1.Provide a Comprehensive yet concise written analysis of how Banyan can make use of OR develop its Dynamic Capabilities given the Industry-based Considerations
2.Explain the advantages and disadvantages of your recommended strategy as a way of Banyan’s strategic efforts to manage differences in its global or International Markets such as India.
1.Founded in the year 1994 by travel enthusiast and former journalist Ho Kwon Ping and his wife Claire Chiang, Banyan Tree Holdings Ltd (BTHR) have made its name and place in the luxury hotel industry in Asia as well as all over the world. Over the years, even with minimal advertising this chain of luxury hotels and resorts have been able to make a mark in the industry with the help of their global marketing strategies and public reactions (banyantree.com 2017).
To be able to understand and analyse dynamic capabilities it is important to first understand business environments properly (Schilke 2014). The factors which directly or indirectly effect the day-to-day operation of an organization can be roughly put in the business environment sector. The development and the success of a business are dependent upon how the organisation is being able to adapt to the changes in its environment. There are two types of business environment, internal and external (Boons and Lüdeke-Freund 2013). The main difference between the two is the control of the organisation over the factors. Internal environments are variables that are under the direct control of the management, while the external factors are the ones which are not under the control of the organisation, but these factors are very relevant in the business and the success of the business. For example: competition, customers, government policies, societal factors, political agendas, legal do and don’ts and technological factors etc. Some of these have direct effect on the operations of the business while there are others who have indirect effect (Hamilton and Webster 2015).
Skilled and trained professional: In the hospitality sector there is always a demand for skilled and trained professional who understand and know the industry’s every nuance. These people are the main asset of the industry. As this market is heavily dependent on the one on one interaction with the customers, it is important for the hotel business to employ people who are motivated and are social. In India hospitality industry is booming as people now understand the perks and the value of premium quality food and lodging, people are also willing to spend more so that they receive best of the best form the hospitality sector. There are several foreign tourists who are attracted towards luxury hotels and resorts in India (Paillé et al. 2014).
Development and growth of assets: The Company has recently launched new brands and subsidiaries including resorts, spas, residences, destination club memberships, retail outlets, and even museum shops as a part of their growth strategy. Along with the brand extension the organisation has also been involved in rapid growth in the global front to capture the market in the America, Caribbean, Europe as well as the Middle East. Expansion in India has begun with the first banyan tree resort in the state of Kerala. It is a first of its kind, premium-luxury boutique resort, which is an all-pool villa retreat. It has a luxurious private island in the backwaters of Kerala which offers a unique sense of calmness and retreat for the villa guests. There are 59 villas in the resorts and each and every villa offer a different yet one of a kind view of the rich heritage of the backwaters and canals (Franks et al. 2014).
Brand Image: While other luxury hotel brands develop the image of the hotel in accordance with the location that it is situated in. Banyan Tree hotels and resorts have been very strong in maintaining their Asian background and theme of the hotels even if they were setting up a property in the heart of Europe. For India it is an easy set up as the company do not have to invest a lot in the creating a faux Asia-like environment. The location choice of Kerala is perfect as the state of Kerala offers almost everything the Brand already stands for (Baranenko et al. 2014).
Unique selling proposition of the brand: Banyan tree offers private villas along with private pool, Jacuzzi and a spa. All these amenities are within a gap of price which is deluxe but not that one has to be a multi-millionaire to be able to stay at the banyan tree. The image of the Brand is also one of its USPs as the architecture, furnishing along with the services provided by the hotels are all in sync with the rich Asian cultural and heritage. This offerings work perfectly in the Indian setting as people who come to visit India from other countries are also majorly looking for Asian set up with a private space for retreat (Grant 2016).
To access the external environmental factors of banyan tree hotels and resorts, it is important to go through the Pestel analysis. Pestel refers to political, economical, social, technological, environmental and legal factors which influence the operations of an industry in a particular country. In this case the country is India and the following is the Pestel analysis (Khan and Quaddus 2015):
Political factor: The tourism sector is one of the major sources of income of the government and hence any political policy that has been adopted by the government has a direct effect on the hospitality sector. It is important to attract international tourist in order to keep the business running. In India, the state government policies are also important as it it’s directly responsible for the development of the industry in the State (Fleisher and Bensoussan 2015).
Economic factor: As banyan Tree is a foreign investor in the Indian market, the taxation policy, inflation rates, economic growth, interest rates and exchange rates of the market is important factor to grow and develop in a foreign nation state. With the inclusion of the new GST policy by the Indian Government the consumption of luxury hospitality has become more expensive (Wetherly and Otter 2014).
Social Factors: As the image of the brand is in sync with the Asian culture and heritage, it will not be a problem for the brand to be able to get accepted by the localities of the place and also by the international tourist who are looking for the Asian charm. As the brand offers luxury villas, instead of rooms it is easily accepted by the societal norms as well.
Technological Factors: India has its fair share of luxury hotels form a very long time. The Taj or The Oberoi has created a base for the hospitality sector in the country. The encouragement of international tourism has also led to development of the several relevant technologies and modern advancement in the ICT sector for the hospitality industry. Logistically there are no problems in India for the expansion of a brand like Banyan Tree.
Environmental factor: The factors which mostly affect the hospitality industry are availability of the raw material for food and diverse weather conditions. As discussed the theme of the Banyan Tree hotels are in sync with the Asian Cultural hence it is easy to find or import relevant raw materials for the food items served at the resorts. In case of other environmental hazards, storms; earthquakes etc have a direct impact on the sales of the hotel business.
Legal factors: There are several international luxury hotels in India. The law regarding setting up a property, and owning of a set up by a foreigner has certain rules and regulations like any other country. But these rules are favorable as India as a country entertains the international business and tourists. Flexible legal amenities are also a favorable factor as to why it is easy for a company like banyan Tree to further expand in the Indian Subcontinent (Eva et al. 2014).
2.As the Indian government entertains and encourages international tourism and one of the government’s main sources of income in tourism, hence there is a wide range of competitors for Banyan Tree Hotels and Resorts. One of the main advantages of the organization is that the theme of the hotel is in sync with the cultural heritage of India (businessworld.in 2017).
Porter’s generic strategies are the ways of evaluating means for achieving an upper hand over the competitors, in other words, creating ways and means to develop an edge against the competitors. The position of an organization in the relative industry is mostly determined by the profit of the average of the industry. The basis of any organization to maintain a profit margin above the average in the long run is by gaining sustainable competitive advantage (Wicker et al. 2015). Low cost or differentiation is the two basic types of competitive advantages that a company can have. The focus strategies of activities are of two types, cost focus and differentiation focus.
Figure: Porter’s Generic Strategy
Source: Author’s Creation
Banyan Tree Hotels and Resorts should follow the Differentiation strategy in India. The differentiation strategy is what best fits the luxury hotel and hospitality industry in this case the firm seeks to offer unique and premium services in the industry along some values that are widely appreciated by consumers of the market. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions it to meet those needs. It is rewarded for its uniqueness with a premium price (Rothaermel, F.T., 2015).
The chain of hotels and resorts is an ultra-luxurious retreat for its guests and hence they look forward to the best of the best in terms of quality and quantity. Good quality with less investment is something every investor is looking forward to. In India, the quality and the image that the company has is very easy to find and is in sync with the Asian cultural heritage. There are a lot of skilled professionals who are ready to be trained as professional at a lower price. The spa facilities that the villas of the Banyan tree offers to its customers need to have an array of skilled professionals, who are able to carry out the tasks. Apart from that there are several high standard hospitality management institutes in India that produce managers and professional of high standards who are able to keep up with the luxury and uniqueness of the brand.
One of the greatest advantages of such luxury hospitality brands in India is that the Government strategies and tax implementations by the government are in sync and are favorable for foreign investors. As a large amount of income of the government is based out of tourism it is important that the policies are in favor of these companies.
The greatest competitor of the Banyan Tree is the Starwood hotel’s Le Meridien which is located in the same state as the banyan tree. Some of the unique selling point of this hotel is similar to that of the banyan tree. Both these companies have a broad market of international tourists in India. One of the main drawbacks of the Banyan tree is that it has a limited number of Villas as supposed to the Starwood hotel which offers luxury rooms. Hence they can accommodate more number of people at the same time. The factors which give banyan tree an upper hand over its competitors is that it provides an Asian theme. Tourists who come to visit indie, one of their main focuses is to enjoy the Asian cultural and heritage which the hotel provides them. Not only that Kerela is famous for its spa retreats and oil messages each of these villas have a separate and very private spa segment which the guests can enjoy at their will. Above all, Banyan tree offers its customers the luxury of utmost privacy and recluse.
Since Banyan Tree Holdings Ltd (BTHR) is a multinational luxury hotel and resort brand they have the scope of developing a skimming price strategy via membership cards and loyalty programs which not only help in customer retention, but also help in the management of customer loyalty and further assist the company in advocating their goodwill. The competitors also may have this facility but the customers who are already aware of the quality of service available in the Banyan Tree will want to come back to the same place as it also offers a sense of security and assurance (economictimes.indiatimes.com 2017). (Words: 2018)
Reference List:
banyantree.com. 2017. Brand Story. [online] Available at: https://www.banyantree.com/en/the-banyan-tree-stories [Accessed 6 Aug. 2017].
Baranenko, S.P., Dudin, M.N., Lyasnikov, N.V. and Busygin, K.D., 2014. Use of environmental approach to innovation-oriented development of industrial enterprises.
Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable innovation: state-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45, pp.9-19.
businessworld.in. 2017. Hospitality Industry. [online] Available at: https://businessworld.in/article/Hospitality-Industry-In-India-A-Big-Contributor-To-Economy-s-Growth-/16-05-2017-118291/ [Accessed 6 Aug. 2017].
economictimes.indiatimes.com. 2017. Indian Hotel Industry. [online] Available at: https://economictimes.indiatimes.com/topic/Indian-hotel-industry [Accessed 6 Aug. 2017].
Eva, M., Hindle, K., Paul, D., Rollaston, C. and Tudor, D., 2014. Business analysis. BCS.
Fleisher, C.S. and Bensoussan, B.E., 2015. Business and competitive analysis: effective application of new and classic methods. FT Press.
Franks, D.M., Davis, R., Bebbington, A.J., Ali, S.H., Kemp, D. and Scurrah, M., 2014. Conflict translates environmental and social risk into business costs. Proceedings of the National Academy of Sciences, 111(21), pp.7576-7581.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University Press, USA.
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Paillé, P., Chen, Y., Boiral, O. and Jin, J., 2014. The impact of human resource management on environmental performance: An employee-level study. Journal of Business Ethics, 121(3), pp.451-466.
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Wetherly, P. and Otter, D. eds., 2014. The business environment: themes and issues in a globalizing world. Oxford University Press.
Wicker, P., Soebbing, B.P., Feiler, S. and Breuer, C., 2015. The effect of Porter’s generic strategies on organisational problems of non-profit sports clubs. European Journal for Sport and Society, 12(3), pp.281-307.
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