Outsourcing by multinational companies as part of global corporate strategy
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Hospitality and tourism strategic planning Premier Inn hotel Whitbread
Business strategy can be considered as the scope and direction of an organisation over a long-term period. When considering the different theories and concepts relating to the development of strategy for any organisation, it can be seen that there are numerous methods and concepts which can be utilised by any organisation based on different market conditions. This report is developed as a discussion paper on analysing the useful mass of various theories related to business strategy in order to identify and evaluate the opportunities for an organisation. A critical evaluation of the usefulness of various business theories has been undertaken with respect to one of the major hospitality organisations in the United Kingdom based on the discussions and held during the class with the colleagues and also through the development of self learning. The organisation chosen for the study is the Premier Inn hotel (owned by Whitbread plc.) which is considered as one of the biggest budget hotel chain in the United Kingdom. An important consideration during the present concepts of development of business strategy is the involvement of ethics in developing any strategy for the success of an organisation. In the second part of the discussion paper, the role of ethics in developing strategy for business success is evaluated.
Premier Inn is one of the United Kingdom’s largest hotel brands with more than 600 hotels which was operating initially under the brand name of Travel Inn prior to 1987 win. Premier Inn hotel is a brand owned by Whitbread group of the United Kingdom and is positioned as a budget hotel chain. Whitbread plc. has plans of doubling the number of hotels in the United Kingdom by 2016 and it also have three hotels in Dubai and one in India with several overseas development plans in the emerging nations. One of the major competitors for Premier in hotel in the United Kingdom is the Travelodge hotels but when comparing the growth of both hotel chains and, it is the Premier Inn which has expanded at a rapid pace and is also expanding to international destinations. One major investment strategy adopted by the company is the expansion in emerging markets such as India and China. The company have planned 18 hotels in India in the coming two years and bad about 60 hotels in major towns and cities in China (Financial Express, 2009). Since Premier Inn is only one of the brands (but the major brand) of Whitbread plc. which has emerged as one of the largest hospitality company with interests in restaurant, brewing and pub segments in the United Kingdom, it is necessary to analyse the entire business strategy of Whitbread plc., but with particular focus on Premier Inn
From the above given background, it can be seen that Premier Inn hotels is positioned by Whitbread plc. as a budget hotel with a cost leadership strategy although the other brands owned by Whitbread such as Beefeater, Costa coffee and Brewers Fayre cannot be considered as positioned for the same target customers as that of Premier Inn. Whitbread plc. started as the owners and operators of breweries and pops across the United Kingdom and has been operating over the past two centuries. When considering the transition from the hospitality segment of pubs to that of restaurants, coffee shops and hotels it can be seen that the company has followed a Value edition model and moved from the positions which were not making revenues for the company such as the breweries and pubs. Whitbread plc. has almost completely exceeded from the brewery and a business and is concentrating on modern areas of hospitality relevant to the 21st-century such as budget hotels and coffee shops. In the last several years, the company has been solely concentrating on increasing the businesses of the value for money hotels and the Costa coffee shops which has increased the profits, revenues and dividends by an average of 10 to 12 % over the past five years. It can be seen that event during the periods of recession in 2009 the company has managed to earn profit and has increased the revenues and profits in 2010. The consistent performance of the entire group under Whitbread plc. even during the recession period is an indication of the strength of the business strategy adopted by the company.
When analysing the strategic plans of the company in the future it can be seen that the major effort is put on expanding into the emerging markets. According to Smith and Siguaw, (2010) saturation has reached in the budget hotel market in the United Kingdom and also in other areas of hospitality such as coffee shops and specialised restaurants where competition has been high and there is high pressure on the existing organisations to reduce the cost base. Whitbread plc. has understood the saturation of the markets in the United Kingdom and even the rest of Europe at the right time and has concentrated on expanding its market and the business into the emerging nations such as India and China. Although large scale expansion with many hotel developments may not be possible in the Middle Eastern market, due to the nature of the market and population, the company has opened three hotels in United Arab Emirates and is also planning several hotels in other Middle East countries. But the major strategic business concept adopted by Whitbread plc. is seen in the area of expanding into the emerging markets such as India and China where the competition on value providing budget hotels aided by a brand name and business model is significantly low at the present time. Almost all the hotels with a consistent brand name and image are positioned at the higher end of the value chain and are costly for an average customer in these emerging nations. Although there are several hotels those of which even though has adopted a chain structure, the inability of these organisations to develop their own brand in a consistent manner over the past several years especially is seen as an opportunity for Premier Inn especially in India. Whitbread plc. has put up a number of Costa coffee shops in India and China and other Middle East countries which has provided them an experience to do business in other areas such as the hotels change in these nations.
Whitbread plc. has developed a corporate social responsibility policy where the secondary stakeholders (employees, customers, community and suppliers) are given prominent position along with the shareholders of the organisation. In developing the hotel chains and the restaurant segment, the organisation has kept in mind the aspects related to environment, sourcing of products and raw materials, health and safety and providing adequate opportunities for the employees of the organisation and finally in providing adequate value through the products and services to the customers of the company. Whitbread plc. has adopted a target oriented approach of reducing the carbon emissions, increasing responsible sourcing from organic farmers and is following a policy of fair trade approach along with providing increasing support to the community’s where in the businesses of the organisation is operating. The target oriented approach provides that the company is building value into every aspect of its business and driving sustainable performance to deepen the corporate responsibility in the business. In some of the highlights of the corporate social responsibility and the consideration of ethics in the development of business strategy and the operations of the several brands of the company, Whitbread plc. has developed a purpose-built green hotel at Burgess Hill as a model for developing for the green hotels and restaurants. Several methods of recycling and using waste material in the restaurants and hotels has been developed by the corporate social responsibility team of Whitbread plc. When considering the future targets of the company, in line with the rules and regulations and considering the futuristic requirements relating to environmental emissions, Whitbread plc. has targeted a cut in carbon emissions by 26% by 2020 considering 2009 as a baseline. It has also targeted diversion of the waste from landfill and recycling 80% of the waste created in the hotels and restaurants of Whitbread plc. by the end of 2012.
In a nutshell, it can be said that Whitbread plc. has adopted a strategy of cost leadership (Premier Inn brand), forward integration (moving from breweries and pubs to coffee shops, restaurants and hotels), strategic acquisitions (Premier Inn brand and several others over the years), market segmentation and targeting (targeting the budget customers) the others. The futuristic strategy adopted by Whitbread plc. in terms of Premier Inn brand is in expanding to the emerging markets and providing value addition to the shareholders. In developing the business strategy and enhancing the operations of the several segments of the business, Whitbread plc. has considered the ethical aspects of doing business and has developed a corporate social responsibility program involving all the stakeholders of the company.