Chun Wa Lee (Gary)
Chapter 5 Case Study on Holiday Inns
Q1) Why did Holiday Inn’s business model and strategies change over time? It was primarily due to the changing needs of the consumers in the market. According to the first fundamental principles in strategic positioning pioneered by Porter, Holiday Inn had successfully started with a right goal and delivers customers a set of benefits different from those offered by competitors, through offering specific average-end of motels during the 1960s. Although Holiday Inn had successfully brought competitive advantages through cost strategy, in 1970s, behaviors of travelers were starting to get diverse. Some started to be willing to pay more for better service and luxurious quality. Some wanted even a cheaper motel. Holiday Inn’s strategy was initially a focus strategy concentrating on a specific group of travelers, those who are willing to forego some services and quality for the sake of saving a little money. However, Holiday Inn failed to adapt rapidly to the changes occurring within the market. Although its niche market is not necessarily small, its rivals, such as Motel 6 and Days Inn introduced types of low-cost motels in order to capture low-priced end customers and stimulate the demand for hotels rooms. Furthermore, companies like Hyatt focuses on the top end of the market with high quality and serviced hotel. As a result, the adverse demand affected the profit Holiday Inn, a focuser on middle-priced hotel room market dramatically. Therefore, in the 1980s, the company fought back by differentiating to offer a wide range of hotels, from the inexpensive Hampton Inn to the luxury crown plazas. Holiday Inns switched from focus strategy to differentiation strategy where it focuses on customer segmentation and meet the needs of as much kinds of customers as possible. This move was successful and brought Holiday Inn a high profitability. However, revenues fell again...
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