which considered it as effective marketing strategy. E.   Operational Efficiency All of the marketing efforts and strategies of the company are all handled by one department and controlled by the General Manager for marketing. As a result, it enables the company to focus on local and international marketing strategy based on the international or global standards of the groups. The said, centralized control enables the entire management to manage its marketing resources, at the same time, focus on the development and innovation.   V.   Strategic Marketing Planning and Marketing Strategy A.   The Boston Consulting Group Approach (BCG Matrix) There are 9 important business units for the Peninsula Hotels, which are grouped according to the city or country that the specific hotel is located: Hong Kong, Chicago, New York, Beverly Hills, Tokyo, Bangkok, Beijing, Manila and Shanghai.         Figure  SEQ Figure \* ARABIC 1 BCG Matrix                                       Figure 1 shows the BCG matrix analysis of the 9 business units of the Peninsula Hotels that is based on the financial report of the company in 2008.     1)    Cash Cow – a business unit that has a large market share in a mature and slow growing industry. Thus, it requires a little investment and generates cash that can be used in other business units (QuickMBA 2007). Manila is the only business unit that was included in the said category. This is because Peninsula Hotel is considered as one of the most prominent and famous hotels in the city. Above all, one of the most important aspects to be considered is the number of competitors in the city. 2)    Star – a business unit that has a large market share in a fast growing industry. This business unit generates cash, however, due to the rapid growth of the market, they require investment in order maintain the lead of a specific company (QuickMBA 2007). Hong Kong and Beijing are the two business units which included in the said category. The Peninsula is considered as one of the oldest and classic hotels in the world, particularly in Hong Kong and Beijing. Because of that, the hotel had been able to gain competitive advantage, in terms of image towards the Chinese and foreign visitors. However, because of the growing economy of the said cities, it had resulted to the growing number of players in the industry, thus pushed Peninsula Hong Kong and Beijing to focus on different strategic plan and implementation that will maintain their competitive advantage. 3)    Question Mark or Problem Child – a business unit that has a small market share in a high growth market. A problem child requires resources in order to grow market share, however, the fact if they will be successful and become stars is not sure (QuickMBA 2007). Tokyo, Bangkok and Shanghai are the three business units that were included in the said category. In Bangkok, the Peninsula hotel has a small share in the market because of the extensive competition, primarily from the local players in the city. The said situation is the same in Shanghai. On the other hand, the Tokyo Peninsula hotel was included in the said category because; the hotel was one of the newly developed hotels of the group. 4)    Dog - a business unit that has a small market share in a mature industry. Chicago, New York and Beverly Hills are three of business units that belong to the said category. The reason behind the said analysis is because of the fact that Chicago, New York and Beverly Hills are considered as three of the most prominent cities in the world. Thus, there are different huge companies that have already started their operations in there. Although it is important to consider that a dog may not required substantial cast, it is connected to the capital that could be better be deployed elsewhere, however in the case of the Peninsula Chicago and Beverly Hills, it is considered as strategic purpose of the group in order to introduce their brand in the West.     B.   Porter’s 5 Forces Analysis Figure  SEQ Figure \* ARABIC 2 Porter’s Five Forces Analysis                                       Figure 2 shows the Porter’s 5 Forces analysis of Peninsula Hotel Group.   1)    Supplier Power – or known as the bargaining power of suppliers tackles on how strong the position of sellers, thus focus on the existence of many potential suppliers which exists in the industry (12Manage 2009). In terms of the case of Peninsula group, the supplier has a moderate power because of the fact that there is huge number of suppliers in the hotel industry in the world. Aside from that, products and services by the different suppliers are almost similar, that gives the company the freedom to substitute. 2)    Buyer Power – or known as the bargaining power of the customers or buyer focus on the idea about how strong is the position of the buyers as well as the possibility of working together in ordering large volumes of products (12Manage 2009). It is important to consider that there are different factors that must be considered in analyzing the bargaining power of the buyer. First is that the population of the buyers in the industry, the bigger the number of the buyers or customers, the lesser the influence or power of the buyer, because of the fact that the group will be able to focus or target more number of buyers. On the other hand, it is important to focus on differentiation and standardization of the products, in the case of the group, there are different direct and indirect competitors in the hospitality industry, and thus it enables the buyers to have the ability to substitute. However, the edge of the group focuses on the high demand for quality and services. 3)    Competitive Rivalry – the rivalry among the existing players in the hotel industry in the world is strong. This is because of the growing number of players at the same time, low differentiation of the products and services that are being offered. However, the main advantage of the group focuses on the loyalty of the customers, at the same time, the image that was held by its brand for a long time. 4)    Threat of Substitution – focus on the how easy a given product or service can be substitute, especially when it was made cheaper (12Manage 2009). In the case of the company, the threat of substitution is somewhat high, because of the presence of some cross-product substation such as cheap motels and houses for rent. 5)    Threat of New Entry – pertains on how easy or difficult it is for a new entrant to start competing. In the case of the group, it will be hard for the new entrant to enter the industry because it is expensive to enter the hotel industry, due to high initial capitals, at the same time; experience is needed, together with the presence of some economies of scale. The group can also create some cost advantage, because it was already in the business for the long time, thus it some control over its pricing. Above all, the group has an advantage in terms of image, loyalty of the customers and access to different vital technologies and skills.     C.  Ansoff’s Product/Market Matrix Ansoff’s Product/Market Growth Matrix suggest that an attempt of a given business to grown is dependent on whether a markets new or existing products in a new or existing markets. Figure  SEQ Figure \* ARABIC 3 Ansoff’s Product/Market Growth Matrix                             Source: (Tutor2u 2009) The entire growth strategies of the group focus on the three strategies suggested by Ansoff: market penetration, market development and product development.   1)    Market Penetration – is the growth strategy which enables the business to focus on the process of selling existing products into the existing market. It focuses on the objective to maintain and even increase the market share of the company (Tutor2u 2009). This can be seen on the effort of the company on its pricing strategies, advertising and sales promotion.  This can be seen on the effort of the company in applying technologies or Information Systems in their entire process, in order to ensure that they are giving fast and efficient services towards the customers. 2)    Market Development – this strategy focus on the different actions of the business that seeks to sell its existing products into a new market. This strategies focuses on establishing or building new hotels in different cities or parts of the globe. In late 2009, the Peninsula Shanghai will be completely opened. Above all, in July 2008, the group entered into a non-legally binding heads of agreement with the Qatari Diar Real State Investment Company for the proposed establishments of hotel in Paris, France (The Hong Kong and Shanghai Hotels, Limited 2008). 3)    Product Development – pertains on the different growth strategies which aim to introduce new products in an existing market. The Peninsula Hotel Group focuses on the different strategies which improve its existing assets, by introducing new concepts or improving facilities that will help to enhance the brand image and competitiveness of the hotels. In 2008, the hotel in Beijing installed a new spa, swimming pool and fitness center, at the same time, welcomed a new fleet of Rolls-Royces and BMWs  during the time for the Beijing Olympics. In addition, the Peninsula New York revitalized its rooftop bar by the process of creating a new concept that was called the Salon de Ning, it is also in an extensive spa, gym and pool renovation. Furthermore, the Peninsula Beverly Hills renovated its roof terrace and swimming pool deck, and was reopened in April 2008. In Manila, guestrooms in the Ayala Tower were renovated, while the Salon de Ning was created in the Peninsula Hong Kong (The Hong Kong and Shanghai Hotels, Limited 2008). VI.  Specific Growth Opportunities There are different opportunities that are available for the company, in order to ensure their success in the future. One of this is the advent of mobile marketing, or the process of advertising and selling their products and services over the Mobile Internet. Mobile Internet has a great impact on the growth of any e-business because it helps to add the number of online users, or the possible customers for online businesses. This is because it allows users to access the Internet by using mobile phones and other handheld gadgets (Executive Standard Ltd UK 2008). In the US alone, the number of unique gadgets that are using the mobile broadband had increased by 154%, from 854,000 in 2006 to 2,168,000 in 2007 (comScore Inc. 2008). In that case, it will be important for the group to focus on considering the mobile Internet users in designing and implementing their marketing strategies. Thus, the group must design and launch a website that can be browsed and navigated by using any mobile phone. The said website must detect what type of mobile phone is accessing it, and can display its content in the right screen size, so that, it will be easily navigated regardless of the model and brand of cell phone being used by the visitor/customer. The said mobile site must contains the same type of content and information contained in the traditional website of the hotels, but its content must have been optimized in order to be viewed and displayed on a mobile phone. By doing that, the customer will be able to leave messages and enquiry at the same time enables them to book and reserve their desired services, products and request in fast and more efficient manner (eCornell 2009).             Aside from that, another important factor to be considered is the different factors that can affect the preferences of the customers. As of now the world is facing global financial crisis, and this can affect the travel and tour activities of different tourists and visitors, or push them to look for alternative and less costly hotels in order to save money. In Hong Kong alone, majority of the travelers are from Mainland China, and they are very price sensitive when it comes to hotel accommodation and food, because they tend to spend most of their money in different high tech and electronic gadgets. It will be important for the group to focus on the said growing number of market, by renovating some structure of the hotels that will enable the hotels to offer lower rates of stays in the hotel. However, the company must make sure that it will still focus on its premium products and services, due to the fact that, the number of business travelers, particularly in Hong Kong, Manila and other major cities, where in their hotels are located is increasing.             Above all, the group must focus on continued innovation in terms of applying technologies in their processes which include their application of Information Technology, together with the different technological services to there customers.   Conclusion and Summary             Hotel and hospitality industry is considered as one of the industries or sectors in the world that is in great need of intensive marketing planning and implementation in the world, because each and every business in this industry has the power to become global. Aside from that, there are also different technologies that are emerging, not only in the process of introducing a specific hotel, resort or restaurants to the customers, but also the process of selling them. The Internet is considered as one of the most important innovations which lead to the current most used marketing strategies, and that is to focus on the customer relationship or connection.             Peninsula Hotels group is considered as one of the most prominent hotel brand name, not only in Asia but around the world. It has a rich culture which can be rooted in 1928, and as of now, the group continues to shine and conquers the world. The secret behind the success is the process of implementing their different strategies, that mainly focus on product differentiation or offering unique and innovative products to their customers that cannot be acquired or availed from other competitors. As a result, the company focuses on the process of market segmentation which pertains on the process of grouping its customers into different classifications which enables them to focus on the individual demands and needs. It can be seen on the effort of the hotels to offer different types of room such as VIP, business, family and honeymoon suites. Aside from that, the hotels also focus on age differences in preferences for the room design and styles, by offering room for adults and children. In L.A., the hotel gives importance on the behavior of their customers towards their pets, thus, the hotel offers special services for the pet owners customers such as monogrammed pillows and beds, walking services and room-service menu. The said marketing strategy does not only focus on the demand of the customers, but also focuses on the different environmental and political factors in the said place. This is because of the fact that, in the United States, animals have equal rights as humans.             In addition, the hotels also focus on the integration of marketing communication. The main advantage of the said approach is that it enables the entire group to focus on the process of managing their marketing resources, because it is being controlled, managed and handled by one individual.             On the other hand, there are different opportunities that can be used by the hotels in order to ensure their success in the future. First is the growing popularity of mobile marketing, because of the growing number of mobile Internet. The said channel can help the hotels to reach more markets or possible customers. Furthermore, the issue of global financial crisis and the growing number of Mainland Chinese visitors in China and other parts of the globe must be considered in the process of pricing and room, services and products innovation. The said action is to ensure that the hotels will be able to meet the demands and needs of the growing number of populations.   VII. References   12Manage 2009, Five Competitive Forces (Porters), viewed 2 March 2009, < http://www.12manage.com/methods_porter_five_forces.html>   Baker, M J 2000, Marketing Theory: A Student Text, Cenage Learning EMEA   Campbell, D, Stonehouse, G & Houston, B 2002, Business Strategy: An Introduction, Butterworth-Heinemann   Chin, Y M 2008, Peninsula Goes to the Dogs to Address L. A. Competition, The Free Library, viewed 26 February 2009, < http://www.thefreelibrary.com/Peninsula+goes+to+the+dogs+to+address+L.A.+competition.-a0190285736>   ComScore, Inc 2008, Number of U.S. Computers Accessing the Internet Via Mobile Broadband Soars 154 Percent in 2007, viewed 25 February 2009, <http://www.comscore.com/press/release.asp?press=2099>   Croft, M 1994, Market Segmentation: A Step-by-Step Guide to Profitable New Business, Routledge   Eaton, M 2008, Carat Lands Peninsula Group, Marketing Interactive.com, viewed 25 February 2009, <http://marketing-interactive.com/news/4390>   eCornell 2009, Hotel Mobile Marketing: A Hotel Guest Story from The Near Future, Hospitality. Net, viewed 25 February 2009, < http://www.hospitalitynet.org/news/154000392/4039958.search?query=mobile+marketing+in+hotel+industry>   Executive Standard Ltd UK 2008, Mobile Broadband, viewed 25 February 2009, <htt p://www.raleighbikes.com/viewforum.php?f=22>   HSH 2005, The Hong Kong and Shanghai Hotels, Limited HSH: About Us, The Hong Kong and Shanghai Hotels, viewed 24 February 2009, <http://www.hshgroup.com/>   Hsu, C, Powers, T & Powers, T 2001, Marketing Hospitality, John Wiley and Sons   Kitchen, P & de Pelsmaker, P 2004, Integrated Marketing Communications :  A Primer, Routledge   Kotler, P 1988, Marketing Management: Analysis, Planning, Implementation, and Control, Prentice-Hall   Marketing Teacher 2009, Ansoff’s Matrix – Planning for Growth, viewed 2 March 2009, <http://www.marketingteacher.com/Lessons/lesson_ansoff.htm>   MindTools 2009, Porter’s Five Forces, viewed 2 March 2009, < http://www.mindtools.com/pages/article/newTMC_08.htm>   Morris, M, Pitt, L & Honeycutt, E 2001, Business-to-Business Marketing: A Strategic Approach, SAGE   Nykiel, R 2007, Handbook of Marketing Research Methodologies for Hospitability and Tourism. Haworth Press   Ohmae, K 1991, The Mind of the Strategies: The Art of Japanese Business, McGraw-Hill Professonal   Peninsula Hotels Groups 2009, A Living Legend Thrives, viewed 24 February 2009, < http://www.peninsula.com/Peninsula_Hotels/en/default.aspx#/Peninsula_Hotels/en/About_Us/>   QuickMBA 2007, BCG Growth-Share Matrix, viewed 2 March 2009, < http://www.quickmba.com/strategy/matrix/bcg/>   Silk, A 2006, What is Marketing? Harvard Business Press   The Hong Kong and Shanghai Hotels, Limited 2008, Interim Report 2008, viewed 2 March 2009, < http://www.hshgroup.com/uploadedfiles/Investor_Relations/Financial_Reports/Reports/Interim_Reports/2008/E45IR2008.pdf. >   Tutor2u, Ansoff’s Product/Market Mix, viewed 2 March 2009, < http://www.tutor2u.net/business/strategy/ansoff_matrix.htm>   Wong, A 2002, Rating Luxury Hotel: E-Marketing Practices in Asia, Ion Global, viewed 25 February 2009, < http://www.ionglobal.com/documents/rating_luxury_hotel_e-marketing_practices_in_asia.pdf>       VIII.       Appendices A.   BCG Matrix Analysis   Those companies that are large enough in order to be organized into strategic business units are facing the problems regarding the process of allocating the different resources among its units. During early 1970’s, the Boston Consulting Group had developed a model that was used in order to manage an portfolio of different business units or major product lines. As a result, the BCG growth-share matrix enables to show the different business units on a graph of the market growth rate versus market share that are connected to the competitors (QuickMBA 2007). B.   Porter’s 5 Forces Analysis The Porter’s 5 Forces is considered as a simple but powerful tool that is used and applied in order to understand where the power lies in the situation of a business. This help to understand both the strength of the current position of the company, at the same time, look the strength of the position that a firm wants to move into (MindTools 2009). C.   Ansoff’s Product/Market Matrix Ansoff’s Product/Market Matrix is a marketing tool that was first published in the Harvard Business Review (1957) in the article known as the Strategic for Diversification. After that, it was used by the marketers who have the objectives for growth. Thus, it helps to achieve different objectives (Marketing Teacher 2009). Credit:ivythesis.typepad.com

Global Marketing Strategies :Case Study of Peninsula Hotel Group

Peninsula Hotel Group: Case Study I. Executive Summary Marketing is one of the most important processes in any business, becau...