1. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3

2. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Foreword: The Role of Marketing in Strategic Planning “Would you tell me, please, which way I ought to go from here?” said Alice. “That depends a good deal on where you want to get to” said Cheshire Cat. - Lewis Carroll(Alice in Wonderland)

3. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Explain company-wide strategic planning. After reading this chapter, you should be able to: OBJECTIVES Understand the concepts of stakeholders, processes, resources, and organization as they relate to a high-performing business. Explain the four planning activities of corporate strategic planning. Understand the processes involved in defining a company’s mission and setting goals and objectives. Discuss how to design business portfolios and growth strategies Explain the steps involved in the business strategy planning process.

4. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The Inn on Biltmore Estate was designed to be a four-star hotel and one of the finest of its kind in the southeastern United States. –among competitors were The Greenbrier (West Virginia), Homestead (Virginia) and Pinehurst (North Carolina) –Stephanie Williams, director of hotel sales & Randy Fluharty, senior vice president, had been planning the development &opening of the inn for more than a year The inn would be the first and only lodging on the property of the Biltmore Estate. The Inn on Biltmore Estate The Role of Marketing in Strategic Planning tab

5. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The French Renaissance chateau mansion, billed as “America’s Largest Home” serves as a museum with a curator. - fully furnished & viewed by hundreds of thousands visitors yearly, it is not used for lodging or serving of food & beverage The 8,000 acres estate in the Blue Ridge Mountains consists of the chateau, a vineyard, three restaurants, an ice cream parlor, a bake shop, and a spectacular flower garden. –now it would have an inn with 222 guest rooms and suites to match its splendor The Inn on Biltmore Estate The Role of Marketing in Strategic Planning tab

6. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Stephanie and Randy believed many would come to the Inn from the 900,000 annual paid estate visitors. –they positioned the inn as a weekend & holiday transient vacation property but with conference/seminar facilities designed with the midweek corporate guest in mind The Inn’s restaurant would feature classic cuisine. –estate-raised beef, lamb, veal, and trout, as well as seasonal fruits, vegetables, and herbs The hotel site had been carefully selected to offer views of a meadow and mountain from one side and of downtown Asheville from the other. The Inn on Biltmore Estate The Role of Marketing in Strategic Planning tab

7. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Seminar & conference guests were expected to come from Charlotte, Raleigh, Greensboro, Atlanta, and Tennessee cities such as Knoxville. –the inn was planned to accommodate business meetings, corporate retreats, and small-group functions –two boardrooms, two banquet rooms & a reception salon can accommodate groups of up to 144 people The Inn on Biltmore Estate - Corporate Business The Role of Marketing in Strategic Planning tab

8. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The hotel would not be affiliated with a chain, so those responsible for planning did not have the benefit of a corporate planning department. Rooms were to be on a modified American plan (MAP) and would include afternoon tea, breakfast, parking, and gratuities. Prices were expected to range from $300 to $500 per room per night. –a premium position within the Asheville market The internal mission was to position the hotel as a destination without overshadowing the chateau. The Inn on Biltmore Estate - Planning The Role of Marketing in Strategic Planning tab

9. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Two test guest rooms were built in a storage area in Asheville. –while water was not connected, in all other respects the test rooms were identical to future guest rooms Details such as drapery, bedspreads, and the armoire were carefully studied in these test rooms. –designer and suppliers worked closely with the inn’s staff Stephanie worked with travel media writers to create preopening knowledge and excitement among the travel-receptive public. The Inn on Biltmore Estate - Planning The Role of Marketing in Strategic Planning tab

10. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The estate had a key customer pass-holder program, allowing unlimited pass privileges to the property. –this database contained over 49,000 names & addresses –90% lived outside the Asheville area. The estate reservation center reported that over 60% of those calling for information did not have lodging. –the estate served as a broker for area hotels Reservations center agents could be trained to first attempt to sell the inn. –and offer lesser-priced alternatives if the caller showed heavy price resistance The Inn on Biltmore Estate - Sales Planning The Role of Marketing in Strategic Planning tab

11. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A problem to be reconciled was that of gate passes for friends & relatives of guests staying at the inn. –estate policy was admittance to the property could be gained only through a paid ticket or pass Hotel guests would want to invite others to join them for dinner or cocktails, desirable for the hotel. –a way was needed to keep them from touring the chateau, gardens & winery without paying for the privilege Another challenge facing Stephanie was a negative perception of the area by those in Atlanta. –an issue discovered through focus group interviews The Inn on Biltmore Estate - Sales Planning The Role of Marketing in Strategic Planning tab

12. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The focus groups revealed that many Atlantians believed it was a great distance away, in the middle of nowhere with nothing to do. –in reality, Asheville is only 3.5 hours from Atlanta –in addition to the estate, the area offered hiking, white- water rafting, sightseeing from the Blue Ridge Parkway –a Native American casino is about one hour away The Inn on Biltmore Estate - Sales Planning The Role of Marketing in Strategic Planning tab

13. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A corporate planner called and wanted to book future business with a discount. –the booking called for a spillover into the weekend It was turned down in expectation of higher yield due to weekend occupancy by transient customers. –without a history of bookings for the hotel, this was a bold decision Yield management importance was recognized by Stephanie, who was looking for a yield management specialist to join her staff –but had discovered that such people were in short supply The Inn on Biltmore Estate - Yield Management The Role of Marketing in Strategic Planning tab

14. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Stephanie identified market segments that she felt offered opportunities for the inn, one of which was the wedding market. Stephanie felt this market offered great potential. –the call center received 5-10 calls per day about holding weddings on the estate –80 percent of these calls were from out of state Other segments to develop included international visitors, attracted by the Vanderbilt name. –Europeans seem to be attracted by the historical family name The Inn on Biltmore Estate - Market Segments The Role of Marketing in Strategic Planning tab

15. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Another possible segment was the Butterfield Robinson walking tour, top-of-the-market mountain tours in the area that cater to affluent individuals. These and many other considerations kept Stephanie and Randy constantly occupied in both planning and development at strategic and tactical levels. –they put to use many of the concepts discussed in this chapter on strategic planning The Inn on Biltmore Estate - Market Segments The Role of Marketing in Strategic Planning tab

16. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A major challenge facing hospitality companies is building & maintaining healthy businesses in a rapidly changing marketplace & environment. The consulting firm of Arthur D. Little proposed a model of the characteristics of a high-performance business which pointed to four factors: ☞ stakeholders, processes, resources, and organization. Introduction Nature of High-Performance Business tab

17. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The High Performance Business Nature of High-Performance Business tab

18. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The starting point for any business is to define the stakeholders and their needs. –traditionally businesses focused on their stockholders A business must at strive to satisfy the minimum expectations of each stakeholder group. –including customers, employees, suppliers, and the communities where their businesses are located The progressive company creates a high level of employee satisfaction. –which leads employees to work on continuous improvements as well as breakthrough innovations Stakeholders Nature of High-Performance Business tab

19. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Growth creates opportunities for advancement, profits mean we can pay our employees a fair wage. There is a synergistic loop between satisfied customers & satisfied employees. –satisfied employees create satisfied customers –employees like dealing with customers who are happy and they know from previous visits This creates more customer satisfaction, which in turn creates more employee satisfaction, resulting in higher-quality products & services. –creating high customer & stakeholder satisfaction Stakeholders Nature of High-Performance Business tab

20. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A critical, sometimes overlooked, stakeholder group are the owners of hotels operated by a hotel management company. Many hotel owners are actually investors and do not wish to manage a property actively. –they contract with an experienced hotel management company –such a company may be a well-known flag company or one that is unknown to the public Stakeholders Nature of High-Performance Business tab

21. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Company work is traditionally carried on by departments. Departmental organization poses some problems, as departments typically operate to maximize their own objectives, not necessarily the company’s. –walls go up between departments –there is usually less than ideal cooperation –work is slowed & plans often are altered Companies are increasingly refocusing attention on the need to manage processes more than departments. Processes Nature of High-Performance Business tab

22. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The Las Vegas Hilton was concerned with the profit contribution from various market segments. –the result was a radically different approach to hotel accounting called market segment accounting This approach incorporated marketing & strategic planning into accounting rather than viewing them as separate stand-alone areas and philosophies. This required an interdepartmental analysis. –because different guests have widely varying impacts on the profit implications for various departments Processes - The Las Vegas Hilton Nature of High-Performance Business tab

23. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 1.What is the relative profitability of the gaming guest, premium-gaming guest and tour/travel guest? 2.How many room nights will a segment fill yearly? 3.How much should be spent to attract each segment? 4.How should rooms be priced for each segment? 5.How should these rooms be allocated to the segments during critical periods of the year? Processes - The Las Vegas Hilton Nature of High-Performance Business The hotel wanted answers to these questions: Teams were formed representing finance, marketing, and information services. –eventually, the heads of all the hotel’s major departments contributed to the new market segment accounting model tab

24. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 To carry out processes, a company needs resources like personnel, materials, machines, and information. –traditionally, companies sought to own & control most of the resources that entered the business Companies are finding some resources under their control are not performing as well as those they could obtain from outside. –more companies today outsource less critical sources Smart companies are identify their core competencies and use them as the basis for their strategic planning. Resources Nature of High-Performance Business tab

25. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Table 3-1Strategic analysis: Questions that generate creative ideas. Organizational Resources for Strategic Planning Nature of High-Performance Business tab

26. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The organizational side of a company consists of its structure, policies, and culture. –all of which tend to become dysfunctional in a rapidly changing company Although structure and policies can be changed, the company is the hardest to change. Companies must work hard to align their organization’s structure, policies, and culture to the changing requirements of business strategy. Organization Nature of High-Performance Business tab

27. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Figure 3-1 Steps in Strategic Planning. The company starts strategic planning by defining its overall purpose & mission at the corporate level. –this mission is turned into detailed supporting objectives. Next, headquarters decides what portfolio of business & products is best for the company and how much support to give each one. Introduction Strategic Planning: Defining Marketing’s Role tab

28. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Each business & product develops detailed marketing and other plans that support the companywide plan. Strategic planning sets the stage for the rest of the planning in the firm. Companies usually prepare annual plans, long-range plans, and strategic plans. –annual & long-range plans deal with current businesses –the strategic plan involves adapting to take advantage of opportunities in its constantly changing environment Corporate headquarters has the responsibility for setting into motion the whole planning process. Introduction Strategic Planning: Defining Marketing’s Role tab

29. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Hospitality faces the need for greater empowerment of employees, particularly in middle-management. It has been suggested that many of the traditions within the industry have experienced little change. –“Most of its managers, for instance, were trained in the classical management style.” –“formal rules and regulations guide decision making and ensure organizational stability. …authority and decision making tends to be centralized” Increasingly, industry executives and researchers view this traditional approach as needing change. Introduction Strategic Planning: Defining Marketing’s Role tab

30. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Because the hospitality & tourism industries are international & multicultural, attitudes & culture can create sharp differences in management style. –a study of hospitality managers in Poland, France, and Austria showed differences in risk taking & international vision The study concluded that different attitudes of the managers affected their degree of autonomy. –the authors also believed the strategy of a hospitality firm and its level of performance were affected by the differing attitudes of managers within the three nations Introduction Strategic Planning: Defining Marketing’s Role tab

31. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A hospitality organization exists to accomplish something… –to provide a night’s lodging –a day of adventure and entertainment for a family –a great dining experience for a couple At first, it has a clear mission or purpose, but over time, its mission may become unclear. –as the organization grows, adds new products & markets, or faces new conditions in the environment When management senses that the organization is drifting, it must renew its search for purpose. Defining the Corporate Mission Strategic Planning: Defining Marketing’s Role tab

32. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 According to Peter Drucker, it is time to ask some fundamental questions. –what is our business? –who is the customer? –what do customers value? –what should our business be? Successful companies raise these simple-sounding, yet difficult questions continuously and answer them carefully and completely. –many organizations develop formal mission statements that answer the questions Defining the Corporate Mission Strategic Planning: Defining Marketing’s Role tab

33. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A mission statement is a statement of the organization’s purpose—what it wants to accomplish in the larger environment. –a clear mission statement acts like an “invisible hand” that guides people in the organization Management should avoid making a mission too narrow or too broad. –the organization should base its mission on its distinctive competencies Firms with well-crafted mission statements have shown better organizational & financial performance. Defining the Corporate Mission Strategic Planning: Defining Marketing’s Role tab

34. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Missions are at their best when they are guided by a vision, an almost impossible dream. –Thomas Monaghan wanted to deliver pizza to any home within thirty minutes, and created Domino’s Pizza –Ruth Fertel wanted to provide the finest steak dinners available, and created Ruth’s Chris Steakhouses The corporate mission statement should stress major policies the company wants to honor. –policies define how employees should deal with customers, suppliers, competitors & other groups Defining the Corporate Mission Strategic Planning: Defining Marketing’s Role tab

35. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The company’s mission statement should provide a vision & direction for the next ten to twenty years. Missions are not revised every few years in response to every new turn in the economy. –a company must redefine its mission if that mission no longer defines an optimal course Defining the Corporate Mission Strategic Planning: Defining Marketing’s Role tab

36. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Vision To become the leading independent five-star hotel in Busan providing excellent products and services at reasonable prices to every customer, every time. Mission Our customers are our priority and we will provide them with a quality experience which is second to none. We recognise the importance of our employees in achieving this and we will create a positive working environment which encourages their loyalty, commitment and hard work. We strive to be excellent leaders and will undertake all our business activities in an honest and ethical manner to provide a fair return on our investment. Defining the Corporate Mission Strategic Planning: Defining Marketing’s Role tab

37. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The company needs to turn its mission into detailed supporting objectives for each level of management. –each manager should have objectives and be responsible for reaching them Each broad marketing strategy must then be defined in greater detail. In this way, the firm’s mission is translated into a set of objectives for the current period. Setting Company Objectives and Goals Strategic Planning: Defining Marketing’s Role tab

38. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Most companies operate several businesses, however, they often fail to define them carefully. –businesses are too often defined in terms of products Market definitions of a business are superior to product definitions. –a business must be viewed as a customer-satisfying process, not a product-producing process –companies should define their business in terms of customer needs, not products Management, of course, should avoid a market definition that is too narrow or too broad. Designing The Business Portfolio Strategic Planning: Defining Marketing’s Role tab

39. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Holiday Inns, Inc., the world’s largest hotel chain with over 300,000 rooms, fell into this trap. –there was a time when it broadened its business definition from the “hotel business” to the “travel industry” It acquired Trailways, Inc., then the nation’s second largest bus company, and Delta Steamship, Inc. –but it did not manage these companies well and later divested the properties Today Holiday Inns is part of the Intercontinental Hotel Group & is refocused on the lodging industry. Holiday Inn Strategic Planning: Defining Marketing’s Role tab

40. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Companies have to identify those of its businesses that they must manage strategically. These businesses are called strategic business units (SBUs). An SBU has three characteristics: Designing The Business Portfolio Strategic Planning: Defining Marketing’s Role Chipotle was once an SBU of McDonalds. –it is a single business or a collection of related businesses that can be planned for separately from the rest of the company –it has its own set of competitors –it has a manager responsible for strategic planning & profit performance and who controls most factors affecting profits. tab

41. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The purpose of identifying SBUs is to assign to these units strategic-planning goals & appropriate funding. –these units send their plans to company headquarters, which approves them or sends them back for revision Headquarters reviews these plans to decide which of its SBUs to build, maintain, harvest, and divest. Designing The Business Portfolio Strategic Planning: Defining Marketing’s Role tab

42. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Designing The Business Portfolio Strategic Planning: Defining Marketing’s Role tab

43. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Companies need growth if they are to compete and attract top talent. “growth is pure oxygen” –at the same time, a firm must be careful not to make growth itself an objective –the company’s objective must be “profitable growth” Many add that growth must be environmentally responsible, though this is not unilaterally accepted Marketing has a responsibility to achieve profitable growth for the company. –and must identify, evaluate & select opportunities and lay down strategies for capturing them Developing Growth Strategies Strategic Planning: Defining Marketing’s Role tab

44. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Figure 3-2 The product-market expansion grid is useful in helping managers visualize and identify market opportunities. The Ansoff product–market expansion grid offers a useful framework for examining growth. Developing Growth Strategies Strategic Planning: Defining Marketing’s Role tab

45. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Management first considers whether it could gain more market share with its current products in their current markets –market concentration strategy Then it considers whether it can find or develop new markets for its current products –market development strategy Next, management should consider product development: –offering modified or new products to current markets –product development strategy Developing Growth Strategies Strategic Planning: Defining Marketing’s Role tab

46. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 By examining these three intensive growth strategies, management ideally will discover ways to grow. If not be enough, management must also examine diversification and integrative growth opportunities. –Starbucks developed packaged products that can be sold in supermarkets –the Hunter’s Head Tavern in Virginia gained national publicity when it became the first restaurant to get an animal rights stamp of approval for humane treatment of animals used in the restaurant Developing Growth Strategies Strategic Planning: Defining Marketing’s Role tab

47. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Diversification growth makes sense when good opportunities are found outside present businesses. –a good opportunity is one where the industry is highly attractive and the company has the mix of business strengths to be successful Three types of diversification can be considered: The company could seek new products with technological or marketing synergies with existing product lines, even though the products may appeal to a new class of customers –concentric diversification strategy Diversification Growth Strategic Planning: Defining Marketing’s Role tab

48. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The company might search for new products that could appeal to its current customers, although technologically unrelated to its current product line. –horizontal diversification strategy The company might seek new businesses that have no relationship to the company’s current technology, products, or markets. –conglomerate diversification strategy A company can systematically identify new business opportunities by using a marketing systems framework. Diversification Growth Strategic Planning: Defining Marketing’s Role tab

49. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Companies that diversify too broadly into unfamiliar products or industries can lose their market focus. –despite the risk, companies that started in one market often desire to enter other, complimentary markets Not a secure strategy, as different businesses often require different management styles & practices. Diversification Growth Strategic Planning: Defining Marketing’s Role tab

50. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 See this feature on page 66 of your textbook.

51. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Opportunities in diversification, market development, and product development can be seized through integrating backward, forward, or horizontally within that business’s industry. –a hotel company could select backward integration by acquiring one of its suppliers, such as a food distributor –or forward integration by acquiring tour wholesalers or travel agents –in horizontal integration the company might acquire one or more competitors Integrative Growth Strategic Planning: Defining Marketing’s Role tab

52. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Integrative growth offers opportunities in related businesses, but a company must have or acquire the expertise to succeed in the new business. –through investigating possible integration moves, a company may discover additional sources of sales A company can systematically identify new business opportunities using a marketing systems framework. Integrative Growth Strategic Planning: Defining Marketing’s Role tab

53. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Introduction Marketing Strategy and the Marketing Mix Figure 3-3 Managing marketing strategy and the marketing mix. Source: Kotler & Armstrong, Principles of Marketing, 12th ed., p. 47. The strategic plan defines the company’s overall mission and objectives. –Fig. 3–3 shows marketing’s role & activities tab

54. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Consumers stand in the center. Next comes marketing strategy, the marketing logic by which the company hopes to create this customer value and achieve these profitable relationships. The company designs an integrated marketing mix made up of factors under its control—product, price, place, and promotion (the four Ps). To find the best marketing strategy and mix, the company engages in marketing analysis, planning, implementation, and control. Introduction Marketing Strategy and the Marketing Mix tab

55. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 To succeed in today’s competitive marketplace, companies need to be customer centered. Before it can satisfy consumers, a company must first understand their needs and wants. –sound marketing requires a careful customer analysis Companies know that they cannot profitably serve all consumers in a given market. Each company must divide the market, choose the best segments & design strategies to serve them. –this involves market segmentation, market targeting, differentiation, and positioning Customer-Driven Marketing Strategy Strategic Planning: Defining Marketing’s Role tab

56. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Since markets consists of many types of customers, products, and needs, the marketer must determine which segments offer the best opportunities. –consumers can be grouped & served based on geographic, demographic, psychographic, and behavioral factors Dividing a market into distinct groups of buyers who have different needs, characteristics, or behavior, who might require separate products or marketing programs is called market segmentation. Every market has segments, but not all ways of segmenting a market are equally useful. Market Segmentation Customer-Driven Marketing Strategy tab

57. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time. –a company with limited resources might decide to serve only one or a few special segments or “market niches” Most companies enter a new market by serving a single segment & if successful, they add segments. –large companies eventually seek full market coverage Market Targeting Customer-Driven Marketing Strategy tab

58. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 After a company has decided which market segments to enter, it must decide how it will differentiate its market offering for each targeted segment and what positions it wants to occupy in those segments. –product position is the place the product occupies, relative to competitors’ products, in consumers’ minds Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. The company’s entire marketing program should support the chosen positioning strategy. Market Differentiation and Positioning Customer-Driven Marketing Strategy tab

59. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 After deciding its overall strategy, the company is ready to plan the details of the marketing mix –the set of controllable, tactical marketing tools the firm uses to produce the response it wants in the target market An effective marketing program blends all of the marketing mix elements into an integrated program. There is a concern that holds that the four Ps concept takes the seller’s view of the market, not the buyer’s. –from the buyer’s viewpoint, the four Ps might be better described as the four Cs Developing an Integrated Marketing Mix Customer-Driven Marketing Strategy tab

60. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Where marketers see themselves as selling products, customers see themselves as buying value or solutions to their problems. Developing an Integrated Marketing Mix Customer-Driven Marketing Strategy Marketers would do well to think through the four Cs first and then build the four Ps on that platform. tab

61. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Managing the marketing process requires the four marketing management functions shown here: Introduction Managing the Marketing Effort Figure 3-4 The relationship between analysis, planning, implementation, and control. tab

62. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The company first develops companywide strategic plans and then translates them into marketing and other plans for each division, product, and brand. Control consists of measuring and evaluating the results of marketing activities and taking corrective action where needed. Marketing analysis provides information and evaluations needed for the other marketing activities. Introduction Managing the Marketing Effort tab

63. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The marketer should conduct a SWOT analysis, which evaluates the company’s overall strengths (S), weaknesses (W), opportunities (O), and threats (T). Marketing Analysis Managing the Marketing Effort Figure 3-5 SWOT analysis. tab

64. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Strengths include internal capabilities, resources, and positive situational factors that help the company to serve its customers and achieve its objectives. Weaknesses include internal limitations & negative situational factors that may interfere with the company’s performance. Opportunities are favorable factors or trends in the external environment that the company may be able to exploit to its advantage. Threats are unfavorable external factors or trends that may present challenges to performance. Marketing Analysis Managing the Marketing Effort tab

65. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Each business needs to evaluate its strengths and weaknesses periodically. Management or an outside consultant reviews the business’s marketing, financial, manufacturing, and organizational competencies. Each factor is rated as to whether it is a major strength, minor strength, neutral factor, minor weakness, or major weakness. A company with strong marketing capability would probably show up with the ten marketing factors all rated as major strengths. Internal Environmental Analysis Managing the Marketing Effort tab

66. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Sometimes a business does poorly not because its department lacks the required strengths, but because employees do not work together as a team. –in some hospitality companies, salespeople are viewed as overpaid playboys & playgirls who produce business by practically giving it away to customers –salespeople often view those in operations as incompetent dolts who consistently foul up their orders and provide poor customer service It is critically important to assess interdepartmental working relationships as part of the internal environmental audit. Internal Environmental Analysis Managing the Marketing Effort tab

67. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A business unit must monitor forces that will affect its ability to earn profits in the marketplace –macroenvironmental forces (demographic-economic, technological, political-legal, and social-cultural) –microenvironmental forces (customers, competitors, distribution channels, and supplies) For each trend or development, management needs to identify the implied opportunities and threats. ☞ The terrorist attacks on September 11, 2001 brought sudden awareness to the hospitality/tourism industry of the impact such events can have on travel. External Environmental Analysis Managing the Marketing Effort tab

68. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The emergence of China, India, and Eastern Europe as new industrial and political powers is seriously affecting hospitality/tourism in unforeseen ways. –high quality health care combined with low cost in countries such as India has created a new segment of tourism known as medical tourism In today’s rapidly changing environment, external environmental threats and opportunities have taken on new importance in strategic planning. External Environmental Analysis Managing the Marketing Effort tab

69. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A major purpose of environmental scanning is to discern new opportunities, areas of need where a company can perform profitably. –opportunities can be listed & classified according to their attractiveness and the success probability The best performing company will generate the greatest customer value & sustain it over time. ☞ U.S Truck Stops Opportunities Managing the Marketing Effort tab

70. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 –an ideal business is high in major opportunities and low in major threats ← Blue Ocean –a speculative business is high in both major opportunities and threats –a major business is low in major opportunities & threats –a troubled business is low in opportunities, high in threats Threats Managing the Marketing Effort Threats are challenges posed by unfavorable trends or developments that would lead to sales or profit deterioration, and should be classified according to their seriousness and probability of occurrence After assembling a picture of major threats and opportunities, four outcomes are possible: tab

71. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 All hospitality companies must study possible threats & build risk management systems. –in addition effects of 9/11, risks such as mad cow disease and microbial contamination are of vital concern Because microbial outbreaks are possible in any food establishment, they must be considered as risks with prescribed procedures to follow after an outbreak. The Jack-in-the-Box restaurant chain was linked to 400 illnesses & 3 deaths due to an outbreak of E-coli. –the chain, accused of serious deception, irresponsibility and poor communications, suffered heavy financial loss for four years and nearly went out of business Threats Managing the Marketing Effort tab

72. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 After the business unit has defined its mission and conducted a SWOT analysis, it can proceed to develop specific objectives and goals. Most business units pursue a mix of objectives, including profitability, sales growth, market-share improvement, cost containment, and so on. –where possible, objectives should be stated quantitatively Objectives support measurable goals, and a business should set realistic goals. –the levels should arise from an analysis of the business unit’s opportunities & strengths, not from wishful thinking Goal Formulation Managing the Marketing Effort tab

73. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Objectives are sometimes in a tradeoff relationship. Some important tradeoffs: –high profit margins versus high market share –deep penetration of existing markets versus developing new markets –profit goals versus nonprofit goals –high growth versus low risk The hotel industry is faced with unique challenges in goal formulation and performance measurement. –due to management agreements between owners & operating companies. Goal Formulation Managing the Marketing Effort tab

74. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Three examples of performance measures used in the hotel industry: Performance Measures Managing the Marketing Effort A hotel’s return. Returns-based performance tests measure income before fixed costs (IBFC) or net operating income (NOI). Operating margins. Owners also often insist on performance measures based on increases in operating margins, such as increasing IBFC from 20 percent of revenue to 28 percent. tab

75. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Performance Measures Managing the Marketing Effort Revenue per available room (REVPAR) tests assume room revenue is a good indicator of overall performance. These tests do not measure revenue such as laundry, food & beverage, rents, and phone. As a result, some hotel managers pay little attention to the marketing of these product lines. Those who use REVPAR often compare their results with other hotels, but the accuracy of comparative data may be questioned. tab

76. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Goals indicate what a business unit wants to achieve; strategy answers how to get there. –every business must tailor a strategy for achieving its goals Michael Porter has noted three generic types that provide a good starting point for strategic thinking. Overall cost leadership. The business works hard to achieve the lowest costs. The real key is for the firm to achieve the lowest costs among those competitors adopting a similar differentiation or focus strategy. Goal Formulation Managing the Marketing Effort tab

77. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Differentiation. The business concentrates on achieving superior performance in an important benefit area valued by a large part of the market. Focus. The business focuses on one or more narrow segments rather than going after a large market. The firm gets to know the needs of these segments and pursues either cost leadership or a form of differentiation within the target segments. Goal Formulation Managing the Marketing Effort tab

78. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Marketing planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives. –a detailed marketing plan is needed for each business, product, or brand The plan begins with an executive summary of major assessments, goals and recommendations. The main section of the plan presents a detailed SWOT analysis, states major objectives for the brand and outlines the specifics of a marketing strategy. Marketing Planning Managing the Marketing Effort tab

79. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 A marketing strategy outlines how the company intends to create value for customers in order to capture value in return It lays out a program for implementing the strategy along with details of a marketing budget. It also outlines controls used to monitor progress, measure return on investment & take corrective action. As a manager or a director of sales of a hospitality business, you will be required to develop a marketing plan every year. Marketing Planning Managing the Marketing Effort tab

80. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Even a clear strategy and well-thought-out supporting program may not be enough. –the firm may fail at implementation The company must communicate its strategy to the employees and make them understand their part in carrying it out. To implement a strategy, the firm must have the required resources, including employees with the necessary skills to carry out that strategy. Implementation Managing the Marketing Effort tab

81. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 All companies need to track results and monitor new developments in the environment. The environment will change, and when it does, the company will need to review strategies or objectives. Peter Drucker pointed out that it is more important to do the right thing (being effective) than to do things right (being efficient). Once an organization starts losing its market position through failure to respond to a changed environment, it becomes increasingly harder to retrieve market leadership. Feedback and Control Managing the Marketing Effort tab

82. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 The hotel-resort industry is characterized by a unique management & ownership structure that complicates the process of strategic planning. Major chains commonly do not own all the properties they manage. –some hotel chains may own no individual properties Owners of hotel-resorts often show surprisingly little interest or knowledge of their properties –owners complain that management companies are nonresponsive, have little expertise in planning, and do not work closely with owners or their representatives Unique Challenges of the Hotel Industry tab

83. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Hotel management companies, generally unknown or invisible to the general public, may own or manage many diverse properties, such as Ramada, Holiday Inn, or Days Inn hotels. Professional managers of individual properties have little or no training in strategic planning. Management companies often have little real power to force owners to make necessary investments or the strategic changes deemed essential. –in many cases, the only alternative has been to drop the property from the chain Unique Challenges of the Hotel Industry tab

84. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Hotels may or may not own or manage secondary properties within the hotel, such as restaurants, retail stores, health and business centers, and nightclubs. –this creates added complexity in strategic planning Strategic alliances between hotel chains on a global basis may further complicate the planning process Marketing has a role to play in strategic planning & must maintain close, continuous customer ties. Marketing is responsible for identifying and studying consumer needs and, as such, has a level of expertise in this area that is invaluable in strategic planning. Unique Challenges of the Hotel Industry tab

85. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Ansoff product–market expansion grid. A matrix developed by cell, plotting new products and existing products with new & existing products. Backward integration. A growth strategy by which companies acquire businesses supplying them with products or services Concentric diversification strategy. A growth strategy whereby a company seeks new products that have technological or marketing synergies with existing product lines. KEY TERMS tab

86. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Conglomerate diversification strategy. A product growth strategy in which a company seeks new businesses that have no relationship to the company’s current product line or markets. Corporate mission statement. A guide to provide all the publics of a company with a shared sense of purpose, direction, and opportunity. Forward integration. A growth strategy by which companies acquire businesses that are closer to the ultimate consumer,such as a hotel acquiring a chain of travel agents. KEY TERMS tab

87. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Horizontal diversification strategy. A product growth strategy whereby a company looks for new products that could appeal to current customers that are technologically unrelated to its current line. Horizontal integration. A growth strategy by which companies acquire competitors. Macroenvironmental forces. Demographic, economic, technological, political, legal, social, and cultural factors. Market development strategy. Finding and developing new markets for your current products. KEY TERMS tab

88. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Market segmentation. The process of dividing a market into distinct groups of buyers who have different needs, characteristics,or behavior who might require separate products or marketing programs. Marketing opportunity. An area of need in which a company can perform profitably. Marketing strategy. The marketing logic by which the company hopes to create this customer value and achieve these profitable relationships. KEY TERMS tab

89. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Microenvironmental forces. Customers, competitors, distribution channels, and suppliers. Product development. Offering modified or new products to current markets. Strategic alliances. Relationships between independent parties that agree to cooperate but still retain separate identities. Strategic business units (SBUs). A single business or collection of related businesses that can be planned separately from the rest of the company. KEY TERMS tab

90. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Strategic planning. The process of developing and maintaining a strategic fit between an organization’s goals and capabilities and its changing marketing opportunities. SWOT analysis. Evaluates the company’s overall strengths(S), weaknesses (W), opportunities (O), and threats (T). KEY TERMS tab

91. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Visit two hotels, restaurants, or other hospitality businesses. You will be able to observe elements such as location, physical facilities, employee attitude, quality of products, reputation of the brand (if it is a brand), and other factors. –from your observations write down what you think are the strengths and weaknesses of the businesses EXPERIENTIAL EXERCISES Try One ! tab

92. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Find a strategic alliance between a hotel company and another company. This can be for another hospitality organization or a company outside the hospitality industry. –state what you think the benefits of the alliance are for each partner EXPERIENTIAL EXERCISES Try One ! tab

93. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Support for this exercise can be found on the Web site for Marketing for Hospitality and Tourism, www.prenhall.com/kotler www.prenhall.com/kotler INTERNET EXERCISES Try This ! Find the mission statement of a hospitality or travel company on the Internet. Critique the mission statement against the guidelines for a mission statement, as stated in the text. –if you have difficulty finding a mission statement, you can check the Web site under this exercise and you will find the URL to some mission statements tab

94. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 Support for this exercise can be found on the Web site for Marketing for Hospitality and Tourism, www.prenhall.com/kotler www.prenhall.com/kotler INTERNET EXERCISES Try This ! Visit the annual report of a hospitality organization (these can usually be accessed through the company ’ s home page). What does the annual report tell you about their strategy? tab

95. Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens © 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458 3 END CHAPTER END