MBAHM 407

Operation Management in Hospitality Industry

Product and Service Design

Case Studies

ANNABELLE S. SIMPAO MATT NUMER OFALLA

MBA-HM Student Professor

“Expectation vs. Reality”

“Located at the front beach, Victory Hotel is the best place to relax under the bright blue
skies while sipping refreshing drinks, reading your favorite novel, listening to your favorite tune or
even simply wanting to just relax. The serenity, convenience and friendly staff will make your stay
a memorable one.” – these are some of the lines that you will come across visiting the Victory
Hotel website loaded with pictures featuring the scenic views, facilities and amenities which is
truly inviting.
End of summer when a foreign couple checked-in for 3 days for a vacation. They were
really pleased of the friendly and accommodating staff that attended to them. Yet, on their
checked-out, guests complain that certain aspects of their stay don’t match up to what was
promised. They complain about noisy neighbors, saying that they paid good money to stay at the
hotel and expect to get some peace & quiet night which is the bare minimum that a hotel could
provide but turned out disappointed. Likewise, it rained a lot giving them no chance to see and
relax under the bright blue skies in the front beach. The shuttle that is supposed to bring them to
the airport was 1 hour delayed due to back-to-back check in and check out and traffic congestion.
“This doesn’t match to what was in the website and brochure!” – the guest says showing
impatience.

Questions:
1. Assume that you are the hotel manager, how are you going to deal with the noisy
neighbors/guests without offending them?
2. Make a flowchart for the transportation service (service blueprint) of the hotel that will
conceptualize a service delivery system.
3. Is there a need to redesign the service design of Victory Hotel? Why or why not? Discuss
your answer.
 “De Mar’s Product Strategy”

De Mar, a plumbing, heating, and air-conditioning company locate in Fresno, California,

has a simple but powerful product strategy: Solve the customer’s problem no matter what, solve
the problem when the customer needs it solved, and make sure the customer feels good when
you leave. De Mar offers guaranteed, same-day service for customers requiring it. The company
provides 24-hour-a-day, 7-day-a-week service at no extra charge for customers whose air-
conditioning dies on a hot summer Sunday or whose toilet overflows at 2:30 A.M. As assistant
service coordinator Janie Walter puts it: “We will be there to fix you’re A/C on the fourth of July
and, and it’s not a penny extra. When our competitors won’t get out of bed, we’ll be there!”
De Mar guarantees the price of a job to the penny before the work begins. Whereas most
competitors guarantee their work for 30 days, De Mar guarantees all parts and labor for one year.
The company assesses no travel charge because “it’s not fair to charge customers for driving
out.” Owner Larry Harmon says: “We are in an industry that doesn’t have the best reputation. If
we start making money our main goal, we are in trouble. So, I stress customer satisfaction; money
is the by-product.
De Mar uses selective hiring, ongoing training and education, performance measures, and
compensation that incorporate customer satisfaction, strong teamwork, peer pressure,
empowerment and aggressive promotion to implement its strategy. Says credit manager Anne
Semrick: “The person who wants nine-to-five job needs to go somewhere else.”
De Mar is a premium pricer. Yet customers respond because De Mar delivers value – that
is, benefits for costs. In 8 years, annual sales increased from about $200,000 to more than $3.3
million.

Discussion Questions:
1. What is De Mar’s product? Identify the tangible parts of this product and its service
components.
2. How should other areas of De Mar (marketing, finance, personnel) support its product
strategy?
3. Even though De Mar’s product is primarily a service product, how should each phase in
service design be managed to ensure that the product is successful?
 “Nestle Infant Formula Controversy”

Nestlé was one of the most successful food-based companies in the world. Set up by
Henri Nestlé in 1867, in Vevey, Switzerland, Nestlé grew over the decades by acquiring smaller
companies to become the largest company in Switzerland by the 1960s. Nestlé's product portfolio
included soluble and roast coffee, other beverages like tea and health drinks, several mineral
water brands, dairy products, chocolates and confectionery, ice cream, frozen food, culinary
products, breakfast cereals, infant food, pet care, pharmaceutical products and cosmetics. By the
end of 2002, the company employed more than 250,000 people in 508 factories around the world.
Although it was one of the most successful companies in the world, Nestlé was frequently
criticized for using unethical marketing practices to promote the sales of some of its products.

It was ironical that the biggest controversy in Nestlé's history involved the product on which
the company was built. Critics said that Nestlé had promoted the use of infant milk formula (which
many experts believed, was harmful to the health of the mother as well as the child), in developing
countries, in an unethical manner. The company was criticized particularly for its promotions
which implied that women in westernized countries routinely used the formula as a substitute for
mother's milk. It was also alleged that Nestlé subtly developed the belief that using the formula
was more beneficial to the mother as well as the child. This type of promotion was in violation of
the 'International Code of Marketing Breast-Milk Substitutes' of the WHO /UNICEF...

The company was severely condemned by health agencies around the world for its
marketing of infant formula in developing countries, by conveying the message that the formula
was better for babies than mothers' milk.

Discussion Questions:
1. What is the impact on a company's image and credibility?

2. What are the major abuses of advertising by Nestle from your own observations and
experiences?

3. In what phase of product development the issue must be solved? How are you going to
address the issue?
 “Punch’d Energy”

Three years ago John Pinelli and his wife were the busy
parents of three teenage kids. As they watched their son drink
energy drink after energy drink and their daughters with those
giant whipped cream coffees constantly in their hands, they
thought that there must be a healthier way to get the energy boost
their kids, and frankly they needed. Punch’d Energy was born and
their product Punch’d Gummies hit the market. Punch’d
Gummies are an all-natural gummy powered by caffeine from
green coffee beans and flavored with real fruit. What started as a
family conversation has turned into a family business that is
positioned for serious growth. PUNCH
Customer feedback showed that the packaging didn’t convey that Punch’d Energy was a
legitimate brand. The bright green single serve package was based on what they thought their
target market would be: college kids. Turns out the clean ingredients and organic approach
appealed to health-conscious women and moms. They needed a package that not only better
communicated their brand, but one that better connected with busy, on-the go moms and was
more convenient to use.
 “The Case for Labeled Cans”

For 17 years, Catawba Brewing Co. has been crafting specialty brews in western North
Carolina—a region now considered a U.S. craft beer landmark. It was here that Catawba was
instrumental in pioneering some of the area’s first craft beers in a can—an idea once considered
ludicrous by most craft brewers.
What started out as a brewing hobby eventually grew into a thousand-barrel facility. By
2010, Catawba Brewing Co. was ready to start diversifying their packaging portfolio. For them,
the choice was obvious—aluminum cans. By going this route rather than using the typical glass
bottle, Catawba felt their beer would be better protected from light exposure and oxygen intrusion.
Using glass bottles also meant breakage, greater shipping cost and a noisy bottling environment.
Yet, to go with their first choice of packaging, Catawba would be faced with some
constricting industry standards. Aluminum can manufacturers had begun implementing a
minimum quantity order for printed cans in the standard 12-ounce and 16-ounce sizes. Typically,
this minimum would require customers to buy a truckload, which ranges from 155,000 to 200,000
cans. To a craft beer brewer, this requirement would be crippling. Not only would Catawba have
limited storage space to house such a large supply of cans for each of their core beer varieties,
but it would also be a costly upfront investment.
References:

Heizer, J., Render, B., Munson, C. Operations Management 12th Ed.Pearson Education Limited,
Edinburgh Gate, England
https://www.chegg.com/homework-help/questions-and-answers/nestle-ongoing-infant-formula-
controversy-nestl-one-successful-food-based-companies-world--q30529841
https://www.inlandpackaging.com/packaging-case-studies/
Mc Graw Hill. Production and Operations Management. 2012