Name: Hamza Abdul Rab

Roll Number: 22010072

Managing in the information age.

Case: The Ritz Carlton: Using Information Systems to Better Serve the Customer

Q1: What are the competitive and strategic challenges facing Ritz-Carlton?

Ritz Carlton is in the Luxury Hotel business and differentiate itself on the basis of its customer
service and its employee customer relationships. It is one of the most popular Luxury Hotels in
North America, however it had started to face a number of challenges on the competitive and
strategic fronts.
Competitive Challenges
 In 1994, due to declining costs of capital, the hotel industry began to flourish, so much so
that many companies which had been posting pretax income loss would now be reaping
healthy profits. Better profitability was expected from the hotel industry however, lower
costs of capital would lower the barriers to entry in the hotel industry and better
expectations of profitability would incentivize entry of new players in the industry,
hence increasing the competition and affecting the overall profitability of the industry.
This calls for a major restructuring in how Ritz Carlton conducts its operations without
affecting the quality of the service.
 Currently Ritz Carlton`s occupancy rate is 70%. Most of the customers are repeat
customers who appreciate the focus of hotel on their personal preferences and the quality
of service that they get. Ritz Carlton has been focusing on improving the customer
service through new systems and are focused on retaining the existing customers
however, there hasn’t been much focus on marketing. This approach puts Ritz Carlton
on the path of continuous improvement, however it also takes away the opportunity to
increase the customer base quickly and improve profitability. In times to come, when the
competition will be high, this strategy might not play well.
Strategic Challenges:
 Ritz Carlton has exhausted its avenues of expansion and all they high payoff projects
have already been undertaken. In the US, location of the Hotel is of paramount
importance to the success of the Hotel and currently there are not any good locations
 which can promise profitable operations. This necessitates expansion beyond borders
which in itself is a challenge and would require a lot of planning. Asia has been a
growing market but the profile of customers in Asia would be very different from that in
the US, which would require Ritz Carlton to carefully rethink its international operations,
systems, positioning, etc.
 As the all the high payoff projects have already been exhausted, Ritz Carlton might have
to re-evaluate its focus on prevention and inspection (which in the past has been shown
to produce major savings down the road). As the stakes in the upcoming projects might
not be very high (all high payoff projects have already been exhausted), the focus on
prevention and inspection might prove costly and might not make the economic sense.
This change in focus will affect the Ritz Carlton`s commitment to quality, and would
move it towards a reactionary style of management which Ritz Carlton has been
despising so far.
 IT infrastructure related issues are also a strategic challenge. The USP for Ritz Carlton
has been the demeanor and service of its staff, which was only possible because of the
information about customer preferences which they could conveniently fetch from
COVIA. Now as the number of customers have increased due to Ritz Carlton recent
expansion, new issues in COVIA have started to arise i.e. duplicate names leading to
identification problems. Hence it’s imperative for Ritz to reevaluate its information’s
systems to maintain the same quality of customer experience.

Q2: What is the relevance of the 'socio-technical' approach toward information systems at Ritz-
Carlton?

Ritz Carlton prides itself in the quality of service that it offers to its customers. This Quality is a
result of their operational excellence i.e. focus on work processes, planning, control, quality
management practices, etc. and their focus on the quality of human interaction i.e. employee
behavior.
Striking the right balance between the both, and using them both to complement each other, a
socio technical approach as they call it, is the key to providing consistent good quality
experience. Employees at Ritz Carlton leverage the systems in place to deliver a more
customized service experience to their customers. The organizational focus on delivering a
customized experience to every customer (in context to their personal preferences) required a IT
system which would be easy to use, would allow for efficient data entry, and would allow for
quick and easy data accessibility without compromises. Thus, for Ritz Carlton, a well-designed
IT system was instrumental to their value proposition and their customer satisfaction.

On the IT strategic grid, Ritz Carlton would be in the Support Category, however as industry
dynamics have changed i.e. lower barriers to entry and expectations of better profitability in the
near future, they will have to revamp their IT system to ensure a consistent customized quality
experience which means that they would have to move to the Factory Category.

Q3: Assess Ritz-Carlton's information systems related challenges in the light of its business
strategy?

Ritz Carlton has been growing over the past number of years and enjoys above average customer
satisfaction ratings and occupancy rates. This has been serving them well even when many other
hotels were struggling to post profits. Their above average customer satisfaction ratings are a
result of their socio-technical approach which allows them to leverage the organizational systems
and infrastructure to further improve the quality of social experience that their customers receive.
However, now a number of IT related challenges have arisen which might affect the execution of
their business strategy. Some of the challenges and their implications are discussed below:
  Encore was not flexible enough to allow for Data Categorization and defect reporting. It
was being used to handle reservations and as a means of filing and updating customer
preferences but this wasn’t enough. Many other hotels would use the preference data and
would categorize it in a way which would be easy for housekeeping to use. This allowed
for simplified processes and less chances of human error. Encore on the other hand
wasn’t as flexible, hence stripped Ritz Carlton of an opportunity to simplify a part of its
operations to even further improve the quality of Service.
 COVIA, was being used to store customer data. It usually had data of only 27% of the
Ritz-Carlton customers that might be registered in a given day. This low percentage was
due to the fact that 40% of Ritz Carlton business consisted of group bookings. This
limited the ability of Ritz Carlton staff to provide a large chunk of their daily customers
the customized service based on their preference. This points towards the fact that
approach of Ritz Carlton towards gathering data is not very robust and is limited.
Therefore, brainstorming is required to develop new methods of collecting accurate data
about customer preferences through indirect methods.
 Currently Ritz Carlton is heavily dependent on the two vendors Galileo and Encore. This
might not play well in the long run. Ritz Carlton has grown significantly over the years
and if any of the two systems were to go down, Ritz Carlton`s quality of service would be
affected.
 Data Entry is first done on the preference pads and then on the system. This leaves room
for error.
 The current Demand projection system might need an improvement as the current basis
of estimating demand is not very robust and dont take into account a number of factors
i.e. The declining or improving trend of customers, industry dynamics, socio economic
indicators, etc.
Q4: Suggest a possible way forward to managing the information systems at Ritz-Carlton for
better outcomes? What are the risks of pursuing such a path as information systems get more
streamlined?

Some of the suggestions for improving and managing the information system are given below:
 Data Entry should be digitalized, in a manner that as data is entered into the preference
“tabs” it automatically gets updated on their surver. This will significantly reduce the
chances of human error however, for this to be executed, Ritz Carlton will have to make
significant investments in its IT infrastructure and will have to take both of its vendors on
board.
 Ritz Carlton can also solicit customized IT database solutions which will solve its
“duplicate names” problems. They will have to develop a new system for categorizing,
tagging and identifying their customer based on parameters which will not be same
among two different customers i.e. phone numbers. This shall require a lot of
brainstorming and significant capital costs however, their choice of parameter might
curtail their ability to record data for each customer as each and every customer might not
like the ordeal of telling/verifying their number. Customized solution would also serve to
convert some of their variable costs i.e. registration fee, transaction fee etc. into fixed
costs i.e. salaries of in house IT staff etc.
 Information systems need to be tailored in a way that they not only serve the purpose of
data registry and data storage, but analysis and categorization as well. Currently
employees manually need to go through the data to categorize in ways useful for
housekeeping. The defect analysis is also done manually using spreadsheets for recording
and graphics.