Strategic Analysis of Marriott’s Merger with Starwood Hotel - Report

This report provides a strategic analysis of the Marriott-Starwood merger, examining the corporate and business strategies employed. It evaluates the strategic position using Bowman's Clock, highlighting the differentiated strategy adopted to enhance customer loyalty and improve service offerings. The analysis includes a critical evaluation of key stakeholders, categorizing them as internal, external, and market-related, and discusses the importance of stakeholder engagement. External factors affecting the merger are assessed using a PESTLE analysis, covering political, economic, social, technological, legal, and environmental influences. Furthermore, the report utilizes Porter's Five Forces to analyze the industry dynamics, focusing on supplier power and other relevant industry forces. The conclusion summarizes the key findings and implications of the merger for Marriott.

Running head: STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD
HOTEL
Strategic analysis of Marriott’s merger with Starwood hotel
Name of the Student:
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Author’s Note:

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
Table of Contents
Introduction:....................................................................................................................................2
Evaluation of relevant strategy level:..............................................................................................2
Analysis of strategic position using Bowman’s Clock-...................................................................3
Critical evaluation of the key stakeholders:.....................................................................................5
External analysis:.............................................................................................................................7
Industry analysis:...........................................................................................................................10
Conclusion:....................................................................................................................................13
References list:...............................................................................................................................14

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
Introduction:
The merger of Marriott with Starwood hotel is one of the strategic appraisal that is
employed by organization to expand their frontier. Starwood hotel and Marriott are leading
hospitality brand having presence in major cities. International footprints of Starwood hotel will
be fused resulting from merger with Marriott and its strong presence in personalized and luxury
services. A changing landscape of hotel industry is depicted by such merger. Core value of
Marriott is centred upon providing excellent services, supporting and promoting employees,
integrity, innovation and supporting the goal of becoming the leading hospitality chain in the
world. It is the goal of Marriott to be number one hotel company that could be done by claiming
market share internationally. Merger has brought additional 5700 hotels with 30 brands making it
largest hotel in the world (Connell 2016). This strategic approach has led to acquisition of
luxury brands of Starwood and inheriting lifestyle brands such as Aloft. Merger would enable the
company to help them in achieving long-term goals of becoming number one company in
hospitality industry.
Evaluation of relevant strategy level:
Corporate strategy- The corporate strategy of organization is supported by business
strategy and the merger would lead to integrate complicated work. A comprehensive portfolio
would be created resulting from combined transactions of international footprints and leading life
style brands of Starwood with Marriott’s strong presence in service and luxury tiers along with
resort and convent segment. The additional value to shareholders of Starwood and Marriott
would be unlocked by providing greater opportunities to associates and broader choice to guests.
Strategic business unit of Marriott merger of Starwood focuses on representing different
division, group and they are the most profitable unit of the group (Yu and Gu 2013).

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
Management of product, maintaining competitive level and expansion of business are the
responsibility of strategic business unit. Corporate strategy of the group will be confined with
business unit expansion. Objective of Marriott at the end of 2015 was to generate additional
150000 jobs, make $ 50 billion investment in real estate and reaching 1 million room (Gibbs et
al. 2016). This expansion plan of Marriott is supported by strategic business unit that led to
strategically setting business. One of reason of merger of Marriott with Starwood is expanding
their business in Asia. Acquisition of Starwood hotel by Marriott is a part of their corporate
strategy and they have been able to derive benefits from such strategy depending upon market
environment. Global corporate strategy would help in guiding business units of Marriott despite
their own market environment and peculiarities (Wood 2016).
Analysis of strategic position using Bowman’s Clock-
Bowman’s Clock strategy is a model to analyse their competitive position while
designing market strategy. Model is represented diagrammatically using framework depicting
relationship between prices and customer value. There are eight strategic position as per this
model and the implementation of model helps organization in comparing their services and
products offered with other company belonging to same industry (Zheng and Zhang 2014).

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
Bowman’s strategy clock:
(Source: Shakhshir 2014)
There is no dispute in the competitive position of Starwood and Marriott and acquisition
has led to development of multitude of possible changes. Adoption of strategic change has led to
adoption of differentiated strategy such as having different reward programs. Differential
strategy would provide travellers with the option of choosing from multiple hotels. Portfolio of
hotel brands are distributed and expanded along with scaling of properties that has helped in
realizing the cost efficiency. The members of loyalty programs are offered reciprocal benefits
and merger has brought Starwood guest program to stand out of crowd as it provide travellers
with lot of access to hotels (businessinsider.com 2016). This particular differentiated strategy
created a new wave of innovation in loyalty space. Value in loyalty of special guests program is
always believed by people and they tend to compare with their hotels in industry. Therefore, in

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
terms of loyalty programs, the merger of Starwood with that of Marriott is currently in strategic
position 4.
The reliability and functionality of products is improved by new market and low end
disruption. This in turn has led to improvement in performance of company and meeting the
customers’ expectation. Customers are provided a convenient hotel stay at lower price due to
improved performance of boutique hotel and regional budget hotel chain resulting from such
strategy. The attributes that are more demanding to customers in hospitality industry are
improved by engagement of Starwood in sustainable innovations (Kowalczyk 2015). In terms of
hotel designs, there has been improvement in the front of lifestyle concepts and loyalty programs
that resulted in differentiating the brand. There has been improvement in terms of services and
products of Marriott beyond the mainstream travellers market who opt for branded budget hotel
and cheaper boutique hotel. Adoption of differentiate strategy by Marriott would provide
customers with several value propositions (Gardini 2015). Their combined strategies would lead
to generate unique value propositions to their customers irrespective of their segments.
Critical evaluation of the key stakeholders:
Stakeholders are individual or group or any organizations who are impacted by the
decisions of an entity. They are either directly or indirectly impacted by business activities and
success of business is driven by realizing the stakeholder importance. Stakeholders of Marriott
after its merger by Starwood can be classified as external, internal and market under their
particular segments.
Internal stakeholders are those who ensures that operational and services are rendered are
on request. It is ensured by them that needs of customers are satisfied by evenly distributing the

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
resources and managing day to day resources. The key factors to profitability of business and
market share is influenced by market stakeholders (Salvioni 2016). However, there is no control
by Marriott on their external stakeholders and their activities are not guided by them. Some of
internal stakeholders of the group are listed down as:
 Franchisee and hotel owners of thirty leading brands of Marriott.
 Contractors such as legal consultants, tax consultants, Ventilation and air conditioning
experts and heating experts.
 Suppliers such as Furniture, food items and sanitary suppliers.
 Shareholders or investors
 Employees who are service assistant and first point of contact
 Associates such as partners and veterans in the hotel industry
The list of external stakeholders of Group are listed below:
 Government
 Industry organizations
 Non-government organizations
 World economic forum
 Travel agency
 Tourism experts
 Sustainability experts
 Host communities
 Legal and labour regulatory bodies
List of market stakeholders are as follows:

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
 Customers
 Economy
 Competition
Continuous engagement with relevant stakeholders is the responsibility of management
and the stakeholders are engaged through forums, survey and public policy agenda maintenance.
Service excellence has been further driven by addressing social and environmental issues such as
immigration reforms, racial abuse, discrimination and human rights. Marriott has been able to
gain largest share of market by engaging with stakeholders efficiently (Andreu et al. 2016). This
led to improved relationship with government and local communities.
External analysis:
The external analysis of acquisition of Starwood by Marriott can be explained by using
PESTLE. This particular framework will help in assessing the nature of environment in which
Marriott is operating.
Political factors- The operation of Marriott is affected by existing danger of terrorism,
political climate and international relations in popular destinations of tourists. Military conflict or
terrors attack is one of the threats facing the hotel chain that could create disruption in
international air travel. There can be decrease in demand for hotel rooms because of rise on
aggressive terrorist organizations such as ISIS. Increasing terrorist attacks on hotels are scaring
away the potential travellers and thereby reducing the scope of generating profits. In such
circumstances, group is required to make investment in adopting costly security measures.
Therefore, for dealing with the political situations in the areas of operations, group is required to
implement security measures. Operations of hotel has the certainty of getting disrupted by any

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
conflict in international relations that require them to strategically align legislative requirements.
Moreover, Marriott is also required to make investment in labour force for ensuring that they are
well equipped with requisite knowledge to serve host countries.
Economic factors- Operation of Marriott is also affected by the economic factors of
respective countries. Such factors comprise of inflation, fluctuation in exchange rate. In the
current scenario, business of group will be adversely affected by ongoing economic turmoil in
Europe and slow down of economy in growth in China. The buying power of individual have
been reduced resulting from debt crisis in Europe and collapse of stock market in China as a
consequence of which travelling ability have been hampered. Tapering off of the business travel
on which the group is depending upon heavily is considerably affected by such crisis
(marriott.com 2015). Furthermore, high exchange rate is significantly impact business travellers
visiting US and ability of people to travel and stay at hotel is reduced by stagnation of middle
class wages and income inequality.
Social factors- The total number of people planning to travel internationally has
increased by considerable percentage since year 2013. It is indicated from statistical figures
published by regulatory bodies that there is increased intensity in travellers to spend money on
travelling. There has been average increase in travel spending from $ 5955 in year 2014 to $
6906. Due to increased number of Asian and Chinese travellers, the performance of group is also
impacted by the cultural change. There is increased demand for certain types of travel
experiences such as luxury resorts and packaged tours because of growing older population in
Europe and United States (Hudson and Hudson 2017). Therefore, group is required to make
changes in services offered in accordance with changed customer preferences.

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
Technological factors- The hotel business is hugely impacted by technological factors in
the form of online rental services. In this technological era, customers are required to be
provided services using electronics and computer platforms. Marriott is required to make
investment in their research and development team for seeking better ways to provide excellent
services to customers (Kang and Lee 2014). For instance, employment of robust reservation
system would help in providing seamless services to customers.
Pestle analysis of Marriott-Starwood:
Source: Created by author)
Legal factors- Certain legal factors have the possibility of disrupting future business of
Marriott and Starwood. The status of services offered by entity such as Airbnb is likely to impact
future business of group. Violations of hotel regulations, safety and healthy laws would create a
great hindrance in hotel operations. One of the legal issues prevailing in United States is
increased minimum wage. Marriott’s operation would be disrupted resulting from such legal
issues as there would be reduction in service and higher cost of labour (theguardian.com 2016).
Merger would provide opportunity for dealing with such issues.

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
Environmental factors- In current scenario, one of the major environmental issue
disrupting business of Marriott is increased cost of fuel. Demand for hotel room would increase
due to reduced cost of travelling accompanied by falling price of oil. Any abrupt increase in cost
of fuel has the potential of hindering hotel business indirectly. Increased electricity cost is one of
potential long term environmental impact resulting from increased effort to restraint greenhouse
gases. Change in climatic condition such as flooding resorts and rising level of oceans has the
likelihood of impacting hotel business by discouraging going to beach.
Industry analysis:
The relevant industry factors impacting the Marriott’s merger with Starwood hotel can be
analysed using Porters Five forces.
Suppliers bargaining power- There are over thirty brands of Marriott and all sorts of
materials such as bed sheets, sanitary items and food ingredients are supplied by many suppliers.
Quality and standard of products are ensured by the control process of group. Regular supply of
essential items is ensured by procedures of supply chain and standard procurement. Suppliers
does not pose threat to business and low bargaining power of suppliers.
Customer bargaining power- When customers are presented with wide variety of
services, then they enjoy an increased bargaining power. Merger of Marriott with Starwood
would provide customers with variety of services such as facilities of boutique hotels and
branded hotel facilities at reasonable prices. Loyalty programs of Marriott combined with
Starwood has enabled locking of customers as it is one the competitive advantage over their
competitors (Markham-Bagnera 2016). In this particular program, loyalty of customers are
rewarded with appeal to always seek return to services of Marriott.

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STRATEGIC ANALYSIS OF MARRIOTT’S MERGER WITH STARWOOD HOTEL
Industry rivalry- The competition faced by Marriott even after merger with Starwood
has generated fierce competition. Traditional hotel companies would have advantage resulting
from such acquisition and they would be provided with more power to compete in hotel industry.
The customer retention rate has the possibility of increasing due to merging of loyalty programs
of both the entities. However, significant threat is emerging from Airbnb. The valuation of this
particular entity is same as that of Hilton and Hyatt. Expansion of services rendered to customers
by Airbnb would pose a great threat to this strategic positioning (Jang 2014).
Porters five forces of Marriott-Starwood
(Source: created by author)
Threat of substitutes- The acquisition strategy of Marriott would provide customers
with wide variety of services and this would help in driving the business profit. This particular