Harvard Case - Starwood Hotels & Resorts Worldwide Inc.: Asia Pacific
"Starwood Hotels & Resorts Worldwide Inc.: Asia Pacific" Harvard business case study is written by Choon Chiang Leong, D.G. Allampalli. It deals with the challenges in the field of Strategy. The case study is 23 page(s) long and it was first published on : Nov 16, 2004
At Fern Fort University, we recommend Starwood Hotels & Resorts Worldwide Inc. (Starwood) to pursue a multi-pronged strategy for growth in the Asia Pacific region, focusing on strategic acquisitions, market penetration, and product development while leveraging its core competencies in brand management, operations, and customer service. This strategy will capitalize on the region's rapid economic growth, increasing middle class, and growing demand for travel and hospitality.
2. Background
The case study focuses on Starwood's expansion strategy in the Asia Pacific region, a market with immense potential but also significant challenges. Starwood, a leading global hospitality company, aims to capitalize on the region's burgeoning middle class and rising travel demand. However, the company faces intense competition from local and international players, as well as a complex regulatory environment.
The main protagonists of the case study are:
- Starwood Hotels & Resorts Worldwide Inc.: A global hospitality giant seeking to expand its presence in the Asia Pacific region.
- The Asia Pacific Region: A dynamic and rapidly growing market with diverse cultural and economic landscapes.
- Competitors: Existing players in the region, including local chains and international brands like Marriott, Hilton, and Hyatt.
3. Analysis of the Case Study
To analyze Starwood's situation, we employ a combination of frameworks:
1. Porter's Five Forces:
- Threat of New Entrants: High due to the region's rapid growth and ease of entry for new players.
- Bargaining Power of Buyers: Moderate, as consumers have diverse needs and preferences but are increasingly price-sensitive.
- Bargaining Power of Suppliers: Moderate, as Starwood relies on local suppliers but has bargaining power through its size and brand recognition.
- Threat of Substitutes: Moderate, as alternative accommodation options like Airbnb and home-sharing services are gaining popularity.
- Competitive Rivalry: High, as the region is crowded with established players and new entrants vying for market share.
2. SWOT Analysis:
Strengths:
- Strong brand recognition and reputation.
- Diverse portfolio of brands catering to different segments.
- Expertise in operations and customer service.
- Strong financial position.
Weaknesses:
- Limited understanding of local market dynamics and consumer preferences.
- Potential for cultural misunderstandings and operational challenges.
- Dependence on external suppliers and partners.
Opportunities:
- Growing middle class and rising disposable income.
- Increasing demand for travel and hospitality services.
- Government initiatives promoting tourism and infrastructure development.
Threats:
- Intense competition from local and international players.
- Economic volatility and political instability in some countries.
- Environmental concerns and sustainability challenges.
3. Value Chain Analysis:
Starwood's value chain can be analyzed to identify areas for improvement:
- Inbound Logistics: Optimizing supply chain management and sourcing strategies to reduce costs and ensure quality.
- Operations: Standardizing operations while adapting to local preferences and regulations.
- Outbound Logistics: Developing efficient distribution channels and logistics networks.
- Marketing and Sales: Targeting specific market segments with tailored marketing campaigns.
- Service: Providing exceptional customer service and building loyalty.
4. Business Model Innovation:
Starwood can explore innovative business models to cater to the region's unique demands:
- Developing localized brands: Creating brands that resonate with local cultures and preferences.
- Offering unique experiences: Tailoring services and amenities to cater to specific interests and needs.
- Leveraging technology: Utilizing digital platforms for booking, customer service, and personalized experiences.
5. Strategic Planning:
Starwood needs a comprehensive strategic plan for Asia Pacific, incorporating:
- Market Segmentation: Identifying and targeting specific customer segments with tailored offerings.
- Strategic Positioning: Differentiating itself from competitors through unique value propositions.
- Growth Strategy: Balancing organic growth with strategic acquisitions and partnerships.
- Financial Planning: Allocating resources effectively and managing risks.
- Performance Measurement: Tracking key metrics to assess progress and make adjustments.
4. Recommendations
Starwood should implement the following recommendations:
1. Strategic Acquisitions:
- Target specific markets: Focus on acquiring properties in high-growth markets with strong demand for hospitality services.
- Identify complementary brands: Acquire brands that complement Starwood's existing portfolio and expand its reach in different segments.
- Conduct due diligence: Thoroughly assess potential acquisitions to mitigate risks and ensure a smooth integration process.
2. Market Penetration:
- Develop localized marketing campaigns: Tailor marketing messages and channels to target specific customer segments in each country.
- Leverage social media: Engage with customers on social media platforms to build brand awareness and loyalty.
- Partner with local businesses: Collaborate with airlines, travel agencies, and other businesses to reach a wider audience.
3. Product Development:
- Introduce new brands: Develop brands that cater to specific needs and preferences in the region, such as budget-friendly options or luxury resorts.
- Offer unique experiences: Create packages and services that cater to specific interests, such as cultural tours, culinary experiences, or wellness retreats.
- Invest in technology: Utilize digital platforms to enhance customer experience, streamline operations, and gather valuable data.
4. Leverage Core Competencies:
- Brand Management: Maintain a consistent brand image across all properties and markets.
- Operations: Standardize operations while adapting to local regulations and preferences.
- Customer Service: Provide exceptional customer service and build loyalty through personalized experiences.
5. Embrace Sustainability:
- Implement sustainable practices: Reduce environmental impact through energy efficiency, waste reduction, and responsible sourcing.
- Promote social responsibility: Support local communities and contribute to social causes.
- Communicate sustainability efforts: Highlight Starwood's commitment to sustainability to attract environmentally conscious customers.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations leverage Starwood's core competencies in brand management, operations, and customer service while aligning with its mission to provide exceptional hospitality experiences.
- External Customers and Internal Clients: The recommendations cater to the diverse needs and preferences of external customers while empowering internal clients to deliver exceptional service.
- Competitors: The recommendations aim to differentiate Starwood from competitors by focusing on unique value propositions and leveraging its strengths.
- Attractiveness: The recommendations are expected to generate positive returns on investment through increased revenue, market share, and brand value.
- Assumptions: The recommendations are based on assumptions about continued economic growth in the Asia Pacific region, increasing demand for travel and hospitality services, and Starwood's ability to effectively implement its strategy.
6. Conclusion
By implementing these recommendations, Starwood can achieve sustainable growth in the Asia Pacific region. The company's focus on strategic acquisitions, market penetration, product development, and leveraging its core competencies will enable it to capitalize on the region's growth potential and establish a strong competitive advantage.
7. Discussion
Other alternatives not selected include:
- Joint Ventures: Partnering with local companies to gain access to market knowledge and resources.
- Franchising: Granting franchises to local operators to accelerate expansion.
- Organic Growth: Focusing solely on organic growth through new property development.
The risks associated with the recommended strategy include:
- Economic downturn: A decline in economic growth could negatively impact demand for hospitality services.
- Political instability: Political instability in some countries could disrupt operations and deter travelers.
- Competition: Intense competition could make it difficult to gain market share and profitability.
Key assumptions include:
- Continued economic growth in the Asia Pacific region.
- Increasing demand for travel and hospitality services.
- Starwood's ability to effectively implement its strategy.
8. Next Steps
Starwood should implement the following steps to execute its strategy:
- Develop a detailed strategic plan: Outline specific objectives, timelines, and resource allocation for each recommendation.
- Conduct market research: Gain a deeper understanding of local market dynamics and consumer preferences.
- Identify potential acquisition targets: Screen potential acquisition targets and conduct due diligence.
- Develop localized marketing campaigns: Create targeted marketing campaigns for each country.
- Invest in technology and innovation: Explore new technologies and platforms to enhance customer experience and streamline operations.
- Monitor progress and make adjustments: Track key performance indicators and make adjustments to the strategy as needed.
By taking these steps, Starwood can successfully navigate the challenges and opportunities of the Asia Pacific market and achieve sustainable growth.
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Case Description
The case describes how Starwood Hotels and Resorts Worldwide Inc. grew under the visionary leadership of Barry Sternlicht, its founder and CEO. It documents how Sternlicht acquired, financed and integrated two leading hotel brands - Westin and ITT Sheraton to become a globally diversified leading hotel chain. The company's newly appointed president of Asia Pacific was given the goal of boosting the share of operating profit from 10 to 25 percent by 2007.
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