Strategy for hospitality organisations

Case study of NHM

 

Table of Contents

Introduction. 3

Analysis of business environment 3

Porters five forces. 3

Threat of new competition and substitute products of services. 4

Bargaining power of visitors. 5

Bargaining power of suppliers. 5

Intensity of competitive rivalry. 5

PESTEL analysis. 5

Political considerations. 6

Economic factors. 6

Social factors. 7

Technological factors. 7

Environmental factors. 7

Legal factors. 7

Stakeholder analysis. 8

Key competencies of the NHM.. 8

Organisational culture of NHM.. 9

Accor Hotel 10

Conclusions. 11

Bibliography. 11

 

 

Introduction

The analysis of the strategies of affecting hospitality management analyses the case study of NHM through the utilisation of different analytical model in order to evaluate the business environment, identify the relative power of different stakeholders, analysis of the key competencies of the NHM and finally the organisational culture, management style and practices. In the last section the problems faced by the NHM is compared and contrasted with Accor hotels in London.

Analysis of business environment

Porter’s five forces model and PEST analysis is used for the analysis of the business environment in which the NHM is operating.

Porters five forces

Porter’s five forces is a framework developed for analysis of the business strategy through the determination of the competitive intensity and attractiveness of the segment in which an organisation operates (Morris, 2003). Three of the five forces refer to the competition from external sources and the two are the internal threats (Bateman, 2007). An analysis of the case study and the characteristics of the NHM indicate that the external environmental forces are from new competition and substitute products and services and it needs to be analysed in tandem.

Figure 1 – Porters five forces model

Threat of new competition and substitute products of services

According Jain and Trehan, (2009), profitable industry segments and markets will attract new organisations and these new entrants will have an effect on the existing organisations in terms of profitability, market share and sustainable business operations. The development of substitute products and services which provide advantages to the customers will increase the propensity to switch to these alternatives (Murphy and Murphy, 2004).

An evaluation of the threat of new competition and substitution products and services to the NHM indicates that there is a high level of barriers to entry in terms of an absolute new competition but not for substitute services. When analysing to other models such as the market attractiveness, the NHM is in an industry which can be classified under the heading of culture. The NHM is providing visitors with an innovative way to develop their cultural underpinning, all the while providing an avenue of spending quality time with friends and family. Hence there are twin advantages for the NHM and it is unique in nature. When considering the threat of new competition specifically from the perspective of barriers to entry, it can be said that there is a significant high level of barrier to entry as the NHM is purely operating in a non-profit model with a specific brand equity which cannot be developed by the private sector. The capital requirements for development of a Museum with the size and scale are impossible at the present moment. Moreover the threat of new competition is based on industry profitability and since the NHM is not based on a for-profit model it will be extremely difficult for the private sector to replicate such a model.

From the threat of substitution products and services, the number of tourist attractions in London is increasing mainly because it is one of the world’s major tourist destinations. The buyer propensity to substitute (Poelman, 2008) relative to the price performance of substitutes can be significantly low because the NHM is not charging any price from the visitors whereas the substitute services such as other museums and attractions are charging a cost. The aspects of switching cost to substitute services cannot be analysed because of the nature of the industry. Due to the significant level of differentiation between the different tourist attractions, it is also impossible to analyse the effect of substitution services in the tourist category. But the number of substitute services in London is increasing mainly targeting at the international tourists. Apart from specific substitution services, from the perspective of providing education and knowledge to interested individuals such as students, researchers, scholars in the areas of national history, the modern developments in information technology is providing avenues and replaceable services where individuals are able to get sufficient information and educate themselves about national history without coming to the Museum. But the quality and the effect of the substitution services in providing the specific advantages provided by the NHM is significantly low.

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Bargaining power of visitors

The visitors of the Museum are the tourists who are interested in learning about national history and also intent on spending quality time with their friends and family. When analysing the tourist market, the importance of London contributes to an enhanced advantage to the NHM and the levels of differentiation provided by the services of the NHM is unparalleled. The lack of switching cost because of the non-profit model and the differential advantage (uniqueness) (Jain and Trehan, 2009) can be said to decrease the bargaining power of the visitors. It is in the areas of information availability and marketing the services that the NHM is at a disadvantage. From the specific perspective of bargaining power, there is a lack of ability of the visitors to put the Museum under pressure. The NHM is constantly improving the services by adding new shows and activities which contributes to better targeting of specific group of visitors such as the school students.

Bargaining power of suppliers

The NHM do not have any significant number of specialist suppliers apart from the caterers, the florist and other service-based organisations which does not conflict with the service provided by the Museum to the visitors. There is high level of supplier competition and since none of the suppliers are able to directly contribute to the specific services provided by the Museum, there is insignificant bargaining power from the suppliers.

Intensity of competitive rivalry

From the perspective of competitive rivalry, it is seen that competition is between the museums and the substitute services but there is significant competitive advantage for the Museum because of the product innovation and the differentiated offer of the Museum. The levels of advertising expenditure required to communicate the message of NHM is high but is comparable to that of the expenses of other substitute services.

PESTEL analysis

The PESTEL analysis provides another framework or model to analyse the business environment which evaluate the political, economic, social, technological, environmental and legal aspects which affect the organisation (Poelman, 2008).

Figure 2 – PESTEL analysis

Political considerations

With the change in government and the deteriorating economic situation in the United Kingdom, the government has been forced to reduce the funding to the NHM along with other government funded projects. But the significance of the NHM as a cultural heritage is so important to the cultural situation of United Kingdom that the government will be unwilling to completely close down the funding and hamper the operations of the Museum. There is a structured model or method which has been developed where the government funding will be reduced and the contributions from individual donors would be enhanced. Since the government have great influence in setting the policy, it is expected that the Museum will have control on several aspects of employee remuneration, developing and designing new products and services which can attract more visitors but it is not expected that there will be a significant change in the operations

Economic factors

The economic growth of the country will be a significant factor in the operations of the NHM as the present economic climate is not favouring the funding opportunities from the government. Due to the non-profit characteristic of the NHM, at the present moment it is not collecting any charge for the visitors. But in the future, the Museum might plan to introduce a minimal fee for entries which may not affect the operations or significantly alter the number of visitors. But at the present moment the economic condition is not positive and the contributions from the donors and other individuals would also depend on the economic situation.

Social factors

The NHM because of the significant cultural heritage and importance to the history of the United Kingdom is providing a unique contribution to the society. Due to this important social factor, the demand from the visitors will continue and such a cultural brand image can contribute to improved funding opportunities from private donors. But due to the economic situation, the Museum is forced to undertake cuts in the employees and freeze new recruitment which might force the competitiveness of the Museum. There is significant evidence that the employees of the Museum have low motivation because of the threat of redundancy.

Technological factors

Along with providing cultural education to the society, the Museum also undertake several research and development activities in the areas of history and also the development of new activities, exhibitions etc. with the use of modern technology. A visit through the museum indicate that the organisation has adopted the modern technology and is utilising the technology to its advantage but the cost of introducing such high levels of technology is prohibitive and the present economic condition of the Museum may forcing to reduce the research and development activities and the design and development of new exhibitions. Innovation has been one of the important competitive advantages for the Museum because of the several leading historians and scholars who are associated with the Museum but again the lack of funding opportunities might be a hindrance in advancing the introduction of new technology which can attract more visitors.

Environmental factors

The main environmental factors which can affect the Museum are the increasing tourism to the United Kingdom. Since London is a unique tourist destination and with the coming Olympics, the propensity for more number of tourists visiting London is high but the higher cost of living in London is prohibitive to the cost conscious visitors. Considering environmental factors it is also necessary to consider the competition from substitute products and services which are employing technology to its advantage. These new tourist attractions are marketing themselves to the new type of tourists and visitors who are more adventurous. But the unique advantages of the NHM cannot be replicated in any way by any of these organisations.

Legal factors

There are no significant legal factors which affect the business environment of the Museum.

Stakeholder analysis

The stakeholders of an organisation are the individuals, groups, organisations etc. which are affected by the actions of the company or the organisation and whose actions contribute to a significant effect on the organisation’s business environment and working conditions (Bateman, 2007). The below diagram identifies the various stakeholders of the NHM and the following analysis provides the relative power of the different stakeholders.

  International visitors Local visitors  
Community Stakeholders Members
Donors Researchers
Media Historians
Cultural groups Employees
  Local council Government  

Figure 3 – Stakeholder diagram

From the above diagram and through the analysis of the relative powers of the different stakeholders such as the government, the local council and the donors have significant contribution which will affect the museum’s operations. Since the Museum is operating based on a non-profit model and the government funding is contributing to almost all of the activities of the organisation it has a huge influence. With the reduction in the government funding, the donors will have increasing level of participation and this will contribute to the increased level of their influence upon the organisation. The types of visitors will also have a significant bearing on the operation of the Museum because of the fact that the Museum has to design and develop its exhibitions based on the requirements of the visitors. The media has a strong influence on the business environment because it is able to project the competitive advantage of the Museum to the potential visitors. There are several researchers and historians associated with the research and who are also in the board of directors of the Museum and provide significantly to the effective working of the Museum. The employees are an important contribution as they are able to significantly improve the services to the visitors through their proactive action. The cultural groups mainly those community groups which are interested in enhancing the cultural image of the United Kingdom will also affect the operations of the Museum.

Key competencies of the NHM

The above analysis of the business environment through the two different models and the stakeholder analysis along with an evaluation of the literature available on the subject indicates that the key competencies of the NHM is in the area of improving the cultural heritage of the United Kingdom in a unique manner which has not been developed or conducted by any other comparable organisation.

Figure 4 – value adding activities of NHM

The Museum is projecting the cultural heritage to the local as well and the international tourists and is an important part of the history of United Kingdom. From the perspective of the business environment, in terms of attracting new visitors, the Museum has sufficient skilled employees who are able to design and develop new exhibitions with the use of modern technology. The major activity of the museum is in collecting, converting and exhibiting the various artefacts. The research and publishing also contribute to the museums activities although secondary. Another key competence is because of the fact that it is centrally located in a tourist destination and is able to continuously attract international tourists and local visitors. In the future the Museum will be able to develop technologically advanced services to the visitors and enhanced the cultural awareness about the national history of the United Kingdom.

Organisational culture of NHM

Organisational culture of the NHM is based on the cultural heritage of the United Kingdom. Almost all the employees working for the NHM are specialised in certain areas and are experts in enhancing the services of the Museum. The decrease in research and studies relating to history is a threat to the Museum and could pose disadvantage to it in terms of recruiting skilled employees.

Figure 5 – Organisational chart of NHM

The management style of the Museum, because of its non-profit character is based on culture of a socially responsible organisation and contributing to the awareness of the importance of historical aspects to the visitors and although there are business oriented activities such as publications, special kinds of exhibitions etc. which are generating revenues, the concentration of the management and the culture of the organisation is to provide a platform of learning to the visitors about the national history of United Kingdom.

Accor Hotel

When comparing and contrasting the several issues faced by the NHM with that of the Accor hotel in London, an important aspect which comes to the fore is that the for-profit organisation such as Accor hotel cannot be directly contracted with that of the activities of the non-profit model of the NHM. The Accor hotel situated in London is providing tangible services to their customers and is based on it specific business model whereas the NHM is a non-profit organisation contributing to the cultural heritage of United Kingdom. But the Porter’s five forces model, PESTEL analysis and swot analysis etc. can be utilised in the analysis of the business environment of Accor hotel in a better manner than can be done for the NHM. In all the areas the competitive factors which affect an organisation from the Porter’s five forces model are affecting the Accor hotel is. There is increasing competition in the market, industry rivalry is high, the substitution products or services and the threat of new entrants is also high. The consumers have a high level of bargaining power along with that of the suppliers. But the brand image of the Accor hotel and the quality of services provided by the hotel to the customers provides the ability for the hotel to collect a premium from the customers. Due to the funding from the revenues generated from the customers, the hotel has to constantly evaluate the service levels and customer satisfaction whereas in the case of the NHM, the overall satisfaction level of the all the stakeholders is considered more than the satisfaction level of the visitors. The employees of the NHM are motivated from the perspective of working to improve and contribute to the cultural heritage of United Kingdom, whereas the employees of Accor hotel can be motivated by means of financial and monetary stimulus packages.

Conclusions

Analysis of the business environment with the use of Porter’s five forces model and the PESTEL analysis have indicated that the NHM is having a highly differentiated model of providing cultural learning and improving the awareness of the society. The Porter’s five forces model is not a very apt model for the analysis of the business of the Museum. But it has provided important factors which contribute to the business environment and the operations of the Museum. The government with its funding had higher power over the actions of the Museum, but in the future the private donors and individuals along with visitors and cultural groups will have a significant effect on the actions of the museum. The business environment of NHM cannot be directly contrasted with the for profit model of Accor Hotels.

Bibliography

  1. Bateman, C., (2007), “Management”, 8th edition, Tata McGraw-Hill Education
  2. Capon, C., (2009), “Understanding the Business Environment”, 3rd edition, Financial Times Prentice Hall
  3. Jain, T. R. and Trehan, M. (2009), “Business Environment”, FK Publications
  4. Kotler, N. G., Kotler, P. and Kotler W. I., (2008), “Museum marketing and strategy: designing missions, building audiences, generating revenue and resources”, 2nd edition, John Wiley & Sons
  5. Morris, V. B., (2003), “The arts in a new millennium: research and the arts sector”, Greenwood Publishing Group
  6. Murphy, P. E. and Murphy, A. E., (2004), “Strategic management for tourism communities: bridging the gaps”, Channel View Publications
  7. NHM, (2012), Organisational structure, available at http://www.nhm.ac.uk/resources-rx/files/museum-organogram-170810-79671.pdf
  8. NHM, (2012), About us, Available at http://www.nhm.ac.uk/about-us/corporate-information/museum-governance/index.html
  9. Poelman, W., (2008), “Design processes: what architects & industrial designers can teach each other about managing the design process”, IOS Press