Wednesday, August 27, 2008

Understanding strategy.

A successful strategy defines how a firm will influence the various factors that help it achieve its purpose. When Embassy Suites Hotels started up, its purpose was "to be the easiest hotel in the world to do business with." This was subsequently accomplished using the following five strategies.

Strategies to influence customers:
Create teams of multi-skilled employees and rotate them through different departments so they understand how the hotel as a whole operates. Train these employees in problem-solving and communication skills, and give them broad authority to respond quickly to customer needs on their own initiative.

Strategies to influence competitors:
Expand very quickly. Build properties in 100 prime locations in the first five years. This will slow down the entry of competitors into the all-suite hotel marketplace because of the cost commitment - hundreds of millions of dollars to develop a new and unproven business on a nationwide scale.

Strategies to influence stockholders:
Obtain first-mover advantage with a product that business travelers consider an exceptional value (two rooms for the price of one). Charge premium prices and promote weekend specials to maximize revenue. At the same time, aggressively drive down operating costs.

Strategies to influence employees:
Be very selective in hiring, focusing primarily on a proven commitment to customer service. Have new employees and their families spend a weekend at an Embassy Suites hotel to understand the guest's experience first hand. Provide monthly bonuses based on operating costs and guest satisfaction ratings.

Strategies to influence the local community:
Hire hotel managers who sign contracts to stay at their assigned property for five years (versus the industry norm of 18-months). Encourage all managers to join local community organizations, build strong personal relationships, and play a visible leadership role in local activities.

A smart company uses these strategies to gain a competitive advantage in each of these dimensions. However, it must also know the standards and behaviors that will contribute to its success.

And that's tomorrow's topic.

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