‘Historically, the term strategy has military roots, with commanders employing strategy in dealing with their opponents (see for example Keegan, 1988). Indeed, dictionaries often continue the military theme, defining strategy as ‘the art of war’. Viewing strategy in such a way, the fundamental underlying premise of strategy becomes the notion that an adversary can be defeated (even a larger, more powerful one) if it can be out-manoeuvred using strategic skill. This intent of strategy emanates quite explicitly from the definition iven by Chandler (1962): ‘Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of actions and the allocation of resources necessary to carry out these goals." Mintzberg’s ‘five Ps’ Mintzberg suggested that nobody can claim to own the word ‘strategy’ and that the term can legitimately be used in several ways, A strategy, he suggested, can be: © a plan; © a ploy; patiem of behaviour: 1 a position in respect to others; a perspective. It is important not to see each of these Ps in isolation from each other. One of the Problems of dividing ideas into frameworks like the five Ps is that they are necessarily simplified. The five Ps are not mutually exclusive, ic. it is possible for an organization to show evidence of more than one interpretation of strategy.Plan strategies A plan is probably the way in which most people use the word strategy. Ittends to imply something that is intentionally put in train and its progress is monitored from the start to a predetermined finish. Some business strategies follow this model. ‘Planners’ tend to produce intemal documents that detail what the company will do for a period of time in the future (say five years). It might include a statement on the overall direction that the organization will take in seeking new business opportunitiesas well as a schedule for new product launches, acquisitions, financing (i.e. raising investment capital), human resource changes, etc. A large tour operator, for instance, might decide that it plans to implement a strategy concerned with expanding its share of the market and that this will be achieved by setting prices at lower levels than competitors and by acquiring smaller firms. It might write its plans down in some detail and circulate them to all of its key managers so that, at any given point in time, the entire organization can be shown to be acting in accordance with the predetermined plan. Ploy strategies A ploy is generally taken to mean a short-term strategy, and is concerned with the detailed tactical actions that will be taken. It tends to have very limited objectives and it may be subject to change at very short notice. Mintzberg describes a ploy as, ‘a manoeuvre intended to outwit an opponent or competitor’ (Mintzberg ct al., 1998: 14) He pointed out that some companies may use ploy strategies as threats. They may threaten to, say, decrease the price of their products simply to destabilize competitors. ‘One example of a ploy strategy is that employed in a soccer match. Ifthe opposing team. hasa particularly skilful player, then the team manager may use the ploy of assigning two players to mark him for the duration of the game. However, this tactic will only last for the one game — the next game will have a completely different strategy. Furthermore, the strategy will only operate only as long es the dangerous player is en the pitch. If he is substituted or gets injured, the strategy will change mid-game ‘Thus the tour operator (introduced above) may have an overall planned strategy which includes offering lower price levels than competitors, but as a short term ploy, it might ‘Stralagic Management for Travel and Tousism suddenly discount its prices within six weeks of departure in order to destabilize its competitors and to sell excess capacity.Pattern strategies ‘A ‘pattern of behaviour’ stmtegy is one in which progress is made by adopting a consistent form of behaviour. Unlike plans and ploys, pattems ‘just happen’ as a result of the consistent behaviour. (Ona simple level, a small specialist tour operator offering summer villa and apartment holidays to a particular Greek island to a small but loyal group of customers might be viewed as following a patter strategy. The company is unlikely to produce elaborate plans ~ simply renewing contracts with property owners and transport providers annually. If offered a new villa on favourable terms, then the operator would probably contract the property and feature it in its brochure without thinking much about it. It is an opportunity that is taken, as it appears too good to miss. However, the operator would probably not feature a hotel in Majorca although it may be available to the company because that would be outside their pattern of business behaviour. Such patterns of behaviour are sometimes unconscious, meaning that they do not even, realize that they are actually following a consistent pattern. Nevertheless, if it proves successful, it is said that the consistent behaviour has emerged into a success. This is in direct contrast to planning behaviour. Position strategies {A potion siraagy is appropsiste when the most important thing to an organization ie how it relates, or s positioned wih respect fo, Hx compestors oF its markets Le costomer). In other words, the organization wishes t9 achieve ot defend a cotain ton, fn business, companies tend to seek such things as markt share, profitability, superior rescore, reputation, ee Tt plainly clorious Ht not all companies are equal won one Considers such criteria, Some airlines, for instance have enviable reputations for reliability tnd quality whilst others are not to fortunate: The competitors with a reputation f defend will use a postion strategy to ensue thatthe reputation they enjoy is maintained ond sitengthenes, This may ten inchcle marketing messages thot point out the swoaknescs in conpeltors’ procuas whit pointing out the feature ef Unit wn. Strategy and stratagic objectives for travel and tourism orgarizations Perspective strategies Perspective strategies are about changing the culture (the beliefs and the ‘eel’, the way of, looking at the world) of a certain group of people - usually the members of the organization itself. Some companies want to make their employees think in a certain way, believing this to be an important way of achieving sucess. They may, for example, try to get all employees to think and act courteously, professionally or helpfully.The elements of strategy Chandler's definition Given the foregoing definitions by Mintzberg, we might think that writers in business strategy are unable to agree on a single definition of the word strategy. This is partly true, but some have tried to sum it up succinctly to make it easier for students to understand. ‘One such definition, still widely quoted, was offered by Professor Chandler of Harvard Business School in 1962. Given that Chandler predated Mintzberg, it is perhaps not surprising that it is rather more simplistic than Mintzberg might have accepted. Stategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allecation of resources necessary for carrying out these goals. (Chandler, 1962 - emphasis added)“Three components of strategy ‘This is a useful definition because it shows the scope of what ‘good’ strategy is. The italics in this quote show the three important contents of strategy. The determination ofthe basic long-term goals concerns the conceptualization of coherent and attainable strategic objectives. Without objectives, nothing else can happen. If you do not know where you want to go, how can you act in such a way as to get there? ‘The adoption of courses of action refers to the actions taken to arrive at the objectives that have been previously set. If, for example, your objective is arrive in London when travelling from Edinburgh there are various courses of action available to you. You might travel by train, by car, by coach or by plane. You might travel on certain days or at certain times of day. You might take advantage of certain concessionary fares, and you might make a booking through an intermediary such as a travel agent or book directly with the principal company (the airline or train company). Thus as a result of wanting to travel to London, 2 whole range of options need to be considered and detailed decisions have to be taken as to which options to select. ‘The allocation of resources refers to the fact that there is likely to be a cost associated with, the actions required in order to achieve the objectives. If the course of action is not supported with adequate levels of resource, then the objective will not be Hence, strategy contains three things. In the example of travelling from Edinburgh to London: 1 Your objective is clearly stated as arriving in London at 2 certain date and time. 2 In order to achieve this objective certain actions are necessary. It is decided that flying is the best option. Thusa specified flight is booked through a travel agent, leaveis taken from work and a plane is boarded at the airport. ‘Strategic Management for Travel ang Tour's 3 However, the actions would not be possible if they could not be resourced. You need the resources of a plane with a suitably qualified pilot, an airport, money to pay for your fight and other such ‘inputs’ Ifany one of these is missing, you will be unable to meet ‘your objective.Specific Stakeholder Strategy One response to “what do we stand for” is to concentrate the efforts of the firm towards satisfying the needs of a small number of specific stakeholder groups, or the needs of one or two generic stakeholder groups. For exam- ple, if “Customer Service” and “Employee Welfare” are the basic values for a particular organization, and if everything the firm does is aimed at achiev- ing these intrinsic values, then in some realistic sense that firm stands for improving the welfare of customers and employees. Since these are but two of many stakeholders, I have dubbed this kind of enterprise strategy, “specific stakeholder strategy.” To adopt such a strategy is to try and max- imize the benefits of the firm to a relatively narrow group of stakeholders. The concept of “specific stakeholder strategy” leads to the following hypothesis: If the actions of the firm have a relatively narrow range of effects on a relatively small number of stakeholders, and if the values of the managers of the firm are closely aligned with the values of these stakeholders, and if there is little relevant social change, then the firm is likely to adopt a specific stakeholder strategy of maximizing the returns to a small set of stakeholders.An example of firms adopting specific stakeholder strategies would ap- pear to be several firms in the computer business who align themselves almost totally with the customer. Hewlett-Packard, IBM and Digital Equip- ment are almost legendary for their customer relationships. From published accounts it is difficult to tell if this customer alignment is an end in itself or a means to an end, but there is some evidence that it is an end in itself (Peters and Waterman, 1982). The history of the industry involved creating a demand for its products. The resulting attention to customer needs and customer service has become the criterion for success and leadership in the industry. We could hypothesize that as managers come up through the ranks in a company oriented towards customers they identify with the cus- tomer and its needs so much that it would be impossible to change the orien- tation of the company. Social issues have had little effect on these com- panies as they have developed. Perhaps with the advent of the personal computer and large computer networks available to the public for little cost, the impact of social issues such as privacy and “1984” will increase, thereby necessitating a reexamination of the enterprise level strategies of these firms. ‘THE EMERGENCE OF THE SAREHOLDEROADPROACH In the mid-1980s, a stakeholder approach to strategic management began t9 emerge. It was developed as a direct response to the concerns of managers who were being butted by increasing levels of complexity and change in the external environment.» The existing strategy ‘models were not particularly helpful to managers who were trying to create new opportani- ties during a period of sich radical change. The word stakeholder was a deliberate play on the ‘word stceolder. Much of the strategy literature atthe time was founded, either explicitly or ‘mpheitly, on the idea that stockholders were the only imporeant constituency of the modera for-profit corporation. Stakeholder theory contradicted this idea by expanding a company’s responsibilty to groups or individuals who significantly affect or are significantly affected by the company’ activites including stockholders. Figare 1.3 contuns atypical sakeholler mp. A firm has internal sakeioller, such a employ ces, who are comidered a part of the internal organization. In addition, the firm las frequent interactions with stakeholders in whe i called the operating (or tsk) etnvironmene The firm andl stakeholders in its operating enwvisonment are influenced by other fretors,sach as socic ‘oy; the economy and the legal environment. These other factors form the broad environment. This section has laid a foundation on which the rest of thie book will be built. The three perspectives that will he incorporated are the traditional, che resource-based, and the stake holder views of trategic management and the firm. Now the strategic management proces: will be introduced in more detail technolFIGURE 1.3 A typical stakeholder map The stakeholder approach A stakeholder can be defined as: Any group or individual who can affect or is atfected by the achievement of an ‘organization's objectives. (Freeman, 1984: 46) ‘This definition drawsin almost everybody that is, or may be potentially involved in the life of an organization. It consequently goes without saying that not all stakeholders are ‘equal in their influence on an organization's objectives. ‘The stakeholder approach (as advocated by Freeman, 1984; Donaldson and Preston, 1995 and Campbell, 1997), argues that organizations, like individual people, are characterized by their relationships with various groups and individuals such as ‘employees and customers. A group or individual qualifies as a stakeholder if it/he/she has a legitimate interest in the organization’s activities and thushas the power to afect the firms performance and/or has a stake in the firm's The implications of this proposition are far-reaching. In essence, stakeholder theory argues that shareholders are neither the sole owners of a business nor the sole ‘beneficiaries of its activities. Whilst shareholders are undeniably one stakeholder group, they are far from being the only group who expect to benefit from business activity and, accordingly, are just One of those groups who have a legitimate right to influence a ‘company's strategic objectives. Some of these groups are internal to the organizationInternal stakeholders External stakeholders Board of recors ‘Shareheloers Employees callectvely CCredtors (existing and potential) Individual employees (e.g. founding ‘Suppliers (existing and potential) entrepreneur) Employees! representatives (rade unions, Customers (existing and potenti) trade associations etc) Functional business areas (marketing, finance Trade bodies (e.g. ABTA) otc) Geographical areas of the orgarization (eg. Pressure groups (e.g. envronmental) Europe, Asa ete) CCompettors(eurtent and future, national and international) Government (egal, sca, and regulatory impacts) Private individuals Inermational regulatory bosies (e.g. VATA) ‘The local community Table 1.2 Examples of internal and exterral stakeholders success of Marriot is largely atributable co advantages created by ‘resources that have been dificult to duplicate by other Companies in the hotel industry. The fis is financial corrals, Marriot can determine and amicpare construction and operating cost: with nearly exzet precision, Second, Marriot: has developed distnctve competence in cusromer service, or “becoming the provider of choice.” Looking to the future, Marriatis actively engaged in creating a third org- ritational capability as the “employer of choice.” Marriott executives reason that with fewer people ‘entering the labor force in the 18-to 25-year-old age group, good workers wil become increasingly dlfcut to attract. Alto, good workers are especialy mportant in service business such as hotels because they interact directly with customers.” Bu da Les oStakeholders and objectives ‘One widely used and useful mode! for understanding how stakeholders exert influence on an organization's objectives was proposed by Mendelow (1991). According to this model, stakeholders can be ‘ranked’ depending upon two variables: interest and power: ‘© stakeholder power refers to the ability to influence the organization; stakeholder interest refers to the willingness to influence the organization. In other words, interest concems the extent to which the stakeholder cares about what the organization does. It then follows that: Stakeholder influence = power x interest ‘The actual influence that a stakeholder has will depend upon where the stakeholder is positioned with respect to ability to influence and willingness to influence. A stakeholder ‘with both high power and high interest will be more influential than one with low power‘Stakeholder poner Figure 1.2 The stakeholder map (adapted from Mendelow, 1991) and low interest. We can map stakeholders by showing the two variables on a grid comprising two intersecting continua (Figure 12). ‘Once ‘we can use the map to assess two things: 1 which stakeholder is likely to exert the most influence upon the organization's objectives, and; 2 the stakeholders that are most likely to be in potential conflict over strategic objectives (where two or more stakeholders are in close proximity inthe high power-high interest par of the map). ‘The managing director and the board of directors are examples of stakeholders with both high power and high interest. This is because they manage the business, depend upon it for their jobs and their positions within the organization give them power with which to implement their decisions. The local community (in most eases) will not concern itself with the setting of organizational objectives and have limited power to impose theirHow do businesses set objectives? Earlier in this chapter, we introduced the idea that strategic objectives, since they the most important level of decision-making, are set by an organization's senior management, usually the board of directors. In setting objectives, however, senior managers are likely to be influenced by a range ‘of diferent sours ‘which have an interest im the organization. Who or what influences the senior management in their objective-seiting? ‘This question cuts to the heart of an important debate that is taking place both in universities and in business circles. This debate revolves around two differing approaches towands objective-setting: the stockholder and stakeholder approaches. The stockholder approach The stockholder approach argues that businesses exist primarily for their owners (usually shareholders). Accordingly, any business behaviour that renders profit performance sub- optimal is not only theft from shareholders but will also, eventually, lead to a level of busines performance tat wll harm all ether groups such as employees, customers and "YP 1970, the Nobel Laureate Professor Millon Friedman contended that ‘the moral obligation of business is to increase its profits’ Friedman argued that the one and only obligation of company directors (which are the legal agents of shareholders’ financial interests) is to act in such a way as to maximize the financial rate of return on the owners’ shares. The capitalist system upon which the Western economies rests in large part upon the presupposition that investments made in shares (eg. in pension funds, unit trusts, ete) will perform well. The profitable performance of shares lies in an increase in the share’s value and in the rate of dividend per share — objectives that can only be served by financial profits. Stockholder Strategy ‘The second type of enterprise strategy is really a special case of the specific stakeholder strategy. However, it so pervades our way of thinking that we can list it separately. It is the concentration of effort by managers towards satisfying the needs of the stockholders of the firm.24 The stockholder strategy is perceived to be so pervasive as to warrant extra attention, even though its logic is identical with that of the narrow stakeholder strategy where “stockholder” is substituted for “narrow range of stakeholders.” The essence of the stockholder strategy is “to maximize returns to stockholders,” or if interpreted more broadly, “to maximize the market value of the firm.” Executives in firms who adopt the stockholder strategy usually believe that they have a fiduciary obligation to stockholders, that is, they must always seek to act in the interests of the stockholders. However, it must be noted that the legal concept of management as bearing a fiduciary obligation to stockholders is undergoing some change. Taken to its logical extreme, such an enterprise strategy could involve actions which are im-moral or unethical, as well as illegal. When questioned about payments to the Committee to Reelect the President in 1972, one Chief Executive responded that he was doing what was necessary to protect the interests of the company and its stockholders.2s (Some of these issues are addressed in chapter Seven on board behavior and stakeholder analysis.) A closely related variant of the stockholder strategy might be called “the financial stakeholder strategy.” This version relies on satisfying the in- terests of the set of stakeholders who have financial stakes in the firm, or who can heavily influence those stakeholders who have financial stakes. Thus, management actions are aimed towards stockholders, banks (both commercial and investment), other holders of debt, investment analysts, etc, The values of management in this case must dictate that “financial stake” counts for more than other kinds of interests. Management recognizes that “ownership” needs to be broadened to include any group who is risking its capital in the firm.The content of corporate objectives The importance of objectives In trict terms, the most important of all objectives is simply to survive as a going concern. Other objectives depend upon the type of organization and the nature of is environment. Objectives are not necessary mutually exclusive in that an organization can usually Stategy and strategic objectives for travel ané tourism rgarizatons [pursue more than one type of objective at the same time. Juach and Glueck (1988) defined an objective as ‘the end the firm socks and the criteria the firm uses to determine its effectiveness’. The objectives can be written in a closed manner in that they are stated in {quantitative terms and are specific in relation to form and timescale, or an open manner in that they are stated in qualitative terms and are general in form and timescale. ‘Objectives are essential to the successful accomplishment of the managerial function in any formmal erganization in that they: [provide a sonse of direction; provide a standard of measurement and a means of controlling performance: ‘ project an image of the organization's style. Corporate objectives Comporate objectives translate the mission into specific long-term targets that can usually be quantified and measured. Corporate objectives are strategic level objectives that ean be used as a starting point in the setting business (or tactical) and operational objectives hich are more detailed objectives set lower down the organizational hierarchy (see the foregoing discussion). The business objectives will usually relate to important constituent pars of the overall organization ~ often termed strategic business units (SBUs), whilst the ‘operational objectives will usually relate to smaller units or teams within each SBU. Corporate objectives normally: «¢ relate to the whole organization; apply to the medium to long term* are set by senior management; «relate to a number of key areas of concern; «can be pursued simultaneously.Care must be taken in writing corporate objectives so that they are clear and easily understood. A common view is that objective writing is a ‘CRIME’ in that corporate ‘objectives should be: + Communicable ~ capable of being easily communicated down the line to the workforce and other intemal and external stakeholder groups. « Realistic capable of being achieved within the timescale {Internal cansstent ~consstert with the overall organizational mission, the operational objectives and the stategy for achieving the objectives set 4¢ Measurable = capable af boing quantified xo that they can be moasired and it is possible toassess whether the objectives have been achieved. * Nece time horizons vary considerably and wil depend largéy upon the nature of the business, crpocially the lead time talon to launch new products and sorvicos In some industries such 3 pharmaceuticals and chemicals where heavy capital expenditure is required and where research and development are timecoasuming, lead times may be long. In many seors of travel and ‘tourism lead times will be comparatively shor, sine launching a new destination or 2 new route ese ean be behead Hay el Tey ie bags tl ect Wg as with hotel constriction or new aircraft purchases, lead times are likely to be quite long. As 2 ‘werking rulethe long term soften cansidered to be 5+ years, themedium term 1-8 yearsand the short term less than I year, a sie Managemert for Travel and Tost ‘+ Explicit - written in clear unambiguous language, precise in relation to both targets set and to timescale, Corporate objectives often relate to economic and social concerns, and to matters of growth and competitive advantage which will now be considered,