Strategic Management

Strategic management is an ongoing organisational process aimed at achieving its long-term goals and objectives by  formulating and implementing strategies to help it to gain a competitive advantage. It involves the analysis, decisions and actions needed for the organisation to create and sustain positive performance. Read this article from investopedia.com to get an overview and examples of different approaches to strategic management and why it is important. Strategic management can be thought of as a series of steps to make a process:

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_{What is the difference between a strategy and planning? Roger Martin is one of the world’s leading thinkers on strategy explains these commonly conflated terms.}

_{YouTube Channel: Harvard Business Review}

The strategic management process in hospitality management involves a systematic approach to setting goals, developing strategies, and making decisions that align with the long-term vision of a hospitality business. This process is essential for ensuring that a hospitality organisation remains competitive, responsive to market changes, and capable of achieving sustained growth. It typically consists of the following key stages:

1. Environmental Scanning: This stage involves analysing both internal and external factors that could impact the organisation. Internally, managers assess strengths and weaknesses, such as staff capabilities, financial resources, and operational efficiency. Externally, they examine opportunities and threats within the market, such as emerging trends in travel, changes in consumer preferences, and competitive dynamics. In New Zealand's hospitality sector, understanding trends like eco-tourism and the importance of cultural inclusivity, such as incorporating te reo Māori and tikanga Māori, is crucial.
2. Strategy Formulation: Based on the insights gained from environmental scanning, the organisation formulates strategies to achieve its goals. This includes setting objectives, identifying target markets, and determining the best ways to position the business within the market. For instance, a hotel might focus on enhancing its food and beverage offerings to attract a niche market of culinary tourists or develop sustainability practices to appeal to eco-conscious travellers.
3. Strategy Implementation: Once strategies are formulated, the next step is implementation. This involves allocating resources, assigning responsibilities, and executing the planned actions. In a hospitality setting, this could mean launching a new marketing campaign, introducing new F&B services, or training staff to deliver enhanced guest experiences. Successful implementation requires effective communication and leadership to ensure that all team members are aligned with the strategic goals.
4. Evaluation and Control: The final stage involves monitoring the outcomes of the implemented strategies to ensure they are achieving the desired results. Managers track performance metrics, such as occupancy rates, customer satisfaction, and financial performance, to evaluate success. If necessary, adjustments are made to strategies to better align with changing conditions or to address any unforeseen challenges.

Setting clear organisational goals and objectives is a key to business success in the hospitality industry. Whilst there terms are connected, they both serve different purposes:

Organisational goals are the big-picture ambitions of the organisation and are usually broad and aspirational. They outline what the business wants to achieve long-term – for example a hotel chain may set a goal to become the leading provider of eco-friendly accommodation in New Zealand.

Objectives translate these broad goals into specific, measurable targets. They are actionable steps which define what needs to be done in order to achieve the stated goals. In our example, the hotel chain’s objectives could include achieving a Green Globe certification level for all properties within two years and reducing energy consumption by 15% annually.

SMART Objectives

You have probably heard of the SMART acronym which is often applied to setting goals and objectives. These are:

• SPECIFIC - Clearly-defined and focused on a particular area.
• MEASURABLE – Allow for progress tracking through data and metrics.
• ATTAINABLE – Challenging but achievable within a realistic timeframe.
• RELEVANT – Aligned with the overall goal and contribute to its success.
• TIME-BOUND – Have a specific deadline for completion.

Strategic priorities are essential to long-term success in the dynamic hospitality industry. Understanding how organisations can define clear goals which align with their overall vision and mission empowers them to navigate market shifts, optimise profitability and deliver exceptional guest experiences. Strategic priorities should be:

Building a Brand

A brand is a product or business which has an identity which can be perceived by its customers. A brand combines elements of design, packaging and advertising which sets it apart from competitors (Kenton, 2023). For hospitality businesses, a strong brand is essential to create an identity and differentiation in a crowded and competitive market place in order to attract and retain customers. There are several steps in the process of creating a brand

Case Study

Pauanui Ocean Resort Brand Identity

Pauanui Ocean Resort is engaging in creating a new brand identity to help its long term goal to become the premier beach resort in New Zealand.

Vision and Mission:

• To become the premier beach resort in New Zealand, known for unforgettable experiences and exceptional service.
• To provide a luxurious and relaxing retreat for travellers seeking a unique beachside experience, with a commitment to sustainability and local culture.

Core Values:

• Sustainability
• Excellence
• Authenticity
• Community

USP:

Combining luxury with eco-friendly practices and a strong connection to the local community.

Brand Elements:

• Name and Logo: “Pauanui Ocean Resort” with a logo featuring stylised wave and koru
• Tagline: “Embrace Tranquillity, Experience Heritage”
• Colours and typography: Soft blues and greens and elegant, clean fonts

Brand Story:

“From a family-owned beachfront property to New Zealand’s leading luxury eco-resort, Pauanui Ocean Resort is committed to providing guests with an authentic and sustainable experience.”

Customer Experience:

Personalised welcome gifts, locally-produced and sustainable in-room toiletries and amenities, locally-sourced produce for the restaurant, sustainable operational practices, guided eco-tours etc.

Marketing Strategies:

Social media campaigns which showcase the resort’s sustainability initiatives, blog posts, innovative cuisine showcasing indigenous ingredients, local attractions and culture, partnerships with travel influencers.

Monitoring and Adjusting:

Regularly receive feedback and update guest services accordingly. Track occupancy rates. Make continuous improvements based on performance data.

Watch

7 steps to creating a brand identity

Brand identity design is the process of creating your logo, color palette, typography, and anything else that visually represents your brand. Learn how to create your brand identity with this simple 7-step process

Increasing Customer Value

Customer value refers to the perceived benefits and satisfaction that guests derive from their interactions and experiences with a hospitality business. It includes both tangible and intangible elements which contribute to the overall value proposition and guest satisfaction. Elements which contribute to customer satisfaction include:

• Quality of Service
  • Service Excellence: Providing exceptional service is fundamental to creating customer value and includes knowledgeable staff, prompt response to guest needs and personalised attention throughout the guest journey.
• Physical and Emotional Benefits
  • Comfort and Convenience: Guests expect physical comfort and quality amenities with options for dining and recreation.
  • Emotional Benefits: Hospitality businesses often aim to create emotional connections with guests by offering experiences that exceed expectations, evoke positive emotions and create lasting memories.
• Personalisation and Customisation
  • Tailored Experiences: Understanding guest preferences and anticipating their needs allows hospitality businesses to personalise services and amenities. Customisation enhances the guest experience and adds value by meeting individual expectations.
• Value for Money
  • Perceived Value: Guests assess the value proposition based on the balance between the price paid and the benefits received. Providing value for money involves offering competitive pricing while exceeding guest expectations in terms of service quality and experience.
• Trust and Reliability
  • Consistent Delivery: Building a reputation for reliability and trustworthiness is crucial in hospitality. Consistently meeting or exceeding guest expectations fosters trust and encourages repeat business and positive word-of-mouth recommendations.
• Unique Selling Proposition (USP)
  • Establishing a unique identity or offering unique features that differentiate the hospitality business from competitors enhances perceived customer value. This could be through unique amenities, sustainable practices, location advantages, or themed experiences.
• Feedback and Continuous Improvement
  • Actively seeking and responding to guest feedback helps hospitality businesses understand and address guest preferences, concerns, and suggestions. Continuous improvement based on feedback demonstrates a commitment to enhancing customer value.
• Overall Experience and Satisfaction
  • Customer value in hospitality is ultimately about delivering a holistic experience that meets or exceeds guest expectations across all facets of their stay—accommodations, dining, activities, interactions with staff, and overall ambiance.

Increasing customer value has benefits for the business through:

• Enhanced guest loyalty
• Competitive advantage in a crowded marketplace
• Revenue growth – satisfied guests are more likely to spend more on additional services and amenities
• Enhanced reputation and brand image

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Increasing Customer Value

By focusing on increasing customer value through personalised experiences, exceptional service, and strategic use of technology, hospitality businesses can enhance guest satisfaction, foster loyalty, and drive revenue growth. Continuous adaptation to changing guest preferences and market trends is crucial in maintaining a competitive edge and achieving long-term success in the dynamic hospitality industry. Some practical ways to do this include:

Complete the following four-pages Documentation Tool activity by typing directly into the box. You have the option to save your answers on the last page.

Activity

Forum: Pauanui Ocean Resort: Adding to customer value

Of the ways to add to customer experience you researched, post the idea you think would have the most impact to the discussion forum, explaining what your idea is and how it will add to Pauanui Ocean Resort’s customer experience. Read your classmates’ responses and reply to at least two other posts.

Achieving Operational Excellence

Striving for operational excellence is essential for an organisation to not only deliver high-quality experiences but also create efficiency and maintain a competitive advantage. Some ways to achieve operational excellence include:

Being a Good Corporate Citizen

Corporate citizenship refers to the commitment of a business to operate in a socially responsible manner which goes beyond just making a profit. It involves making positive contributions to the community, environmental awareness, supporting social causes, and adopting ethical practices throughout the organisation. For hospitality businesses, this means integrating social responsibility into their core operations, engaging with stakeholders, and fostering an ethical and sustainable business model. This concept is important in the modern business environment and can be a positive feature of businesses in the hospitality sector by:

• Enhancing the public perception of the business
• Enhancing customer loyalty by aligning with customer values
• Employee engagement and retention
• Regulatory compliance
• Community and economic development

Watch

Corporate Citizenship

A brief video explaining the key points of corporate citizenship.

Source: The Business Professor

Going further than fulfilling core functions by actively contributing to a healthy environment, a strong community and thriving local economy shows good corporate citizenship. Ways in which a hospitality business can become a better corporate citizen include:

Resource allocation is the process of assigning limited resources, which could be financial, human, physical, technological or informational, to achieve organisational objectives. Effective resource allocation ensures these resources are used efficiently and effectively to maximise return on investment and to achieve a competitive edge. Effective resource allocation allows hospitality businesses to:

• Implement strategic plans: Align resource allocation with the organisation’s strategic goals and objectives.
• Optimise performance: Ensure resources are directed towards activities that generate the highest return.
• Prioritisation: Allocate resources to the areas which differentiate your business from the competition.
• Manage risk: Allocate resources to mitigate potential risks and ensure business continuity.

In the hospitality industry, resource allocation requires consideration of several factors, starting with identifying and defining strategic goals and objectives. Then the process can continue by identifying all available resources and analysing their capabilities and limitations, followed by gaining an understanding of current and future demand for your services and resources. Finally, track the effectiveness of resource allocation through measuring and recording key metrics. There are several techniques and tools which a hospitality business can use to help in resource allocation. Click on the hyperlinks for these examples to find out more about each:

• Cost-benefit analysis
• Activity-based costing
• Balanced scorecard
• Scenario planning
• Project Management software
• SWOT analysis

Challenges in Resource Allocation

The hospitality industry is dynamic and volatile, and the scarcity of resources means they must be allocated with care. Creative and innovative solutions are needed to use resources effectively and with maximum impact, with consideration paid to the demands of different parts of the business. Forecasting future resource needs is also problematic, making long-term resource allocation challenging.

Setting Performance Measures

In the dynamic and competitive world of Hospitality Management, setting performance measures is crucial to ensure operational excellence and customer satisfaction. Performance measures provide a framework for evaluating the effectiveness of processes, identifying areas for improvement, and achieving organisational goals.

Understanding Performance Measures

Performance measures are quantifiable indicators used to assess how well an organisation is achieving its objectives. These measures help managers monitor progress, make informed decisions, and drive continuous improvement. In the hospitality industry, performance measures are particularly important because they directly impact customer experiences and business profitability.

Key Areas for Performance Measures

1. Customer Satisfaction: Ensuring guests have a positive experience is paramount. Measures in this area might include:
   • Customer feedback scores
   • Net Promoter Score (NPS)
   • Repeat business rates
2. Operational Efficiency: Efficient operations reduce costs and enhance service delivery. Key measures include:
   • Average check-in/check-out times
   • Room turnover rates
   • Inventory management accuracy
3. Financial Performance: Financial health is a critical indicator of business success. Important financial measures are:
   • Revenue per available room (RevPAR)
   • Average daily rate (ADR)
   • Gross operating profit per available room (GOPPAR)
4. Employee Performance: A motivated and skilled workforce is essential for delivering high-quality service. Measures here include:
   • Employee satisfaction and engagement scores
   • Staff turnover rates
   • Training completion rates
5. Quality of Service: Maintaining high standards of service is vital. Relevant measures are:
   • Compliance with service standards
   • Mystery shopper scores
   • Health and safety audit results

Setting Effective Performance Measures

As we saw in a previous section, when setting performance measures, it is important to ensure they are SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. This framework helps in creating clear and actionable measures that drive improvement.

• Specific: Clearly define what is being measured. For example, instead of measuring "customer satisfaction," measure "customer satisfaction based on post-stay surveys."
• Measurable: Ensure the measure can be quantified. For instance, use a 1-10 scale for customer satisfaction surveys.
• Achievable: Set realistic targets that are attainable given your resources and constraints.
• Relevant: Align measures with the organisation’s goals. For example, if the goal is to improve guest experience, focus on measures like NPS.
• Time-bound: Specify the timeframe for achieving the targets, such as "increase NPS by 10% within six months."

Implementing Performance Measures

1. Data Collection: Use various tools and methods to gather data. This might include surveys, financial reports, and operational logs.
2. Analysis: Regularly analyse the data to identify trends, strengths, and areas needing improvement.
3. Reporting: Develop clear and concise reports to communicate findings to stakeholders. Visual aids such as charts and graphs can enhance understanding.
4. Action Plans: Based on the analysis, create action plans to address any issues and capitalise on strengths. Ensure these plans are aligned with the SMART criteria.
5. Review and Adjust: Periodically review the performance measures and adjust them as necessary to ensure they remain relevant and effective.

Incorporating Māori Values

In New Zealand, incorporating te reo Māori and tikanga Māori into hospitality practices is not only respectful but also enriching. When setting performance measures, consider integrating Māori values such as manaakitanga (hospitality) and kaitiakitanga (guardianship). For instance, you might measure the extent to which your establishment respects and incorporates these values through guest feedback and community engagement initiatives.

Activity

Forum: Pauanui Ocean Resort – Performance Measurement Action Plan

From the case study performance measurement results suggest at least one action point which could be taken under each of the 6 performance measurement metrics. Post your suggestions and justification for them to the discussion forum and engage with your classmates to discuss them further.

Post at least one suggested action point for each performance measurement metric in the case study and justify why you think it would be a benefit to Pauanui Ocean Resort. Respond to the suggestions made by your classmates.

Strategic initiatives are targeted efforts designed to advance the organisation's long-term objectives. Evaluating the success of these initiatives helps to determine their effectiveness, justify resource allocation, and guide future planning.

Steps to Evaluate Strategic Initiatives

1. Define Objectives and Key Results (OKRs)
   • Clearly articulate the objectives of the strategic initiative.
   • Identify the key results that will indicate success.
2. Establish Evaluation Criteria
   • Develop specific criteria to measure the effectiveness of the initiative. These should align with the overall objectives of the resort.
3. Collect Data
   • Gather relevant data before, during, and after the implementation of the initiative to provide a comprehensive view of its impact.
4. Analyse Data
   • Use analytical tools to assess the data against the established criteria.
   • Identify trends, successes, and areas for improvement.
5. Review and Report Findings
   • Summarise the findings in a clear and concise report.
   • Provide insights and recommendations based on the analysis.
6. Adjust and Improve
   • Use the findings to make informed decisions about future initiatives.
   • Adjust current strategies as needed to enhance effectiveness.

Case Study

Pauanui Ocean Resort – Evaluating Success of Strategic Initiatives

Content: To maintain its high standards and identify areas for improvement, Pauanui Ocean Resort implemented a strategic initiative to enhance the guest experience through improved personalised service.

Objective: To improve guest satisfaction and loyalty by offering personalised services tailored to individual preferences.

Key Results:

• Increase Net Promoter Score (NPS) by 10 points within six months.
• Achieve a 15% increase in repeat bookings.
• Attain a guest satisfaction score of 90% for personalised services.

Evaluation Criteria:

• NPS before and after initiative implementation.
• Repeat booking rates before and after initiative.
• Guest satisfaction scores from surveys focusing on personalised services.

Data Collection:

• NPS: Conducted surveys before and after the initiative.
• Repeat Bookings: Analysed booking data from the resort’s management system.
• Guest Satisfaction: Distributed detailed surveys focusing on the personalised services provided.

Result Data:

• NPS:
  • Before: 65
  • After: 75
  • Conclusion: NPS increased by 10 points, meeting the target.
• Repeat Bookings:
  • Before: 25%
  • After: 35%
  • Conclusion: Repeat bookings increased by 10%, slightly below the 15% target but showing significant improvement.
• Guest Satisfaction (Personalised Services):
  • Before: 80%
  • After: 92%
  • Conclusion: Guest satisfaction for personalised services exceeded the 90% target.

Analysis:

The initiative to enhance guest experience through personalised services at Pauanui Ocean Resort has shown positive results. The NPS increased by 10 points, meeting the set target, indicating improved guest loyalty. Repeat bookings increased by 10%, which, although slightly below the target, still demonstrates a positive trend. Guest satisfaction for personalised services significantly exceeded the target, highlighting the effectiveness of the initiative.

Review and Report Findings:

The strategic initiative was largely successful, achieving significant improvements in guest satisfaction and loyalty. The slight shortfall in repeat bookings suggests room for further refinement and targeted efforts to convert satisfied guests into returning customers.

Adjust and Improve:

1. Enhance marketing efforts to promote personalised services to previous guests.
2. Continue to gather feedback and adapt services to meet evolving guest preferences.
3. Train staff continuously to maintain high standards of personalised service delivery.

Incorporating Māori Values:

Pauanui Ocean Resort also incorporated te reo Māori and tikanga Māori into the strategic initiative, enriching guest experiences and enhancing cultural engagement.

• Positive feedback on Māori cultural elements: 85%
• Conclusion: High level of guest appreciation, with opportunities to further integrate and promote Māori culture.

You’ve reached the end of the learning material for the Strategic Management topic. Let’s go over the key points:

• Strategic management is an ongoing process to help an organisation reach its goals.
• Organisational goals and objectives need to be clearly defined, and SMART.
• Strategic priorities define which goals and objectives are most important.
• Brand identity combines design, packaging and advertising to set a business apart from its competitors.
• Customer value is the perceived benefits and satisfaction that guests derive from their experiences with a hospitality business and comprises several different factors.
• Operational excellence is necessary to create efficiency and a competitive advantage.
• Being a good corporate citizen is crucial in the modern business environment and can be made into a positive feature of the business.
• Resource allocation is the process of assigning limited resources to organisational objectives and includes financial, human, physical, technological and informational resources.
• Setting and measuring performance criteria is an important process to help an organisation ensure operational excellence and customer satisfaction by identifying areas for improvement.
• Incorporating Māori values through te ao Māori, tikanga Māori and te reo Māori is an increasingly important factor in the New Zealand hospitality environment.