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
The Five Forces Model
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
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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
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Red vs. Blue
Value innovation
Value curve
Unique and surprise
Focus and simplicity
Compelling and smile
Brand strategy
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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
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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
Cracking the code of change
Dimensions
Theory E
Theory O
Combined
Goals
Maximimize
Develop org.
shareholder value capabilities
Embrace the
paradox between
value and culture
Leadership
Top down
Bottom up
Direct from top,
empower bottom
Focus
Structure and
systems (BPR)
Culture, people
Seven Ss
Process
Plan and execute
Experiment and
evolve
Plan for
spontaneity
Rewards
Financial
rewards
Intrinsic rewards
Incentives
reinforce not
drive
Consultants
Analyze and solve Empower
problems
employees to
solve own
Experts who
empower
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
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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