Marriott's Merger with Starwood Hotels: A Strategic Analysis

The report throws light on the on the importance of strategic analysis and planning for maximizing the growth of business. The strategic analysis has been discussed in the light of the world-leading hotel, Marriott International after its acquisition of Starwood hotels. The report highlights the business strategy of Marriott’s merger with the Starwood’s hotel and the evaluation of its key stakeholders engaged in the hospitality business. This report further elaborates the external analysis of Marriot using PESTEL and the Industry or competitive analysis using Porter’s five forces model.

Running head: MARRIOTT’S MERGER WITH STARWOOD HOTELS
MARRIOTT’S MERGER WITH STARWOOD HOTELS
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1MARRIOTT’S MERGER WITH STARWOOD HOTELS
Executive Summary:
The report throws light on the on the importance of strategic analysis and planning for
maximizing the growth of business. The strategic analysis has been discussed in the light of the
world-leading hotel, Marriott International after its acquisition of Starwood hotels. The report
highlights the business strategy of Marriott’s merger with the Starwood’s hotel and the
evaluation of its key stakeholders engaged in the hospitality business. This report further
elaborates the external analysis of Marriot using PESTEL and the Industry or competitive
analysis using Porter’s five forces model.

2MARRIOTT’S MERGER WITH STARWOOD HOTELS
Table of Contents
Introduction:....................................................................................................................................3
Evaluation of Levels of Strategy:....................................................................................................3
Corporate Strategy:......................................................................................................................3
Business Level Strategy...............................................................................................................4
Bowman’s Clock:........................................................................................................................5
Evaluation of Stakeholders:.............................................................................................................5
Internal stakeholders:...................................................................................................................6
Market stakeholders:....................................................................................................................6
External Stakeholders:.................................................................................................................6
External Factors Evaluation:............................................................................................................7
PESTEL Analysis:.......................................................................................................................8
Competitive Analysis:...................................................................................................................11
Conclusion:....................................................................................................................................12
References:....................................................................................................................................13
Appendix:......................................................................................................................................15

3MARRIOTT’S MERGER WITH STARWOOD HOTELS
Introduction:
A merger is a consolidation or amalgamation of more than two companies to form a
single company (Rothaermel 2015). When both the merging company wants to diversify, wants
to increase the economies of scale, gain competition or greater efficiency then it could result in
Merger (Madsen and Walker 2015). Merger and acquisition always depends on the scope and
direction of an organization. It is used in improving the performance of the company and
accelerates the growth rate. Sometimes such situations also arise that can force an organization to
accept acquisition or merger (Grant 2016). Strategy involves formulation of plans after analyzing
the environmental conditions then implementing it to achieve the goals and fulfilling the
stakeholder’s expectations.
The report highlights the strategical analysis of Marriott International’s acquisition of
Starwood Hotels. The Marriott International and Starwood Hotels are leading brands in the
hospitality sector, with its chain in the top cities of the world. This report further elaborates the
external and Industry analysis of the company. The merging of both the hotels will further fuse
the international footprints and life style brands of Starwood Hotels with Marriott’s luxurious
and personalised services (Hellier 2017). Guests will be offered many opportunities and will be
served the best from both worlds. The merger will further make Starwood and Marriott as the
world largest company leading in hotel business (Wood 2017). Using various levels of
frameworks and strategy the merger between Starwood hotels and Marriott International will be
analyzed.
Evaluation of Levels of Strategy:
Corporate Strategy:
Since 1927 Marriott International has been a leading industry in the hospitality segment
and still achieving great heights due to its corporate strategy. Before the merger was being taking
place, Marriott had too little international exposure with just 76% of its asset in North America
(Marriott.com. 2017). Though Marriott International has established core values, it was still
appealing to the upper-scale and mid-scale brands. Marriott long-term goal was to be the best
hotel in the world. More market shares were needed to be claimed at a global level for achieving

4MARRIOTT’S MERGER WITH STARWOOD HOTELS
this goal. They used the strategy of being more appealing to customers belonging to the upper
scale using upscale brands. The structure and core values of Marriott were redesign to support
the long-term goal and vision of the company. The business related to hospitality is all about
providing comfort to the guest through service excellence irrespective of their background or
nationality. It is crucial for an organization to align their corporate strategy and furthermore
structure according to their long-term goals (Scholes 2015). An organizational strategy with
unpredictable long-term goal can bring doom for the company, as the market and environmental
impact can make it difficult for it to withstand in future. Marriott International core values is
hinged on promoting and supporting the employee diversity, innovation, putting people first,
integrity and service excellence (Grinblat and Titman 2016). Moreover, initiatives for
environmental sustainability were used to support Marriot’s long-term goal of becoming one of
the leading hotel chains in the world.
Business Level Strategy
Business strategy is meant to support the company’s corporate strategy. Standard
Business Units (SBU) focuses on performance that represents various groups and divisions that
are responsible for the profit and loss of the company despites it core values (Peteraf, Gamble
and Thompson 2014). Marriot International regional strategic business unit’s presences include
America, which is one of the most profitable, Asia Pacific, Africa, Middle East and Europe.
Each regional business unit is solely responsible for its products management, competition and
expansion, which must be within the corporate strategy. By the end of the year, Marriott global
strategy is to reach $50 billion in investment of real estates and give $1, 50,000 additional hotel
jobs (Wood 2017). This is only possible when the business units support the organizational
expansion plans. The various business units of Marriott has its own plans, by 2019, Asia Pacific
portfolio is expecting to expand in 19 different countries by exceeding more than 340 hotels
(marriott.com. 2017). One of the crucial reasons for merging Marriott with Starwood would be to
expansion of its business in Asia. Starwood has its maximum market share in the Asian region
especially in China so Marriot is trying to increase its market presence globally
(Starwoodhotels.com. 2017). After acquisition of the Delta Hotels and Resorts Brand in 2015,
Marriot turned out to be the largest services hotelier throughout Canada. In 2014, after
acquisition of Protean Hotels, it became the largest in Canada (Hellier 2017). Therefore, it can be

5MARRIOTT’S MERGER WITH STARWOOD HOTELS
known that Acquisition is one of the vital corporate strategies followed by Marriott for expansion
after analyzing the market environment condition of the respective business units. The Strategic
business units (SBU) besides supporting the expansion of the business also help in promoting
environmental sustainability and community relationships (Bourne 2016). The global corporate
strategy guides the respective business units despite the present market environment and their
peculiarities.
Bowman’s Clock:
The merging and competitive condition of Starwood and Marriott is undisputed. The
world’s leading hotelier brings the best services of both the hotels Starwood and Marriott
together in a single offering (Starwoodhotels.com. 2017). Irrespective of the different segments
of customers like individual or corporate, middle-scale or upper scale, all the customers will be
provided personalised services and have access to luxurious lifestyle. Marriot International has
followed the strategy of differentiation. The customers will be provided high value propositions
as a combined service due to its loyalty programme. These loyalty programme and combined
services will further serve the customer as unique value proposition irrespective of their
segments, religion or race (Della Corte 2016) The propositions has proved to appeal all the
segments of customer globally as they get the best services from both the worlds.
Evaluation of Stakeholders:
Stakeholders are those individuals, organization or group that is affected or impacted due
to the outcome of any decision or activity occurring in the business (Andriof et al. 2017). The
organisational stakeholders determine the extent of an organisational growth and its strategy. It
would be crucial decision for an organization to identify their stakeholder and classify them
according to their priority to achieve the goals and objectives. Since 1927, Marriot International
consistent effort aligned with proper corporate strategy has made it the world top hotelier
(Hellier 2017). The management and Board of Directors of Marriott would not achieve it alone,
if the stakeholders of the company were not engaged or involved with the business operations
and plans (Hill and Jones 2013). The report of policy advocacy and stakeholder’s engagement
are issued by Marriott at times. The figure I given in the appendix illustrates Marriott and

6MARRIOTT’S MERGER WITH STARWOOD HOTELS
Starwood engaged stakeholders. The stakeholders participating in the business of Marriott’s can
be identified and classified into the following segments:
Internal stakeholders:
Marriott’s daily affair is managed by the internal stakeholders. Internal stakeholders are
responsible for ensuring the operational services of the hotel. They are further responsible for the
evenly distributing the resources to satisfy the demands and needs of their customers (Wheelen
and Hunger 2017). The internal stakeholders include the following:
 The owners of the hotel and franchises of Marriott leading brands.
 Employees including the service assistant
 Shareholders and investors.
 Suppliers, which includes the supply of food items, sanitary products and furniture items.
 Contractors including tax consultants, Heating, Ventilation and Air conditioning (HVAC)
Experts and Legal consultants.
 Associates including veterans.
Market stakeholders:
Marriott International has both the regional and global market to deal. The market
stakeholders are the key elements for increase in market shares and profitability of the hotel
business (Bourne 2016). The market stakeholders of Marriott’s are as follows:
 Customers
 Economy (both Regional and Global)
 Competition
External Stakeholders:
These stakeholders are external and are very vital factors for the organisational growth as
they can either make or break the hotel businesses. Marriot has little or no power and control
over their external stakeholders. Marriott must engage with its external stakeholders to achieve
success as the different market environment has its own peculiarities. The external stakeholders
of Marriott are as follows:

7MARRIOTT’S MERGER WITH STARWOOD HOTELS
 Government
 Industry Organisations
 Non-Government Organisations
 Tourism industry
 Travel industry
 World Economic Forum
 Sustainability experts
 Immigration
 Labour and legal regulations or frameworks
It is the responsibility of Marriott’s management to engage it stakeholders continually in
the hotel businesses. The stakeholders are engaged by participating in various forums, surveys
and public policy agenda is maintained (Crane and Matten 2016). Marriott service excellence has
been improved by stakeholder’s engagement as they addressed the environmental and social
issues like, immigration reforms, racial discrimination and human rights. Stakeholder’s
engagement and efficient involvement has increased the market share and further helped Marriott
to improve its relation with government and host countries. Only after the approval of Chinese
government, Starwood was merged with Marriott International’s (Wood 2017).
External Factors Evaluation:
Marriott being a leading company in a global level is affected by various external factors
like political, economic, socio-cultural, technological and legal factors (Madsen and Walker
2015). For more than 90 years, Marriott operates in more than 100 countries so the management
can achieve long-term success must properly analyze the market environment in which business
thrives (marriott.com. 2017). The business environment can either be a source of opportunities or
threats (Morden 2016). China offers vast opportunities in the business related to hotel chains,
with a huge population size and one of the world’s best travel markets. The middle class market
is large and still growing due to the rise in their discretionary income and the desire for travel is
expanding gradually. Starwood acquisition was one the best decision of Marriott taken at right
time and in right direction (Frynas and Mellahi 2015). Starwood market presence in China is

8MARRIOTT’S MERGER WITH STARWOOD HOTELS
very strong so Marriott’s strategy is to penetrate in the Chinese market (Starwoodhotels.com.
2017).
PESTEL Analysis:
Through PESTEL analysis, Marriott’s business environment and operational functions
and competitive forces can be further be analyzed:
Political Factors:
Marriott being the world largest hotel chains operating in more than 90 countries has also
to deal with the government rules and regulation of those particular countries. The major
political factors that affect the business of Marriott are as follows:
Conflicts or Terrorism- the terrorism rate has tremendously increased in the Middle East and
Marriott hotels are largely expanded all over Asia and the present developing countries. Conflicts
taking place in few parts of Latin America and Africa is also affecting the hotel business as the
domestic as well as business travelers get scared due to the conflicts.
Labour Laws- Marriott inclusion policy and diverse nature helps the labor force to align with the
present labor laws of its host countries. Each countries strategic business unit expects to earn
profit and thus need to appropriately interact with the business environment (Hill Jones and
Schilling 2014). Marriott always try to invest in the labor forces that are equipped with complete
knowledge of the jurisdiction of their host countries in which they operate. As the government
will be held responsible for the citizens being exploited by foreign investors.
Trade restrictions- Marriott International situated in America is controlled or managed by the
trade agreements existing between America and the various countries in which the business
operates. At first, the merger of Starwood’s with Marriott was approved from Canada and
European Union. After several setbacks, the deal was later approved by the Chinese
Government.
Political Stability- if the political condition of the country is stable then without any uncertainty
the investors’ confidence and trust is enhanced and they will plan to invest in that country
(Peteraf, Gamble and Thompson 2014).

9MARRIOTT’S MERGER WITH STARWOOD HOTELS
Legislation- according to the structure, each country have their own legislation. Most of the
African regions do not support the LGBT communities. The government have imposed, and
enacted various laws to negate or discourage the community (Guardian 2017). Marriott support
these communities and has its business in Nigeria but have chosen to remain neutral to avoid any
backlash with the people of Nigeria or its government.
Economic Factors:
The economical factors affecting the Marriott business are mentioned below:
Inflation- when the price of goods and services increases and leads to the reduction of purchase
value of money then Inflation occurs (Frynas and Mellahi 2015). Marriott’s business was highly
affected in Venezuela, as the government failed to curb inflation making the country’s currency
situation highly unstable. Marriot has now removed three of its major properties from the earning
numbers and has limited their investments in Venezuela.
Disposable Income- china’s huge middle class market with rapidly increasing disposable income
is a huge opportunity for Marriott to take advantage of the business environment. Marriott is
aggressively and continually expanding their business in China to take full control of the middle
class market.
Economic Growth- Africa and Latin America have the fastest economic growth rate and are the
most promising countries for business despite the political risks. After acquisition of Protean
Hotels in Africa, Marriott International still wants to acquire more properties in African countries
by 2020. The emerging countries are also appealing the other hoteliers interested on planning
their business expansion. This will further lead to increase in competition and saturate the market
condition by reducing the price.
Exchange rate- in countries like Nigeria, the reduced oil prices has lead to the scarcity of Foreign
exchange. Marriott being a foreign investor in the country is unable to perform the business
efficiently due to the increased cost of inflation, importation and interest rate.

10MARRIOTT’S MERGER WITH STARWOOD HOTELS
Socio- Cultural Factors:
Change in Life-style- after the acquisition of Starwood’s, Marriott’s has balanced its portfolio
rendering services. The entire upper to middle class customers desiring luxurious lifestyle are the
target customers of Marriott and it is the responsibility of Marriot brand to satisfy their
customers want and desire.
Demographics- Marriott with the help of its work force policy is trying to adapt the cultural and
social trends of the host countries. The emerging population of China has made Marriott to
increase their share investment in those areas as the country also have large number of people in
their youth and are willing to work.
Technological Factors:
The technological factors involve the usage of computers and electronics so that excellent
services are rendered to their customers by providing facilities like hotel reservation system
(Jenkins and Williamson 2015). Research and development further helps in increasing the
standard by betterment of services.
Environmental Factors:
Marriott business can be disrupted due to the major environmental factor caused due to
the increase in the fuel prices. As the oil prices are failing, it would further lead to reduction in
travel cost and the demand for hotel room would further increase. Moreover, Marriott’s
electricity cost could increase due to curb greenhouse gases. Marriott business is also harmed
due to the global climatic change as the increase in temperature and rising ocean levels are
making the beach resorts uncomfortable for the customers. The environmental factors could lead
to the relocation of hotels.
Legal Factors:
Marriott’s business can be impacted in future due to the major legal factor caused due to
the services of Airbnb and its host, as it is violating the hotel regulations, zoning laws and safety
regulations. The authorities of New York and Barcelona are further imposing fine on Airbnb for
not paying the lodging taxes. In America, Marriot International is also facing the possibility of

11MARRIOTT’S MERGER WITH STARWOOD HOTELS
sudden increase in the minimum wage that has increased to $15 per hour for certain proposals.
This could further increase the labor cost of Marriott and reduction in services.
Competitive Analysis:
Porter five forces model has been used for analyzing the competitive position of Marriot
hotels. The five forces evaluating Marriott’s strategic position are described below:
 Threat of New entry- Marriott has been a profitable industry since a long time and there
is a possibility of attracting new entrants in the hospitality sector. The market condition
for hospitality business is still unsaturated at regional levels. Marriott is the best hotel in
the world and none can match its level or quality of service excellence. The loyal
customers would always want to give priority to Marriott above any other hotel.
 Competitive Rivalry- there is various competitors of Marriott at both regional and
national level. Marriott International has the world largest hotel chain with more than 1
million rooms. The second largest is Hilton holding more than eight laces room
worldwide. Price is the crucial factor for customers considering the services provided by
the different hotels.
 Bargaining power of buyers- when the customers are offered varieties, their purchasing
power increases (Harrison and John 2013). Marriott has the power to safeguard the
interest of its customers through its loyalty programme. The focus of this programme is
to reward their targeted customers for their loyalty and appealing them to always choose
Marriot services in future.
 Bargaining power of Suppliers- Marriott has more than 30 brands and large number of
suppliers providing all sorts of products like food ingredients, sanitary items and bed
sheets. Marriot also has to ensure its standards and qualities by reviewing the supply
chain procedures, the prevailing competitive price and standard procurement at times.
 Threat of Substitution- In countries like Nigeria, the overall cost of businesses are
rapidly increasing and most of the companies have to face insufficient power supply,
which further lead to the increment of cost in the balance sheet of the company. It is a
huge challenge for the world-leading hotel, Marriott to earn profit in Nigeria. The
customer’s vital factor for getting a suitable accommodation is its affordable price due to
the economic downturn in the country (Eden and Ackermann 2013).

12MARRIOTT’S MERGER WITH STARWOOD HOTELS
Conclusion:
Thus from the above report it can be concluded that Marriott International became the
leading hotel chain after constant effort and staying true to its objectives, values and goals.
Since 1927, Marriot has been truly consistent in its effort and did not become the leading
hotel overnight. The acquisition of Starwood has been one of the greatest accomplishments
of Marriott’s for expansion of its business. Starwood takeover has proved to be the smartest
move of Marriott International as Starwood was underperforming with its limited services to
the customers. Both the hotel Marriott and Starwood has synergies between them, which is
unlike the potential takeovers taken place in past.
Marriott International has always been known for its ethical and cultural values and
putting their customers first. The business is enhancing globally and creating a unique world
of opportunities and experiences to the people from various segments promoting diversity.
Moreover, the sustainable initiative used by the business is also enhancing the values of
Marriott in the hospitality sector. The core values and sound management of the business has
made it a leading performer worldwide in the hospitality industry. Marriott has created its
own brand due to its constant effort, planning and applied business strategies of acquisition
and merger to achieve success in the end.

13MARRIOTT’S MERGER WITH STARWOOD HOTELS
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14MARRIOTT’S MERGER WITH STARWOOD HOTELS
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15MARRIOTT’S MERGER WITH STARWOOD HOTELS
Appendix:
LOW HIGH
KEEP SATISFIED
 Employees
 Shareholders (investors)
 Host communities
 Government
 Immigration
 Legal frameworks
KEY PLAYERS
 Customers
 Competition
 Associates
 Hotel owners and Franchise
 Economy
 Suppliers
 Contractors
MINIMAL EFFORT
 World Economic Forums
 Non-Governmental Organisations
(NGOs)
 Sustainability experts
KEEP INFORMED
 Tourism industry
 Travel industry
 Industry Organisations
Figure I: Stakeholder’s Level of Intent