How has the service operating system contributed to this performance, i.e.

has Club
Med developed a competitive advantage through its service operating system? Is this
sustainable?

The customer service operating system that Club Med A entails is Transforming guest
members who are strangers into acquaintances by social interactions such as group dining,
games, dance activities and other recreational activities.
It was creating a relaxing environment that is close to nature, thus giving the customer an
experience of a retreat.
There was a functional organizational structure with vertical hierarchy starting from Chief of
villages to GOs. They would organize activities and have free discussions with guests and
make them feel taken care of by hosts.
The traditional conveniences such as clock etc. were avoided in the GM rooms, and the entire
vacation was prepaid except for extra drinks at the bar or for shopping at the shops.
There were organized stage shows and song performances in which guests could participate
and have recreation experience.
The maintenance and upkeep responsibility were sometimes given to the local government,
which sometimes west possible due to economic downturn issue.
Heavy load of vacationers at certain Village airports would cause operational delays and
hassles.

The customers were asked for their satisfaction surveys, and these were used to motivate
other frequent vacationers, further improving upon the customer loyalty.50% of surveys were
filled as compared to industries 2-4% response ratio.
Let's analyze the competitive advantage of Club Med A on these factors.

Price- As compared to Industry profit margins of 2%, Club Med A has 11 % margins in air
transport, but in lodging, its margins are 4% as compared to the industry average of 3%.This
pressure is due to 48% cost of goods sold as compared to industries average of 40%. Thus it
has bargaining power with customers, but it has to watch out for competitors as it's on the
shaky ground If the competitor works on competitive pricing which is all-inclusive like what
Club Perillo did, it would put the Club Med a bargaining power at risk. There is a risk of high
fixed costs of property and human resource.
Location- The customers are delighted by ambience experience giving ratings in the 90s, but
communication issues due to remoteness of village location is a hassle and cause customer
dissatisfaction.
Quality- Quality in terms of delightful customer service by GOs is a strength. Still, in terms
of food and beverage experience, the quality is undoubtedly an issue, and here a competitor
can take the lead.
Speed/ turnaround -The flight and transfer services have a lower rating in the 60s and 50s.
Indeed, speed and turnaround can effectively improve as it causing a drag on the system, and
many customers have had a bad experience.
Service-Service is a strength as Village chief, and the entire human resources machinery is
trained in guest service and being excellent hosts. Since the club invests heavily in labour
fixed costs, it has this as a potential entry barrier having a network of well-trained service-
oriented GOs.

1
 Perceptual Map of Club Med A

Analysis summary : We display the perceptual map of Club Med A, and according to
analysis from the surveys and the case, the company is in a broad market delivering higher
service. It has done reasonably well so far as it got the first-mover advantage in its offering of
All-inclusive Pricing. But now other companies are imitating its offering thus dissipating its
competitive advantage. It needs to enter into niche categories to improve upon its dwindling
margins and leverage on its innovative processes to run the strength of its human resources
providing unique capabilities. Keeping the service quality high, it needs to enter into more
categories as well, its room is considered "Spartan", and it looked in terms of a general
Vacation service provider rather than a niche one. So, a rival can attack using price pressure
along with a niche service. Creating unique capabilities is the key, as this market can soon be
commoditized if innovative processes aren't incorporated.