Options analysis

Analysis of Martin’s three options

Option 1: Close the hotel for a year to allow mass renovation

Option 2: Transforming all rooms into self-contained apartments

Option 3: Forming a strategic alliance with a famous safari tour company

Close the hotel for a

year to allow mass renovation

Restraining forces

- Missing all profits for one year- Very expensive- Potential loss of customer base, loyalty, reputation and competitive advantage (due to new brand name)- Actual workforce will miss their salary (?); no info is provided about types of contract (should the hotel pay its employees even if it’s closed for renovation? Could they keep the job without getting a salary for 1 year); if employees need to be paid, this would cause a strong cash flow problem

Driving forces

-Possibility to improve its competitive advantage by repositining the hotel as premier- The hotel had already reached its decline phase and needed rejuvenation- The new hotel would be much improved-The new hotel would need an improved workforce (training is needed)- Changing physical evidence, price and product would mean to change the hotel marketing mix and to create a new position within the market

Option 1

Option 1 – Appendix 3 – Approach1

• “Upskilling” the existing workforce- Less down-time- Motivational – increase employees’ loyalty- Less risk – as most employees would be Kenyan

- Time consuming- Expensive as strong emphasis is given to training and development- Fewer applicants- No new ideas- Poor relation between employees and customers (as most of them would be Kenyan

and they might not know other cultures/languages)- Employees might compete to get higher positions

- As retention: most financial motivators might be used to keep the workforce- In general internal recruitment is less expensive than external recruitment

Option 1 – Appendix 3 – Approach 2

• Building a new global workforce- New ideas- Wider range of experiences- Higher posssibilities to find ideal candidates- Possibility to create a more international internal environment (easier to create

closer relations with customers)- Less expensive as little emphasis is given to training and development

Option 2

Transforming all rooms into self-contained

apartments

Driving forces

- Increasing demand- Fewer competitors- First mover advantage (in case it is the first hotel to provide this service)- Good possibilities to increasse market share- Profit might be more stable due to less seasonal fluctations- Lower fixed and variable costs

Restraining forces

-It might be difficult to change target (this involves higher advertising/promotion expenditure)- Reducing workforce by 70% might make relations with local community difficult- The hotel should be closed for a long period to allow renovation - loss of profits- Could business travellers stay less than one week? If not, the hotel would lose some customers

Option 3

Forming a strategic

alliance with a famous safari tour company

Driving forces Restraining forces

-Customers might find this two-week package tour more convenient- KenSafar is a famous safari tour company > the hotel might improve its brand recognition- Promotion costs could be shared with Kensafar- KenSafar has a better understanding of local attractions > benefit for customers- KenSafar’s owner has many local networks and contacts and he knows market trends > easier communication and easier to respond to market trends- This would be an extra service > a new market opportunity in addition to existing ones

-To make improvements the hotel should be closed > loss of profit + costs- The hotel has to pay a commission (20%) to Kensafar- A marketing audit is needed-Not all customers can afford a two-week holiday and might prefer staying only one week

Which option was best? Martin was unsure....

Market penetrationOption 1

Product development

Option 3

Market development DiversificationOption 2

Product

Existing NewEx

isting

New

Mar

kets

The Ansoff Matrix

Market penetrationOption 1

Product development

Option 3

Market development DiversificationOption 2

Product

Existing NewEx

isting

New

Mar

kets

Market penetration/Option1:-Low risk (? But the hotel will lose one-year profit...is this a low risk strategy?)- Change pricing strategy: more competitive prices- Lower profits (reduced prices to stay in the market)- Improve advertising to attract customers- Competition might increase (price wars)- This strategy could be easily imitated (low entry barriers)

Diversification/Option 2:- High risk strategy- Difficult to achieve- Apartments should be diversified (different services/facilities) to provide a wider product portfolio and spread risks > to get a related diversification

Product/development – Option3:-Medium-risk – more covenient- Wider customer base- Suitable for The Imperial as it has reached its decline stage (line 131)

Something in common...

• Common for all options: - Renovation is needed- Investment is needed- New marketing strategy/plan• Common for option 1 and option 2:- Change/reduce workforce - workforce

planning is needed