DE MONTFORT UNIVERSITY

CW2- Strategic Choices available to De Vere.

For the attention of Nikki Phillips.

Strategic Marketing Management- MARK 3015. Lillie Mae Underwood P10537538 3/6/2013

Contents
1.0 Introduction................................................................................................................................ 3 2.0 A Partnership Strategy for De Vere ............................................................................................ 3 2.1 External Partners ....................................................................................................................... 3 2.11 Celebrity Chef- Hugh Fearnley-Whittingstall. .................................................................. 4 2.12 No1 Boot Camp ................................................................................................................... 4 2.13 Sarah Haywood- Wedding Planner .................................................................................. 5 2.2 Rationale for De Vere forming a strategic relationship with Sarah Haywood .................. 5 2.21 Value-enhancing Opportunities ......................................................................................... 5 2.22 Skills and Resource Gaps .................................................................................................. 6 3.0 Industry Position Strategic Options............................................................................................. 6 3.01 De Veres Strategic Option 1: Flanker Strategy- Flank Attack ......................................... 6 3.02 De Veres Strategic Option 2 :Confrontation Strategy- Frontal ........................................ 7 3.0 Competitor Reaction ..................................................................................................................... 8 3.1 Marriotts Reaction to De Vere using a Flanker Strategy .................................................... 8 3.2 Marriotts Reaction to De Vere using a Confrontation Strategy ......................................... 9 3.3 Hiltons Reaction to De Vere using a Confrontation Strategy ............................................. 9 3.4 Porters Value Chain ............................................................................................................... 10 4.0 Market Downturn. ........................................................................................................................ 10 4.01 Maintenance Strategy for the Declining Market. .............................................................. 11 4.02 Niche Strategy for the Declining Market. ........................................................................... 12 5.0 Conclusion .................................................................................................................................... 13 6.0 Strategic options for Partnerships ............................................................................................. 14 7.0 Strategic Choices for share leaders in Growth Markets ................................................................. 15 8.0 Possible Competitor Reactions ....................................................................................................... 16 8.1 Competitive Strategy Matrix ....................................................................................................... 16 8.2 Porters Value Chain.................................................................................................................... 17 9.0 Product life cycle of De Vere ........................................................................................................... 17

1.0 Introduction This report provides an overview of the strategies that De Vere should adopt in order to maintain a good market position. Each Section of the report has an appropriate framework or a model for a partnership strategy, industry position strategy, competitors reaction to the industry position strategy and market downturn. All these strategies need to be maintained and managed in order for De Vere to stay healthy and profitable within the market.

2.0 A Partnership Strategy for De Vere There are a number of reasons why De Vere may form strategic relationships among its suppliers, producers, distribution channels organizations and customers These may include: value enhancing opportunities for both parties involved, to create a competitive strategy by using others physical or knowledgeable resources in order to break into new markets, to fill skills and resources gaps that may occur when entering a similar market but in a different geographical location, for example and finally organizations may form strategic relationships because of environmental complexities; the company may need to have someone who knows that particular environment very well in order to achieve success and growth in new markets (Cravens and Piercy, 2009). 2.1 External Partners Going into partnership with an external partner would give De Vere authenticity to their growth strategy creating trust and confidence from the consumer. A strategic alliance between two companies is an arrangement to cooperate to achieve one or more common strategic objectives (Cravens and Piercy, 2009). There are three

different companies that De Vere could create an alliance with, each providing benefits for both parties and creating different rationale for the alliance. 2.11 Celebrity Chef- Hugh Fearnley-Whittingstall. Hotel restaurants have strong associations with special-occasion dining (Mintel, 2012) and if De Veres restaurant menus were written by Hugh Fearnley-Whittingstall then this could boost their diner numbers and create desirability about the restaurants. This would be hugely beneficial as this market has been one of the worst affected by the recession (Mintel, 2009). However for the purpose of this report De Vere should choose a different strategic relationship in order to reach new markets. 2.12 No1 Boot Camp This is a suggested alliance for De Vere to use but for this report it is not the primary strategic partnership. No1 Boot Camp is currently based in Norfolk, Ibiza and Marbella providing a number of residential packages where participants take part in army-style fitness regimes, nutritional workshops and beauty treatments to l ose weight for a special occasion or to change their lifestyles. From 2007-10 there has been a steady increase of obesity from with mens BMI increasing 2.6% and women are rising by 1.7% (Mintel, 2012). With the use of celebrity success stories and press reviews, No1 Boot Camp could see selected De Vere Villages full to capacity; on the other hand it would provide the Boot Camp with a regular long-term contract and allow them to move into different regions in the UK.

2.13 Sarah Haywood- Wedding Planner Sarah Haywood plans elegant, stylish, glamorous and fun celebrations. We are the Luxury Wedding Planners for savvy, sophisticated couples who demand first class service and a world-class event (Haywood, 2013). This could allow De Vere to host these wedding events and use her name to promote their wedding service. This would give De Vere Weddings desirability for the customer, hopefully boosting bookings and the partnership would provide Sarah Haywood with large geographical coverage for potential clients as De Vere currently offers 24 wedding locations. This is the strategic alliance that De Vere should follow as both parties will benefit from the partnership. They will both make a commitment to actively participate on a common project that is in strategic scope (Cravens and Piercy, 2009). 2.2 Rationale for De Vere forming a strategic relationship with Sarah Haywood The two main rationale for De Vere to create a strategic alliance with Sarah Haywood are skills and resource gaps and for value-enhancing opportunities. Strategic alliances are a way for companies with complementary strengths to enter a given market more effectively and efficiently than either alliance partner could manage alone (Pietras and Stormer, 2001). De Vere should develop their plans to increase their share in the wedding market because after 40 years of decline, the number of weddings has risen by 3.7 per cent in a year (Doughty, 2012). By working in partnership with Sarah Haywood, De Vere has the expertise and services greater than any current or potential competitor (Mullins and Walker, 2013). 2.21 Value-enhancing Opportunities By creating a partnership De Vere and Sarah Haywood can couple their competencies to offer superior customer value (Cravens and Piercy, 2009). Forming a strategic alliance with Sarah Haywood will enable De Vere to enhance the

perceived value that their customers receive as their wedding will be an exclusive Sarah Haywood event and her name a reputation will add augmented value to their experience of De Vere and the services they provide. 2.22 Skills and Resource Gaps Currently De Vere offers a wedding service but to ensure a value enhancing experience for the customers they need to fill the skills and resource gaps that may be hindering their success in terms of their wedding services reputation and extra revenue. These marketing agreements expand the traditional channel of distribution coverage and gain the advantage of market knowledge (Cravens and Piercy, 2009); by providing an exclusive wedding service using Sarah Haywoods skills and expertise will allow De Vere to have greater access to the wedding market, conversely it will provide Sarah Haywood a larger target audience covering a wide geographic area in England, thus giving her greater exposure and expanding her impressive portfolio. ).

3.0 Industry Position Strategic Options A business might take a variety of marketing actions to maintain a leading share position in a growing market, different marketing actions may be needed to achieve each objective (Mullins and Walker, 2013). 3.01 De Veres Strategic Option 1: Flank Attack De Vere has a mid-market positioning strategy and similar to its direct competitors Hilton and Marriott, it offers line extensions at different price points for their customers. Although De Vere is not a market leader they have a competitor advantage as they offer De Vere Village, a higher quality holiday-lodge type of accommodation. A third of UK adults are believed to have taken an activity holiday

and that 50% to be interested in doing so in future. Walking, hiking or rambling holidays are most popular in both current and future interest terms Focusing on the outdoor sports market De Vere could link their Village complexes to country estates; the non-competitive, social and physically low-impact nature of these activities gives them strong appeal to third age consumers aged 45-64, a group that is expected to be 15% larger in 2010 than it was in 2000 (Mintel, 2006). This aging market is set to increase as the population is growing older in the UK, so this seems a good market to move into as it has longevity. Using a flanker strategy in a proactive manner, offering a selection of accommodation types in a number of different locations can protect against loss of specific segments of current customers. De Vere developed a second entry that covers weaknesses from their original offerings such as conferencing (Mullins and Walker, 2013). This strategy will be well suited to De Vere offering countryside sports to the affluent, aging population. 3.02 De Veres Strategic Option 2 : Frontal Attack The UK hotel industry is worth an estimated 14.59 billion in 2011 (Keynote, 2012), it is little surprise that the industry is highly competitive as the market is saturated. De Vere could use a confrontation strategy in order to try and gain a market share from its direct competitors Marriott and Hilton hotels overseas. Both competitors offer luxury accommodation in exotic destinations; their UK customers trust the brand so perceive the service quality to be consistent around the world. This is something De Vere could challenge directly. De could focus on the long-haul holidaymakers tend to be either young singles, better-off families or empty nester couples. Holidays outside Europe with a relatively

strong appeal to those who are separated, divorced or widowed are cultural/historical sightseeing holidays (Mintel, 2012). The Hotel industries are also forecast to grow according to Mintel (2012d). The likes of development in De Vere hotels and the academy they are running for new employees make them incredibly attractive organisation (Emerald, 2011). Therefore De Vere are categorised within the growth section of the product life cycle. To continue their growth De Vere should develop a confrontation strategy. By actively planning for this they will stay one step ahead of their competitors as a quarter of companys do not plan for this type of strategy (Mullins and Walker, 2013 There is however greater risk using a frontal as De Vere would need to invest heavily into creating this strategy to ensure that they gained a dominant position in order to secure their place a market leader for UK hotels.

3.0 Competitor Reaction To ensure overall success of a business the marketing plan must be connected to the firms business plan including organisational-level mission, vision, goals, objectives and strategies (Marshall and Johnston, 2011). 3.1 Marriotts Reaction to De Vere using a Flanker Strategy Focusing on Porters (1988) Marriott could develop a differentiation strategy where they compete with De Vere on the basis of providing a unique service with features that customers value, perceive as different, and for which they are willing to pay a premium for (Porter, 1988). Offering their target market of male and females in socioeconomic groups ABC1s aged between 40-64 (Mintel, 2012) Marriott can concentrate their efforts on their international hotels and providing an exclusive service for this affluent target group. This way they may overtake De Vere and re-

establish themselves as a market leader in luxury hotel accommodation providing exclusive Country Club memberships. 3.2 Marriotts Reaction to De Vere using a Frontal Attack Strategy Marriott hotels is the established market leader and it has a high level of preference and loyalty among customers and the trade, therefore their reaction to De Vere using a confrontational strategy is to wait and take no initial action and wait for De Vere to fail or to make very slow progress in the wedding market using this strategy. Marriott may use a cost leadership approach as one of their competitive strategic options. Marriott has the resources and the revenues to pause their strategy until De Vere has exhausted their capital and resources for their growth strategy in the new market; when this has occurred Marriot can use a cost leadership strategy. The company would then endeavour to have the lowest costs in the industry and produce services for a broad customer base. For this strategy the key element is to focus on costs not prices, therefore they may not deliver a service that under cuts De Vere but their profit margins can be increased by controlling their costs (Porter, 1988). 3.3 Hiltons Reaction to De Vere using a Confrontation Strategy Hilton could implement a focused differentiation strategy, to target underdeveloped segments in the market. The strategy concentrates on a serving a specific market niche (Porter, 1988). For example: They will try to satisfy needs unmet in certain niche segments by De Vere such as 2nd marriage couples. They understand that their needs and wants will be different to those of whom it is their first marriage. Their age, socioeconomic status, behavioural and lifestyle traits will differ hugely as they will be targeting ABC1 socioeconomic groups in the age range on 40-64 (Mintel, 2012). This target market has a large amount of disposable income therefore they

can save much more towards a wedding; therefore their wants will differ as their average spend will be greater meaning Hilton can offer a much more suitable product and service to this market. 3.4 Porters Value Chain For the purpose of Marriotts reaction to De Vere using a confrontational strategy or a flanker strategy this report will focus on the support activity of technology development and the primary activity of service in Porters value chain. The value chain serves as a means for Marriott to identify ways to create, communicate, and clearly deliver more customer value within their firm (Marshall and Johnston, 2011). The support activity of technology development can enhance the service that they provide. Marriott can embrace technology usage for the benefit of customers. Focusing on the use of social media Marriott can create communications channels for both B2C and B2B customers. It will allow them to produce an online tone of voice, reflecting the quality service they provide. The service that they provide can be extended beyond the hotels. Having a presence in their customers everyday lives will increase the customer perception of them in a positive manner. However it is important to remember that it only takes one weak link in the value chain and the whole process of cultivating satisfied customers can be circumvented (Marshall and Johnston, 2011).

4.0 Market Downturn. The market has reached its capacity and the market for De Vere had dropped by 80%. This is because the cost of providing luxury accommodation in the UK has risen and the demand has shrunk. Their target market of ABC1s aged 40 -64 are taking their short breaks in mainland Europe because the exchange rate is

favourable and theyre looking to escape their UK lifestyle for a long weekend of luxury (Mintel, 2012) short city breaks As a product starts to decline, managers face the critical question of whether to divest or liquidate the business. Unfortunately, firms sometimes support dying products too long at the expense of current profitability and the aggressive pursuit of future breadwinners (Mullins and Walker, 2013). 4.01 Maintenance Strategy for the Declining Market. There are a number of strategies that De Vere could implement for the declining market. Harvesting would allow them to maximise short term cash flow, becoming a profitable survivor would increase their share of the declining market with an eye on future profits, implementing a niche strategy would see them focusing on strengthening their position in relatively substantial segments. However for this rapid market decline a maintenance strategy for De Vere would be the most suitable. It will allow them to maintain share in the short term as the market declines, even if margins can be sacrificed (Mullins and Walker, 2013). However the characteristics of this market are hard to predict because of the macro environment such as the economic climate. Moody's (a Global Credit Ratings Agency) said it had acted to downgrade Britain for the first time because of continuing weakness in the UK's medium-term growth outlook, the risk that the Government will fail to hit its targets for reducing the deficit and the UK's high and rising debt burden (Hennessy, 2013). This could seriously damage UK consumer perception as they may feel the need to halt their spending on luxury things such as weekend breaks.

4.02 Niche Strategy for the Declining Market. However it is important to remember that not all markets decline in the same way or at the same speed (Mullins and Walker, 2013). There may be niche pockets in the hotel market that may be in the growth stage of the product life cycle. If De Vere follows this strategy it would place them in a strong competitive position as they could predict future market entrants. As aforementioned the rate of marriages are set to increase, the market for this has increased since 2006 because of the governments legislation on civil partnerships which are a legal relationship exclusively for same-sex couples, distinct from marriage (BBC, 2013). If De Vere can see that the declining trend for the overall market is set to continue, then they should switch to a different strategy that will provide better cash flows and return on investment over the markets remaining life.

5.0 Conclusion

6.0 Strategic options for Partnerships

SOURCE: Cravens, D and Piercy, N. (2009). Strategic Relationships. In: Strategic Marketing. 9th ed. London: McGraw-Hill. pp 338.

No1 Boot Camp. 5.32m member of a health and fitness club in 2012 (Mintel, 2012). Steady increase of obesity from 2007-10. Mens BMI increasing 2.6% and womens rising by 1.7% (Mintel, 2012). Retailers focus on sportswear rather than equipment as it takes up too much retail space (Keynote, 2012). Consumers want to get fit and see results quickly (Keynote, 2012).

Sarah Haywood- Wedding Planner. Overall decline in the number of singletons, younger people are more likely to be single, which supports the trend for younger generations to wait until they are older before marrying (Keynote, 2012). In 2010 there were 277,736 marriages in the UK (Keynote, 2012). A steady increase in civil partnerships from 41 in 2007 and 509 in 2010 (Keynote, 2012). 1

Celebrity Chef- Hugh Fearnley-Whittingstall. Hotel catering sales are difficult to establish, this market has been one of the worst affected by the recession (Mintel, 2009). Hotel restaurants have strong associations with special-occasion dining (Mintel, 2012). Some argue that we should shop locally and eat only food that is in season, to avoid excess `food miles' (Mintel, 2009); something that Hugh Fearnley-Whittingstall is a great advocate of. 2

SOURCE: Cravens, D and Piercy, N. (2009). Strategic Relationships. In: Strategic Marketing. 9th ed. 4 London: McGraw-Hill. pp 338.

No1 Boot Camp. 3 (4) Outdoor health and fitness is not something that Sarah Haywood- Wedding De Vere currently provides. Planner. (4) No1 Boot Camp could (4) Her skills and expertise could reach new geographical boost De Veres reputation for their markets in the UK by weddings. partnering with De Vere. (1) Having an industry expert with an (1) Offering customer value impressive portfolio will enhance the with stylish accommodation desirability of De Veres wedding offered by De Vere, celebrity services. success stories from the (4) Her skills and expertise will give boot camp and making it De Vere a competitor advantage available in different over their close competitors Marriott. locations around the UK.

Celebrity Chef- Hugh FearnleyWhittingstall. (4) HFW could provide interesting dishes with his skills that would attract more diners (1) Having his name on the menu would enhance the value for the diner as it would give the perception of quality.

7.0 Strategic Choices for share leaders in Growth Markets

Flanker Strategy- Reactive. De Vere could use a flanker strategy because: 1. By offering exclusive services they could attract new customers with specific needs or purchase criteria. 2. Their main competitor Marriott, has sufficient resources and competencies to effectively implement a different strategy. 3. De Veres current services are perceived as weak by a segment of potential/current customers. (Mullins and Walker, 2013).

Confrontation- Proactive. De Vere could also use a confrontation strategy. This would mean: 1. They could improve the ability to win new customers who might have otherwise been attracted to Marriotts offering. 2. Relatively homogenous market in respect to customers needs.. 3. De Vere suffers low awareness, preference, and loyalty from its potential customers. (Mullins and Walker, 2013).

8.0 Possible Competitor Reactions

Strategic option 1: Flanker Competitor 1: Marriott They could decide to jump De Veres flanker strategy and focuses on building their market share outside of the UK. This could potentially earn them more revenue and establish them as the market leader. Then by the time De Vere have created a strategy to enter the market there will be no segment for them to target. Marriott decides not to attack their strategy. Instead they wait until De Vere publishes their annual accounts to then gauge how successful their attempts were. Then Marriott react by entering the market with a similar partnership and then gain position as market leader. Competitor 2: Hilton No competitor reaction

Strategic option 2: Confrontation

They use an encirclement tactic to try and gain a small share of the market that De Vere has gained. They will try to satisfy need unmet in certain segments by De Vere such as 2nd marriage couples. They have the resources to do this however their segment they serve will be smaller.

8.1 Competitive Strategy Matrix

Marriott would try to have the lowest costs in the industry and produce services for a broad customer base. For this strategy the key element is to focus on costs not prices, therefore they may not deliver a service that under cuts De Vere but their profit margins can be increased by controlling their costs (Porter, 1988). Marriott could develop a differentiation strategy where they compete with De Vere on the basis of providing a unique service with features that customers value, perceive as different, and for which they are willing to pay a premium for (Porter, 1988).

Hilton will try to satisfy needs unmet in certain niche segments by De nd Vere such as 2 marriage couples. They understand that their needs and wants will be different to those of whom it is their first marriage.

8.2 Porters Value Chain

Marriott can embrace technology usage for the benefit of customers. Focusing on the use of social media Marriott can create communications channels for both B2C and B2B customers. It will allow them to produce an online tone of voice, reflecting the quality service they provide.

How Marriott supports customers during and after the sale. The service can be enhanced by the ue of technology through social media. The service that they provide can be extended beyond the hotels. Having a presence in their customers everyday lives will increase the customer perception of them in a positive manner.

9.0 Product life cycle of De Vere

The market has reached its capacity and the market for De Vere had dropped by 80%. This is because the cost of providing luxury accommodation in the UK has risen and the demand has shrunk. Their target market of ABC1s aged 40-64 are taking their short breaks in mainland Europe because the exchange rate is favourable and theyre looking to escape their UK lifestyle for a long weekend of luxury.

Revenue/Prof it

Introduction

Growth

Time

Maturity

Decline

http://www.bbc.co.uk/news/uk-18407568 http://www.telegraph.co.uk/news/politics/georgeosborne/9889605/George-Osborne-no-let-up-inplan-to-cut-deficit-after-AAA-downgrade.html Read more: http://www.dailymail.co.uk/news/article-2108188/Resurgence-marriage-After-officialreport-showed-married-couples-happiest-weddings-increase.html#ixzz2MU3iNIBu Pietras, T., & Stormer, C. (2001, Making strategic alliances work. Business and Economic Review, 47, 9-12. Retrieved from http://search.proquest.com/docview/209592406?accountid=10472 Emerald (2011) (2011) The De Vere Academy trains stars of tomorrow: Hotel group provides young people with hospitality-related apprenticeships: Human Resource Management International Digest, Vol. 19 Iss: 4 pp. 16 17 Mintel (2012d) Hotels UK October 2012: Mintel marketing report. October 2012. London: Mintel International Mintel Health and Fitness Clubs - UK - November 2012 Keynote Sports Equipment Market Report 2012 Source: Mid-2010 Population Estimates by Marital Status, National Statistics website Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queens Printer for Scotland) Keynote Singles Market, Market Assessment 2012 Mintel Hotel Catering - UK - October 2009 Mintel Eating Out Review - UK - July 2012 Keynote Cooking & Eating Habits Market Assessment 2009

Long-haul Holidays - UK - March 2012 Sporting Activities in the Great Outdoors - UK - January 2006