The current world has become increasingly globalised and a large number of businesses find it attractive to expand internationally with the intent of accessing diverse markets and growing the organizations revenue (Schuster and Holtbrugge, 2012). However, it should be noted that entering a new country or a foreign market is not an easy task and organizations should carefully analyze the available options of entering a foreign market and settle on the one that is most suitable for its operations. There are several ways that multinational enterprises use to enter a foreign market or a foreign country. These include establishing a joint venture, acquiring a license to establish operations in the new country, entering as an exporter, or by means of a subsidiary that is wholly owned.
The Wyndham Hotel Corporation is one of the largest multinational hotel chains in the world. It is mainly based in the U.S.A. but has locations in Margarita Island in Venezuela, the Caribbean, the United Kingdom, Germany, Turkey, Ecuador, Colombia, Mexico, and Canada. The hotel has been in the hospitality industry since its inception in 1981 and has managed to penetrate the international market by operating a number of chains in the countries named above (Williamson, 2017). The intent of this research is to analyze and suggest a mode of entry for the Wyndham Hotel Corporation into the South African market in the future.
Analysis of the Wyndham Hotel Corporation
The organization will be analyzed using the SWOT analysis tool that is mostly used in strategic planning. With regards to Vanek, Mikolas and Zvakova (2012), the technique evaluates the Strengths, Weaknesses, Opportunities and Threats the organization currently faces in its business environment. It should be noted that the key intent of this analysis is to find out the strategies the hotel can employ in exploiting existing external; opportunities, eradicate weaknesses, maximize on its strengths and counter the threats.
StrengthsOne of the major strengths of the hotel that will be beneficial in venturing into South Africa is its ability to perform well in new markets. The hotel has a well built expertise in venturing into new markets and ensuring that it succeeds in them. This has helped the hotel to expand its revenue stream and diversify the risk of the economic cycle in the markets where it operates. Another key strength possessed by the hotel is a strong portfolio in its brand which has been strategically built over the years (Schuster and Holtbrugge, 2012). This strong brand is quite instrumental when the hotel will venture into a new market. The last major strength of the hotel is the presence of a workforce that is highly skilled and committed to the goals of the organization. The hotel takes its staff through learning and training programs with the intent to provide quality and automated services to their clients.
The first major weakness of the organization is poor product positioning in the market. Although the product sales are successful, the elements of unique selling propositions and positioning are not defined clearly and this can entice attacks from competitors in this segment. Another key weakness is poor investment in modern technologies. Considering the different locations the organization intends to venture into and the scale of expansion, the hotel needs to invest more resources in new technology so as to integrate the expansion process across the board (Harrison, 2013). The current level of technology of the hotel is not in sync with its vision. The last major weakness of the organization is its investment in research and development. Compared to other key players in the market, its investment in research and development is below par. Although a lot is spent in this area, the organization cannot effectively compete with other key players in the industry when it comes to innovation.
New clients from online channels present a major opportunity for Wyndham Hotel Corporation. In the recent past, the organization has undertaken to invest large amounts of money in online platforms and this has paid off by opening a new sales channel for the hotel. It is projected that in the future, the hotel will use this opportunity to learn more about its customers and serve them better by employing big data analytics. New trends in customer behavior and preferences also present another opportunity for the hotel (Schuster and Holtbrugge, 2012). If the organization leverages this opportunity, it will be able to diversify into new categories of products and build new revenue streams. Lastly, the decreased transportation costs due to slashed shipping costs will lead to a reduction of the hotels products hence giving the organization a chance to either increase its profitability or give customers incentives thereby gaining a larger market segment.
Intense competition presents a major threat to the Wyndham Hotel Corporation. Over the last few years the number of players who have entered the market has increased due to the stable profitability of the industry. As a result, there has been a downward pressure on the overall sales of the organization and this affects its profitability. The absence of a regular supply of innovative products presents another threat to the organization (Harrison, 2013). Many of the products that the hotel has developed over the years have been a response to the developments that competitors have made. Therefore, the irregular supply of new products has led to fluctuating sales over certain periods of time. Lastly, the organization operates in different jurisdictions that have varied liability laws. This presents a key threat because the hotel can be exposed to a number of liability claims if the policies in the different markets in which it operates change.
The hospitality Industry/sector analysis
In analyzing the hospitality industry, Porters Five Forces Model will be used. Note that this model will identify and analyze the five competitive forces that shape the hospitality industry and also aid in determining the strengths and weaknesses that exist within the industry (Levesque and Sheperd, 2014). From the analysis it will be established why the hospitality industry is able to sustain varied profitability levels. According to Porter, there are five undeniable forces that play a key role in influencing each and every market and industry in the world. Many times, the forces are employed in measuring the profitability, attractiveness, and competition intensity of the market or industry.
This refers to the strength and number of an organizations competitors. It is important to know the number of organizations that one is competing with in the market and also know the quality of their services and products as compared to yours so that you can come up with effective strategies of competing fairly. In a market that is characterized by intense rivalry, organizations tend to employ high impact marketing campaigns and aggressive price cuts as the major strategies of attracting customers. Additionally, buyers and suppliers in these markets can easily leave one organization for another if they feel they are not being treated right (Hursti and Maula, 2013). Conversely, in markets where the competitive rivalry is at its lowest, an organization is likely to have healthy profits and tremendous strength. The hospitality industry within which Wyndham Hotel Corporation operates is characterized with intense competition and an organization needs to be continuously innovative so as to remain relevant in the market.
The power of suppliers is determined by the ease at which they can increase the price of their products and services. Some of the key factors an organization should consider when it comes to the power of suppliers include the number of potential suppliers available in the market, the uniqueness of the services and products that they offer, and the general cost of switching from one supplier to another. It should be noted that if an organization has many suppliers to choose from, it will be easier and cheaper to switch to a more favorable alternative. However, the suppliers are fewer and are on high demand, an organization will be more in need of their help thus strengthening their supplier power and giving them the ability to change an organization more. This negatively impacts on the companys profitability. As relates to the market within which the Wyndham Hotel Corporation operates, there are many suppliers thus making it easy for the organization to choose one that serves their interest the best.
The power held by buyers is determined by how easy it is for them to drive down the prices of an organization. Some factors considered when analyzing the power of buyers includes the number of buyers in the market, the quantity of the orders that they make, what could it cost them to change from using the services and products of an organization and use those of a competitor, and are the buyers strong enough to dictate their terms of service to you (Tsai, MacMillan, and Low, 2014). When dealing with a few clients who are savvy, they tend to posses more power and can dictate their terms of service to the organization. However, this power tends to decrease with an increase in the number of customers. The Wyndham Hotel Corporation is a high profile hotel and its major clients are the extremely wealthy individuals and corporations who require customized services most of the time; therefore, are few and quite seasonal. This makes the buyer power of the clients to be high.
Threat of substitution
This refers to the ease with which the customers of an organization can switch from using its services and products to using those of the rival. The threat of substitution analyses the number of rivals in the market, how the quality and prices of their products and services compare to those of the organization under scrutiny and the profit margin of the rivals which determines their ability to lower costs even further (Fitzpatrick, Nguyen and Cayan, 2015). The two most profound aspects that inform the threat of substitutes include a buyers inclination to change and switching costs both immediate and in the long term. Many organizations in the hospitality industry are faced by this threat more...
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