Wheelen Pertemuan 4 Chapter04 Dr DeMicco

CHAPTER 4

Environmental ScanningIdentifying Forces Driving Change

By Anil Bilgihan for Dr. DeMicco

Student Learning Objectives

On completion of this chapter, you will be able to;

Identify the environmental scanning process. Develop an appreciation to scan the business environment effectively. Describe the effective environmental scanning system. Identify the unique elements business domain. Identify and define the sources of information and give at least 1 hospitality

related example for each of them. Identify the timing information. Achieve a more practical understanding of forces that drive change in hospitality.

(Case Study) Comprehend the feedback and evaluation systems.

Objectives

Upon completion of this chapter, you will:

1. Understand the skills necessary to scan the business environment effectively.

2. Develop and maintain an effective environmental scanning system.

Key Concepts of the Chapter

• Environmental scanning

• The business domain

• Setting up a structure for scanning

• Determining information needs

• Determining information mediums

• Timing information

• Identifying sources of information

• Choosing scanning activities

• Analyzing and synthesizing information

• Information sharing

• Information feedback and evaluation systems

Objectives

1. Develop the skills necessary to scan the business environment effectively.

Please read pages 91 through 112 in the text book for further information.

Strategic Management Model

Industry

Remote

Task

Firm

Functional

Environmental Events

Long-term Objectives

Performance MeasureAction PlanResources NeededEvaluation TimetableResponsibilityAccountabilityRational

Short-term Objectives

Mission Statement

Nature of BusinessTarget CustomerProducts/ServicesStandard DesiredMeans to Accomplish Above

Evaluation

Competitive Methods

S2P2

P3 S3

P1 S1

Domain Definition

Geographic Market AreaSegmentPrimary CompetitionTarget Market

Strengths and Weakness Analysis

Functional AnalysisFinancial PositionStructural AnalysisPhysical AssetsLabor ForceRiskCompetitiveness

Scanning the Business Environment

Identifying the Forces Driving Change

• The goal of any environmental scanning process is to successfully identify the key forces driving change within the contextual environment of the organization.

• To achieve that goal, managers must set up personal and organizational scanning systems to be sure that the widest perceptional view of the environment is achieved. This scanning system should; Identify each force, the variables, and their interdependencies with other variables. Suggest cause-and-effect relationships. Determine the history and timing associated with the development of the forces. Assist the manager estimating the impact of forces driving change on the firm.


Identifying Events in the Environment

Industry Structure

Innovation / CM Life Cycle

Fads Major TrendInnovations Fact of Life

All firms in the sectorhave invested in the CM

Innovator/Entrepreneur creates a new CM

Leading firms adopt and invest in the new CM

Ideal Scanning Window

Establishing an Environmental Scanning System

• Establish domain definition

• Organizational structure issues

• Determine information needs – quantitative and qualitative

• Determine information mediums

• Assess timing of information

• Identify sources

• Choose scanning activities – regular and irregular

• Determine analysis and synthesis processes

• Determine information sharing

• Establish information feedback and evaluation systems

Domain Definition

• The task of domain definition is the first step in establishing an effective environmental scanning system.

• The domain of an organization refers to the context in which it exists and functions.

Please read page 94 in the text book for further information.

Criteria of the Domain Definition

Organizational Structure Issues

• Who participates in the process, what resources

are allocated to this endeavor, and how the

information is processed and used.

• Scanning the environment must fit into that

structure because resources

must be allocated to this

important management activity.


Determining Information Needs

• Determining the information needs of the firm can begin only after the process of defining the domain the firm must complete in is completed.

• Once established, the information will generally fall into four categories;◦ Quantitative ◦ Qualitative◦ Personal◦ Non-personal

Examples of Quantitative Information

Determining the Information Medium

• Most common medium is face-to-face personal interaction.

• The written medium, both personal and impersonal, continues to be an important one.

• The telecommunication revolution will no doubt bring about rapid changes in the mediums used.


New Communication in the Information Age

Assessing Timing of Information

• The phase timing is everything has a great deal of validity in the world of strategy.

• Bad timing can be avoided most often when firms have effective scanning systems and the organization has structured itself to improve the processing of information and its timing.

• The timing also reflects how managers study the emerging forces that are developing.


Body of Knowledge in the Hospitality Industry

Identifying Sources of Information

• The primary concern of the manager in selecting the sources of information are validity and reliability.

• Validity refers to fact that the information accurately represents and describes the relationships that are necessary to make important strategic decisions.

• Reliability refers to the need for accuracy and consistency over time.


Common Information Sources Available to the Hospitality Manager

Choosing Scanning Activities

• Scanning is an activity that does not lend itself to neatly defined processes or timetables.

• It cannot be done effectively without strong cognitive, experimental, and perceptional skills.


Concept Map of Environmental Event


Matrix Analysis

• Today’s manager must be able to understand the present relationships and regulators.

• To do this, the use of matrices to assess relationships becomes extremely useful.

• Matrix analysis help to create greater understanding of the present and emerging body of knowledge.


Information-Sharing Feedback and Evaluations Systems


A Continuous Process of Scanning is Necessary

• A good scanning system will never be able to remove all the uncertainty from a decision.

• Scanning should be done on a continuous basis levels of executives who contribute substantively to the strategic management process.


Summary of the Chapter

• The chapter provides an overview of tools necessary for proper environmental scanning.

• It begins with the importance of identifying forces that drive change and how to establish a domain for analysis purposes.

• It then provides insight into the steps in the effective assessment of key forces and opportunities.

• Shows the importance of sharing derived conclusions throughout the organization.

Readings for the Chapter

• http://www.widenarrow.com/begrepp__bi-cykeln.html (interactive webpage)

• Literature in strategic management in the hospitality industry, Michael D. Olsen

• CEO Perspectives on Scanning the Global Hotel Business Environment, Michael D. Olsen, Bvsan Murthy and Richard Teare

http://www.widenarrow.com/begrepp__bi-cykeln.html

http://www.widenarrow.com/begrepp__bi-cykeln.html

Case Study

• Please read Case Study: ‘Technology as a Competitive Method: The Case of InterContinental Hotels’ (page 119-125).

• Please answer the discussion questions at the end of the Case Study.

Case Study Answers

InterContinental Hotels

HRIM 603 Strategic Hospitality Management Case Study #4 Technology as a Competitive Method: The Case of InterContinental Hotels F.Anil Bilgihan

1) Technology, broadly, is a tool or set of tools aimed at making some aspect of life better, easier, or more efficient. Science and technology have great potential to improve lives in all communities around the world. Technology is evolving at such a rapid pace it's hard to tell what will happen in six months. It's hard to predict what products will make it to the market and which will take the crown and end up as everybody's favorite toy, business companion or home entertainment device. Every technology has changed our lives, some of them in manner more aggressive than other. It’s hard to point out to a specific technology and makes it responsible for the major changes in a life of person, because every one of us may be influenced by other things. Businesses are using technology to gain industry advantage in many ways. “The successful companies of the next decade will be the ones

that use digital tools to reinvent the way they work. These companies will make decisions quickly, act efficiently, and direc tly touch their customers in positive ways.” Bill Gates.

2) InterContinental Hotels used the technology as one of their competitive methods to gain industry advantage. For instance AT&T announced that it has deployed an Internet Protocol Virtual Private Network (IP VPN) for InterContinental Hotels Group and its managed Candlewood Suites Hotel portfolio, the first of its kind in the hospitality industry. The AT&T solution leverages the VPN and Multi-Protocol Label Switching (MPLS) technology to provide a multi-faceted and highly reliable – but low cost – network. MPLS prioritizes data traffic between the hotel and the property management application residing at AT&T’s IDC, ensuring application performance and uninterrupted communications. It is a very unique technology for hospitality industry. Their success is behind their corporate decisions of how to invest in technology. Their company strategy was based on the leadership of its CEO, Brian Langton, who believed in the need to integrate key marketing, reservations and operating systems into one strong technology based system that would lead the industry as Holiday Inn had during the 1960s. He prophesied the future of technology, which was e-commerce, and integrated necessary technologic developments to his company. The company applied the strategic plan. And with the help of that competitive method, company gained considerable advantage over others in the industry.

Case Study Answers

Their success is behind their corporate decisions of how to invest in technology. Their company strategy was based on the leadership of its CEO, Brian Langton, who believed in the need to integrate key marketing, reservations and operating systems into one strong technology based system that would lead the industry as Holiday Inn had during the 1960s. He prophesied the future of technology, which was e-commerce, and integrated necessary technologic developments to his company. The company applied the strategic plan. And with the help of that competitive method, company gained considerable advantage over others in the industry.

3) Distinguishing among competitors and gaining more market share by using technology as competitive methods have challenges. It is very important to scan the environment in this situation also. The key to gain more market share by using technology is to have the right choice at the right time. Everyday technology is developing so fast and these developments can be adapted to hospitality industry as well. For example when VOIP is developed, it is very important to use this technology in your hotel first. You need to look the environment and then adopt the technology where it fits in your industry. However, those upgrades seem to be endless as the development of technology is not likely to stop. On the other hand, hospitality organizations allocate a budget for technology every year. That budget is often narrow; most of the hospitality organizations do not have enough economical power to buy all of the available technologies. The point here is to decide which technology to integrate with, by scanning the environment and foreseeing which technology will be demanded most by the customers. Strategic alignment is the key. It should support the companies’ mission.

4) As we discussed in the third question, strategic alignment plays the key role. Companies should select the right technology at the right time and this technology should be parallel to company strategy. For example, McDonalds used free Wi-Fi at their restaurants but it failed, because it didn’t fit into company strategy which was ‘fast’. Table turnovers increased. Later they put time limit for Wi-Fi, and then it became successful. Amount of the budget allocated to be spent in technological development is another important issue.

5) The investments that IHG has done in technology were very successful. The first reason was, they realized the need in e-commerce and invested enough money for the upgrade. The second reason was that they realized this need at the right time and put it into process right away. And the third reason was their understanding that the developments they have done were not a technology game but an issue of customer service fulfillment. In 2000, selection of Web-enabled PMS was a unique strategy.

6) Although main goal of IHG was customer satisfaction, those two hotels stand as prototypes. They were used as our “experimental guestroom” in University of Delaware to show what can be done with the latest technology. So, it can be said that there are differences between the corporation and those two hotels. That does not mean other brands of the corporation lacks technology, but it would be useful to keep in mind that those two hotels are not one of those Hampton Inns or Embassy Suites which are also brands of the corporation.

7) Any information related to other companies technological status would be helpful in determining the overall demand for the technology investments IHG has made over the years. This keeps IHG in competition with other companies. Moreover, customer feedbacks and data mining methods can be used as well.

8) Academic researches, the media (technology magazines, internet), technology conferences like HITEC, and the researches that big companies made and, surveys can be useful in tracking developments in technology for the travel industry.

Figures for Case Study

Figure 1


Figure 2 IT Planning Process


Figure 3


Figure 4

Chapter Questions

• Which is NOT a function of the scanning system?

◦ Identify each force, the variables, and their interdependencies with other variables

◦ Suggest cause and effect relationships◦ Determine resource allocation◦ Determine the history and timing of the

development of the forces◦ Assist in estimating the impact of forces driving

change

Chapter Questions (cont’d)

• The concept of industry structure refers to

◦ the degree of complexity in the market place.◦ the degree of uncertainty in the market place.◦ another way to define the industry domain.◦ the degree of concentration of suppliers.◦ the degree of dispersion of customers.


• In understanding industry structure, the manager must be able to assess the degree of interdependencies that exist in the domain. This statement refers to

◦ the firm's ability to lead competitors in creating new products and services.◦ the investment in strategic alliances with other firms.◦ the degree to which the firm is dependent upon its board of directors.◦ the manager's ability to determine the cause and effect relationships in the

business domain.◦ the manager's ability to utilize such management tools as yield

management.


• The term body of knowledge refers to

◦ the sum total of the firm's knowledge regarding its competitive method.

◦ the ability of the firm to gain competitive advantage because it possesses more knowledge.

◦ the sum total of all literature that has been written on a particular topic.

◦ the consultants' reports on industry structure.◦ none of the above


• Which is not a criterion for evaluating the quality of information sources?

◦ The influence it has on strategic thinking◦ The number of sources◦ Timing◦ Validity◦ Reliability


• Which company led the hotel industry in utilizing technology in the1980s?

◦ Holiday Inn Worldwide◦ Marriott◦ Hilton◦ Starwood


• When discussing the structure of an environmental scanning system, one must consider the following issue(s):

◦ who should participate in the process.◦ what resources should be allocated.◦ how the information is being processed and used.◦ all of the above◦ none of the above


• What skill is not required for the director of competitive intelligence or development analysis?

◦ Analytical skills◦ Marketing skills◦ Communication skills◦ Self-management capability


• Which is not considered a category of information?

◦ Quantitative◦ Qualitative◦ Personal and personal◦ Signals and signs


• Which field is not mentioned in the sampling of disciplines and fields of study contributing to the body of knowledge in the hospitality industry?

◦ Nutrition◦ Sociology◦ Safety and security◦ Accounting


• Which mode of scanning activities would most managers fit into now?

◦ Proactive◦ Routine◦ Reactive◦ Null


• Content analysis is a tool to help managers interpret the large amount of information about the environment. In using content analysis, which skills are not required for applying the content analysis process?

◦ Comprehension skills◦ Analytical skills◦ Synthesizing skills◦ Application skills◦ Extrapolation skills


• Environmental scanning activities should be carried out:

◦ annually.◦ bi-annually.◦ quarterly.◦ continuously.


• Concept mapping is another tool to help interpret the large amount of data that a manager must review in analyzing the environment. It is a useful tool to help managers:

◦ determine the frequency and volume of ideas that have emerged from the content analysis process.

◦ assess the relationship among various themes identified in the content analysis process.

◦ rank the most important themes.◦ identify relationships among various themes.◦ all of the above


• Matrices are excellent ways of understanding the relationship of:

◦ the task environment with the remote environment.◦ the task environment with the resources of the firm.◦ the firm environment with the multinational

environment.◦ the task environment with the resources of the firm;

the firm environment with the multinational environment.◦ all of the above


• Scanning is best accomplished by

◦ a team of individuals working independently on policy oriented matters.

◦ a team of individuals working together on strategic issues.◦ information shared equally among all the firm's employees.◦ information sharing based on the total body of knowledge on

the subject.◦ a team of individuals working together on strategic issues;

information sharing based on the total body of knowledge on the subject.

Student Learning Objectives

On completion of this chapter, you will be able to;

Identify the environmental scanning process. Develop an appreciation to scan the business environment effectively. Describe the effective environmental scanning system. Identify the unique elements business domain. Identify and define the sources of information and give at least 1 hospitality

related example for each of them. Identify the timing information. Achieve a more practical understanding of forces that drive change in hospitality.

(Case Study) Comprehend the feedback and evaluation systems.

Wheelen Pertemuan 4 Chapter04 Dr DeMicco

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