Contemporary Trends at Movenpick Hotels and Resorts - Case Study Example

MOVENPICK HOTELS AND RESORTS Background Information Above is a photo of Movenpick Hotel Instanbul.1 The history of Movenpick Hotel and Resorts dates back from 1948. The founder of this group of hotels and resorts is Ueli Prager. In 1966, the group was officially started and two hotels were opened, one near Zurich Airport and another in Regensdorf. Currently the group owns over 90 properties either existing or under construction. These properties are located in Europe, Africa, the Middle East and Asia. It was in 1976 that the hotel first set foot outside of Europe. It was at this time that the Movenpick Hotel Jolie Ville in Cairo was opened. It was at this new hotel that the initial testing of the most commonly and successfully used ‘System of Management Contracts’ was conducted. The hotel was first established in Germany in 1980 at Ulm/Neu-Ulm. In this country the portfolio has since grown to seventeen properties. This group of Hotels and Resorts also owns a fleet of five luxury cruisers. All these are found in Egyptian waters. In 1998, the Movenpick holding was split into a number of operating units. These are; Movenpick Fine Foods, Movenpick Wine, Movenpick Gastronomy and Movenpick Hotels and Resorts. As a result, the separate operating units gained potential for autonomous development in their respective business operations. It was in 2001, that the hotel first set foot on the northern coast of Africa by opening business in Tunisia and Morocco. During the ‘World Travel Market’ in London in 2003, this group of Hotels and Resorts was awarded recognition as the “fastest growing hotel chain in the Middle East”. Movenpick Hotels and Resorts also took over hotels in Dar es Salaam and Mauritius in 2005 thus making its first entry into East Africa. In 2006, a management agreement for a hotel in Bangalore was signed and a holiday resort in Phuket was taken over. This marked the launching of an expansion in their operations on the Indian sub-continent as well as in Asia. Since 1973, the Movenpick Hotels and Resorts have witnessed a successful implementation of their founder’s (Ueli Prager) mission. They have also maintained the brand name which is synonymous to warm-hearted hospitality and quality. Based on the above analysis regarding the evolution of Movenpick, we can conclude that this company is a multinational corporation with core competencies in the field of hospitality, gastronomy, foods and wines. It offers a wide range of products and services, all of which are united by the themes of “enjoyment”, “treats” and “authenticity”. The majority shareholder of Movenpick Hotels and Resorts is Movenpick Holding with a total shareholding of 67.7%. The Kingdom Group is the owner of the remaining 33.3% (Movenpick Hotels and Resorts Development 2011).2 My analysis focuses on Movenpick hotels in Egypt and Zurich. The following factors will be considered in the comparison; porters five forces, value curve, macro environment, task environment and trend market. Porters Five Forces. According to Porter M.E. (1979), ‘Porter’s Five Forces’ is a framework used by managers in analyzing the industry and formulating business strategy. These forces are as a result of horizontal and vertical competition. Threat brought about by substitute products, established rivals and new entrants are from horizontal competition. Threat brought about by suppliers bargaining power and customers bargaining power are from vertical competition. Threat of new entrants Movenpick Hotels in Switzerland are not threatened as such by new entrants into the hospitality industry as it is the case for Movenpick hotels in Egypt. This is because in Switzerland, there exists more barriers to entry than in Egypt. Since Switzerland it’s a first world economy, relatively large level of start up capital would be required to start a hotel of the class of Movenpick as compared to the capital required in Egypt which is a second world country. This capital requirement acts as a great barrier to entry in Switzerland and thus Movenpick Hotels in Switzerland are more advantaged in this aspect. Customers bargaining power In Switzerland the bargaining power of customers is likely to be high since there are more hotels of the class of Movenpick relative to demand as compared to Egypt where the are relatively few hotels of the Class of Movenpick. This means that in Switzerland customers can easily threaten to buy similar services from rival companies in the hotel industry. Movenpick hotels in Switzerland are therefore forced to consider greatly the impact customers have on the business while making decisions concerning the companies as compared to Movenpick hotels in Egypt. Suppliers bargaining power The suppliers’ bargaining power is determined by many factors one of them being suppliers’ concentration. In Switzerland the hotel industry faces more suppliers of its raw materials as compared to the hotel industry in Egypt. This implies that there is more competition between suppliers in Switzerland as compared to suppliers in Egypt and hence we can conclude that suppliers are weak in Switzerland compared to suppliers in Egypt. Rivalry from existing players In Switzerland, the hotel industry has more players than in Egypt. This means that Movenpick in Switzerland faces greater rivalry from existing players than Movenpick in Egypt. Threat of substitute products In Switzerland, there are more hotels of the class of Movenpick that provide more unique services and hence act as substitutes to what Movenpick offers. This is different from Movenpick hotels in Egypt since in Egypt there are relatively few hotels of the class of Movenpick and which provide services that are substitutable with those of Movenpick Hotels. This implies that the Movenpick Hotels in Switzerland are greatly affected by the prices of substitute services when it comes to pricing their own services as compared to the Movenpick hotels in Egypt. Value Curves These are curves whose focus is on where an organizations products or services create value (Kim W.C. & Mauborgne R, 1997). Since these curves can be developed from different perspectives, I will develop them based on how Movenpick products and services compare with those of its competitors in the two countries. Movenpick product From the above graph, it can be clearly seen that the Movenpick hotels in Switzerland provide better services than most of their competitors. Contrary to this, the Movenpick hotels in Egypt provide services that are of lower value compared to their competitors. Macro Environment These are the Major External factors that are also uncontrollable and that affect the manner in which an organization makes its decision. These factors can be summarized into socio-demographic, political, economic, natural environment and technological factors. Political Factors Movenpick hotels in both Switzerland and Egypt operate in different political environments. In Switzerland there is a high level of political stability compared to Egypt. Actually, Egypt is currently healing from the effects of political upheavals. This has adversely affected businesses in Egypt and actually most of them were forced to close down because of poor performance. Movenpick Hotel especially the one located in Cairo must have performed poorly during the entire period when Egypt was experiencing political uprisings. This was because Cairo was the epicenter of the chaos. On the other hand, Switzerland has been a rather peaceful country with political stability thus creating a conducive environment for Movenpick and other hotels to operate in. This has made Movenpick especially at Zurich to perform well compared to Movenpick hotels in Egypt. Economic Factors There are different economic factors that affect the operation of Movenpick Hotels in both Egypt and Switzerland. One of this is the tax system in both countries. Switzerland being a first world country, its tax system is relatively unfavorable for operation of businesses as compared to the tax System in Egypt which is a second world country. It therefore implies that businesses in Switzerland are taxed more on their profits as compared to businesses in Egypt. This is because the cost of living in Switzerland is higher and the income levels of the population are also high. The relatively lower taxes on business profits in Egypt act as an incentive to invest further. On the other hand, the relatively high taxes in Switzerland act as a disincentive to expand investments in that country. That is why there are more Movenpick hotels in Egypt as compared to Switzerland. Technological Factors Switzerland being a first world country is more technologically endowed as compared to Egypt which is a second world country. This means that the production processes, transport and distribution, information and communication are more efficient in Switzerland as compared to Egypt. The end result of an efficient process is low cost of doing business which has a positive impact on profits. We can therefore conclude that based on technological factors, its cheaper to do business in Switzerland than in Egypt and hence Movenpick hotels in Switzerland have an upper hand in this aspect. Socio-demographic Factors These factors include social culture, demography and social structure. The values attitudes and beliefs of the population in Switzerland differ greatly from those of the population in Egypt. Egypt is largely Islamic while Switzerland is largely Christian. These two religions have different beliefs and to a certain extent even different values which greatly influence how businesses in this two countries operate. Islamic religion is known to be too conservative while Christianity is somehow liberal. Under a conservative culture and belief, tourism rarely thrives and therefore based on this, tourism would thrive better in Switzerland as compared to Egypt. This has an implication on hotels in the different countries. Based on this analysis, we would then conclude that Movenpick hotels in Switzerland perform better than in Egypt since in the latter, the environment is relatively less conservative. Task Environment As an organization conducts business, there are many forces and institutions with which it interfaces with. These forces and institutions generally referred to as task environment directly influence the decision making process and therefore greatly affect the realization of the organizational goals. Task environment is usually made up of suppliers, stock market, techniques of production, customers, competitors, market sectors and raw materials. To some organizations it also includes human resources and international sectors. Competitors and potential entrants Movenpick Hotels in Egypt are more likely to face competition from new entrants into the industry than Movenpick hotels in Switzerland. This is because the hospitality industry in Egypt still has more potential for growth as compared to the hospitality industry in Switzerland. Switzerland being a first world country, the level of fixed costs is likely to be high hence acting as barrier to entry in any industry inclusive of the hospitality industry where Movenpick is a player. On the other hand, in Egypt, fixed costs are likely to be relatively low especially in the hospitality industry implying that the possibility for growth of competition from new entrants is high. Since the rate of growth of the hospitality industry in Egypt is relatively higher than in Switzerland, Movenpick hotels in Egypt are more likely to face more competition from new entrants as compared to Movenpick hotels in Switzerland. Customers and Suppliers The nature of a firm’s transactions with its customers and suppliers greatly influences the level of its competitiveness. The customers of Movenpick hotels in Switzerland are more likely to force the hotel to lower its prices due to their strong bargaining power as compared to the customers in Egypt. This is because in Switzerland, there are more players in the hospitality industry as compared to Egypt. Suppliers in Switzerland have a greater capacity to raise prices of raw materials than suppliers in Egypt. Employees can also be considered as suppliers of labor. Based on this fact, we can conclude that due to the high availability of labor supply in Egypt, the Movenpick hotels in this country incur relatively low labour costs thus leading to overall reduced cost of operation as compared to Movenpick Hotels in Switzerland where labor is in scarce supply. \References Kim W.C. and Malbourgne R.Value Innovation: The Strategic Logic of High Growth, HBR, 1997. Movenpick Hotels and Resorts Development 2011 Viewed on 7 October, 2011. Porter, M.E. (1979) How Competitive Forces Shape Strategy, Harvard Business Review, March/April , 1979. Read More