Importance of Choice in the Strategy Formulation

Importance of Choice in the scheme FormulationIn recent years, international hospitality exertion, exchangeable any early(a) industry, has been affected by the effects of globalization, the study technology revolution, and the consumer demand. Hence, the targets in touristry ache suffered con lookrable alterations and forced hospitality overseers to re- examine their decision-making envisions. Hospitality is difficult to manage and assess as long as it deals with a new aw atomic number 18ness and addresses to new demands. Its level can be given through the customer feedback. For tourism to be con lookred an industry it must have a crossroadion process and a generic product mutually and inseparably related. The purpose of this chapter is to focus oversight upon the theoretic aspects regarding the strategic pickaxs in this field, the way they are elaborated, implemented, used, and put into practice. To be more precise, the chapter looks at the strategic excerpts used be Ro mania and Bulgaria on the sea side tourism.2.2. strategic CHOICE2.2.1. IMPORTANCE OF CHOICE IN THE STRATEGY FORMULATION PROCESSRanking the elements in a dodging formulation process, strategic choice comes third. When there are no choices, there can be little value in contemplateing strategy at all. To be better understood, a rendering of strategy is infallible to mention. According to Michael Baker, Marketing strategy is a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing gross revenue and achieving a sustainable competitive favor.(See Baker, MICHAEL, The strategical Marketing Plan Audit, 2008, ISBN,p.3 ). According to the above definition, any strategy must have a pre established plan which establishes goals, identifies alternatives, and makes use of intuition and experience. In other words, it includes basic activities on a long term, as well as objectives. In general, small companies are bound by their resources, whereas large ones find it difficult to change quickly. Even when managers seem free to make strategic choices, the results whitethorn depend in the same pass judgment on chance and opportunity, as on the managers deliberate choices. It is proven fact that events, and especially unexpected events, can play a major part in determining results. Any process of choice could be divided into four stepsIdentifying creamsEvaluating the options against preference criteriaSelecting the best optionTaking actionIn practice, it may be difficult to identify all viable actions at the same time. Sometimes, unexpected events create new opportunities, destroy the foreseen ones, or alter the balance of advantage among opportunities. For these reasons, good strategic choices have to be challenging enough and achievable. And here comes analysis, judgment and skills, elements which make the difference in defining strategies.2.2.2 STRUCTURE OF STRATEGIC CHOICEThe foreshadow 1.1 show s how the trine logical elements of strategy formulation process interact. The shaded background is a reminder of the importance of context in determining the aspects to be solved by strategic choice.Figure 1.2 expands the detail so that to illustrate the significance of the overlaps. The common ground between any two circles is of some(prenominal) pursuance, precisely it is however where all three circles overlap that viable options exist. Thus, the chosen strategy is a viable option because it is here where intent and assessment fully meet. Of interest are also the areas where any two circles overlap. So, the criteria for choice derive from intent and assessment.In practice, the process for choosing a strategy may be structured like in Figure 1.3. It starts by identifying available options. Any chosen strategy will have to answer the questions what , how , why , who , and when in order to provide answers to for each one of these questions. There are likely to be different k inds of options. Figure 1.3 shows three types products/ services / commercializes, resources/ capabilities, and methods of progress. They are typical but not necessarily exhaustive.2.2.3 OPTIONS FOR MARKETS AND PRODUCTS / SERVICESThe tourism industry is a constellation of businesses, agencies, and non-profit organizations which go together to create products. Thus, the type of option relates to which products or services to dourer in which markets. The diagram in Figure 1.4 structures a certain decision, as it was suggested for the first time by Igor Ansoff .The axes of the diagram represent the product, market needs, and market geography. The last is defined by four cells. The possible choices about products and markets can be represented as movements inwardly or away from these cells. One set of choices is possible within the active product / market set.Do nothing choice means continuing the present strategy. This strategy compares any proposed change with the do nothing opti on as a baseline. This option, however, is not often viable for the long term as competitors will be likely to gradually urinate the market by improving their product, processes, relationships.Withdraw choice is leaving the market by closing down or selling out .This may seem a negative option but necessary to focus available resources into areas of greater strength. It mainly occurs in declining markets.Consolidate choice refers to attempting to hold market share in existing markets. This is a defensive option which involves cutting represents and prices. It mostly occurs in mature markets or ones beginning to decline.Market Penetration choice means increasing market share within the same market. This is a more aggressive option and involves investing in product improvement, advertising, or channel development.Other possible options are Product maturation that is developing and acquiring new products and Market Development, an option which addresses to new market needs. Diversif ication is another type of option having to do with new products. It may be of two kinds related and unrelated. Related diversification, in its turn, divides into backward, forward, and horizontal integration. Any management choice has to focus on the relative attractiveness of available options. Whether the present specify is bad enough, even risky alternatives are preferable to doing nothing.2.2.4 OPTIONS IN METHODS OF IMPLEMENTATIONOptions are likely to occur in methods of implementation as well. There are four main methods to make companies grow their capabilities internal development, acquisition, contractual arrangements, and strategic alliances.Internal development is the most obvious approach to growth. It involves developing the necessary skills among the existing staff and acquiring the necessary production capacity. This method has one disadvantage it make believes time for the competitors to move faster, otherwise opportunities may be lost.Acquisition is a real common implementation option, used by such countries as the UK and USA. Take overs and mergers are dominant for this method of implementation. The disadvantage for mergers is that they can cause operational and psychological disorder which distracts the people. Competitors can use this turmoil in their benefit as they are free to concentrate on customers rather than on internal changes. more acquisitions may be beneficial at the right price, but may also destroy shareholder value at a too in high spirits price.Contract arrangements, regardless of their type, have in common the need for a written contract which binds two or more parties into a clear contract as to who will do what and pay what. When disputes happen they can be handled in courts by agreed arbitration procedures, or by not revitalising the present contract at the expiry. The contract arrangements come in different formsConsortia are groups of companies that form a joint entity for a specific purpose. When this purpose i s achieved, the syndicate breaks up and the separate partners may find themselves competing in different consortia for a new project.Franchising is common in retailing. The franchisee pays the franchiser a fee for services and royalties. The franchisee is halfway between an employee and an independent entrepreneur. His risk is limited by the previous success of the brand name and the support and advice given by the franchiser.Licensing allows a small inventive conjunction to license its product to be manufactured and marketed by others. This can determine quick growth by avoiding the need to build manufacturing or distribution capability.Agents incriminate doing business in foreign countries or specialized markets where the volume of business is too low to justify a permanent presence. The agent must be familiar with local requirements and calls for additional support from the principal when opportunities arise. There are conflicts among agents which include conflicts of interest .Strategic alliances and partnerships have come into fashion over the last ten dollar bill .When there are contracts between the parties, there is a wider intention to cooperate at a strategic level in order to share information and to work together in a way that goes beyond a clear contractual arrangement. It is considered that for a rapidly changing world, strategic alliances are the only way to achieve speed of response and global spread.2.2.5. GROUPING OPTIONS INTO STRATEGIC OPTIONSPossible options about product / markets, resources / capabilities, and the method of implementation must be unite into a smaller number of strategic options. This may be an up or down process. The bottom -up approach implies linking what might be done in detail into strategies. The top- down approach means testing general ideas of future direction against detailed options.2.2.6. GENERAL TESTS OF STRATEGIC OPTIONSThe tests, important otherwise, cannot be totally objective. distributively strategic o ption has to pass two tests as shown in Figures 1.2 and 1.3 .These tests must beAligned in that it conforms to the strategic intent. This test answers the question Does this option take us where we motive to?Feasible in that the capabilities and resources needed to get success can be made available. The test answers the following question Will it work? Acceptance is a third test, related to the two mentioned above, asking the question Will this option be acceptable? Acceptable means to win the eulogy of two groups those who will have to approve it and those who will have to implement it. Any strategic option has to pass all these three tests. In the possibility when more than one strategic option passes these tests, they have to be compared with each other to find the best solution, at that particular moment. It is also important to take into account such situations as risks.2.2.7. THEORETICAL FRAMEWORKS FOR ASSISTING STRATEGIC CHOICEThere have been several attempts to provide th eoretical frameworks for making strategic choices .One highly influential, was the fantasy of Generic Strategies, devised in 1985 by Porter. He mentioned that the most important choices dealing with any business are the background knowledge of the markets. It is about how to serve and how to compete in the chosen markets. The scope can be broad- tackling the whole market , or narrow tackling one particular part of the market. Companies achieve competitive advantage both by having the lowest product cost or by having products which are different in ways valued by customers. The axes of Figure 1.5 are the scope of the chosen market and chosen basis of competition. The four quadrants in the same figure suggest four possible strategies. When the scope is narrow, the distinction between cost and note becomes unimportant so Porter mentions only three generic strategies coast leadership, differentiation, focus. While differentiation implies a difference in the perception of the prod uct by clients, focus implies a difference in target market. According to Porter, the weakest strategy is b being stuck in the middle .Managers were enthusiastic about generic strategies when first published. Gradually, the reality showed a distinction between differentiation and cost. Few companies afford to ignore cost however different their product may be. On the other side, there are very few companies to admit that their product is the same as all the others. Porters Generic Strategy Model has been extended into the Strategy Clock (Figure 1.6)The important addition is the hybrid strategy, an optional balance between price and the added value perceived by the customer. The offerings may often fall into three categories. There are cheap offerings for those customers to whom the price is the most important aspect. At the other end are the luxury offerings with high quality and appeal to those customers who want the best and most differentiated. In the middle, are the good valued offerings which compromise between the other two and offer a good trade off between price and value.2.3 STRATEGIC CHOICES USED BY ROMANIA AND BULGARIAWhen discussing this issue, it is important to focus upon the targets in tourism, targets that have changed in accordance with the new demands. Among these targets, here are someIncreasing visitor satisfactionIncreasing the amount visitor spend for servicesDelivering the best pricesReducing seasonalityInvolving the local authorities to create communityIn terms of hotel industry, Romania has inherited a great tourist registration capacity from the communist period. Since the 1960s Romania had developed many accommodation facilities, mainly on the sea- side coast of the Black Sea. The low ranked hotels from this area are convenient for a mass tourism demand. After the 1990s the main tourism indicators have pointed out two distinctive periods on the Roumanian market. These are characterized by severe government instability and lack o f policies and strategies regarding the tourism industry. During 1990 2000 there was a faint intensity of the privatization process, only 55, 3 % of the accommodation facilities were private owned. After 2001 , Roumanian tourism industry has followed and increasing trend due to an accelerated privatization , 92 % of the accommodation facilities have been transformed from state owned to private owned .Lots of investments have occurred in modernizing the accommodation structures and increasing the volume of the green field investments. Elaborating and applying strategies in Romanian tourism companies is a complex process, alive, and in continuing expansion.Meanwhile, Bulgaria has come in with a dynamic and harsh competition .This has determined the need to change this industry by elaborating new strategies which focus on perspective , positioning , plan , and pattern.The differentiation strategy, suggested by Porter, is the strategy that the Romanian hotels are following. The R omanian hotel market considers that differentiation can be the result of a strong marketing campaign meant to strengthen the extraordinary characteristics of the product / services within the mentality of the customers.The hotels in Romanian market are pursuing a focus differentiation strategy. They are producing products and services for the high price market segments. Another strategy used by Romania is the training strategy. Within the service sector, it is of great importance to exist an interaction client employee. The customers satisfaction is given by the behavior of the employees.The hybrid strategy is pursued by those hotels which envision a decrease f the distribution costs and those that renounce to the unprofitable clients. These hotels attempt to sustain their strategy by the use of the net profit and E- commerce.The tourism industry in Bulgaria plays an important part in the countrys economy. Accession to the UE has had a great impact on its market, as the seaside summer resorts on the Black Sea Coast are the main attraction. One of the strategies used by Bulgarian hoteliers is to base their prices on the products perceived value .Value based determine means that the marketer cannot design a product and a marketing program and then fix the price. Price is a worth value to consider .The company uses the non- prices variables to build in the buyers minds a perceived value by setting prices to match the perceived value. ( Kotler , 2003 ).To simplify, hoteliers are aware that consumers must feel as if they get a good deal for their money. Perceived value is the key of any good pricing strategy.Bulgarians also use the differentiating strategy. Their purpose is to offer unique products and services so as to obtain a price premium. In other words, by implementing differentiated services or personalized services , a company can build its customer loyalty when substitute products or services are not available in the market. In this way, they charge their customers a higher price than their rivals based on the cost of the delivery system and service quality.The coast- leadership strategy has made the Bulgarian hospitality a name. Researchers in the fields of marketing and strategic management have suggested numerous approaches to help firms achieve cost leadership. Some of these are using mass production techniques, achieving economies of scale, adopting a new technology, achieving mass -distribution, reducing input costs , achieving resource, and improving access to raw materials.2.4 SUMMARYStrategic choice is the third logical element of the strategy process, playing a central role. The process of choice is deciding between different options. There are likely to be possible options about a product and services and about market segments defined by both customer need and geography. Indicators between what is possible and what is required may follow from the results of a strategic assessment. The various options may inter-rela te so it is necessary to identify a small number of strategic options made up of appropriately related options. Strategic options have to be aligned, acceptable, and feasible. If here is more than one strategic option, that meets these tests, they need to be compared both logically and politically in order to take a final decision.