Harvard Case - Globalization of Hyatt Place
"Globalization of Hyatt Place" Harvard business case study is written by Gevork Papiryan. It deals with the challenges in the field of International Business. The case study is 11 page(s) long and it was first published on : Sep 12, 2014
This case study solution recommends a multi-pronged approach for Hyatt Place's continued globalization, prioritizing strategic expansion into emerging markets, leveraging existing strengths in brand management and operational efficiency, and adapting its business model to cater to the unique needs of these new markets.
2. Background
The case study focuses on Hyatt Place, a mid-priced hotel chain owned by Hyatt Hotels Corporation, aiming to expand its global presence. The company faces challenges in navigating diverse cultural landscapes, adapting to varying economic conditions, and maintaining its brand identity while catering to local preferences. The case study highlights the importance of understanding the unique characteristics of emerging markets, including their economic development, political stability, and consumer behavior.
The main protagonists of the case study are the Hyatt Place leadership team, responsible for formulating and implementing the company's globalization strategy. They need to balance the desire for rapid expansion with the need to maintain brand consistency and operational excellence across diverse markets.
3. Analysis of the Case Study
This case study can be analyzed using the Porter's Five Forces framework to understand the competitive landscape and identify potential opportunities and threats:
1. Threat of New Entrants: The hotel industry is characterized by high barriers to entry due to significant capital investment, complex regulatory environments, and established brand loyalty. However, the rise of new players in the mid-priced segment, such as Airbnb and other budget-friendly hotel chains, presents a growing threat.
2. Bargaining Power of Suppliers: Hyatt Place has a moderate bargaining power with suppliers, as the hotel industry is relatively fragmented. However, dependence on specific suppliers, such as construction companies and food distributors, can create vulnerabilities.
3. Bargaining Power of Buyers: The bargaining power of buyers in the hotel industry is high, as consumers have numerous options and can easily compare prices and services online. The rise of online travel agencies (OTAs) further empowers buyers.
4. Threat of Substitute Products: The hotel industry faces competition from alternative accommodation options like Airbnb, vacation rentals, and hostels, particularly in the mid-priced segment.
5. Competitive Rivalry: The mid-priced hotel segment is highly competitive, with established players like Marriott, Hilton, and IHG vying for market share. Hyatt Place needs to differentiate itself by offering unique value propositions, such as its focus on technology and modern design.
4. Recommendations
Hyatt Place should consider the following recommendations to achieve successful globalization:
1. Targeted Market Entry: Prioritize expansion into emerging markets with high growth potential, such as Southeast Asia, Latin America, and Africa. Conduct thorough market research and due diligence to identify specific countries and cities with favorable economic conditions, infrastructure development, and growing tourism sectors.
2. Adaptive Business Model: Tailor the Hyatt Place brand to local preferences and cultural nuances. This involves:* Product Customization: Offer room configurations and amenities that cater to local needs and preferences.* Food and Beverage Adaptation: Develop menus that incorporate local cuisines and flavors while maintaining Hyatt Place's quality standards.* Cultural Sensitivity: Train staff on cross-cultural communication and etiquette to ensure a welcoming and inclusive experience for guests.
3. Strategic Alliances: Partner with local businesses, developers, and government agencies to facilitate market entry and leverage local expertise. This can include joint ventures, franchise agreements, and strategic partnerships with airlines, tour operators, and travel agencies.
4. Leverage Technology: Utilize digital marketing strategies, online booking platforms, and mobile applications to reach a wider audience and enhance guest experience. Implement technology solutions for seamless check-in and check-out processes, personalized services, and efficient operations.
5. Focus on Sustainability: Integrate environmental sustainability practices into all aspects of operations, from energy efficiency and waste management to responsible sourcing and community engagement. This will resonate with environmentally conscious travelers and enhance Hyatt Place's brand image.
5. Basis of Recommendations
These recommendations are based on the following considerations:
1. Core Competencies and Consistency with Mission: Hyatt Place's core competencies include brand management, operational efficiency, and technology integration. These strengths can be leveraged to ensure consistency in service quality and brand identity across global markets.
2. External Customers and Internal Clients: The recommendations prioritize understanding the needs and preferences of diverse customer segments in emerging markets while ensuring a positive experience for employees and franchisees.
3. Competitors: The recommendations aim to differentiate Hyatt Place from competitors by offering unique value propositions, adapting to local preferences, and leveraging technology to enhance guest experience.
4. Attractiveness ' Quantitative Measures: While specific financial metrics are not provided in the case study, the recommendations are expected to contribute to increased revenue, market share, and brand value.
5. Assumptions: The recommendations assume that Hyatt Place has the financial resources, management expertise, and commitment to implement the proposed strategies effectively.
6. Conclusion
By strategically targeting emerging markets, adapting its business model, leveraging technology, and prioritizing sustainability, Hyatt Place can achieve successful globalization while maintaining brand consistency and operational excellence. This approach will enable the company to capitalize on growth opportunities, enhance its competitive advantage, and solidify its position as a leading player in the mid-priced hotel segment.
7. Discussion
Alternatives not selected:
- Aggressive Expansion: Rapidly expanding into multiple markets without thorough market research and adaptation could lead to operational inefficiencies and brand dilution.
- Franchise-only Model: Relying solely on franchising could compromise brand consistency and quality control, especially in markets with less stringent regulatory frameworks.
Risks and Key Assumptions:
- Political Instability: Emerging markets can be subject to political instability, which can impact business operations and investment returns.
- Economic Volatility: Fluctuations in currency exchange rates and economic growth can affect profitability and investment decisions.
- Cultural Differences: Navigating cultural nuances and adapting to local preferences can be challenging and require careful planning and execution.
Options Grid:
| Option | Advantages | Disadvantages | Risks |
|---|---|---|---|
| Targeted Market Entry | Focused expansion, leveraging resources effectively | Slower growth, potential for missed opportunities | Political instability, economic volatility |
| Adaptive Business Model | Enhanced customer satisfaction, stronger brand appeal | Increased complexity, higher costs | Cultural misunderstandings, operational challenges |
| Strategic Alliances | Access to local expertise, reduced investment risk | Potential for conflicts, loss of control | Partner reliability, cultural clashes |
| Leverage Technology | Improved efficiency, enhanced guest experience | High initial investment, potential for technical issues | Cyber security threats, data privacy concerns |
| Focus on Sustainability | Positive brand image, reduced environmental impact | Higher costs, potential for regulatory challenges | Consumer perception, operational complexities |
8. Next Steps
To implement these recommendations, Hyatt Place should:
1. Form a Global Expansion Team: Assemble a dedicated team with expertise in international business, marketing, finance, and operations to oversee the globalization strategy.
2. Conduct Market Research: Conduct thorough market research to identify specific target markets, analyze competitive landscapes, and assess market potential.
3. Develop a Global Expansion Plan: Define clear objectives, timelines, and resource allocation for each target market.
4. Implement Pilot Projects: Launch pilot projects in selected markets to test and refine the adapted business model, marketing strategies, and operational processes.
5. Monitor and Evaluate: Continuously monitor progress, assess performance metrics, and make adjustments as needed to ensure the success of the globalization strategy.
By taking these steps, Hyatt Place can effectively navigate the complexities of globalization and achieve sustainable growth in emerging markets.
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Case Description
Multinational, multi-brand hotel corporations serve almost all segments of the market. They own hotels and work with other hotel owners through leases, management contracts and franchise agreements. In the hotel business it is widespread to receive contracts for management, but many well-known players use franchising agreements during their global expansion. In 2011, Hyatt Hotels Corporation has announced that its select-service brands are expanding internationally. Among other issues, the leadership of the corporation now needs to find answers for several questions: What modes of entry should be used in brand internationalization? How should new internationalization opportunities be pursued for the lower-category Hyatt Place while maintaining the company's premium brand?
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