Exercise: Innkeepers of America Jankeepers of America, a medium sized national hotel chain, has operated successfully for many years in the economy segment of the lodging industry. Its chain of hotels provides rooms that are comfortable and roomy. To keep costs low, the company locates its properties near a major restaurant instead of providing that service itself. The rooms and lobby areas are comfortable with normal accommodations, but extra frills are avoided. Although the company has its own staff of security guards, cleaning and landscaping services are contracted out to local companies, During the past three years, several new competitors have entered the economy segment of the industry using aggressive pricing strategies. To meet the new competitive threat, manage- ment developed a series of steps that they have followed over the past two years. They lowered the price of the hotel rooms by 10% last year and again this year with the goal of matching com- petitor prices. They also created a new advertising campaign that targeted budget-conscious cus- tomers by giving them discount coupons for weekend stays. This promotion increased occu- Pancy on the weekends, and plans are to continue it this year. Three new positions were created and filled in the customer service department. Employees were given shares of the company stock as part of a bonus plan. A continental breakfast menu was created. Guests could get rolls and breakfast drinks in the lobby or they could get them delivered to their room for an extra fee. Over 50% of the guests used this service. The reservation system was fully computerized, and front-desk employees received four half-day training sessions on the new system. However, de- spite these changes, the company’s overall market share did not increase, and in the last quarter it dropped slightly. The company’s net profit margin also declined from the previous year. Management was concerned, and a meeting was held to recommend and review courses of action, The head of marketing proposed a new company Web site where customers could book reservations online. The operations vice president noted that with the additional customer ser- vice staff and features, such as the continental breakfast, the company’s image was beginning to change. She recommended that all of the new hotels planned for construction next year be de- signed with more features to appeal to an upscale market segment, The marketing vice president agreed and noted that an upscale property would allow management to charge higher prices for the rooms to cover the higher costs associated with the upcoming campaigns. The president shared a letter with the group where a major competitor, Economy Lodge, Inc, wanted to ‘merge with Innkeepers of America. According to the president, “This merger would increase our market share by a sizable amount, and we would be able to compete more strongly in the econ- ‘omy segment of this industry. However, before we decide on this and other actions you've rec- ommended, we should rewrite our mission statement so that we have a sense of our core pur- Pose and which decisions we should make to achieve that purpose.”