Strategic Analysis Of Ibis Hotel

The present report is hovering around the discussion of strategic and non-strategic decisions of Ibis Hotels. In order to fulfill the aim of current study, the main argument has been divided into number of steps. Firstly, the overview of Ibis hotel has presented by highlighting the number of countries in which it is operating. Secondly, the discussion has moved to strategic decisions by defining the concept of strategic decisions and the shedding light on strategic decisions of Ibis hotel following by analysis of strategic decisions of Ibis hotel. Thirdly, the non- strategic decisions has discussed by offering due placing to non-strategic decisions of Ibis. Fourthly, the risk section has defined the risk and differentiated between risk aversion and risk awareness and then highlighted the risk approach of Ibis hotel by making reference to strategic decisions of Ibis hotel. Finally, the future course of strategic action has suggested to Ibis hotel given the evidences of company’s strategic and non-strategic decisions.

1.Overview of Ibis Hotel

The Ibis hotel, which is known as “ibis” corporately is one of therenownedinternational hotel which is being owned by Accor hotels. The ibis was formulated in 1974 in Bordeaux and it has 1068 hotels that are operating in 64 countries across the world (Ibis hotel, 2016). The unique factor of ibis hotels which is differentiating it from other global hotels is the low price of ibis hotel in comparison to other global hotels (Ibis hotel, 2016). All of the ibis hotels are located either in commercial areas or in places that are easily approachable by the customers. The hotel offers well equipped bed rooms to its customers with comfortable bedding with an aim of ensuring calm sleep of customers. The Ibis hotel is considered as best economical hotel in the chain of international hotels.

2.Strategic Decisions

2.1Definition

The strategic management is defined as the process of formulating and implementing long term goals of organisations by keepingassessment of internal and external environment of organisation into consideration and by allocating necessary resources for fulfillment of goals. It has offered by Eden and Ackermann (2013) that strategic decisions are taken by top management and pertain tohave direct influence on long term performance orientation of business and have direct association with aims and objectives of the firm. Moreover, the strategic decisions are defined as set of alternatives which can influence key factors for defining the success of strategies of an organisation(Hill, Jones and Schilling, 2014). The De Wit and Meyer (2010) has referred strategic decisions as infrequent decisions that are being taken by top leadership of the organisation and are highly important in terms of underlying actions, utilised resources and setting paradigm for future course of actions that may affect survival and health of organisation in long run. The current study is considering the perspective of De Wit and Meyer (2010) about strategic decisions into consideration for assessing strategic decisions of Ibis Hotels. Some characteristics of strategic decisions that will be incorporated in current study are as follows; aligned with mission and values of organisation, strong resource commitment and influence competitiveness of business.

2.2Strategic Decisions of Ibis Hotel

The most significant strategic decision of Ibis hotel pertains to its expansion at global level. Since its inception the hotel has witnessed rapid growth at global level and as of 31st December 2015, the hotel has network of 1068 hotels with 134,786 rooms(Ibis hotel, 2016). The strategic move of Ibis hotel is based on entry into a new market at international level that requires both huge resource commitment and a broader view to gain competitive advantage in long run.

Along with this, an important strategic decision of Ibis hotel is the launching of “15 minutes service satisfaction guarantee”. The service has launched in the entire chain of Ibis hotels which enables the hotel to achieve it ambition of offering best services and high value at economical prices (Evans, Stonehouse and Campbell, 2012). The service allows the hotel staff to look for solution of any customer’s problem related to service delivery or quality, within 15 minutes of reporting the problem. The service is available for 24 hours and if the staff fails to provide solution, then the specific customers are invited by hotel and their service remains on hotel during their stay.

In related vein, an important strategic decision of the Ibis hotel is the adoption of low cost leadership strategy (Bouncken, 2002). In comparison to other similar hotels the Ibis hotel is offering lowest prices in exchange of huge value.

2.3Analysis

Among the above mentioned instances of strategic decisions of Obis hotel, the expansion at international level resides within corporate level strategy of business. The analysts has offered that corporate level strategy affects the whole organisation and significant risking of sub-optimisation of resources is involved. Within the corporate level strategy, the Ibis hotel is relying on value creating strategy and it is adopting to expand its business. The expansion strategy of the businesses is mainly motivated by the desire of gaining higher market shares and aim is to growth regardless of risk and hurdles that might come in the way of growth (Datta, Hemnann and Rasheed, 2002). The expansion can be carried out through five strategies including; concentration, integration, diversification, cooperation and internationalisation (De Wit and Meyer, 2010). The abovementioned instance of strategic decision of Ibis hotel to expand internationally is based on internationalisation strategy of expansion.  The international strategy is defined as the notion of increasing involvement of firm at international level (Doole and Lowe, 2008). There are different entry modes available and the Ibis hotel has relied on foreign direct investment, which has allowed the hotel to establish a subsidiary in international market (Efrat and Shoham, 2015). The international expansion strategy of Ibis hotel has allowed the hotel to successfully enter in 64 locations across the world and the hotel has its franchises in all continents. Therefore, it is reasonable to argue that expansion at international level falls under the strategic decision of firm as it is being regulated by top leadership, requires strong commitment of resources and set precedents for further goals of Ibis hotel. Along with this, the expansion strategy of Ibis hotel has allowed it to gain competitive advantage at international level.

The “15 minutes service satisfaction guarantee” of the Ibis hotel is offered in combination to people and pricing strategy of the hotel. The people strategy of Ibis hotel is to offer high quality services to the customers and paying attention to their complaints with an aim of making their stay comfortable (Douglas, Craig and Nijssen, 2001). On the other hand, the pricing strategy of Ibis hotel is to offer increased value in turn of money at highly economical prices. The implementation of 15 minutes service satisfaction guarantee of Ibis hotel by the leadership of hotel was motivated by the notion that they need to ensure that being economical, they are not compromising on service quality. Therefore, the underlying strategic move of Ibis hotel has ensured long run service delivery and it has ensured the huge competitive advantage to Ibis hotel. This strategic decision of organisation is in direction of mission of ibis hotel to offer modernity, comfort and services at the best possible price.

Finally, the low cost leadership strategy of the Ibis hotel comes under the category of business level strategies. The hotel has gained competitive advantage at global level by enhancing the experience of customers in hotel at economical rates. The business level strategies are being formulated by the top management and by pursuing cost leadership strategy, the significant commitment with resources is required. Therefore, it can be maintained that current decision comes under the category of strategic decisions and it has considerable long term impact on success of Ibis hotel.

Non- Strategic Decisions

2.4Definition

The non-strategic decision could be either tactical or operational and it has medium and shorter time horizon respectively. The non-strategic decisions are mainly aimed at assisting the achievement of strategic decisions of organisation relating to day to day operations of the businesses(Cullen and Parboteeah, 2013). It has mentioned by Kapferer (2012) that non-strategic decisions are highly important for aiding achievement of strategic goals of organisation and they encompass development of divisional plans, structuring the work flow, deciding the distribution channel and acquisition of different material and human resources. The current study will rely on definition of Kapferer (2012)and it will refer to the decisions taken by medium as well as lower level of management on continual or daily basis.

2.5Non-strategic Decisions of Ibis Hotel

In the light of above mentioned definition, one of the important non-strategic decision of ibis is the training of staff members for enabling them to make the implementation of 15 minutes satisfaction program successful (Aung, 2000). The training and trials have offered extensively to all staff members and they are motivated that their contribution is vital for satisfaction and comfort of customers.

Followed by this, the non-strategic decision of ibis pertains to the extensive advertising of company’s brands including the branding of ibis, ibis styling and ibis budget. The different promotional packages are being used by the Ibis hotel with an aim of attracting and retaining customers. The promotion is carried out through travel magazines, banners at airport and railways, and on internet.

2.6Analysis

The decision of training the staff to ensure the success of 15 minutes satisfaction program comes under the non-strategic decision. The staff has given awareness and training about the program by human resource management department. The decision is being taken by middle managers and the training has carried out under the supervision of lower level of management. Along with this, the training requirements are being assessed based on the routine complaints of the customers and thus modifications are brought in training programs and implemented on continual basis. Therefore, it is well aligned with the definition of non-strategic decisions offered byKapferer (2012).

The decisions of advertisement and promotion is being taken by the marketing department of the hotel. The packages for promotion are being offered on different events such as Christmas, New Year, summer vacation packages and winter packages. These promotion decisions are being made by Ibis hotel on regular basis and they have short terms orientation. Which is reflecting that it comes under the category of non-strategic decisions of Ibis hotel. The same has confirmed by the research of Albaum, Albaum and Duerr (2008) that advertisement and promotion decisions are non-strategic.

3.Risk

3.1Definition

The risk for a business refers to the potential of inadequate profits or losses due to different uncertainties in internal and external environment of organisation (Hull, 2012). The source of risk is mainly an unforeseen event in future which may or may not be assessed in advance by the organisation and can lead to failure of business if not managed appropriately (Lam, 2014). The management of risk refers to a complete process of identifying and assessing risk with an aim of undertaking preventive measures for minimising the effect of risk on health of business. The Power (2004) has defined risk management as a discipline that is responsible for assessing the severity of risk and defining ways that may help in addressing the uncertain future situation for preventing financial and non-financial damage to organisation.

3.2Difference of Risk Averse and Risk awareness

The phenomenon of risk aversion refers to avoidance of risk by the organisation and they prefer low return with known risks rather pursuing un-known risks with high returns (Matzler, Grabner-Kräuter and Bidmon, 2008). Whereas, the risk awareness is the ability of organisation to get sensitised about the hazards of different actions and decisions of organisation on people, policies and profitability of the organisation (Hallikas et al., 2004). The risk aversion leads to avoidance of risk, while the approach of risk awarenessrefers to mitigation of risk by taking different approaches for minimising the negative consequences of risk.

3.3Risk analysis of Ibis Hotel

The Ibis hotel is relying on a detailed and structured mechanism of risk management which can be seen in the figure 1 mentioned below. It can be seen that there are six steps in risk management process of the Ibis Hotel including; identification, evaluation, prevention protection, event and reaction (Aung, 2000). All of these steps are prevailing around three core aspects encompassing; risk mapping, anticipatory actions and reactive reactions.

Figure 1. Risk management system of Ibis hotel

Source: Aung (2000)

The Ibis hotel is incorporating risk awareness approach and they take necessary actions for eliminating the major risks that may jeopardise the realisation of hotel’s goals. The major element of risk awareness culture of Ibis hotel is that all divisions and members of organisations are considered as stakeholders of risk and their contribution is encouraged by risk management department for assessment of risk. The risk management of Ibis hotel is structured around two core levels (Enz, 2009). Firstly, the global risk management system that enhances awareness of risk for all units and takes necessary steps for management of risk. Secondly, a common system of risk management exists from corporate and operational risk of the hotel.

Given the strategic decisions of the Ibis hotel, the global expansion patterns of hotel are showing that organisation is far from risk aversion. The internationalisation has higher risk associated with it and Ibis hotel relies on integrated assessment of internal and external environment of the Ibis hotel before taking any initiative (Aung and Heeler, 2001). The assessment is carried out internally for capabilities, resources and strengths of the Ibis hotel and it is carried out externally for the country of interest. Likewise, in order to implement 15 minutes satisfaction initiative the organisation has investigated its internal process completely with an aim of investigating their capabilities to implement such a huge initiative of ensuring high quality. The risk aware nature of the Ibis has led to successful implementation of its strategic moves.

4.Recommendations

4.1Situational Analysis of Ibis Hotel

SWOT Analysis of Ibis Hotel

Strengths

Weaknesses

  1. The Ibis hotel is located in commercial areas and can be easily reached
  2. The Ibis hotel has strong global network.
  3. Exceptional service quality based on 15 minutes satisfaction guarantee program
  4. Offers huge customers value and comfort on economical prices
  5. Hotel offers 24 hours kitchen and bar services
  6. Three differentiated brands (3 personalities) for satisfaction of varying customer needs including ibis budget, ibis, ibis styles and ibis budget
  7. The Ibis has gained ISO certification
  1. High operational cost for offering comfort and relying on expert advices to design sound proofroomsin economical rates
  2. Cost of developing and evolving good night’s sleep solutions by exerts is substantial
  3. The Ibis hotel is targeting mainly individual travelers as segment and distribution channel is not wide enough to attract business groups and troops.

Opportunities

Threats

  1. Ability to emerge in new market and customer segments.
  2. The ibis hotel may formulate alliances with the competitors at local level.
  3. The integration with suppliers can be carried out by Ibis hotel.
  1. The number of budget hotels is increasing at both local and global level offering threat of substitutes
  2. Competition is likely to increase at global level and sustainability could be a threat
  3. The bargaining power of suppliers and regulatory forces at international level may affect the functioning in long run.
  4. The changes in demand and preferences of consumers might acts as a threat in long run.

 

4.2Future Course of Action

The situational analysis of Ibis hotels is suggesting that in spite of serval strengths there are few limitations associated with Ibis hotels as well that are needed to be taken into account in strategic actions of the company. The first recommendation pertains to the development of distribution channels of the Ibis hotels. Currently, the distribution channels of Ibis hotels are using internet as an intermediary and targeting individual traveler and visitors. In future the Ibis hotel can further improve its distribution channels by involving intermediaries such as travelling agencies and intermediary agencies for targeting the business groups. Therefore, the recommendation is to expand the target segment of the Ibis hotel from individual to business segment.

Secondly, the strategic decision making of the Ibis hotel has suggested that Ibis hotel is focusing on cost leadership strategy. Among the generic strategies, there are two other strategies including; differentiation strategy and focus strategy (Frynas and Mellahi, 2015). The differentiation strategy can help the Ibis hotel to continually innovate, as innovation is the requirement of continually changing environment of businesses. Along with this, the ibis may also expand its brands for focusing on luxury customer target along with budget and economical targets of customers.

Finally, currently, the Ibis hotel is expanding in international market through foreign direct investment. It is evident from situational analysis that Ibis hotel is facing threat from high emergence of budget hotels at local level. Therefore, it is recommended that Ibis hotel may enter into partnerships with local hotels with an aim of minimising the competition. Furthermore, the expansion through mergers and acquisition and strategic partnerships has considered as an appropriate expansion method at international level in prior research (Forsgren, 2015). Therefore, Ibis hotel can carry out strategic partnership or it can also pursue mergers and acquisition with an aim of expanding in international market and gaining competitive advantage.

5.Conclusion

The report has offered that Ibis hotel is one of the leading brand in economical hotel at global level. The strategic decisions of the company encompassed internationalisation of the Ibis hotel in number of locations, the low cost differentiation approach of the hotel and 15 minutes satisfaction program of the hotel. The non-strategic decisions of the Ibis hotel are including details about training programs of the company so that employees can learn to deal with complaints of customers within 15 minutes.Along with this, the advertisement and promotion decision is an important non-strategic decision of Ibis hotel. The study has further revealed that Ibis hotel is based on the risk awareness culture and risk is being assessed and managed systematically by including input from multiple stakeholders. Finally, the recommendations have made to Ibis hotel to expand its distribution channel, rely on differentiation and focus strategies and to expand in international market through mergers, acquisition, and strategic partnerships with local players in hotel industry.

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