Hospitality Business Strategy

This document provides an analysis of the business strategy in the hospitality industry, with a focus on Hilton. It includes PESTLE and SWOT analysis, analysis of the competitive environment using Porter's Five Forces model, and different types of strategic directions available to the organization. It also justifies and recommends the most appropriate growth platform and strategies for Hilton.

Hospitality Business
Strategy

Contents
INTRODUCTION.....................................................................................................................................3
PART A......................................................................................................................................................3
PESTLE and SWOT analysis of the organization and an analysis of its capabilities...............................3
Analysis of the competitive environment using Porter’s Five Forces model...........................................6
PART B......................................................................................................................................................7
Different types of strategic directions available to the organization........................................................7
Justify and recommend the most appropriate growth platform and strategies.........................................8
Strategic Management Plan...................................................................................................................10
Conclusion and Recommendations........................................................................................................11
REFERENCES........................................................................................................................................13

INTRODUCTION
Business strategy is one of the most important components for an organization because it
helps in attaining goals and objectives. It can be defined as the working plan in order to enhance
financial performance. A business strategy acts as the backbone of the company and helps the
management to make effective decisions (Aithal and Aithal, 2016). There are different steps that
are involved in developing an effective business strategy like determining vision, mission, goals
and objectives. Organization chosen for this report is Hilton, an American multinational
hospitality company. The organization was founded by Conrad Hilton in the year 1919 and is
headquartered in Virginia, United States. The report analyzes the impact of macro environmental
on a hospitality organization as well as its internal environment and capabilities. An analysis of
the competitive environment using Porter’s Five Forces Model is also included. Lastly, a
strategic management plan along with strategies, objectives and tactics is also included.
PART A
PESTLE and SWOT analysis of the organization and an analysis of its capabilities
PESTLE Analysis
PESTLE analysis is a framework that explains the influence of various macro
environmental factors on an organization. This tool is basically used when an organization starts
a new business or has decided to expand its business in a foreign market. The PESTLE analysis
of Hilton Hotels is as follows –
 Political Factors – The United Kingdom runs under the influence of a parliamentary
system and is considered to be a politically stable country.
 Economic Factors – The UK is relatively economically strong nation as compared to
other countries and has a high GDP as well as large population allowing even small
businesses to be successful (Boella and Goss-Turner, 2019).
 Social Factors – There are many social factors that can affect Hilton negatively like
increasing dependency ratio, education costs etc.
 Technological Factors – The United Kingdom has access to the latest technology and
the people are innovative having expertise in science and IT.

 Legal Factors – Organizations that operate in the United Kingdom are expected to
compulsorily follow the Employment Act 2010 as well as other legislation.
 Environmental Factors – Pollution and various environmental issues come along and
can affect an organization in a negative way.
SWOT Analysis
SWOT is a strategic tool that can be used by an organization as well as individuals in
order to identify their strengths, weaknesses, opportunities as well as potential threats (Bowie
and et. al., 2016). The SWOT analysis of Hilton is as follows –
 Strengths – Hilton is one of the most widely recognized hospitality organizations across
the world. The organization also has a large base of satisfied customers and shares a
strong relation with them. The hotel group offers high quality services and products to its
guests.
 Weaknesses – One of the weaknesses of the company is that it is majorly dependent on
US market and has been facing high levels of debts. Apart from this, Hilton has a very
little share in the global market, despite having a large brand portfolio.
 Opportunities – The organization has a huge opportunity of expanding its business
internationally. This will help it in reaching out to new potential customers and satisfying
their needs (Chan and Hsu, 2016). And for this, the company should focus on it research
and development.
 Threats – There is a major threat of a change in macroeconomic climate which can lead
to an instability in the political condition. Competition from other hospitality brands can
also affect the overall performance as well as profitability of Hilton in the market.
VRIO Analysis
Resources Valuable Rare Inimitable Organized
Products ✓
Hotel Locations ✓ ✓
Patents ✓ ✓ ✓

Employees ✓ ✓ ✓ ✓
Valuable
 Valuable resources are those resources that help the company in gaining a competitive
advantage against their competitors. The different valuable resources for Hilton are
products, hotel locations, patents as well as employees.
 Products are a valuable resource for the company because they are highly differentiated
as compared to its competitors (Chhetri and et. al., 2017). Due to this, their perceived
value among the customers is very high. The locations of the hotel are valuable because
they help in attracting customers and encouraging them to visit them.
 The locations also contribute to the overall differentiation of the brand. Patens are also a
valuable resource for the organization because it can sell its products and services to the
customers without any kind of interference from the competitors. This helps in increasing
the overall profit as well as licensing revenue of the firm.
 Employees are also among valuable resources of the firm because the company has
highly skilled, experienced and trained employees. They help the company in attaining its
goals and objectives as well as contribute to its overall profitability.
Rare
 These are those resources that can only be acquired by one company and help it stand out
against competition. The products are not rare because similar products can be offered by
the competitors and they can gain competitive advantage.
 The hotel locations are rare because competitors cannot operate in those particular
locations (de Brito and Terzieva, 2016). Also, the exotic locations chosen by Hilton are
not found easily. The employees are also a rare resource because they are highly trained and skilled, which
is not likely to be the case for other companies. Patents are a rare resource because they are not available easily and thus, the competitors
cannot process the same patents as Hilton. Due to this, the respective company can use its
patents without any kind of interference from competitors.

Inimitable
 Inimitable resources are those that are not easy to copy or imitate at a reasonable price.
The inimitable resources of the respective company are patents as well as employees.
While products and hotel locations are imitable resources.
 Some products of Hilton are not imitable because products that are manufactured and
produced by it, can be copied by any other brand (Ginesta, 2017). This is because it does
not involve a large amount of money.
 The hotel locations are imitable because the locations where Hilton has set up its hotels
can be found anywhere else also. On the other hand, patents are inimitable because they
are not legally allowed to be copied.
 Employees are also an inimitable resource because the employees working at Hilton
many have special skills and knowledge that is not present in employees of other
companies.
Organized
These are those resources that have to be organized from time to time within an
organization. An organization must organize its resources in order to gain a competitive
advantage against others and thus stand out in the market. Resources that have to be organized
are employees by providing them effective training. On the other hand, resources that don’t need
to be organized are products, patents as well as hotel locations.
Analysis of the competitive environment using Porter’s Five Forces model
Porter’s Five Forces model can be defined as a framework that is used in order to analyze
the competition of an organization. The framework was developed by Michael Porter and
consists of five forces that can have an impact on the overall functioning of an organization.
Porter’s Five Forces for Hilton are described below -
Threat of New Entrants – New entrants within the hospitality industry can bring
innovation in the products as well as services in lower prices as compared to Hilton without
compromising on the quality (González-Rodríguez and et. al., 2018). This can lead to the
company’s existing customers shifting towards them. This will affect the overall profitability of

the company. Since customers like innovation in products and services, respective company
should focus more on its research and development. This is a strong force.
Bargaining Power of Suppliers – Organizations in the hospitality industry buy the raw
material for their products from numerous suppliers. This means that the suppliers in the industry
have a dominant position, which make this a strong force. They can use their power to charge
high prices from the company due to which the overall revenue and profitability of the company
will get impacted.
Bargaining Power of Buyers – This is also a strong force because the buyers or
customers of Hilton seek products and services that are of premium quality available at low
prices (Jogaratnam, 2017). This can put a pressure on the company’s performance in the long
run. Therefore, the company should pay attention to maintaining a smaller customer base at some
locations because this will reduce their power to negotiate for the same.
Threat of Substitute Products – When a new product or service launched by a
competitor meet the needs of the customers, the profitability of the company will suffer. This is a
comparatively low force that can affect the performance of Hilton Group. Therefore, the
company should be more oriented towards its product and not just services. Apart from this, the
company can also increase the switching costs for the customers.
Rivalry among Existing Competitors – If the rivalry among competitors within the
industry will be intense, it will lead to a decrease in the overall profitability of the firms. Hilton is
a multinational brand that operates in a very competitive market. Therefore, it should innovate its
products and services in order to differentiate itself from other hospitality organizations as well
as set a benchmark in order to compete better (Jones, Hillier and Comfort, 2016). This can be
done by collaborating with competitors in order to increase market share as well as size.
PART B
Different types of strategic directions available to the organization
Michael Porter suggested four different business strategies that can be adopted by
organization of different sizes operating in all industries (Porter's Generic Strategies, 2020).
These four strategies are referred to as Porter’s Generic Strategies. The strategies help an
organization in identifying a potential base of customers wherein it can gain a competitive

advantage. Not only this, they also contribute to the company’s overall performance in the
market. The different types of strategies for Hilton are explained below –
Cost Leadership – In this strategy, an organization generally attempts to gain a market
share with the main aim of becoming the lowest-cost producer within the industry. This can be
achieved by producing products in mass quantity wherein the costs can be cut at various stages
of product development (Porter's Generic (Competitive) Strategies, 2019). This allows
organizations to sell products that are priced below the average cost in the market. In context to
Hilton, to attract more customers, it can cut down costs on some of the products and services in
some locations.
Differentiation – The main focus of organizations that adopt this strategy is on
differentiating their products and making them ore attractive so as to gain a competitive
advantage against competitors. In context to Hilton, while designing its products, the company
focuses on various criteria that customers within the industry think to be important like
functionality, features, services, benefits, quality etc.
Cost Focus – This strategy can be defined as organizations that look out for developing a
low-cost advantage within a small market segment. The products that are offered by
organizations are usually basic and similar to the ones that are being offered in the market. With
this strategy, organizations can understand the market dynamics as well as needs of customers. If
Hilton adopts this strategy, it will have to lay primary focus on the cost of its products and
services.
Differentiation Focus – In this strategy, the main focus of an organization is on
differentiating its products but, within a small market segment. For this strategy to be successful,
it is important for the company to first identify a customer base with unique needs as compared
to a wide population (Li and Singal, 2019). Also, it should be made sure that no other competitor
is offering similar products. This strategy is most commonly used in small market segments.
From the above analysis, it can be seen that Hilton has implemented the strategy of
Differentiation in order to gain competitive advantage in the hospitality industry. This has helped
it in offering unique and high-quality products to the customers and gain better profit margin in

the market. Also, there are no substitutes, the customers are also highly satisfied and loyal to the
respective organization.
Justify and recommend the most appropriate growth platform and strategies
Ansoff’s Growth Matrix can be defined as a strategic framework that an organization’s
attempt to grow and expand depends on if it markets new or existing products in a either a new
or an existing market. The matrix is one of the most beneficial tools because it provides an
access to various possible strategies of growth and sets outs measurable, achievable goals and
objectives. The Ansoff’s Growth Matrix in context to Hilton is explained below along with
justification.
Market Penetration – In this strategy, a firm uses its existing products in an existing
market in order to increase its overall market share (Okumus and et. al., 2019). This an be done
in various ways like decreasing the prices of products so as to attract existing as well as new
customers, increasing distribution and promotional activities or acquiring a competitor within the
market. Hilton hotel can reduce the cost of per night stay in the rooms and increasing the
promotional activities relating to the same.
Product Development – In the product development strategy, the company develops
new products to be catered into a new market. It involves deep research and development for the
expansion of the new products. This strategy is usually applied when an organization has a
strong understanding of the market it is currently operating in and thus provides unique and
innovative products to the customers. If Hilton adopts this strategy, it will have to enhance its
services for customers who seek luxury.
Market Development – In this strategy, an organization enters a new market with
existing products. A market development strategy can help the company in expanding its
business among new segments of customers, regions and geographies (What is the Ansoff
Matrix?, 2020). This strategy can be helpful when customers within the new market place are
profitable. There are number of ways in which this strategy can be adopted like catering to a
completely different segment of customers, entering a foreign or domestic market.
Diversification – This is the riskiest strategy because in this an organization enters a new
market with a new product. This is because market as well as product development is required in

this (Peters and Kallmuenzer, 2018). There are two types of diversification, related and
unrelated. Hilton can create new products in order to grow and expand its business in a
completely different market as well as customers.
From the above analysis, Hilton is recommended to adopt the market development
strategy because it is already widely recognized by people across the world. The hotel group will
enter a new market along with its existing products. This will help it in gaining new customers
due to which overall profitability and revenue of the company. Therefore, this will be the most
appropriate strategy for the company to adopt.
Strategic Management Plan
Strategic Planning can be defined as a process wherein an organization defines its
strategy and makes effective decisions by allocating it resources in an efficient manner (Roma,
Panniello and Nigro, 2019). The strategic plan for Hilton is described below –
Mission: A mission statement generally describes why does an organization exists as
well as its overall goals and objectives. The mission statement of Hilton is to become the most
hospitable organization in the world by creating memorable and lasting experiences.
Objectives To start hotel operations in Monaco within 6 months in order to increase sales by 20% by
offering existing products. To cut down unnecessary costs by 15% within 8 months of attracting new customers in
the market.
Strategies
Bowman’s Strategy Clock
This model is used in marketing in order to analyze the overall competitive position of a
company as compared to competitors. The model is explained below –
 Low Price and Low Value Added – This position is not considered to be very
competitive because the products are not differentiated and customers also perceive very
less value despite low price.

 Low Price – Organizations in this position seek to be low-cost leaders in the market and
develop a strategy of cost minimization.
 Hybrid – This position involves a combination of low price as well as product
differentiation and the main aim is to persuade the customers (Walsh and Dodds, 2017).
 Differentiation – The main aim of this strategy is to offer products to customers that are
of highest perceived value.
 Focused Differentiation – In this strategy, products are placed at highest price levels
wherein the customers buy them because of their high value.
 Risky High Margins – This positioning strategy involves a high risk wherein
organizations set high prices so that high profits can be generated.
 Monopoly Pricing – This strategy is involves giving only two options to the customers,
either buying or not buying the products.
 Loss of Market Share – In this strategy, organizations set a middle-range or standard
price for the products with a low perceived value.
Segmentation, Targeting and Positioning
Segmentation – Hilton should segment its customers based on their preferences as well
as unique needs (Ginesta, 2017). There are different types of segmentation like demographic,
psychographic and behavioral.
Targeting – This is the strategy for selecting the target customers. Hilton should target
people who are looking for premium and luxury experiences.
Positioning – Various positioning strategies can be adopted like advertising, branding,
social media promotions etc. This will help in generating awareness among the customers in the
new market.
Tactics
Tactics can be defined as guidelines that are provided to a business in order to carry out
its operations in an effective manner. Tactics that Hilton can adopt can include monitoring
business plan as well as services offered to the customers regularly (González-Rodríguez and et.
al., 2018). The organization can also develop partnership with hotel brands that have been

performing effectively in the market. Lastly, all employees should be provided training so that
they acquire all the necessary skills and knowledge.
Conclusion and Recommendations
From the above report, it can be concluded that business strategy plays an important role
and contributes to the overall success and profitability of an organization. There are different
strategic models that can be used in order to analyze the impact of various external factors like
PESTEL, SWOT analysis etc. Respective company, Hilton, is recommended to adopt the
strategy of market development wherein it will have to sell its existing products in a new market
in order to increase overall share in the market.

REFERENCES
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