Hilton is the most internationally recognized brand name in the hospitality industry and the largest hotel franchise in the world. Hilton Worldwide was formally known as the Hilton Hotels Corporations, the business was founded by Conrad Hilton in 1925 and headquarter of the company was based in United States (Choo and Bontis, 2002). Hilton has experienced up and downs since the first Hilton Hotel opened in the Cisco, Texas nearly 100 years ago, with influences from great recessions and financial crisis, Hilton remained as the leader in the industry with its board portfolio of 15 world-class brands (Hilton Worldwide, 2019).
Hilton was the 38th澳洲IT代写_澳洲pte代考_代考一般多少钱 privately held company ranked by Forbes in terms of sizes until 2013, the company restructured and reorganized and raised $2.35 billion through IPO in December 2013 (Associated Press, 2014). Hilton’s initial public offering was the biggest ever for business in the hospitality industry and the second largest IPO of the year as it surpassed the value of the Twitter’s IPO (Associated Press, 2014).
澳洲IT代写_澳洲pte代考_代考一般多少钱Competition in the hospitality industry is intensive and the business fluctuates with external economic environments. The emerging digital technology and shared economy also posed threats to business in the hospitality industry. This essay will focus on the strategic decision of Hilton from theoretical perspectives, and part of Hilton’s strategy will be analyzed through the theory of competitive advantages and the industry evolution and strategic changes. The rest of this essay is composite with literature review, theoretical analysis and a conclusion.
- Literature Review
This section presented an overview of prior research and studies on theory of competitive advantages and its relation with strategic management. The strategic management and decision making concerned business performance, variables of strategic choice and competitive advantage.
2.1 Competitive advantage and strategic management
Business organization can obtain competitive advantage when it outperform its competitors through the development or acquisition of unique attributes or executes actions which could not duplicate by its competitors in short period of time. Discussion and pursuit of competitive advantage is one of the central themes in the academic field of business strategic management (Porter 1996). Strategic management has multiple definition, as it was defined as the set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the objectives of an organization’ (Pearce and Robinson, 1988, p. 6).
Strategic management also is the process to keep the business organization match to the environment (Certo and Peter, 1990). From Porter’s discussion on the five competitive forces that shape strategy, which analyze the competitive forces exist and shape the industry allow business to develop an effective strategies towards competition (Porter, 1979).
澳洲IT代写_澳洲pte代考_代考一般多少钱The concept of competitive advantage was origin and derived from the economic and military literature and theories, which later implied to business and strategic analysis (Whittington 1993). Porter (1985) argued that competitive advantage enabled business organization have superior performance than its competition, and competitive advantage is the key determinant for business sustainability. While early discussion on competitive advantages were take perspectives from Market-Based View (MBV) and the Resource-Based View (RBV), there are also new emerging perspectives like the Knowledge-Based View and the Capability- Based View (Wang, 2014).
澳洲IT代写_澳洲pte代考_代考一般多少钱Researchers suggested that knowledge is important resources for business organization, as it includes trade knowledge, technical know-how, intellectual properties and research and development competencies, those abilities and competencies are the main drivers for business organization to achieve superior performance in the information age (Hamel and Prahalad, 1994; Tiwana, 2002). With globalization and international integration, capitals, natural resources, production sources and existing technologies are easy to copy and duplicate by other players in the market, however, knowledge and ability to develop new products are difficult to imitate (Tiwana, 2002). Thus, from strategic perspective business relies on its specific industry knowledge, intellectual property and research and development ability to develop competitive advantage that hardly intimate by its competitors, hence achieve superior performance.
2.2 Core competency and Industry Changes
澳洲IT代写_澳洲pte代考_代考一般多少钱The concept of core competencies derived from resource-based view of strategy, which focus on business’ capabilities (Prahalad and Hamel, 1990). Core competency support business competitive advantages and articulate a strategic intent (Prahalad & Hamel, 2000). As business used to focus on building its competitive advantages through cost advantage and product differentiation, with globalization and technology advancement the competitive advantages developed in traditional way are no longer sustainable (Porter, 1980; Shieh, & Wang, 2010).
澳洲IT代写_澳洲pte代考_代考一般多少钱When considering the sustainability of the competitive advantages, it is closely related with the capability and knowledge possess by the business organization. Where those distinctive, rare, valuable resources possessed by the business organization that its competitors cannot imitate, duplicate and reproduce is the core competencies of the business organization (Barney 1991; Prahalad & Hamel 1994). Thus, core competencies distinct business with its competitors, also enabled business to perform better, it also considered as the key to success in the international marketplace (Papp & Luftman 1995).
Hospitality industry is very competitive and experiencing challenges from newly emerging “sharing economy”, as Uber challenged traditional transportations, Airbnb also challenged hospitality industry. The size of sharing economy market estimated at $ 26 billion, when the Airbnb first enter the hospitality industry as there is no legal guidance and regulations, the impact of this new business were moderate on the revenue of hospitality industry in United States (Kaplan & Haenlein, 2010).
After regulatory intervention, the impacts on hospitality industry were found unevenly distributed, and the consumer segment that has the least impact is the “business travellers” (Zervas and Byers, 2014). With evolving digital economy and technology development, the hospitality industry is experiencing changes and challenges, Airbnb only represented partial influences of dynamic external environment on the industry. Thus, business has to get prepared for changes in the industry and the implementation of new technology in the business operation.
- Company Information
澳洲IT代写_澳洲pte代考_代考一般多少钱Hilton gained the position as the industry leader with its market share worldwide. The company aligned its Vision, Values and Mission in the business operation, as the hotel envisions to ‘filling the earth with the light and warmth of hospitality.’ To achieve this, it has made it its mission to ‘be the preeminent world’s hospitality company – a first choice for guests, team members, and owners alike’ (Hilton Worldwide, 2019). Before Christopher J. Nassetta, President and Chief Executive Officer took over the company, Hilton was repotted lagging with its service and consumer experiences.
Hilton positioned itself as a luxury hotel, while its portfolio brand names diversified over multiple segments including luxury, full service, curio-a collection by Hilton, select service, extended stay suites and timeshare. With multiple services provided to satisfy wider populations and consumers in the different segments, the company used different brands to separate the services and distinguish brand identity, include Hilton Hotels, Hilton Garden Inn, Embassy Suites, Double-Tree, and Homewood Suites, Hampton, and Hilton Grand Vacations (Hilton Worldwide, 2019).
澳洲IT代写_澳洲pte代考_代考一般多少钱Hilton has limited number of competitors but its competitors are also large multinational companies with well-known brand names, its major competitors are Marriott International, Inc. (Marriott), InterContinental Hotels and Starwood hotel. Hilton relied on its award–winning customer loyalty program, Hilton Honours to build loyal customer base and expand its hotel operation, there are over 82 million members participated in the Hilton Honours program (Hilton Worldwide, 2019). With strong presence in the home country, Hilton had began its international expansion since the 1960s, and Hilton had utilized merger and acquisition strategy in its international expansion, for example, Hilton has acquired the U.K-based hotel and engaged in an agreement with resort developer in Thailand. In 2010, Hilton launched its website www.hilton.com in multiple language to provide oversea consumers a tailored Internet experience while search for hotel accommodation.
Hilton has been investing in corporate social responsibility as the company recognizing its business depending on the vibrant communities and sustainable environment, thus Hilton Worldwide participate and sponsor over thousands of Volunteer Projects during its Annual Global Week of Service (Hilton Worldwide, 2019). Hilton also has been recognized as the highest performing and most diverse brand portfolio in the industry, as it ranges from iconic luxury resorts to the timeshare hotels (Hitt, et al., 2007). As each brand offered differentiating touches under Hilton Worldwide, it restated the mission and philosophy to “share the light and warmth of hospitability” (Hilton Worldwide, 2015).
- Theoretical Analysis
澳洲IT代写_澳洲pte代考_代考一般多少钱This section will outline the findings from analysis on Hilton’s strategy in accordance to the two theories previously identified and changes in the hospitality industry.
4.1 The Nature and Sources of Competitive Advantage
Consumer Needs and Requirements
The hospitality industry categorized consumers into different segments, the consumer segments include tourist, business travellers, leisure holiday travellers, corporate meetings and etc., moreover, tourist including low-medium income groups and luxury groups. Hilton primarily focus on the high-income and luxury groups and business travellers, the needs and requirements of the consumer group are identified as below:
- Loyalty programs
- Ambience/local flavor
澳洲IT代写_澳洲pte代考_代考一般多少钱In hospitality industry, the bargaining power of buyer is very high and buyers obtain the bargaining power as they can easily substitute to other similar products offered by Hilton’s competitors with no switching costs. Thus, Hilton Worldwide used multiple strategies to retain existing customers, such as its loyalty programs. Hilton also introduced multiple packages to attract customers, those packages related to special events and include discounts, special offers and benefits. Hilton has secured the most convenient location when possible, at the same time, Hilton had used different training programs to ensure consistency in it service level at varies location.
Establishing Competitive Advantages with Knowledge and Technology
Hilton has been adapting to innovations and new technologies, and recognized adaption to new technology as its main competitive advantage (Ireland and Hitt, 2006). In align with this strategy, Hilton has been adapted with innovation and recognized the need for instant and accurate information in today’s hotel information system. The OnQ system at Hilton is the representation of innovation and adaption to new technology, and the system enabled Hilton to serve customer better while support the operation for the entire Hilton brand hotel and allow Hilton to expand with consistent services regardless the size and segment at each customer touch point. Hilton also established its own proprietary hotel management system, known as the System 21®澳洲IT代写_澳洲pte代考_代考一般多少钱, it connects all Hilton’s resources together with all 15 brands and over 5500 properties located in 109 countries.
The System 21®澳洲IT代写_澳洲pte代考_代考一般多少钱 enabled Hilton to leverage through the ability to analyze and relocate all available resources in the organization, and Hilton able to develop its competitive advantage through existing resources. The OnQ system is a part of Hilton’s customer relationship management (CRM) strategy. The OnQ system is built with the goal to serve customer on the cue because ‘customers really matter’, Hilton intended to reach the effect that ‘customers rejecting Marriott and choose Hilton’. The system is designed to offer clearer understanding of Hilton’s existing customers and guide further improvement on customer experiences with their previous Hilton experiences. The OnQ system combined Hilton’s information technology system and its knowledge on its customers, this leveraged the growth of Hilton and enable Hilton to build competitive advantages through the information and knowledge extragrated from the OnQ system.
The growing usage of data analysis and Big data enabled business in the hospitality industry to study through its existing hotel guest data base, with the OnQ system, Hilton will be able to optimize its expansion, minimize marketing cost and offer personalized services to its returning customers. Existing information technology system enabled Hilton to understand its customers while predicting future customer flows to each brand name properties. The competitive advantages build through technology innovation and knowledge on its customer base promotes Hilton’s future growth.
The OnQ systems as a part of customer relation management strategy encouraged customer profiling at Hilton, which allow Hilton to retain its existing customers and reduce the probability of its existing customer switching to its competitions brand names. From the interview with Jonathon Wardman, Vice President CRM at Hilton, it was revealed that Hilton would analyzes the Hilton’s SALT (Satisfaction and Loyalty Tracking) surveys, through gaining customer feedbacks Hilton also made changes to its services, and one of the changes Hilton made after receiving feedbacks from the SALT survey is that Wi-Fi will be complimentary for the customers who booked their stay directly with Hilton (Smith, n.d.).
The two systems that Hilton develop and used offered Hilton the leverage to perform better than its competition and gaining crucial knowledge on their customers, which promote brand differentiation and brand recognition in the process of global expansion. Moreover, the brand differentiation and brand recognition in the global business environment enabled Hilton to secure large market share when it enter into a new market.
4.2 Industry Evolutions and Strategic Change
Position in the Industry Life Cycle
澳洲IT代写_澳洲pte代考_代考一般多少钱The hospitality industry is still experiencing growth, as the tourism industry showed growth in countries like U.S., China, Australia and etc. Growing tourism industry also formulated the growth in the hospitality industry. As for Hilton, the company had a compounded annual growth rate (CAGR) of 16.42%, and the company outperformed its competitor Marriott, who had a compounded annual growth rate (CAGR) of 7.64%.
澳洲IT代写_澳洲pte代考_代考一般多少钱Evolutions are likely not directly happened in the in the hospitality industry but still made an impact. Technology evolutions in the transportation, information technology and commination industry will also influence the business operation in the hospitality industry. Transportation means that would reduce travelling time would decrease the customer demand, while improvement on information technology and communication will also likely decrease the customer demand as no more travel is necessary for business communications, and customers can easily book travelling through Internet with options to compare prices and services with more conveniences. Industry evolutions would provide more bargaining power to customers for the hospitality industry.
Pace of Technology Change
Today, technology advancement is measured by minutes, as of new inventions and innovation are taking places each moment. As discussed above, the technology advancement might not directly relate with any particular company or industry but it will impact other industries as well. The digital economy and growing usage of Internet has changed business in forms of marketing, promotion, sales and communication.
澳洲IT代写_澳洲pte代考_代考一般多少钱With growing number of smartphone users, Hilton has launched its international business website back in 2010, and it also has launched mobile Apps for smartphone users to book hotel rooms, view hotel information and change bookings with remote access. The development and usage of online booking website and smartphone apps satisfy the needs of Hilton’s customers, while respond to the changes in the external environment. However, the internal changes of Hilton are driven by its existing information systems and adaption of balanced scorecard methodology, as Hilton focused on building a broad customer base and the premier global hospitality business.
Hilton has been innovative in its product offering, services and amenities, which also reflected through its dominating market shares. As Hilton was the first hotel to install televisions in its hotel guest rooms, first to introduce and lauched airport hotels and it is also the first hotel brand names to incorporate the concept of environmental friendly building and earned LEED and Green Seal environmental certifications, it showed Hilton’s innovative corporate initiatives and willingness to make changes. To promote fast growth, Hilton also embraces the concept of franchising hotels, and became the first U.S. coast-to-coast hotel chain. Innovation and creativity are the keys for business to stay agile and competitive in the dynamic business environment, which also enriched intangible resources at Hilton, which are the innovative and creative culture.
Partnership and Learning
澳洲IT代写_澳洲pte代考_代考一般多少钱When Hilton became Hilton Worldwide in 2009, it also restructured its Human Resource strategy to encourage employee development and learning, and the Hilton Worldwide University (HWU) was created to maximize performance across the company (Eggleston, 2012). As Hilton made customer satisfaction as a strategic goal, it also offered constant training to its employees, however, with its 15 brand and over 5000 properties, offer a unified training program to all employees is difficult. At the same time, Hilton also needs to further improve employee’s skill in terms of management, leadership and professional development, thus, Hilton partnered with top universities and gain content from Harvard Business Publishing, eCornell, Wharton and IMD (Eggleston, 2012).
With high quality content and unified employee training programs, Hilton was able to improve employee skills and know-hows, and build organizational capability through all available resources through out the organization, including financial resources, advanced information technology, brand recognition, customer knowledge and highly trained human resources. As the one of the organizational goals of Hilton is to provide high quality of customer services and reach customer satisfaction, the strategy Hilton taken was aligned with the organizational goals.
Hilton as one of the leading business in the hospitality industry experiencing a wide range of threats, to cope with the dynamic business environment and management risks, Hilton has implemented multiple strategic tools to build competitive advantages and organizational capabilities. From the analysis on part of Hilton’s strategy, it has adapted to new technology and innovations, which enabled Hilton to achieve wider brand recognition and differentiated its brand with its competitors. The information systems also enabled Hilton to coordinate and relocate its tangible and intangible resources for faster expansion and acquire higher market share with the speed to market while maintaining consistent level of customer services.
With technology advancement, Hilton has been quickly adapting to customer demands and satisfying customer needs through data analysis tools. Hilton has also been partnering with top universities with the intention to offer unified and high quality training to all of its employees. The strategies Hilton have been taken enabled Hilton to expand at fast pace while maintaining high quality of customer services, as the strategy taken focused on all necessary resources Hilton need to achieve its organization capability to meet the organizational goals. The consistency of strategic goals and strategic decisions ensure the success of Hilton in the hospitality industry.