Posted at 10.13.2018
Based on the contract reached in the last Panel of directors get together for Travelodge to check out the opportunities in starting an procedure as a strategic business unit within the air brand industry, this survey considers the choice of rolling out Travelodge's new plan to fly within the united kingdom (the united kingdom towns). It starts off by conducting a critical analysis on the background of the business, looking at the option of business available and comes up with runs of strategic option proposed for the operation and plan for implementation within a particular time frames
Travelodge is the second largest budget hotel brand, third biggest hotel string in terms of room quantities in britain and the fastest growing hotel in the UK. It performs in the hospitality industry. From Organisational point of view, Travelodge has it's headquarter at Thame, Great britain, UK and its own mother or father company is Dubai International Capital (www. travelodge. co. uk).
The time 2007 showed a strong financial performance with the following key figures in comparison to 2006:
UK operation revenue develop up by 20% to 243. 8 million (from 203. 5 million in 2006), London exhibited strong expansion at 32% and room sales up by 14% at 5. 5 million.
Spain noticed occupancy rate up by 15 points and secure at 77% across the board.
Earnings before interest and Taxes increased by 30% to 55. 8 million (from 42. 8 million in 2006).
Free cashflow generation in 2007 stood at 60%
(http://www. travelodge. co. uk).
The company has conceived a move out plan to start out a new operation in the flight industry starting with the UK road. This will handled as a new strategic unit of Travel Lodge Hotels, albeit under Travel Lodge - with the code name Travelodge flight. It is designed to embrace a low cost strategy (low cost travel tickets and other services), effectively rivaling Airlines within the reduced cost proper group (such as EasyJet and Ryanair amongst others). The brand new operation will be based at Gatwick airport, which really is a 20 to thirty minutes commuting distance by rail from London Victoria. The company will be getting a UK Civil Aviation Specialist Type A Operating Certificate permitting it to transport travellers, cargo and email on airplane with 20 or more seats, for its new operation in to the UK. (http://www. caa. co. uk/default. aspx?catid=183&pagetype=90&pageid=340)
This report will therefore take a look at the way the new operation should be approached strategically.
Stakeholders are defined as "individuals or organizations who stand to get or lose from the success or failing of something" (Nuseibeh and Easterbrook, 2000). For an air travel company these can include management, employees, federal, community/Greenpeace/environmentalists, customers and suppliers among others. Since, by explanation, stakeholders are those who are impacted by (or impact on) the project, their perspectives need to be considered for a project to reach your goals. Stakeholders can have positive or negative views regarding a given project, and often don't agree with one another, so that it is an issue to reconcile their different viewpoints.
It will probably be worth considering the record and lineage of the word "stakeholder analysis. " The term was introduced in a seminal e book by R. Edward Freeman called Strategic Management (1984). The word stakeholder was used to stand in contrast to the neoclassical view of the organization as providing to stockholders. Freeman used the word stakeholder research to remind management that it was in the long-term interests of the business to pay attention to the interests of these who have an impact on or are influenced by the activities of the business. In the same focus, Travelodge management should endeavor to identify the key stakeholders, their pursuits and the affect they can exert on the proposed new procedure.
The first step in stakeholder evaluation is to recognize who organisational stakeholders are. Think of all the folks within the organization who are impacted by business activity, who've impact over it, or have a stake in its successful conclusion. The next stakeholders may feature prominently when Travelodge embarks on its new operation in the air travel industry.
These will be the owners of the business and the principal-agency romantic relationship dictates that Travelodge must have fiduciary duty to put their hobbies first in conditions of value creation. The new technique to operate Air fleet should therefore be satisfactory to them in terms of high return on the investment and low risk.
The air travel industry is one of the highly regulated industries globally. Travelodge's new strategy will face troubles in this field considering that most world airlines are strongly attached to countrywide governments (the just to illustrate are British Airways and American Airlines) or these are actually nationalised, for example the Malaysian Airlines (www. caa. gov. uk). Government as a stakeholder is of important importance to granting operating licence and regarding Travelodge the licence might not be given or withdrawn unless this group is fully content with specific regulatory conformity such taxation and environmental laws and regulations.
This group of stakeholders has high interest but low power in the company. They are able to however, increase their overall effect by forming coalitions with other stakeholders, such as trade union in order to exert a greater pressure and thereby making themselves more powerful. The withdrawal of their labour is one such example. Travelodge's technique for working with this group would be to keep them happy by for example reassuring them with their job security, training and development.
The negative impact of any company's business activities on the surroundings attracts the interests of this band of stakeholders. There were serious criticisms of the Air travel industry in recent times because of the bad insurance policy on the environment (air transport pollution). The just to illustrate is the recent protest by greenpeace and local community around Heathrow airport opposing the airport terminal expansion programme by BAA (http://stopheathrowexpansion. com). This group of stakeholders has real potential to synergy with others to lobby finance institutions to refuse funding Travelodge's new procedure should they not honor environmental regulations. Travelodge must respond to the greenpeace/envrionmentalists' demand by for example buying green planes (Ecojets).
This band of stakeholders have both high interest and impact in Travelodge. Suppliers are referred to as market of inputs. Suppliers of recycleables, components, and services (such as expertise) to the company can be a source of power over the firm. Suppliers may won't work with the company, or for example fee excessively high prices for unique resources (for example, aircrafts in the case of Travelodge). The management strategy for interacting with this group should factor the next issues:
supplier transitioning costs in accordance with firm turning costs
presence of swap inputs
supplier attentiveness to firm attentiveness ratio
threat of frontward integration by suppliers relative to the risk of backward integration by firms
cost of inputs in accordance with selling price of the product
This group has high interest and can have high impact in the company especially if there are so many competing organizations in an industry. Customers are described as the market of outputs. The power of customers to place Travelodge under pressure due to awareness to price changes. Travelodge must observe the pursuing factors when coping with customers:
buyer awareness to firm concentration ratio.
bargaining leverage, especially in sectors with high fixed costs.
buyer switching costs relative to firm turning costs.
buyer information availability.
availability of existing substitutes products.
Collins and porrs, 1984 argued that The greatest value of a company is its image and brand (Collins ands Porras, 1994). By attempting to fulfil the needs and needs of many differing people ranging from the local people and customers to their own employees and owners, companies can prevent harm to their image and brand, prevent shedding large amounts of sales and disgruntled customers, and stop costly legal bills. As the stakeholder view comes with an increased cost, many firms have decided that the idea improves their image, increases sales, reduces the risks of liability for corporate negligence and makes them less inclined to be targeted by pressure groupings, campaigning categories and Non Governmental Organisations (NGOs). Travelodge's management will therefore have to ensure that the technique for the new operation complies with suitable laws regulating the airline industry (such as environmental law, employment laws amongst others).
The new tactical direction performed by Travelodge to operate in the Air travel industry represents a proper change. The strategic review below explores what options are available to Travelodge in taking this procedure.
to be competitive in terms of Porter's common strategies (Porter, 1980), the business would need to consider the three strategies as they were recommended by Michael porter
Overall cost command - this plan puts much emphasis on efficiency. Companies that attempt to become the lowest-cost producers in an industry can be known as those following a cost command strategy. By producing high volumes of standardised products, the firm hope to take good thing about economies of size and experience curve results. The product is often a basic no-frills product that is produced at a comparatively low cost and distributed around an extremely large customer bottom part. Maintaining this strategy requires a constant search for cost reductions in all aspects of the business enterprise.
This is the strategy which Travelodge has been and presently pursues in its other procedures - low cost hotels (www. travelodge. com). The question of whether it's proposed new procedure will call for the use of this same strategy is matter of thorough proper assessment by Travelodge management. The type of product (UK flights) that Travelodge Air travel will establish might require a different option where in-flight services (such as refreshments and meals) may need to be provided.
However, low cost control is disadvantageous since it causes less customer commitment and good deal creates bad attitude towards the quality of the product in the state of mind of the customers (Porter, 1980).
Differentiation strategy - this strategy is targeted at the wide market which involves the creation of something or services that is identified throughout its industry as unique. The company or business unit may then impose a premium for its product.
Among of the types of differentiation include better service levels to customers and better product performance among others compared to the existing competitors. Following a differentiation strategy incurs extra costs in product/service delivery (Porter, 1980). Such costs include high advertising spending to promote a differentiated brand image for the merchandise. Launching the new operation means that Travelodge will be taking up a strategy where drinks and meals can be found as differentiang factors. Research does indeed claim that a differentiation strategy is much more likely to create higher income than is an inexpensive strategy because differentiation creates a better entry hurdle. However, there are problems associated with this strategy, which include the difficulty on part of the firm to calculate if the excess costs entailed in differentiation can actually be recovered from the customer through premium pricing.
Focus - Michael Treacy and Fred Wiersema (1993) have improved Porter's three strategies to identify three basic "value disciplines" that can create customer value and provide a competitive advantage. They are functional excellence, product command, and customer intimacy. Companies make use of this plan by concentrating on the areas in market where there is minimal amount of competition. Companies can employ the emphasis strategy by focusing on a specific niche market on the market and offering specialised products for your niche. This plan provides the company the likelihood to charge reduced price for superior quality (differentiation concentrate) or by offering a low price product to a tiny and specialised band of buyers (cost focus). This plan might be appropriate for Travelodge's new procedure where it will target rich pensioners who may choose to happen to be the countryside.
The problem with this strategy, however, is that the niche market is small and may well not be large enough to justify a company's attention. The concentrate on costs can be difficult in companies where economies of size play an important role. There is also a danger of bigger better resourced opponents getting into the same niche industry.
Porter (1908) argues that a organisation should choose one technique and apply to avoid getting stuck in the middle. There is no competitive benefits for a corporation that is jammed in the middle and the effect is often poor financial performance.
Where to be competitive in conditions of Ansoff product market matrix (1957)
Market development - this program involves providing existing products in the new market. In marketing terms, a firm is selling a recognised product available on the market targeted to another customer segment (Kotler, 2003). This seems to be part of Travelodge's proper intent - developing a new product for a new market. However, there are dangers associated with this strategic option such as experience of the market. In order to do this effectively, Travelodge would have to design an effective marketing strategy, you start with marketing research, segmentation, focus on the best portion and product placement.
New product development (developing services for existing market) - a company with market for its current products might go on a strategy of expanding other products for the same market. It could also seem that Travelodge's strategy is to provide Air transfer for it's hotel guests. The potential risks poised by this strategy range from funding, performance to competition amongst others. This means that a company should carry out new product planning.
Diversification - This strategy results in the company entering new markets where it experienced no occurrence before. This is actually the strategy that Travelodge is seeking - coming into the Flight industry where it acquired no existence before. Regarding to Ansoff (1957), this is actually the most unidentified and riskiest strategy. He shows that for a firm to pursue this plan there needs to be the thread - where there are some common activity that links everything the organization does.
The implication of the strategy in terms of resources centres on the following:
Managerial - this strategy will strain available managerial resources and may distract from managing the main business. Travelodge should ensure it has distinctively core competence in terms of management and staff who will be managing the Airline business.
Financial - strains the sources of the business leading to liquidity problems. Additionally it is likely to entail reduced margins as Travelodge expands from more to less profitable procedure (not yet examined). It should also be mentioned that that enlargement strategy may get attention from better resourced challengers. Therefore Travelodge will have to ensure that it puts in place obstacles to entry into the industry. This involves constant research and development (creativity), which in turn requires funding.
Purchasing of new aircrafts - That is a new operation and as such Travelodge will have to have admission or negotiate some type of loan from the finance institutions to finance the purchase of new airplane.
Strategy creation and implementation can be an on-going and involved process requiring continuous reassessment and reformation. Strategic management works on several time scales. Short term strategies entail planning and controlling for today's. Long-term strategies involve preparing for and preempting the near future. Marketing strategist, Kotler (2003), has suggested that understanding this dual nature of strategic management is the least understood area of the process. He says that controlling the temporal aspects of proper planning requires the use of dual strategies together.
The desk below packages out the suggested time stand for utilizing the new procedure.
April - May 2010
At the look level of the job:
Draw up an action intend to be followed through from the look period to the release of the new procedure.
At the look stage, defining and review the money level available for the new procedure.
Consider competent staff who should be brought on board to form a team will continue to work through the task.
Consider the need to recruit external experts to help guide the project where there is inadequate competence in the company.
Consider the financing level available for the new procedure.
June - July
At the stakeholder discussion stage:
Consult senior managers and board members on contentious conditions that need to be addressed.
Involve other stakeholders (including employees, community and government agencies) of these views on the project.
august - sept 2010
At the review level:
Review effects of the strategy and any issues from budget monitoring
Consult with mature directors on key issues arsing from other stakeholders.
Communicate the strategy to all the personnel in the organisation and keep regular improvements across the organisation on the progress of the task.
Review and amend the financial forecasts in light of any new requirements due to stakeholder appointment.
Conceder staff requirements for the new operation (that is, recruitment, training and development).
- Release the new operation
- This level will also require some form of opinions and control.
2. 2 Systems and steps for dissemination
The process for disseminating information a clear co-ordination of strategy and ensuring every staff involved and damaged by the plan are regularly up to date of improvement. Strategic implementation should not be divorced from formulation of strategy. Mintzberg conditions this the "fallacy of detachment" arguing that such separation inhibits learning and versatility. When a new strategy is designed, personnel should be kept educated since it signifies a change in a organisation. Regarding Travelodge, the plan to operate long haul route presents a big change in the strategic way within Travelodge. As a result the next issues needs to be addressed:
Education - communicating and explaining the nature and reasons for change. The earlier it is done, the less chance of roumers and distortions that will complicate the change process.
Participation - the active involvement of these afflicted by the changes in the changing process. Questions come up, however, about the level and the opportunity of the involvement.
Facilitation - helping those damaged by the change to simply accept and modify to the changes. Management should combine change within different levels in the company. Change must be inspired and strengthened through training of personnel.
Introduce change little by little, either over a hand and hand or detail by detail basis to reduce resistance. Pilot plans are of value for learning and demo purposes.
2. 3 Monitoring and evaluation
Any Successful tactical plan will need to have a clearly described objective, careful analysis of both internal and exterior situation when formulating and utilizing the strategy.
The company will need to have a clear eye-sight of its long term ideas. These also require evaluating the financial and strategic objectives. Financial aims involve options such as sales goals and earnings development. Strategic objectives are related to the firm's business position, and may include actions such as market show and reputation (quickmba, 2007). The Environmental scan includes inside analysis and external macro environment (Infestation research) of the organization.
Johnson and Scholes (1999) argued a model in which tactical options are evaluated against certain key success standards laid down below:
After evaluation of the responsibilities in terms of organisation eyesight, mission and the target with regards to the strategic planning and execution with reference to several theories and principle, tactical plan should be designed so that will facilitates easy execution, monitoring and control system. It vital that a full analysis of the process, controlling for variances is made in to the strategy with a view to making provision for adjustments as and when needed to avoid implementation a failure.
Strategic managers of Travelodge should ensure that the next steps are used when creating and implementing the strategy for the new operation:
Achieve exec sponsorship and commitment.
Involving a broad base of leaders, professionals and employees in scorecard development by agreeing on terminology.
Beginning interactive (two-way) communication first.
Working through quest, vision, strategic results, and strategy mapping first to avoid rushing to judgement on methods.
Viewing the scorecard as a long-term voyage rather than short-term task.