The tourism and hospitality industry contribute a significant amount to the economy of a number of countries around the world. There are countries that run on tourism and hospitality. The industry not only helps in employment and increase in the inflow of foreign exchange it also helps in spreading the culture and heritage of the areas (Buhalis and Crotts 2013). According to Xiang et al. (2017), the companies that operate in the industry are in the service sector and hence they have to strategies in a way that improves their relation with the customers and build better opportunities in the future. Business organizations formulate the policies and decisions in a way that it is aligned with the objective of the company.
Marriott International is an American multinational organisation that operates in the hospitality industry. The company has over the years of operation gathered significant goodwill among all the stakeholders (Marriott.com 2018). The organisation operates in more than 127 countries and has over 6500 properties all over the world. Headquartered in Bethesda, Maryland, the company has been established by J. Willard and Alice Marriott in 1927 (Marriott.com 2018). The company has established itself as a leader in the industry and has set a number of pioneering benchmarks in the process of operation in the hospitality industry. The core values that have been followed by the company since establishment revolves around the people who are associated with the company, the stakeholders are the first priority for the management. Apart from that excellence, change and integrity are some of the value that is followed in the organisation, based on these values the strategic management decisions are taken and implemented (Marriott.com 2018).
The new market where the company is strategized to invest in Iceland, the company has a number of properties in Asia, Africa and America, however Europe especially the Nordic countries the company has properties in just four countries: Denmark, Norway, Finland and Sweden. Therefore the company is planning to further expand in the Nordic territory. Segmentation is an important part of the marketing strategy in the hospitality industry in order to understand the guests and their needs and requirements. The hotel will be established in the Capital Reykjavik, which draws a number of tourists who are both for leisure as well as business purposes.
Strength: The goodwill of the company on an international scale is one of the biggest strengths that the company has while establishing the operations in a new market. Marriott is renowned for its customer friendly premium services and its values. Thus, it can be said that the company has a goof brand value among the previous as well as on the target market (Marriott.com 2018).
Another major strength of the company which will help the company to establish the hotel successfully in Iceland is the fact that the company embraces the local culture of the area where the property has been established, this provides the guests a sense of welcoming to a new place where they have arrived as visitors (Bull et al. 2016). Acceptance of diversity in the process of operation will help the company to establish and align with the Psycho-Graphic and Behavioral segmentation of the venture.
The company operates on large scale economies and thus there are opportunities for the company to conduct market research in order to understand the needs and requirements of the guests who visit the country and develop the services in a way that will suite the requirement of the visitors. The revenue of the company was $22 billion in fiscal year 2017 (Marriott.com 2018).
Weakness: One of the major drawbacks of the company is that the market is completely unknown for the management and considerable amount of market research is required.
Strategies of establishing the property on the European grounds have not been strongly established (Bull et al. 2016).
The culture that the company has is very different from the new market that is being targeted.
The company has been subjected to a number of controversies thus, impacting the reputation in the market.
Opportunities: Prague is a country where there is a high rate of tourism; the government of the country also encourages and facilitates foreign investment as well. Travel & Tourism contributed ISK885.3bn (USD8, 464.1mn), of GDP of Iceland (Wttc.org 2018), which is 34.6% percent of the total GDP in 2017 (Wttc.org 2018). This is forecasted to rise in the following year. Some of the other facts are stated in Appendix 2 and 3. Apart from this there are also significant amount of investment in the industry, in 2017 ISK100.3bn was invested in the industry which amounted to 17 percent of the total investment (Wttc.org 2018).
The unique architecture and rich cultural heritage of the country draws a number of tourists from all over the world making the country an appropriate expansion option for one of the leading hospitality organisation (Bull et al. 2016).
The economy of the country is developed therefore it will encourage domestic tourists who will visit Reykjavik also to choose the services of Marriott over any other organisation as they have the means and they taste for luxury.
Picturesque location of the country and the weather also permits large number of tourists’ inflow all around the year (Wttc.org 2018).
There has also been an increase of international tourists in the country which is an opportunity for the company as it serves as Marriott have a number of loyal and advocate customers all over the world (Wttc.org 2018).
Marriott has been focusing on personalizing the services of the hotels based on the country, the acceptance of cultural difference has always been a part of the company but developing services based on the country of operation is an opportunity to draw the attention of the target market.
Threat: The market already has an intense competitive environment and it will be a challenge for Marriott to establish the brand in the way it has in the other parts of the world (Bull et al. 2016).
According to triadvsor some of the top rated luxury hotels that are established in Reykjavik are the Hilton group, the Grand hotel etc who are also some of the major competitors on an international level. Seasonal tourists in the region are another threat to the company.
There has been a significant rise in the international hospitality industry owing to the fact that there is a growth in the international travelers as well. Foreign exchange is a significant means of economic development and this has encouraged the government of several countries to motivate and invest in the tourism and hospitality industry. With advancement of technology and improved means of communication and transportation, the global hospitality market has witnessed a boom (Buhalis and Crotts 2013). Marriott is one of the leading companies operating in the hospitality industry and over the years the company has established four properties in the Nordic region, and choosing Iceland is a good option for the company as part of expansion plan as the country has a significant amount of tourist both domestic as well as international (Thakran Verma 2013). Following is a PEST analysis which will help in establishing the feasibility for the brand to build a property in Iceland, furthermore, with the help of the porter’s five force analysis the competition in the environment can be analyzed. Since the external business environmental factors are not under the control of any organisation the management has to undertake research and critically evaluate the situations in order to ensure that the strategies that are undertaken align with the objectives of the business.
Political: The country follows a parliamentary democracy constitution that was adopted in 1944. The country enjoys a stable government that encourages investment and business in order to provide the people as well as the economy to grow and develop. The export law, taxation etc liberal as the government of the country always encourages investment. The country is a member of the European Union thus the policies of investment and trade are according to the ones that are equal to all the members of the union. The country also enjoys the several treaties and agreements with other countries this is mainly governed by European Economic Area (EEA) with the exception of agriculture and fishery industry. On November 2017, Katrín Jakobsdóttir was elected as the prime minister of the country. 61.5% of the total trade of Iceland in goods is from the EU which is then followed by the United States, Norway and China (Chamber.is 2018).
Economy: The economy of the country is developed and the disposable income of the people of the country is also high. As per the forecasts of the International monetary fund the country has a growth trend in economic development. This is an opportunity for foreign investors to invest in the country. About 7.2 percent of the total employment in the country is generated through the tourism and hospitality industry (Chamber.is 2018). The GDP of Iceland in the year 2017 is $23 billion and is expected to grow therefore, making the decision of expansion in the economy feasible for the Marriott for expansion (Chamber.is 2018). The economic crisis of 2008 has led to some important changes in the economy of Iceland, there has been rapid progress and investment in the economy improving the standard of living and increasing the purchasing power of the people. Today the economy of Iceland has proven to be one of the most productive in the world.
Societal: As the country is developed and is on the rising trend of development, the standard of living and the quality of life among the citizens are high. Iceland is one of the most sparsely populated countries in the continent. There is also acceptance of other culture and religion among the people and thus making it easier for foreign investors. According to the United Nations Human Development Index, Iceland continues to be on the top of the list. Along with this the society also gives importance to education along with compulsory education and higher education facilities for students. It can be said that the characteristic of the society is progressive and modern. Hospitality industry in the country is also on a growing trend as the number of domestic travelers in the country has also increased over time (Wttc.org 2018). 27.4% of direct Travel & Tourism GDP was generated from the domestic travel spending and is expected to grow further in the future (Chamber.is 2018). Refer to Appendix 4 for the info-graphic representation of the international and domestic visitors in the country. Apart from that the country is also responsible towards the environment and development of the society at large, the Country has been listed as one of the greenest in the world. The culture of the country is strong with its legend and literary that dates back to the centuries back and this is something that draws a number of tourists to this region along with the picturesque geography of the region.
Technology: in order to ensure the convenience and the premium quality experience the company assures to provide the customers, technology plays an important role. Iceland has the facility and infrastructure to install some advance technologies such as digital hotel room keys, facility in booking and cancellation (Wttc.org 2018). The technology of Smart room access systems enables the guests to use their mobile phones as keys to access all the controls of the room. This technology has solved the issue of many guests who misplace the keys or demagnetization of the plastic key card (Wttc.org 2018).
Porter explains that there are four aspects in the external environment that leads to competition in the industry.
Threats of new entrants: Marriott has a very prominent brand name that has been associated with goodwill, since the company has properties in more than 127 countries and over 6500 establishment it is difficult for new entrants to pose a threat to the organisation. However in order to establish a new company in the hospitality industry the venture would require a major capital investment making the process of setting up a new company. Therefore, it can be concluded that the threat of new entrants for an establishment like Marriott would be low (Dobbs 2014).
Bargaining power of the suppliers: The Company considers the people associated as the most important stakeholders and thus the suppliers are also equally important. Due to the brand value of the company the suppliers would like to stay associated with the brand, hence it can be said that the bargaining power of the suppliers are less. Also there are an abundance of suppliers in the hospitality industry, which therefore lowers the switching cost of the suppliers (Dobbs 2014).
Intensity of competition: There are a number of luxury hotels with similar profile of the target market in the capital city of Iceland, there are also international competitors like the Hilton hotels and the grand hotels in the city, therefore it can be said that the intensity of competition in the country is high (Yunna and Yisheng 2014).
Bargaining power of the customers: As discussed above the intensity of completion in the industry is high and therefore there are a number of choices in terms of taking a luxury option for accommodation in the country. As the options of the customers are more it can be said that the switching cost of the customers are low as they would get similar services form other luxury hotels in the vicinity as well(Cetindamar and Kilitcioglu 2013). Only for the loyal customers of Marriott the switching cost are high, it can be therefore concluded that the bargaining power of the customers are high to medium. This makes the company always create strategies and policies which would keep the customers or guests engaged and wanting to return to the services over and over again (Yunna and Yisheng 2014).
Threat of substitute: for a company that operates in the hospitality industry, the major substitute is when a person chooses to stay with a family or a friend instead of availing the hotel services. Air Bnb is the new substitute that the hospitality industry such as a hotel face, this website allows a person to choose a host from the city instead of choosing to live in a hotel room (Ikkala and Lampinen 2015). This website operates in the hospitality industry as it connects the house owners with the guests, thus proving a substitute to the traditional hotel business. It can be concluded that the threat of substitute is medium as the website and the concept of AirBnb is relatively new and there are a number of travelers who would like to choose the traditional way, as far as family or friends are concerned that is not always possible for a traveler to have in every country or city that they travel (Guttentag 2015).
For a company to expand in a new market there are a number of factors that has to be considered as discussed in the above section. Based on these factors analysis the management has to decide upon the strategies which would be best suited for the expansion of the company (Eden and Ackermann 2013). The ways in which the company can emerge over the other competitors in the market has to be discussed along with communicating with the target market regarding the expansion of the service. There are businesses as well as corporate strategies that are required to be formulated in order to ensure that the strategies are aligned with e objectives and are based on the values and principles of the company. In order to determine the market growth Porter’s generic strategies are going to be implemented on the other hand, Ansoff matrix is going to be used in order to determine the corporate strategies that the company can use in the new market.
Figure: Porter’s Generic Strategies
Source: (Tassabehji and Isherwood 2014)
There are three ways that was directed by Michel porter for organizations to device business strategies.
Cost leadership is when a company offers the customers the service or product at the lowest price; this is not possible when it comes to a luxury product or service which is in the case of Marriott hospitality services (Tassabehji and Isherwood 2014).
Differentiation is the strategy where the company offers a product or service that is different from what the other competitors are offering. In order to ensure a differentiation strategy the organisation must have analytical and innovative back up to support the strategy. Along with this the company should assure that the product or service that is being delivered is of premium quality or the customers will not be interested in availing the same (Salavou 2015). The strategy should also be backed up with effective marketing in order to communicate with the people the facts that make the service different from the ones that are offered by the competitors. The Management of Marriott cannot take this strategy as the company is a luxury service and the is more resource and capability for the company to undertake the focus strategy rather than just differentiation (Alstete 2014).
Lastly is the focus strategy is what the management should adapt in order to attract the target market. The focus is on differentiation, the company can focus on the rich cultural heritage of Iceland while building the property in order to provide the customers with an experience of a life time. Marriott is known for its hospitality based on the cultural background of the country where the property is established (Teeratansirikool et al. 2013). For example: The Marriott of the Chinese territory is very different in the way of service and architecture than the Marriott of India or France. Over the years of operation the company has gathered good name in the industry which is a part of the differentiation strategy as well. As a brand the company has established itself as different in the minds of the target market (Tansey et al. 2014).
For Marriott the product and services do not change, the company does not diversify in order to grow as it is known for its hospitality services (Elmes and Barry 2017). The brand value of the company is significant hence the corporate strategy that the company takes is based on the existing services. The strategy of market Penetration is also undertaken by the company they have established a number of properties in China and also in India where the market does not change with the help of the loyal project and new and innovative marketing strategy (Elmes and Barry 2017).
The corporate strategy that the company has to establish in order to ensure expansion and development can be established with the help of Ansoff Matrix (Morden 2016). It is clear from the above diagram that the company is strategizing for market development as a growth strategy, with keeping the products and services in the existing; the market is new and emerging with the idea of establishing a property in Iceland. The company has always used this strategy in order to grow, for a company to keep a stable growth trend has to grow and establish properties in various markets (Jenkins and Williamson 2015).
There are four strategies that a company can undertake while taking decisions of emerging in a new market. Following are the four strategies:
Acquisition: in this strategy the host company takes over the rights and ownership of another existing company in order to grow, this can be international companies as well (Forsgren and Johanson 2014).
Merger: According to Bastié et al. (2013), here two companies have equal rights and equity as they amalgamate their operations.
Strategic Alliances: when two or more companies share their capabilities in order to pursue or achieve the objectives of the business (Brouthers 2013)
Organic Growth: the resource and capability of the company is the major source of this strategy, here the company exclusively uses its own strengths and capabilities in the expansion (Daszkiewicz and Wach 2014).
This is the strategy that Marriott is going to undertake while expanding in the new market. The profit as well as the resource capability of the company assures that the feasibility of this strategy. According to Clarke et al. (2013), the advantage of organic growth is that there is no third party involved in the expansion; however, the investment in the new market requires strong capital back up (Laufs and Schwens 2014). There have been successful mergers in the history of Marriott example: Marriott and Starwood.
The three factors that the management of an organisation has to consider while implementing the strategies are:
Resource and strategies: This can be segregated in two sections tangible and intangible, resources. Tangible resource: Finance, human resource and equipments are the most important, the revenue of Marriott was $22 billion in 2017, therefore it can be said that the company has resources to invest in a project in Iceland (Greco et al. 2013)
Arrangement and configuration: in order to implement the strategy of emerging in the Iceland market, the company has to adapt to the cultural heritage of Iceland in order to maintain the competitive advantage and the differentiation focus strategy that has been discussed above. But the strategy that has been undertaken is in sync with the existing structure and principle of the company (Hill et al. 2014).
Change: Management should be employed in order to take care of the new venture, this change is initiated form the scratch and thus organisation should be implemented in such a way that the process is streamlined (Rothaermel 2015).
5. Conclusion and Recommendation
It can be thus concluded from the above discussion that the feasibility of the expansion strategy of Marriott to Iceland is feasible and logical. The company initiates market expansion as a strategy for growth and development and Hilton which is one of the direct competitors of the company already has its property established in the country. The target market that has been explained is available in the country. The macro environment analysis show that the external factors of the country is favorable of the company to expand to the country. With the help of the business and corporate strategy tools it is clear that the strategy is feasible and the company has the resource and capabilities to ensure that the strategy is implemented successfully.
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