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Strategy in Tourism Introduction Objectives of the Subject: Why this subject? Tourism markets more complex that believed Assume markets discrete with little overlap Assume easy to identify pattern But Study of movements of 1200 tourists identified over 1000 different movement patterns

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Strategy in Tourism

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Strategy in tourism l.jpg

Strategy in Tourism


Introduction l.jpg

Introduction

  • Objectives of the Subject:


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Why this subject?


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Tourism markets more complex that believed

  • Assume markets discrete with little overlap

  • Assume easy to identify pattern

  • But

    • Study of movements of 1200 tourists identified over 1000 different movement patterns

      • Large overlap between so called special interest tourists

      • No single special interest tourist


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Simply categories not always valid

  • Simple categorization does not reflect full spectrum of tourism

  • Factors influence movements:

    • First time vs...... repeat

    • Main destination vs...... stopover

    • Distance decay from home

    • Market access in destination

    • Time

    • Spatial considerations


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Figure 1aFigure 1b

Figure 1

Cultural

Nature-based

Tourist A

Tourist C

Tourist B

Shoppers


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Equation that equals 25


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Useful On-line sources

Chacko H (1997) Positioning a Tourism Destination To Gain a Competitive Edge. http://www.hotel-online.com/Trends/AsiaPacificJournal/PositionDestination.html

Davies R (2003) Branding Asian Tourist Destinations. http://www.asiamarketresearch.com/columns/tourism-branding.htm

Starkov M. & Price J (2006) Budgeting for a Robust Internet Marketing Strategy in 2007. http://www.hotel-online.com/News/PR2006_3rd/Sep06_InternetStrategy.html

Starkov J (2003) Brand Erosion, or How Not to Market Your Hotel on the Web; Critical Online Distribution Issues Revisited a Year Later. http://www.hotel-online.com/News/PR2003_2nd/Jun03_BrandErosion.html

Yeoh E. & Chan K.L. (2000) Positioning Sabah as an International Tourist Destination. http://www.hotel-online.com/Trends/ChiangMaiJun00/PositioningSabah.html

Anon (2007) A Vision for Cape Town – http://wiki.capeinfo.com/index.php?title=Brand_identity

Blain C., Levy S & B Ritchie (2005) Destination branding: Insights and practices from Destination Management Organizations. Journal of Travel Research 43: 328 – 338.

BSI (2004) The BrandScience Guide for Destination Research. Brand Science Inc. IACVB.http://www.iacvb.org/images/pdf/BrandScience_Guide_for_Destination_Research_%289-30%29_FINAL.pdf

Cheung E (2006) Canadians Make World’s Best Friends. Canada.com - www.canada.com/vancouversun/news/story.html?id=8c7e4044-5560-48d2-80ce-aa2309529012

Hall D (1999) Destination branding, niche marketing and national image projection in Central and Eastern Europe. Journal of Vacation Marketing 5(3): 227 – 237.

Harkinson G (2005) Destination Brand Images: A business tourism perspective. Journal of Services Marketing 19(1): 24 - 32

Kotler P & G Armstrong (1996) Principles f Marketing – International Edition (7th Ed). Prentice-Hall International. Sydney

Kotler P (1999) Kotler on Marketing. Free Press. London.

McKercher B (1998) The Business of Nature Bases Tourism. Hospitality Press. Melbourne.

Morgan N., Pritchard A & R Piggott (2003) Destination Branding and the Role of Stakeholders: The case of New Zealand. Journal of Vacation Marketing 9(3): 285 – 299.

Morse, J., King J & J Bartlett (2005) Walking to the future… together: A shared vision for tourism in Kakadu National Park - www.environment.gov.au/parks/publications/kakadu/tourism-vision/part4.html

Pike S (2004) Destination Marketing Organizations . Elsevier. Sydney.

Ritchie J. R. B & R Ritchie (1998) The Branding of Tourism Destinations: Past Achievements and Future Challenges - http://people.commerce.ubc.ca/phd/ritchie/Papers/AIEST1998.pdf.

UNESCO (2007) UNESCO – World Heritage Center - http://whc.unesco.org/

UNWTO – various tourism statistics


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What is tourism?What are the differences between tourism and leisure?


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Objectives


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Tourism, recreation and leisure have many similarities:

  • share the same facilities,

  • compete for the same consumer dollars

  • discretionary activities.

    But – also have some key differences

    Tourism is an extreme form of recreation.


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Tourism

  • How is Tourism similar to and different from leisure and/or recreation?


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Similarities

Tourism requires time - usually large blocks of time

Involves activity

Social

State of mind and a state of being

share the same facilities

compete for the same consumer dollar

Produce common social and psychological outcomes

Similar motivations for participation.

Differences

More commitment and greater involvement

Involves greater skill levels

Longer lead time

Business travel?

Regimentation?

Social Acceptability?


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Why

Tourism takes more

  • Time

  • Money

  • Effort

  • Intellectual input

  • Risk (emotional and financial)


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Tourism is less:

  • Frequent

  • Familiar

    Socially tourism is:

  • Less rule bound

  • A break from everyday life


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Exercise 1Product Development Issues

Why do few leisure activities work as tourism products?


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Not an AttractionAttraction


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Main Difference between Tourism and Leisure/recreation

  • Tourism requires MORE:

    • time

    • effort

    • expense

    • commitment

    • pre planning

  • As a result, tourists expectations are GREATER, and the type of service or facilities they demand must be BETTER then they can find at home.


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More

Better, Different or Unique

What does that Mean

Higher Expectations

Product


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Tourism Demand Generators:

the Role of Attractions


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5 As

  • Attractions

  • Accommodation

  • Access

  • Activities

  • Amenities


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Keys

  • Attractions (includes activities)

  • Access and

  • (plus government)


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Goals and Objectives:

  • understand the role that demand generators / attractions play in the development, positioning and marketing of tourism products, organisations and destinations

  • Describe and define the various types of attractions

  • understand ways of developing demand generators


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Introduction

  • Number 1 Rule of Tourism:

    • destinations must have a central focus that generates demand

    • No demand generators – no tourism


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Demand generators:

  • give the customer a reason to buy a product

  • form central theme of the tourism experience

  • ed to be quality, experiential character, unique, exciting, one of a kind experiences that appeal to the target market


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Attractions

  • Definition (Pearce 1991, p. 46)

    • "a named site with a specific human or natural feature which is the focus of visitor and management attention."

  • This definition excludes features like vistas

  • Lew (1987) broader definition:

    • all those elements of a "non home" place that draw discretionary travellers away from their homes.


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Types

  • Natural

  • Cultural

  • Built


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The Role Attractions Play in Drawing Visitors

  • Attractions drive people to travel

  • Both the quality and quantity of attractions affect travel decisions.

  • At primary destinations - have to have sufficient breadth and depth of appeal to encourage visitors to stay for many days.


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Play 3 roles in tourism

  • an intrinsic part of the trip, in which the demand for the attraction is established before the trip commences.

  • major motivator for a trip or for selecting a destination

  • optional, discretionary activity engaged in at a destination.


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Hierarchy

  • Most important shape the image of a destination and in influencing visitors to come to a region

  • The more powerful the attraction, the greater its ability to pull visitors from great distances.

  • Lesser attractions complete the tourist experience


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  • degree of obligation involved in visiting attractions

    • more dominant - the greater the sense of obligation to visit.

    • less dominant - purchase decision becomes increasingly discretionary

  • least dominant - low involvement purchases


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International Appeal

Few / Unique

Primary

Secondary

Tertiary

Many / Common

Local Appeal


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Primary Attractions

  • give the traveller a reason to visit an area

  • often help create or frame the image of that region.

  • stronger and more unique the attraction the greater the likelihood of developing a sustainable competitive advantage for the destination region.

  • Goal of tourism development is to create primary attractions


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Primary Attractions

Amenities

Activities

Secondary

Attractions

Primary

Attraction

Transportation

Travel

Trade

Tertiary attractions

Accommodation


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Secondary Attractions

  • have regional appeal.

  • will travel shorter distances to see them,

  • or if they are already in the region will make a specific trip to visit the attraction.


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Destination Area

Visitation


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Tertiary Attractions

  • limited appeal.

  • not travel long distances

  • may not even go out of their way to visit the attraction

  • but if easily accessible, they will see it.


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Destination Area

Visitation

(by convenience)


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Attractions Systems(Leiper 1990)

  • A system that connects the tourist and attraction through markers

  • Markers (3 types)

  • Generating

  • Transit

  • Contiguous (in-destination)

Tourist

Attraction

(nuclei)


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Tourist

  • If no tourists visit, then it is not a tourist attraction


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Attractions (nuclei)

  • Attraction

    • Hierarchy

    • Individual site / place

    • Clustered (i.e. precinct)

    • Concentrated or dispersed

  • Surrounds also important


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Markers

  • items of information about a phenomenon that is a potential nuclear element in a tourist attraction

    • More than just marketing

  • Role

    • Catalyst

    • Push or Pull


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Factors to consider

  • Pre-departure awareness vs....... in-destination awareness

  • limited amount of time = setting priorities about which attractions to visit

  • Time availability

  • Distance to travel

  • Substitutability (market access)

  • Profile in marketing literature


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% visitors


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Generating vs..... in vs..... no awareness


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Conversion % of intended to go


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Volume of visitors


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Primary attraction development

  • the breadth and variety of attractions must be compatible

  • the size and scale of the primary attractions and their capacity to accommodate tourists

  • most destinations appeal to a variety of markets

  • The amount of use different attractions by different markets depends on their perceived relevance and convenience


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5 ways to Create Attractions

  • build

  • bundle

  • create tourism precincts

  • develop linear touring routes

  • use events.


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Build

  • Purpose built cultural tourism attractions - one of two themes:

    • tourismification of the extant yet previously undeveloped heritage assets,

    • building of purpose built theme parks.

  • But - many publicly owned ones fail


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Bundling

  • more realistic and cost effective

  • Provision of separate products and services to buyers as a package or bundle

    • e.g. - different products are grouped together to create a more appealing new product that benefits both the consumer and the individual suppliers.

  • Bundling common in tourism,

    • packaged tour

  • key – consistent them and compatible products

  • need keystone attractions


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Precincts

extreme form a bundling.

  • theatre, museum, historical and ethnic districts

  • creates a critical mass of products that facilitates easier use by the tourist.

  • larger tourist numbers provide enhanced business opportunities for ancillary attractions and service providers.


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Linear or circular tours / heritage networks

  • linear or circular touring routes link different communities

  • sum of assets is greater tourism appeal than the individual assets within a community.

  • Bundling diverse attractions into a themed touring route creates an appealing primary attraction.


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Festivals

  • Festivals and events are defacto, short duration primary attractions.

  • concentrate a wide array of activities into a condensed time frame ,

  • create a critical mass of products for tourist consumption.

  • But – few festivals are tourist attractions because few are aware of them prior to departure


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Lecture 4Access and the Spatial Interactions of Tourists


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Goals and Objectives:

  • examine the impacts of physical access on tourist flows

  • examine the effect that Distance Decay and Market access has on the development of tourist facilities

  • discuss itinerary models


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Access

  • Access, or the ability of visitors to get to a destination plays a key effect on the success of a destination.

  • If tourists cannot get to a destination, then they cannot experience the attractions therein.


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Issues to Consider

Access is a Moderating Factor

  • Physical Access

    • Distance decay

  • Time

  • Market Access


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Physical Access

How tourists get to the destination.

  • Measured by:

    • the quality of roads leading to a destination,

    • the number, frequency and capacity of commercial air, train, cruise ship or bus services, and

    • charter access to the area.


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How access affects a destination


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  • Absolute tourism capacity (and peak capacity)

  • Limits peak season development

  • Limits demand

  • Dictates the absolute quantum of development

  • Impact on seasonal destinations – vulnerable – fewer people visit during peaks

  • Hinders market access

  • Price considerations (high and low)

  • Profitability

  • Life cycle impacts – limits natural evolution

  • Higher costs - construction

  • Higher costs for supplies

  • Maximum size of individual properties or attractions, either directly or indirectly.

  • Poor quality products?

  • Limited or restricted physical access will limit future development opportunities

  • May be desirable and actions include:

    • limiting parking facilities in parks

    • limiting park entry permits

    • dictating and controlling travel routes within natural areas

    • various fees and lottery systems to restrict demand.


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Ko Samui


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Poor physical access may be an advantage


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  • Difficulty of access = exclusivity and uniqueness

  • Price is a common discriminator

  • Remoteness and isolation


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Distance Decay

  • tourist movements are influenced by:

    • time availability

    • distance

    • cost of travel

    • effect of competing destinations/attractions


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  • Distance Decay (absolute) – demand declines with distance

  • Market access (relative) – demand declines with the number of intervening destinations offering similar products


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Distance Decay


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  • Demand for tourism varies inversely with the distance travelled or with an increase in time or money costs (Bull 1991).

    • the further one travels from the point of origin, the less demand there will be for tourism products.


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Distance Decay


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  • People must travel a certain minimum distance to achieve a sense of escape or getting away from it all

  • Supply opportunities increase exponentially with distance

  • Demand decreases exponentially with distance

  • The shape of the curve reflects the intersection of different supply and demand functions influenced by time availability.


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Global tourism movements


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  • 80% of global tourism movements to countries with 1000 km of a the source market

  • Aggregate demand falls by 50% per 1000 km

  • Demand for an individual country falls by 67% per 1000 km


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Taiwan Outbound


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Trip characteristicsHK Outbound


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  • Consumer behaviour changes as distance increases

  • Destination choice influenced by time availability.

  • Trip purpose has a moderating effect on distance people are willing to travel.

  • Inverse correlation between the amount of time spent at the main destination and the total trip duration

  • Difference between independent and package travel.


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Cultural Distance

Definition: cultural difference between tourist and host

  • Language (especially)

  • Religion

  • History (shared)

  • Race / ethnicity

  • Affluence


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Small Cultural Distance

Travel for recreation and escape

be with family and friends

Seek similar culture and food

Seek similar language

Fun and leisure

Theme parks, shopping

Eating food similar to found at home

Large Cultural Distance

Travel for self development and learning

Meet other people

Seek cultural difference

Travel has deeper meaning

Museums, cultural and heritage attractions

Eat different foods than normally found at home

Impact of tourist behaviour


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Environment Bubble


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Premise

All tourists are, to some extent strangers in the host community, the extent that the tourist's role is pre-determined will dictate the manner in which tourists interact and the images they will develop of one another.

  • People interested in experiencing strange and novel situations but only if that strangeness is non-threatening.

  • experience change from the security of their own environmental bubble.


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Environmental Bubble

  • Bubble of familiarity that reduces the amount of strangeness to an acceptable level to enable the tourist to consume the experience

  • How tourists reduce perceived risk to an acceptable level

    • Travel is a pleasurable experience

    • Most people want to have fun and not be threatened

    • Many activity threaten, so choose and environmental bubble to reduce risk


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What it means

  • DeKadt (1977) “most travelers are not anthropologists or sociologists. They are primarily consumers who are temporarily unemployed and who are seeking a break, an escape from their normal life.”

  • Most travelers are not adventuresome drifters

    • But, they still want to feel like they are experiencing some type of novel experience


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Operationalise

  • How can strangeness be reduced?

  • Examples?


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How/Why Industry delivers it?

  • Efficiencies can be achieved when the product can be standardized, packaged, mass produced and easily consumed.

  • Tourist's experience ordered, predictable and controllable, as much as possible.

  • Enables tourists to take in the novelty of the area without any physical or emotional discomfort.

  • observe it without experiencing it first hand.


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Why

  • Expand potential market

  • Make easier for less robust tourists to consume

  • Broaden market base

  • Focus on:

    • enjoyment and not challenge

    • Fun not threat

    • Reward, not risk


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How

Size

of

market

Strange

Familiar


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How

  • Environmental Bubble

    • Reduce skill level required to participate

    • Reduce fitness level required

    • Reduce cultural distance

    • Enhance fun and learning

    • Enhance consumption

    • Able to do more easily


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Plog

  • Environmental bubble allows people to move beyond Plog’s definitions

    • Psychocentric can become near Psychocentric

    • Midcentric can play at being allocentric, etc


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Extreme cases

  • Create tourist ghettos or completely artificial activities


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Another word for Environmental Bubble?


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Value adding

  • From industry perspective creating the environmental bubble adds value that let’s industry charge for its goods and services

  • Commercial tourism is the business of strangeness reduction


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Benefits all

  • Tourist

  • Industry

  • Management


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Time


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2 economic perceptions of time

  • Commodity value - Is travel time a ‘cost’?

  • Resource value - Is travel time a ‘resource’?


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Lecture 11Travel propensity, intervening factors and individual travel careers


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  • Examine travel propensity

  • Examine factors affecting propensity

  • Examine Pearce’s idea of a travel career


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Propensity and Intensity

  • Propensity = participation rate,

    • % of individuals with a population who travel.

  • Intensity or frequency = average number of trips taken by a person over a given period of time.


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Tourism as a democratic activity?

  • Myths:

    • tourism is that all have equal access to travel

    • Travel is a right and not a privilege

  • Is it true?

  • Some people may not

    • be physically robust enough to travel,

    • want to travel.

    • have any travel companions.

    • be able to afford to travel.


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Reality

  • Travel is socially selective, with the ability to travel affected by:

    • Age

    • Lifecycle stage

    • Education

    • Gender

    • Income

    • Lifecycle,

    • Life stage

    • Social class

    • Ethnicity?


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Ethnicity

Source: HK Census 2001


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Travel by Hong Kong Residents

  • 2006 Survey of 1535 households conducted by SHTM

  • Asked about overnight Pleasure travel


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Propensity


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Comparing Travelers with Non-Travelers


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Destination

  • About 5000 overnight pleasure trips recorded

    • 62.0% to Guangdong province

    • 14.0% to Macau

    • 32.2% to elsewhere in Greater China (incl Taiwan)

    • 27.8% to international destinations


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Importance of Travel


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Age

  • Difference by age:

  • Oldest travel least

  • Younger most likely to go OS


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Education

  • Differences by Education

  • < high school no travel

  • tertiary international travel


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Income


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Household size


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Residence


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Comparing Int’l, China and non-travelers

  • International travelers:

  • Younger

  • Higher income

  • Smaller household size

  • Higher education


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Comparing Motives by Destination

  • Differences:

  • Importance of travel

  • Spend time with family / friends

  • Meet different people

  • Rest and relax

  • discover

  • No Differences:

  • Escape

  • Increase knowledge


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Intensity of International Travel27.8% who traveled outside of Greater China


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Total number of overnight trips

Frequent international travelers are frequent travelers in China too


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Importance, Travel experience and Type of Trip

Type of Trip

Importance and Experience


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Profile of Frequent Travelers

  • Difference in:

  • education

  • income

  • No differences in:

  • age

  • household size


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Income


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Expenditure (most recent trip)


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Market Access

  • Assess the attractiveness of similar destinations based on a comparison of their relative proximity to their markets.

  • More proximate destinations should have a competitive advantage over destinations offering similar products that are less proximate.


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  • Measured by the relative difference in the time, cost, distance or effort required to access different destinations.


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Time Budgets

  • Limit what can be done

    • Trade off

      • many activities/ shallow or

      • Few activities deeply

  • Priority setting

    • Priorities, trade offs

    • Pre-plan itinerary

      • Do you have mental space to add things

  • Effective time

    • How much time is really spent in the destination


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Implications

  • Convenience

  • Time spent at places

  • How much time to ‘risk’ for lower order attractions?


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Market Access


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Difference between Distance decay and Market Access

  • Distance decay = how far do I want to travel?

  • Market access = how many intervening opportunities are there between the consumer and the destination?


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  • Market access - adopts a multi-market focus.

  • Destinations serve multiple markets, each having its own unique relationship with that destination.

  • Market compares relative distance to markets, rather than absolute distance.

  • Adopts a destination orientation


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Key elements

  • comparative means used to assess the attractiveness of destinations offering similar products, or of similar products in a destination

  • a relative term that assesses the relative proximity of these destinations/products to the market in question

  • based on the idea of convenience


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Why is it important


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2 Key implications

  • Vulnerability – especially is market access is the main point of competitive advantage

  • Affects visitor profile, especially outbound


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Why important?


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Lecture 1Introduction to Strategic Planning


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Objectives

  • Concepts of Strategic Planning

  • Sustainable Competitive Advantage

  • Business Strategy


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Nature of Tourism

  • Reactive industry

  • Multiple stakeholder

  • Many layers of government

  • Little unity

  • Fragmented

  • Who controls it?

    • No-one

      • Individual businesses control their business

      • Government tourism bureaus have little power other than in marketing and promotion


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3 levels of competition

  • Local – immediate competitors

  • National – similar products in other areas of the country

  • International/ Global – similar products overseas


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Reality of Tourism

  • Many similar products

  • Low brand awareness

  • Consumers purchase without testing

  • Perishable stock – cannot store unused hotel room


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Strategy Overcomes Barriers

  • driving and/or leading development

  • creating a positive business environment to stimulate development

  • identifying and taking advantage of emerging trends

  • creating the positive political environment for tourism

  • striving to achieve the best mix of economic, social, cultural and environmental benefits for an area.


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Type of Tourism ‘Plans’

  • General

    • National, visionary

    • Broadly based,

    • Easy to write hard to implement

  • Infrastructure

    • Building and development

  • Political

    • Benefit individual political parties or national image


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Most tourism plans

  • Marketing

    • Strategic marketing management applies here

    • Achieve economic goals

    • Focus primarily on marketing and product development

  • Why

    • Tourism departments given the role of marketing

    • Local government given the role of marketing

    • Sales and marketing in businesses given the role of marketing


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Need to develop a strategic approach

  • How to compete in a volatile market?

  • How to spot opportunities and hide weaknesses

  • How to survive bad times

  • How to thrive in good times


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Definition of Strategic Planning

  • "is the process of formulating long term objectives and strategies for the entire business or business unit, by matching its resources with its opportunities.

  • Its purpose is to help a business set and reach realistic objectives and achieve a desired competitive position within a defined time.

  • It aims to reduce the risk of error and place the business in a situation in which it can anticipate, respond to and even create change to its advantage" (Brown 1995: 1).


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Strategy:Move from current competitive position to a more desirable one

  • Medium to long time frame

  • Vision, objectives

  • Commitment

  • Match activities with resources


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Answer 6 Questions

  • What products to offer?

  • What products not offered?

  • Which markets targeted?

  • Which markets avoided?

  • Who do I choose to compete with?

  • Who do I choose not to compete with?

What Business are you in?


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Why

  • No product can be everything to everyone

  • No resources to do it

  • Therefore need to decide:

    • What to offer

    • Who is the desired visitor

    • Who to compete with


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Strategic Management Process

  • Selection of mission and goals

  • External environment analysis

  • Internal environment analysis

  • Strategy selection

  • Strategy implementation

  • Strategy evaluation

Strategy

formulation


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  • Clarifies role of each party

  • Clarifies what desired

  • Clarifies what needs to be done

  • Clarifies how to do it

  • Clarifies how an asset fits into the whole


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Sustainable Competitive Advantage

  • Key to the whole process

    • Identify what you do better than others

    • Identify what they do better and how to balance it


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Why important

  • A real competitive advantage that is sustainable over time in the face of competitor reaction.

    • facilitates the development of a strategy that involves an organisation wide plan to excel in your strengths or to reduce or hide your weaknesses

  • Dictates positioning of the product

  • Directs future growth


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5 elements of SCA

  • Big enough to make a difference

    • Marginal is of no benefit

  • Real or perceived to be real by consumers

    • If not valued by consumers, then no benefit

  • Sustainable in the face of competitor reactions

    • How will competitors react

  • Rare among the firm’s competitors

  • Linked to positioning of organization


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Customer focus

  • Businesses exist to satisfy the needs, wants and desires of its customers.

  • What the consumer believes to be true about the business is far more important than what the operator believes to be true.

    • Perception is reality!


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Core Competencies of a Business

Things it does extremely well and that the competition does not do well

  • reputation for quality – Ritz Carlton.

  • customer service and product support - Hotel Intercontinental

  • name recognition - Qantas

  • cost advantages – low cost carriers

  • financial resources – Cathay Pacific

  • systems – MacDonalds

  • geographic location - beaches


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Factors that contribute to SCA

  • Your skills and assets

    • What you do best

    • What you do differently and better

  • Where you compete

    • What is the core product

  • Who you compete with

    • What are competitors SCA and weaknesses

    • How to match or exploit

  • How you compete

    • What is overall product, distribution strategy, etc


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Strategic Consideration

  • Matching their SCA, effectively nullifies it.

    • do not necessarily have to do what they do better, just do it as well

  • Reposition their SCA as a less appealing advantage nullifies it as well.

  • Position others into different product categories nullifies their SCAs from your perspective.


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6 Elements of Strategy

All

  • The Product market in which the business is to compete.

  • The Level of Investment

  • The Functional Area Strategies Needed to Compete

  • Strategic Assets and Skills of the Organisation

    Businesses with multiple Strategic Business Units

  • The allocation of resources between SBUs, and

  • Synergies between SBUs.


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Product Markets

Defined by:

  • the services or products it chooses to offer and not offer,

  • the markets it chooses to serve and not serve,

  • the competitors with whom it chooses to compete and avoid,

  • and the level of vertical integration.

  • Many businesses try to do too much and end up doing nothing very well


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    2 Laws of Strategy

    1) Law of Sacrifice

    • you have to give something up in order to get something.

    • the more narrow the focus, the better it is to create a positive image in the client's mind. Sacrifices can occur in three ways.

    • Sacrifice product lines.

      • Focus on a few clearly defined products to create a unique position in the marketplace.

    • Sacrifice target markets

      • The target is not the market.

      • Target to reflect the values you want to present

    • Sacrifice change.

      • It takes time for a product to become known to a consumer.

        • Too frequent changes in slogan, logo, etc confuses the market

        • develop an image over time and reinforce it.

          • Advertising can change, but the core values cannot


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    2) Law of Focus

    • The most powerful concept in marketing is owning a piece of the prospect's mind.

    • ‘burn’ image into people’s minds

    • establish one benefit

      • toothpaste


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    Level of Investment

    Strategic goals dictate investment

    • grow,

    • maintain,

    • milk, or

    • divest.

    • All have limited resources.

      • Investment decisions will be driven by your competitive position vis a vis other destinations, attractions or businesses.


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    Functional Area Strategies

    5 considerations

    • product line strategies

      • (remember the sacrifice law)

    • Positioning strategies

      • Strategic marketing is a battle of perception

      • What is believed to be real is real

    • Pricing strategies

      • Public less price sensitive

      • Key is value for money

    • Distribution strategies

      • What intermediaries to use, what commission to pay, desired exposure

    • Logistical strategies.

      • How the business operates


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    Strategic Assets and Skills

    • strategic skill is something an organisation does exceptionally well.

      • include staff or directors with strong contacts with the travel trade, expertise in international marketing or a flare for promotion.

    • A strategic asset is a resource, such as a brand name or an existing customer base that is strong in comparison to its competitors.

      • easier to identify

      • usually more permanent than strategic skills.


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    Multiple Business Units

    Allocation of Resources to Business Units

    • What units to support more than others and why

    • establish clearly defined organisational goals before allocating resources.

    • Providing each with enough resources to accomplish its stated goals is the key to the allocation issue.

      • if insufficient resources are available, tough decisions may have to be made to remove resources from one or more SBUs.

    • Failure = poor performance of the entire organisation.


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    • Thinking of an organisation of your choice, describe its Sustainable Competitive Advantages and rationalise your choices. Remember, an SCA is something your organisation does exceptionally well, or it could be sometime that another organisation does poorly.

    • 2Examining the SCAs you have identified, assess whether or not they are linked to the 6 elements of the business strategy used by the organisation. Discuss.

    • 3Finally, have the SCAs been linked to the positioning of the product? If so how?


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    Strategic Analysis Building Blocks


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    Strategic Management Process

    • Selection of mission and goals

    • Strategic Analysis (Research)

      • External environment analysis

      • Internal environment analysis

    • Strategy selection

    • Strategy implementation

    • Strategy evaluation


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    Strategic Analysis

    • Conduct a strategic situation analysis which will enable you to identify the potential Sustainable Competitive Advantages of a tourism product, organisation or destination.

    • Identify strategic options and select the most appropriate option

    • Develop action plans to capitalise on the strategic option identified.


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    Why do it

    Only reasons:

    • to gain insights into what the product, destination or region does well,

    • what it does poorly in comparison with its competitors

    • how it could improve its performance.

      Goal is to evaluate:

    • the effectiveness of existing tourism plans

    • whether or not a new plan is needed

    • whether or not existing policy should be amended

    • the initial identification of SCA's, strengths , weaknesses, opportunities and threats to the region, and

    • issues to be considered in new tourism policies.


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    Rules

    • Adopt the perspective of the consumer -

      • Can only satisfying consumers needs, wants and desires by thinking like a customer

    • Goal Oriented

      • Why is the analysis undertaken

    • Specify What you are comparing to –

      • goal is to seek comparative advantages over competitors.

      • know exactly what is being compared to what.

    • Seek Insights

      • seek insights into how to compete more effectively.


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    Selection ofmission and goals

    • Mission

      • Sets out why the organization exists and what it should be doing

    • Major goals

      • Specify what the organization hopesto fulfill in the medium to long term

    • Secondary goals

      • Are objectives to be attained that lead to superior performance


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    External Analysis

    Purpose

    • identify opportunities, threats, and/or trends that may be beneficial or detrimental to the organisation's well being

    • to identify strategic issues and questions that need answering in later stages of the planning process.

      Four elements

    • Environmental Analysis

    • Competitor Analysis

    • Customer Analysis

    • Market Analysis


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    Arrivals to Hong Kong during SARS

    Monthly Visitor Arrivals in HK 2003 (source HKTB 2004)


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    The role of the macroenvironment

    • Forces in the macroenvironment include:

      • political/legal;

      • demographic;

      • economic;

      • technological;

      • sociocultural;

      • global

      • ecological


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    The role of the macroenvironment


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    Political/legal forces

    • Legislation and proposed legislative changes

      • Taxation

      • Trade practices

      • Employment

    • Government policy

    • Trends in governments’ role


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    Arrivals to HK 1963 to 2005


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    Demographic forces

    • Population growth rates

    • Life spans

    • Age of population

    • Geographic dispersion


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    HK Travel Propensity by Age


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    Economic forces

    • Inflation rates

    • Interest rates

    • Currency exchange rates

    • Unemployment levels

    • Disposable income and personal savings rates


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    Exchange rates and Travel to Canada from the USA

    Source: BC Government


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    Technological forces

    • Technological change

      • Computers

      • Internet and e-commerce

      • Communications

    • Technological innovation will provide a basis for the creation of new companies and the decline of others


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    Sociocultural forces

    • Women in the workforce

    • Health consciousness

    • Environmental movement

    • More mobile workforce

    • Employee’s need for flexibility in work arrangements


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    Relationship between Income and HK Outbound Travel


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    Global warming

    Biodiversity

    Costs on tourism?

    Ecological Forces


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    A rise in the sea level would result in flooding of coastal lands, coastal erosion, and retreat of coastal front. If the sea level rises one meter, an area of about 272 km2 would be flooded in Taiwan

    Losses from weather related disasters

    http://sd.erl.itri.org.tw/fccc/en/index.html


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    Competitor Analysis

    • Assessment who you are competing against.

      • Identifying all current and possible competitors and then

      • identify their strengths and weaknesses in relation to your activity.

      • group them.

    • Competitors react in different manners depending on their market position, their own strategic strengths and weaknesses, their perception of how much competition you provide them

    • Key features:

      • their pricing and costing structures,

      • their strengths relative to yours,

      • your strengths relative to them,

      • their profitability, stability and the like.

    • Competitor’s strengths can be nullified by matching them.


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    Porter’s five forces model

    INSERT FIGURE 3.1 p71

    The Five Forces Model

    Source: Adapted from ME Porter, ‘How competence forces shape strategy’, Harvard Business Review, March–April 1979. Adapted and reprinted by permission of Harvard Business Review. © 1979 by the Harvard Business School Publishing Corporation; all rights reserved.


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    Threat of new entrants

    • Barriers to entry:

      • Brand loyalty

      • Absolute cost advantages

      • Economies of scale

      • Switching costs

      • Government regulation

    • The higher the entry barriers the lower the threat of new competition


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    Rivalry amongestablished companies

    • The intensity of competitive rivalry in an industry arises from:

      • Industry’s competitive structure

      • Demand (growth or decline) conditions in industry

      • Product/service differentiation

      • Ratio of fixed costs to variable costs

      • Height of industry exit barriers

      • Diversity of competitors

      • High strategic stakes


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    Strategic groups in the international airline industry


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    Cathay Pacific and Dragonair Routes

    Examples of Entry Barriers


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    The bargaining powerof buyers

    • Buyers may be consumers (end-users) or distributors (dealers or wholesalers)


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    The bargaining powerof buyers

    • Buyers are most powerful when:

      • There are many small sellers and few large buyers

      • Buyers purchase in large quantities

      • A single buyer is a large customer to a firm

      • Buyers can switch suppliers at low cost

      • Buyers purchase from multiple sellers at once

      • Buyers can easily vertically integrate to compete with suppliers


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    The bargaining powerof suppliers

    • Suppliers have bargaining power when:

      • Their products have few substitutes and are important to buyers

      • The supplier industry is dominated by a few large producers

      • Differentiation makes it costly for buyers to switch suppliers

      • The buyer’s industry is not an important customer to the supplier

      • Suppliers can vertically integrate forward to compete with buyers and buyers can’t integrate backward to supply their own needs


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    A sixth force: complementors

    • Companies that sell complementors to the enterprise’s own product offerings

    • Increased supply of a complementary product collaterally increases demand for the primary product

    • E.g. Hotel rooms are complementors to casinos and entertainment facilities in resort complex in Macau/Las Vegas


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    Customer Analysis

    • who uses your product,

    • what are their motivations

    • Segments

    • Emerging trends are


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    Segmentation

    • every market consists of groups of customers with somewhat differing needs and wants

    • Can be grouped into segments that are internally consistent, experience similar problems and respond to market stimuli in the same way

    • better cater to the needs and wants of individual groups.


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    • Each segment must satisfy a number of criteria, including:

      • sharing common values and interests that are sufficiently different and distinct from other segments

      • being sufficiently large to give the organization return for its effort

      • being easy to reach through promotional media and other marketing activities, at an affordable cost

      • having their needs satisfied by the products being offered


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    Demographic segmentation

    • Historically - socio-demographic segmentation

    • Easy, data available, but not effective

    • Why?

      • tourism is an experiential activity,

      • people's desires for certain experiences may transcend traditional socio-demographic groups.


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    Values based Segmentation

    • Based on ability to fulfill needs

    • Psychographic segmentation

    • products to be designed or destinations to be positioned more effectively to cater to the needs and wants of individual groups.


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    Market Analysis(more than your customers)

    • determine the attractiveness of the market or sub market to your product

    • understand the dynamics of the market in order to anticipate, react and plan for change

    • Identify trends


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    Key Considerations

    • the size and life cycle stage of each market,

    • the potential for new markets or growth prospects for existing markets

    • the market profitability and price sensitivity

    • cost structure of the market.

    • distribution channels

    • market trends: are current fads going to have legs or will they have a short life cycle?


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    • Alternative markets for your products,

    • Alternative products for your markets.

    • Unmet needs in the marketplace.


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    Key Outcomes (1)


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    Key Outcomes (2)


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    Internal Analysis

    • From what does a company derive its strategic strengths and weaknesses?

    • What internal factors influence the durability of competitive advantage?

    • How can a company avoid competitive failure?

    • Things you control


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    4 Elements of Internal Analysis

    • Performance

    • Non financial performance

    • Product portfolio

    • Resource analysis


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    Performance Analysis

    • financial performance of the business

    • achievement of goals

    • trends in market usage, profitability, costs, etc

    • identification of potential trouble areas

    • cash flow analysis

    • bad debts and performance of distribution system


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    Non-Financial Performance

    • satisfaction levels of clients

    • repeat usage level

    • performance of staff

    • efficiency of office procedures and administrative tasks


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    Product Portfolio

    • portfolio analysis

    • assessment of life cycle stage of existing products and need to introduce new products

    • ability of existing portfolio to satisfy current and future financial objectives

    • comparison with competitor's portfolio


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    Resource Analysis

    • staffing performance and adequacy

    • financial resources

    • office and administrative resources.


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    Why do it?


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    Value creation per unit


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    The roots ofcompetitive advantage


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    The generic building blocks of competitive advantage

    • Superior efficiency

    • Superior quality

    • Superior innovation

    • Superior customer responsiveness


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    Superior efficiency

    • The quantity of inputs that it takes to produce a given output

    • Employee productivity

    • Cost-based competitive advantage


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    Impact of Fuel Costs on Airlines

    Source:

    iagblog.com


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    Typical airline operating costs

    Source: IATA 2005


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    Costs per available seat mile US airlines

    Source:

    www.thetravelinsider.info/2004/email0507.htm


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    Analysis of cost efficiency

    • To analyze cost efficiency requires an understanding of the financial ratios

    • How can organization improve efficiency?


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    Financial ratios


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    Superior quality

    • Customer-perceived value in the attributes of products/services

    • Reliability

    • Differentiation-based competitive advantage


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    Quality Management

    • Introduction of quality assurance programmes


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    Superior innovation

    • Anything new or novel

    • Uniqueness

    • Differentiation-based competitive advantage


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    Superiorcustomer responsiveness

    • Identifying and satisfying the needs of customers

    • Customisation

    • Superior quality and superior innovation integral to superior customer responsiveness


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    Impact of building blocks of competitive advantage on unit costs and prices


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    The value chain


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    Support activitiesand value chains

    • Support activities provide inputs to primary activities

    • Each company needs to develop a unique value chain

    • Focuses attention on the value-based activities needed to develop and deliver products and services


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    Procurement: arranging to buy all the necessary

    raw materials

    Support activities

    Technology development: creating new products/services

    Human resource management: staff recruitment and training

    Infrastructure: administration, financial control and management

    Margin

    Operation

    Tel. answering service

    Fd prep

    Pizza production/packaging

    Inbound logistics

    Raw materials/ingredients packaging

    Outbound logistics

    Motor bike delivery

    Marketing and sales

    Leaflets,

    Ads

    Internet

    After sales services

    None

    Primary activities

    Value Chain of Pizza Hut


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    Resources

    • Tangible resources comprise

      • Financial assets (cash, debt, equity)

      • Physical assets (buildings, equipment, inventory, land, raw materials)

    • Tangible resources will normally be those measured and presented in financial statements


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    Resources

    • Intangible resources comprise

      • Legal assets

      • Human assets

      • Informational assets

      • Organisational assets

      • Relational assets

      • Reputational assets


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    Capabilities

    • Types of activity that a company performs to create value

    • Capabilities constitute the various skills, knowledge and expertise of employees

    • Capabilities may evolve


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    Analysis Putting it Together

    • Now you have gathered the information, what do you do?

    • Analysis is both science and art

      • Science to interpret the numbers correctly

      • Art to gain insights.


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    SWOT Analysis


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    Most SWOT done poorly and of little value

    No strategic focus

    No goals or insights

    Simply statement of vague facts

    Not compared to anything


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    Key factors to consider

    Strategic thinking tool:

    • must be focused on achieving a specific outcome

    • must examine the issue from the perspective of the consumer

    • must compare the product, property or region with another product, property or region that is (potentially) in the same [product/market category as you.

    • must be focussed on identifying and exploiting SCAs, or nullifying competitors’ SCAs


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    Lecture 5Managing products

    Goals and Objectives:

    • understand product life cycle models

    • understand product portfolio models

    • be able to conduct a portfolio analysis


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    Range of Tourism products


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    Product Consumption

    Two key issues:

    • ensure that the proper suite of products is available

    • bring new products on stream to ensure continued appeal of the destination or organisation.

      Therefore, managing an organisation’s or destination’s product portfolio is vital to destination success.


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    Defining Product

    Classic Marketing Theory

    • Classical marketing theory - a product as “anything that can be offered to a market for attention acquisition, use or consumption that might satisfy a want or need.”

    • Key element - the ability to satisfy a need or want.


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    Operators may see products as the collection of components that are packaged and sold to the consumer,

    Consumers may have completely different feelings

    Differences between Operators and Consumers


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    Operator

    transport,

    trail notes,

    Equipment

    qualified guide,

    instruction,

    food and accommodation

    Transfers at the beginning and end of the trip

    Consumer

    chance to challenge yourself, be with like minded people, travel in safety with a qualified guide.


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    Consumer’s View is Always Correct

    • The physical elements of the product provide a means for the consumer to satisfy his or her needs.

    • Therefore, must always think of products from the perspective of the person who is buying the good or service.

    • People buy a range of personal benefits when they buy tourism

    • Component parts - facilitate need satisfaction, but do not provide it.


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    Components of a Product

    • core products,

    • tangible products and

    • augmented products


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    Core product

    • what is the consumer really buying?’

    • ‘what needs are being satisfied by the use of the product?’

    • explains why the consumer buys the product and what her or she hopes to get out of it.

      Provide a range of personal benefits that satisfy the individual's needs, wants or desires.


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    Tangible Product

    • transforms core product into something the consumer can purchase.

    • usually by assembling a number of component parts into a single product that can be defined, labelled and branded

      What is consumed


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    Augmented product

    • add extra value to the product.

    • reservations hot line,

    • cancellation policies, etc

      Value Adding


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    Successful Products

    • satisfy the client’s needs, wants or desires

    • have a sufficiently long life cycle to recuperate the owner's investment and return a suitable profit,

    • have the potential for a high value added component,

    • have the potential for a high and durable margin,

    • be marketed and delivered in a cost effective manner, and

    • offer some competitive advantage over existing products


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    Tourism ‘Product’

    Tourism products include:

    • single entities, such as hotels or theme parks

    • the commoditised set of goods and services packaged together for offer to the consumer, such as packaged tours

      They also include:

      • commercial goods or services

    • Services or experiences offered free of charge to tourists.


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    • Commercial goods and services

    • Consumption and of commercial attractions

    • Purchase of commercial food, leisure and shopping

    • Consumption of local cultural and heritage sites offered free of charge.


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    Multi Purpose products

    • The same physical product can become many different products for sale by an organisation.

    • Example – function room in a hotel


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    Life Cycles


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    All products evolve through a life cycle.

    • Not all products follow the cycle precisely,

    • Some products will fail and never leave their introduction stage.

    • Fad-like life cycle, enjoying a rapid period of growth, a very short maturity phase and an equally quick slide into oblivion.

    • scallop like life cycle, maturing and stabilising and then entering a period of renewed growth.

    • Oscillate widely as trends, resources and market tastes change.


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    • the recognition that products have a finite life – over-reliance on one or a small range of products will also have a finite life

    • during a product’s life cycle, it will pass through different stages, with each stage posing a different challenge to the seller


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    • all elements of an organisation’s strategy need to change as the product evolves into different life cycle stages

    • the profit, cash flow and cash needs vary considerably from stage to stage

    • the demands upon management and the appropriateness of managerial styles also varies from one stage to another.


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    Unique to tourism:

    • tourism products rarely removed from the market in their entirety.

    • Instead - obsolete tangible products need to be repositioned to appeal to different, more attractive market segments.


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    Life Cycles


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    Issues & Strategies


    Market l.jpg

    Market


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    Marketing Strategies


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    Competitor Reaction


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    Portfolio Analysis

    Must offer a suite of products to their clientele.

    • Ideally, products in each stage of the life cycle and continually develop new products.

      Product lifecycle concept - limited as a strategic tool.

    • too cumbersome to be used to effectively to assess an organisations entire suite of products.

      Instead, product portfolio models have been developed that enable an organisation to develop a ‘snap-shot’ of its current suite of products, their competitiveness or attractiveness in the marketplace


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    2 Main Models

    • The Boston Consulting Group growth Share Matrix – better known as the Boston Matrix, and the

    • General Electric Matrix, otherwise known as the Market Attractiveness – Business Position Matrix.


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    www.tutor2u.net/business/ strategy/bcg_box.htm


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    • Designed to help organisation’s develop market share strategies based on the cash flow generating characteristics of their products.

    • Allows organisations to represent its entire product portfolio to highlight its relative strengths and weaknesses vis a vis its main competitors


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    Assumptions

    • cash flow potential of a product is related to the overall growth rate of the market, its relative share and its current size in that market.

    • Profitability relates to the market share


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    Value

    • provides a picture of the initial shape, health and balance of an organisation’s product portfolio

    • Products in different categories present different challenges and opportunities.


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    • Problem Children

      • (often, but not exclusively new products) are low share products that are in markets with high growth potential.

      • require both cash and other resources to help establish them.

    • Stars

      • (or rapid growth products) are high share products in high growth markets.

      • Large generators of cash, but also need large influxes of cash to fuel further growth.

      • may not be profitable


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    • Cash Cows

      • (the equivalent of mature markets) are high share products in low growth markets.

      • maturity phase of their lifecycle and

      • represent the stabilising influences of any organisation.

      • In theory, these products provide the greatest source of profits and net cash for an organisation.

    • Dogs

      • (or declining markets) are low or no share products in low or no growth markets.

      • in the decline phase of their lifecycle.

      • growth potential is low therefore invest little in these markets.

      • assumed to be unprofitable


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    Limitations

    • Initially a quantitative tool, but now used qualitatively

    • subjective

    • Some underlying assumptions untrue:

      • dogs, assumed to be unprofitable, are often the most profitable.

      • Market growth is not a good indicator of the appeal of a product - unsustainable growth.


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    Value

    • Adopt a holistic approach and manage their entire portfolio. Manage a portfolio and look at the entire business to help:

    • Organisations at risk have an imbalance of products in one stage of their life cycle.

    • New products and products in their rapid expansion stage require cash and other resources to make them grow

    • A diversity of products is the best recipe for stability

    • Organisations with a broad product base, and therefore, a broad market base are best equipped to cope with the inherent chaos and instability


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    Market Attractiveness – Business Position Matrix


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    Assumptions

    success of an organisation is determined by 2 factors:

    • the extent to which it operates in attractive markets, and

    • the extent of its ability to compete in these markets.

    • Organisations/destinations cannot compete in all markets

      • preferable to identify markets it can compete most effectively in rather than possibly identifying those markets that are the most ‘attractive.’

    • Goal of this matrix is to match an organisation’s strengths with market opportunities.


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    Different Stages Require Different Strategies

    Category 1:

    • top left hand corner

    • attractive growth opportunities for organisations.

    • Products in attractive markets where the organisation can compete.

    • investment strategy to grow the use of the product.


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    Category 2:

    • diagonal cells from top right to bottom left

    • show some potential but have some drawbacks.

    • the business can compete well, but are in unattractive markets, or are in attractive markets, where the business cannot compete as well

    • selectively invest to grow.


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    Category 3:

    • bottom right corner

    • products in unattractive markets where the organisation does not compete well.

    • harvest or divest.


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    Why NOT SWOT Analysis

    • S

    • W

    • O

    • T


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    • Everyone knows about it but few understand how to do it

    • SWOT only valid

      • if compared to something

      • Done for a purpose

      • With a clear outcome in mind


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    Analyze HK


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    Lecture 6Managing Markets


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    • To examine different tourism lifecycle models

    • To identify the need to manage an organisation’s markets

    • Identify means of assessing the strategic position of a business by examining its markets


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    Previous Lectures

    • Distance influences type of visitor

    • Attractions influence visitation

    • What roles does HKTB really Play?


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    Product vs..... Market Management

    • ensuring that they manage their markets effectively

    • many tourism organisation’s constrained in their ability to alter their product

    • Therefore, success rests in managing their markets.


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    Market Management

    • Tourism organisations must manage their product portfolio,

    • But, often have little flexibility in tangible product.

    • Plus, tourism marketing organisations (national, state and regional tourist commissions, the travel trade, etc) often have no direct control over product development.


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    Therefore, need to manage markets:

    • to ensure they remain interested in the product on offer


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    Markets evolve through life cycles

    • should be possible to use a matrix to ‘map’ the relative life cycle stage of each market attracted to a destination


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    Destination-Market Matrix


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    • 2 x 2 matrix that describes the current relationship between a destination and its markets.

    • Each square represents a different stage in the market’s life cycle

    • vertical axis represents the absolute growth potential of the market being examined.

    • horizontal axis reflects time.

    • Most markets will move in a clockwise manner


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    • Markets located in the matrix according to their relative life cycle stage (horizontally) and their absolute potential for future growth (vertically).

      • current importance of the market to the destination is reflected by the size of the circle used to identify the market.

      • share of all visitors (or revenue, or total person nights)


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    6 relationships shown

    • the relative importance of each market

    • The life cycle stage of each market,

    • the 'age' of each market in each life cycle stage (from its entry into a stage to its imminent exit along the horizontal axis),

    • a prediction of the future performance of the market

    • the total number of markets attracted to an area

    • the interrelationship that exists among all markets attracted to the area.


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    • Markets expected to enter their life cycle at the New stage and will likely evolve through each of the stages of the standard lifecycle.

    • Reality may differ:

      • some markets fail, entering the life cycle at the new stage, but becoming tired markets quite quickly.

      • some have a long incubation period,

      • some mature quickly.

    • Also:

      • Not all markets are of equal value

      • some have greater potential for growth than others.


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    NEST Analysis

    • New, Expanding, Stable, Tired

    • Can follow life cycle stage of each market and predict next stage

    • Identify gaps and holes to be filled

    • Predict balances, imbalances

    • What to do


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    Healthy destinations

    • Balance of markets at each stage

    • New markets being developed to replace tired markets

    • No big Bugle


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    Unhealthy destination

    • Over reliance on one market

    • No new markets being developed


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    Management Actions

    • New’ markets:

      • define which markets hold the greatest potential

      • invest to grow these markets

      • Other 'New’ markets can evolve on their own.

    • Expanding’ markets:

      • investment of time and money.

      • products and services may need to be altered to better serve the needs

      • lead time required to modify the product to cater for large numbers of ‘expanding market’ tourists.


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    • Stable’ markets:

      • defend, reinforce or support these markets,

      • invest to steal market share from competitors.

    • ‘Tired’ segment

      • determine the potential and feasibility of revitalising the market

      • decide to divest

      • use these markets to block others.


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    Underlying principles

    • to strive for a balance of markets

    • to ensure that new markets with at least the same potential of existing markets are being developed

    • to recognise that some markets require investment, while others provide the resources needed to help new markets grow

    • striving for sustainability in demand and desire for the product.


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    Cast Study – Hong Kong


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    Strategic Thinking and Option Identification

    • SWOT = mid point

      • Not an end in itself, but

      • A means to an end

    • Good Situation Analysis identifies:

      • key issues to move from one competitive position to a more favoured one,

      • barriers that must be overcome to improve your competitive position.

    • Situation Analysis is an idea generator.


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    Options Phase

    • Identify a range of options

      • No bad options here, only ideas

    • Select most suitable options and try various scenarios

    • Assess each idea for its:

      • Practicality

      • Desirability

      • Feasibility

      • Attractiveness

      • Costs / benefits to organization


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    Action Strategy Development and Implementation


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    SMART Objectives

    • Specific

    • Measurable

    • Attainable

    • Realistic

    • Timely


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    Strategy implementation

    • Designing organizational structure

    • Designing control systems

    • Matching strategy, structure and controls

    • Managing strategic change


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    Strategy evaluation

    • Feedback loop

    • Formal evaluation process

    • Evaluation and feedback provide information on when and why change needs to take place


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    Strategic activities are likely to occur following consultation between the chief executive officer and others at the corporate level

    Levels of strategic management

    Usually responsible for the translation of strategic direction and strategic intent from the corporate-level into strategies at the business-level

    Responsible for the development of functional-level strategies that contribute to the fulfillment of business-level and corporate-level strategic objectives


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    Stakeholder impact analysis

    • The steps in a stakeholder impact analysis are

      • Identify stakeholders

      • Identify stakeholders’ interests

      • Identify resulting claims stakeholders are likely to make

      • Identify most important stakeholders

      • Identify the resulting strategic challenges


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    Abell’s Framework for Defining the Business

    Source: D. F. Abell, Defining the Business: The Starting Point of Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.


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    Vision

    • a realistic, credible, and attractive view of the future for the organization.

      e.g. Colonel Saunders’ vision was to see KFC restaurants all over America


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    Mission statements

    • A description or declaration of why a company is in operation

    • Provides the framework or context within which strategies are formulated

    • Mission statements have a symbolic function to hold an organization together for its internal stakeholders and to establish an identify for its external stakeholders.


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    Self-concept – What is the firm’s distinctive competence or major competitive advantage?

    Customer market – who are the firm’s customers?

    Product and service - what are the firm’s major products or services?

    Geographical domain – Geographically, where does the firm compete?

    Technology – Is the firm technologically current?

    Concern for survival, growth, or profitability – is the firm committed to growth and financial soundness?

    Philosophy – what are the basic beliefs, values, aspirations, and ethical priorities of the firm?

    Concern for public image – Is the firm responsive to social

    Concern for employees – are employees a valuable asset of the firm?

    Components of mission statement (Pearce & David,1992)


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    Ben & Jerry’s mission statement (Does it have all the components?)

    • Ben & Jerry’s mission is to make, distribute, and sell the finest quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products. To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees. To operate the Company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community – local, national, and international.


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    Values

    • How managers and employees should conduct themselves

    • Organizational culture

      • The set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals

      • Often seen as a source of competitive advantage

    • In high-performing organizations, values respect the interests of key organizational stakeholders.


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    Our Philosophy

    Shangri-La hospitality from caring people

    Our Vision

    The first choice for customers, employees, shareholders and business partners

    Our Mission

    Delighting customers each and every time

    Our Guiding Principles (Core Values)

    • We will ensure leadership drives for results.

    • We will make customer loyalty a key driver of our business.

    • We will enable decision making at customer contact point.

    • We will be committed to the financial successof our own unit and of our company.

    • We will create an environment where our colleaguesmay achieve their personal and career goals.

    • We will demonstrate honesty, care and integrityin all our relationships.

    • We will ensure our policies and processes are customerand employee friendly.

    • We will be environmentally conscientious and providesafety and security for our customers and our colleagues.


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    Major Goals and Objectives

    • Goal: A desired future state or objective

    • Four main characteristics of well-constructed goals:

      • Precise and measurable

      • Address crucial issues

      • Challenging but realistic

      • Specify a time period


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    Corporate Social Responsibility

    • The sense of obligation on the part of organizations to include social criteria in strategic decision making

    • Presumes that organizations will favor courses of action that benefit or enhance the welfare of society at large


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    Strategic Options


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    Strategy

    driven by the future and the perceived goals you wish to achieve

    Benefit

    Vision, goal, path

    Risk

    Locked in, inflexible, fail to respond to rapidly changing environment

    Opportunism

    driven by the present and the opportunities that exist here

    Benefit

    Responsive, able to respond to crises

    Risk

    Jump from opportunity to opportunity, no vision, or plan

    Strategy vs. Strategic OpportunismLong term vs. short term view


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    2 Main Strategic Options

    • Differentiation means:

      • an element of uniqueness in the strategy that provides value to the customer

      • such as enhancing performance, quality, reliability, prestige, etc

    • Low cost strategies (really a subset of differentiation)

      • are based on the cost advantage an organization has to better produce, market or sell the product

        - low cost does not mean low price


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    Differentiation

    • a product offering that is different from your competitor's in one or more ways that makes it unique and valued by the consumer

      • Key is valued by customer

      • If they value it, will pay a higher premium or repeat purchase


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    Points of Differentiation

    1) QUALITY OPTION

    2) BRAND AWARENESS

    3) PRODUCT ASSOCIATIONS

    4) CUSTOMER ORIENTATION

    5) BRAND LOYALTY

    6) CUSTOMER BASE

    7) PRODUCT FEATURES

    8) SERVICE FEATURES

    9) TECHNICAL FEATURES

    10) DISTRIBUTION CHANNELS

    11) PRODUCT LINE BREADTH


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    Quality

    • real or perceived quality advantage to your customers

      • Which toothpaste or petrol is really better?

    • Reposition other products as inferior

    • Premium brand as opposed to a value or economy brand

    • BUT

      • Systems must be in place to ensure top to bottom quality


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    • Quality may mean

      • Lower price

        • McDonalds

        • Walmart

      • Higher price

        • Five star hotels


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    Benefits of Perceived Quality

    • affects market share - ensure that the difference in quality is sufficiently large and maintained over time.

    • affects price – People are prepared to pay more for a perceived high quality product

    • does not have to affect cost –quality does not have to mean additional costs.

    • factors that signal quality that may have nothing to do with the actual performance of the product.

      • Size (large or small)

      • Packaging

      • Uniformed staff

      • Silverware, etc.


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    Brand Awareness

    1) provides sense of familiarity and people like familiarity, especially for low involvement or high risk products

    2) can signal a presence, a commitment and substance

    3) Brand recall is essential in entering or staying in a market

    4) Durability


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    Product Associations

    • What do people think of when they think of a product

    • Person, animal, personality?

    • Fun, experience?


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    Distribution Channels

    Especially true for international tourism

    • Diversity of markets

    • Diversity of media

    • Ability to control travel trade and on line sales

    • E-channels and problems with them.


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    Low Cost Strategy

    • Can be a point of differentiation caused by greater efficiencies that gives the business an advantage

    • Can be due to cheaper, lower quality inputs


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    Low Cost Options

    • NO FRILLS PRODUCT/SERVICE

    • LOW COST PRODUCT DESIGN

    • RAW MATERIAL COST ADVANTAGE

    • LOW COST DISTRIBUTION

    • LABOUR COST ADVANTAGE

    • GOVERNMENT SUBSIDY

    • LOCATION COST ADVANTAGE

    • PRODUCTION INNOVATION AND AUTOMATION

    • PURCHASING INEXPENSIVE CAPITAL EQUIPMENT

    • REDUCING OVERHEADS

    • SCALE ECONOMIES

    • THE EXPERIENCE CURVE


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    Niche Positioning

    Most relevant for tourism due to:

    • Multiplicity of products

    • Multiplicity of competing destinations

    • Limited resources

    • Niche does not mean small, it means focused


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    Definition

    • splitting of traditional markets into smaller segments and then devising separate marketing programs for each of these segments.

      • products and services are delivered that more closely meet customer needs

      • Mass individualism

    • It is a conscious decision an organisation makes to position itself attractively for a specific, identifiable and profitable segment of the consumer market.

      • builds on the organisation's strengths

    • Different from a Follower or Me too strategy

      • organisation that simply picks up what is left over after the major and niche players have selected their markets.


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    Types of Niches

    • geographic

    • demographic

    • values based

    • industry specific basis


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    Conditions favouring niche positioning

    • market segmentation in large markets

    • scope for differentiation of products/services

    • concentration of a few dominant players

    • lower barriers to entry

    • extensive knowledge of the market

    • extensive knowledge of the product's own unique features


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    How to identify niches

    Attractive features including:

    • Durability

    • Profitability

    • Accessibility

    • Appeal to your organisation


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    • their heavy, heavy or heavy, heavy, heavy users

    • their light users to look for ways to build them

    • growth markets

    • declining markets

    • geographic markets

    • most profitable markets

    • customer's values

    • frequency of purchase, as well as volume

    • decision makers, and the like.


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    Lecture 2


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    Destination Branding

    Prof Bob McKercher

    School of Hotel and Tourism Management

    The Hong Kong Polytechnic University


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    Competition is intense

    • Emerging destination

    • Unclear destination image

    • Low product awareness

      Source: WTO 2007


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    But Most Destinations Offer Similar Experiences

    • Too many ‘me too’ places

    • Same product

    • Same image

    Compete on price


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    The challenge:

    • Differentiate in a meaningful way

    • Gain a sustainable competitive advantage (SCA)


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    Each destination has its own unique story


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    What is Destination Branding?

    Technical Definition

    The marketing activities that support the creation of a name, symbol, local, word mark or other graphics that both identifies and differentiates a destination that conveys the promise of a memorable travel experience that is uniquely associated with the destination that serve to consolidate and reinforce the recollection of pleasurable memories of the destination experience, all with the intent purpose of creating an image that influences consumers’ decisions to visit the destination.

    (Source: Blain, Levy and Ritchie 2007)


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    Simplified Definitions

    • The set of deeply held beliefs, not necessarily true, that people in one country believe about another country

    • the promise, the big idea, the reputation and expectations that reside in every customer’s mind about the destination.

      Challenge – capture the distinct essence of a place


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    Benefits to destination

    • A way to differentiate places

    • Communicates a clear preferred position to the consumer

      • Positions other destinations as inferior in some way

    • Promises something of value

    • Makes or reflects the personality of the place

    • Establishes beliefs about a place

    • Prompts behavior

    • Own a place in the consumer’s mind


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    Benefits to consumer

    • Trust and loyalty

    • Buy brands

    • Believe in superiority

    • Promises a type of experience

    • Makes a lifestyle statement

      • Holidays are lifestyle experiences that reflect your lifestyle

    • Consumers continue to demand greater choices supported by reliable branded products.


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    Consequences of poor brandingA product without a brand image is like a person without a personality – they meld into the background - Morse, King and Bartlett 2005)

    • ‘me too’ destination - undifferentiated

    • Poor understanding of the destination's unique experiences;

    • Visitors develop their own perceptions of the destination;

    • Need to compete on price – someone can always do it cheaper

    • Destination or product becomes a commodity and not an experience

    • Competitors with a stronger and more positive brand will win business.

      (source: Morse, King and Bartlett 2005)


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    SuccessfulBrands


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    Characteristics of a successful destination brands

    • Delivers benefits customers desire – makes a promise to the visitor

      • Based on real market research

      • Stimulates consistent delivery of experiences

    • Brand managers understand what it means to consumers

    • Properly positioned in the market to add value

    • Stays relevant over time

      • Promotional activities may change, but the core brand values do not

    • Pricing based on value adding


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    Characteristics (con’t)

    • Consistent delivery across all media by all stakeholders

    • Brand portfolio is consistent and sensible

      • Individual regions and businesses fit under the umbrella brand

    • Focus of all marketing activities

      • Coordinated around the brand

    • Brand given proper support over the long run

      • Belief in and commitment to it over time

    • Effectiveness monitored over time


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    BrandingGenuine brands are the result of a comprehensive, well thought out and carefully crafted strategy that encompasses the entire destination experience

    Many approaches, but common features

    • Brand Identity / Values

    • Brand Personality

    • Brand Position

    • Brand Image / Essence


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    Brand Identity / Values

    • Identify core values of the destination

      • What is the destination about?

        • Durable, relevant

        • Meaningful to both tourists and local residents

        • Reflects reality

          • Do both tourists and residents believe it

    • Represents the foundation or guiding principles for the destination


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    Brand Identity / Values

    • Begin with an independent situation analysis

      • Strengths, weaknesses internally and externally

      • Customer and industry beliefs

    • Cannot be imposed or local stakeholders will not buy in

      • Must be developed through consultation with:

        • Industry

        • Residents

        • Tourists


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    Brand Personality

    • Identify those attributes that give a place its own unique personality or character

      • Translate the identity

    • Counteract negative impressions

    • People buy experiences

      • Experiences reflect their personalities

        • People seek destinations that reflect their desired experiences


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    Brand Position

    • How defined in the market

    • Values and Personality define position

    • What makes it:

      • Unique

      • Appealing to its target market

      • Offer of a quality experience

    • Reflect and respect local stakeholders


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    Positioning

    Options

    • Attribute based – oldest, highest, etc

    • Benefit based – “experience the…”

    • Competitor positioning

      • Malaysia truly Asia

      • Hong Kong – Asia’s World City

    • Price / Quality – less recommended


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    Brand Image / Essence

    • consolidates the brand identity and its brand values.

    • form the framework for communications, culture and promotion


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    Issues

    • Every destination has a "brand image".

    • Can differentiate a destination from competing destinations.

    • BUT lack of a brand strategy, and support by inconsistent advertising campaigns, creates a confused image to prospective customers.

    Source: http://www.asiamarketresearch.com/columns/tourism-branding.htm


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    Brand recall (among travel agent staff)

    Source: http://www.asiamarketresearch.com/columns/tourism-branding.htm


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    Hierarchy of Brands

    • corporate umbrella brand

    • family umbrella brand

    • Range brands

    • Individual brands


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    Marriott Individual Brands

    • Marriott Hotels & Resorts - renowned for its “spirit to serve,” its consistent quality and its genuine care.

    • JW Marriott Hotels & Resorts - a new dimension of luxury in a hotel with exquisite architectural detail, the finest dining, and gracious sophistication

    • Renaissance Hotels & Resorts - distinctive decors, imaginative dining, and attentive service in fantastic destinations around the world

    • Courtyard - designed by business travelers for business travelers

    • Residence Inn - helps guests maintain a balance between work and life. Spacious suites with full kitchens combine home like comforts with functionality

    • Fairfield Inn - our most affordable

    • Marriott Conference Centers - focuses on meetings.

    • TownePlace Suites - More residential community than hotel, designed for those travelers on the road for weeks at a time.

    • SpringHill Suites - up to 25% more space than a comparably priced hotel room.

    • Marriott Vacation Club International - time share - resort ownership in premier destinations worldwide with the option to exchange vacations

    • The Ritz-Carlton - provides the finest personal service and facilities throughout the world.

    • Marriott ExecuStay - temporary housing needs - We manage thousands of apartments

    • Marriott Executive Apartments - residential accommodations with hotel-like amenities to business executives on overseas assignments of 30 days or more


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    Integration Challenges1) Compatibility between levels


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    2) Product / Market Compatibility


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    Kakadu

    Source: Morse, King and Bartlett 2005


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    Actions

    1) Selection of Brand name:

    • Suggest something about the product benefits

    • Suggest product qualities

    • Easy to pronounce, remember and recognize

    • Distinctive

    • Should not carry poor meanings in other countries and languages


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    2) Logos

    • Most important visual evidence

      • Raise awareness

      • Communicate image

    • But – logos must be supported by substance

      • Represent but do not define the brand

      • Create associations and expectations, but are not the brand

    • Logos not supported by a strategy fail!


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    3) Building Positive Brand Associations

    Ask 3 questions about brand associations

    • Which associations are positive and negative

    • How strong is each association

    • Any unique associations

      Build on positive associations

      Negate negative associations

      Neutralize competitors positive associations


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    4) Leveraging the Brand to Build Equity

    • Merchandising

    • Driving strategic decisions

    • Partnerships

    • Co-branding

    • Vertical integration

      • City – region – country

    • Horizontal integration

      • Industry partnerships in destination


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    Managing the Destination Brand

    • Leadership

    • Buy-in

    • Consistency in use of logo, message and and slogans across all stakeholders

    • Ability to deliver promised experience

    • Ongoing monitoring and evaluations


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    Leadership

    • Establishing objectives

    • Developing a shared vision

    • Consultation, consultation, consultation!

    • Establishing a policy framework to achieve those objectives

    • Developing guidelines, policies and practices

    • Working with partners in education, training and development programs

    • Long term commitment


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    Quality Management

    • Introduction of quality assurance programmes


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    ConclusionConsider the Brand framework

    • Brand position: what you offer.

    • Brand promise: What people can count on /expect

    • Brand proof: trust you to deliver what you promise.

    • Brand messages: Key ideas to communicate, broken down for each important audience you reach.

    • Brand voice: The personality to express throughout your communication.

    • Brand appearance: The colors, symbols and images that represent you.


    Useful on line sources392 l.jpg

    Useful on-line Sources

    BSI (2004) The BrandScience Guide for Destination Research. Brand Science Inc. IACVB.http://www.iacvb.org/images/pdf/BrandScience_Guide_for_Destination_Research_%289-30%29_FINAL.pdf

    Ritchie J. R. B & R Ritchie (1998) The Branding of Tourism Destinations: Past Achievements and Future Challenges – http://people.commerce.ubc.ca/phd/ritchie/Papers/AIEST1998.pdf


    Bibliography l.jpg

    Bibliography

    Anon (2007) A Vision for Cape Town – http://wiki.capeinfo.com/index.php?title=Brand_identity

    Blain C., Levy S & B Ritchie (2005) Destination branding: Insights and practices from Destination Management Organizations. Journal of Travel Research 43: 328 – 338.

    BSI (2004) The BrandScience Guide for Destination Research. Brand Science Inc. IACVB.http://www.iacvb.org/images/pdf/BrandScience_Guide_for_Destination_Research_%289-30%29_FINAL.pdf

    Cheung E (2006) Canadians Make World’s Best Friends. Canada.com - www.canada.com/vancouversun/news/story.html?id=8c7e4044-5560-48d2-80ce-aa2309529012

    Hall D (1999) Destination branding, niche marketing and national image projection in Central and Eastern Europe. Journal of Vacation Marketing 5(3): 227 – 237.

    Harkinson G (2005) Destination Brand Images: A business tourism perspective. Journal of Services Marketing 19(1): 24 - 32

    Kotler P & G Armstrong (1996) Principles f Marketing – International Edition (7th Ed). Prentice-Hall International. Sydney

    Kotler P (1999) Kotler on Marketing. Free Press. London.

    McKercher B (1998) The Business of Nature Bases Tourism. Hospitality Press. Melbourne.

    Morgan N., Pritchard A & R Piggott (2003) Destination Branding and the Role of Stakeholders: The case of New Zealand. Journal of Vacation Marketing 9(3): 285 – 299.

    Morse, J., King J & J Bartlett (2005) Walking to the future… together: A shared vision for tourism in Kakadu National Park - www.environment.gov.au/parks/publications/kakadu/tourism-vision/part4.html

    Pike S (2004) Destination Marketing Organizations . Elsevier. Sydney.

    Ritchie J. R. B & R Ritchie (1998) The Branding of Tourism Destinations: Past Achievements and Future Challenges - http://people.commerce.ubc.ca/phd/ritchie/Papers/AIEST1998.pdf.

    UNESCO (2007) UNESCO – World Heritage Center - http://whc.unesco.org/

    UNWTO – various tourism statistics


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