Strategic Alliances in the Hospitality essay
- Length: 16 pages
- Sources: 14
- Subject: Recreation
- Type: essay
- Paper: #21737573
Excerpt from essay :
While companies of all types and sizes stand to benefit from strategic alliances, the relevant literature indicates that companies competing in the hospitality industry are particularly well situated to gain a competitive advantage in this way. In this regard, Rahatullah and Raeside report that, "The strategic alliance literature reveals that resources alone can not bring competitive advantage, but complementary resources can contribute to the strategic fit of partners in the alliance (2009, p. 36). In some cases, strategic alliances may be established in the hospitality sector in unexpected ways. For instance, Jayawardena (2002) cites the example of strategic partnerships being formed between institutions of higher education and the hospitality industry to ensure that the coursework being delivered is congruent with the needs of the sector. According to Jayawardena (2002), institutions of higher education should ensure that their curricular offerings remain relevant and tied to the needs of the industry and help prepare their graduates for the type of competitive environment that is in place. In order to remain current and relevant, institutions of higher education must constantly evaluate what the driving forces are in the hospitality sector and formulate curricular offerings that match these needs. In this regard, Jayawardena notes that, "Tourism education and training institutes can do this by forming strategic alliances and 'smart partnerships' with the industry that they serve and conducting continuous industry-driven needs assessments. In this way, both academia and industry can ensure that the products coming out of the institutions will be well prepared for the industry" (2002, p. 150).
Other strategic alliances within the hospitality sector are more intuitive and apparent. For example, according to Chathoth (2004), there has been an enormous amount of growth of strategic alliances within the hospitality industry using air carrier alliances, which have increased unprecedented levels in recent years. This authority adds that these strategic alliances have special import for the hospitality sector since they contribute to the travel and tourism industry in ways that directly contribute to their customer base (Chathoth, 2004). A number of such strategic alliances have been forged in the hospitality sector with different airlines (Wahab & Cooper, 2001). In many cases, the win-win aspects of hospitality sector strategic alliances with airlines can extend to consumers as well. For example, Chathoth notes that with respect to air carriers, "A major shift in airline firm's operating philosophy resulted, as firms sought a more economically efficient form of flight operations through the introduction of airline alliances with partnering firms, aimed at providing frequent flier programs to their customers at the outset. Customers benefited from such alliances, as they were able to use their frequent flier miles on any of the partnering firm's flights" (2004, p. 173).
While it may be intuitive and apparent that strategic alliances between organizations competing in the hospitality sector are mutually beneficial if there are no direct conflicts of interest involved, this is not always the case and even direct competitors stand to benefit from strategic alliances. With respect to the former type of arrangement, Laws et al. note that, "Destinations are complex groupings of primary attractions and secondary services, and it is increasingly recognized that their sustainability depends on forming effective and long-lasting relationships or alliances with suppliers and other organisations which contribute to clients' experiences" (1998, p. 79). With respect to the latter type of arrangement, though, Laws and his associates also point out that, "An industry can be analyzed by the contribution of its members to the value chain, the management philosophy becomes one of collaboration, even between organisations which compete within the market" (1998, p. 79).
Strategic alliances have already been established to better coordinate services between so-called "eco-tourism" destinations and spa towns and beach resorts (Wahab & Cooper, 2001). By collaborating in mutually advantageous ways, these hospitality sector enterprises stand to benefit in numerous ways, including:
A. Preventing under-pricing and unfair price competition;
B. Sharing resources to mount more effective promotional campaigns;
C. Forcing tour operators to enter longer-term fairer agreements with destination suppliers;
D. Preventing tour operators playing one destination off against another for short-term gain; and,
E. Sharing market intelligence and examples of good practice in destination marketing and management (Wahab & Cooper, 2001, p. 180).
One of the main prerequisites to becoming truly effective partners in a strategic alliance in any industry, though, is adequate information technology infrastructure and expertise. In the Age of Information, more and more companies are relying on e-commerce platforms to develop such strategic relationships with other companies. Unfortunately, many companies -- particularly smaller enterprises -- may not be adequately prepared to launch and maintain a strategic alliance because of a lack of this information technology prerequisite. Companies competing in the hospitality sector, though, are sluggish to prepare for and taken action with respect to their Internet presence at their peril (Sims, 2002).
Fortunately, though, the solution to this lack of it expertise and infrastructure is relatively easy to overcome given top-level management direction, commitment and oversight (Sims, 2002). In fact, across the board, Innovations in technology have fundamentally affected how strategic alliances are forged in the hospitality sector. Companies competing in the hospitality industry have achieved significant success by creating so-called "e-marketplaces" which are private e-commerce industry-focused business-to-portal platforms that exploit the competitive advantages of all alliance partners through enhanced purchasing power and reduced logistical management costs (Sims, 2002). Time and again, such platforms have proven their effectiveness in taking advantage of the potential value-added aspects of strategic alliances (Sims, 2002).
Besides improving access to markets, a number of e-marketplaces have also integrated strategic alliances to facilitate their operations in the following ways:
A. Outsourcing non-core processes;
B. Partnering to enable technical integration to the marketplace (on-boarding); and/or,
C. Aligning with other e-marketplaces to offer complementary product offerings (Sims, 2002, p. 210).
Although there are benefits to be gained through each of these approaches, Sims suggests that the approach that carries the least risk is to outsource non-core processes. In this fashion, companies competing in the hospitality sector can devote more time to income-generating activities and concentrating on their core competencies and such arrangements can also constitute a strategic alliance. For example, according to Sims, "Transaction-heavy functions such as payroll processing and credit verification are commonly outsourced. on-boarding companies to the marketplace often requires partnering with a technology firm or consultancy to ensure rapid integration" (2002, p. 210). Strategic alliances that incorporate e-marketplaces can provide a number of valuable outcomes for the actors involved as well as their customers irrespective of the type of industry that is involved (Sims, 2002). What is important to note is that each such strategic alliance is capable of adding value and providing a competitive advantage for the actors that are involved by helping the partners focus the allocation of resources on core value propositions (Sims, 2002).
For instance, Sims (2002) cites the case of major hotel chains and sports-related industries that have used business-to-portal opportunities to improve their profitability and add value to their supply chain management. According to Sims (2002), e-marketplaces are a type of business-to-portal (B2P) e-commerce; e-marketplaces can be used by strategic alliance members to facilitate their own interactions as well as identifying potential new members that can contribute to the synergistic relationship. To date, some good examples of how such B2P e-marketplaces have been used in the hospitality industry include Marriott's alliance with Hilton, Hyatt and Club Car of America (Sims, 2002). The benefits that accrue to the use of B2P e-marketplaces include reduced trading costs, easier purchasing functions and a consolidated venue for selling goods; in some instances, these venues charge for each separate transaction while others generate revenues by assessing a subscription fee; in yet other manifestations, a combination of these approaches is used (Sims, 2002).
There are four primary e-marketplace models that are currently being used for these purposes as described below:
A. Catalog: The catalog form aggregates products or services from multiple points to provide low-cost distribution for sellers and one-stop shopping for buyers.
B. Auction: Auctions are a venue for sale of onetime items such as excess inventory.
C. Exchange: Exchanges provide a channel for the sale of commodities.
D. Community. A community focuses on a specific subset of buyers/sellers to provide content of particular interest to match the interests of particular groups of specialists to increase their involvement and leverage knowledge and improve products (Sims, 2002, p. 6).
Taken together, it is clear that strategic alliances represent one of the best ways for companies competing in the hospitality sector to gain a competitive advantage and remain sufficiently agile to respond to changes in the marketplace, but to achieve these desirable goals requires identifying appropriate strategic partners. As noted throughout, such strategic partners can be found in apparent places, but in unexpected areas as well, limited only by the imagination, creativity and wherewithal of the leadership team.
The time is ripe, though, to pursue such strategic alliances and first movers will stand to benefit in substantive ways. As Yu…