Marriott Corporation The Cost Of Capital Case Study Analysis

1. Introduction:
The case presents a company, named “Marriott Corporation” (MC), possessing an attractive and
well known position in the hotel industry, providing services broadly categorized into three
divisions; lodging, contract services and restaurants. It was established by J. Willard Marriott in
1927. Dan Cohrs, vice president of MC’s project finance, is preparing his annual
recommendations for the hurdle rates at each of the firm's three divisions.
Finance division evaluates investments using “Weighted Average Cost of Capital” (Wacc) as a
hurdle rate to discount the cash flows for an investment opportunity. This Wacc is calculated
from two subgroups; cost of equity and cost of debt, giving appropriate weightage to each group.

2. Problem Statement:
Following points need to be analyzed;
- What risk-free rate and risk premium should be used for cost of equity?
- How does the cost of debt for Marriott should be calculated.
- Determine weighted average cost of capital (Wacc) for Marriott Corporation, and the three
lines of business.
- What type of investments should be evaluated using Wacc of MC.
- If a single Wacc is used for all lines of business, what would happen.
- How can cost of equity be estimated without comparable public companies.

3. Analysis / Result:
Let us consider and analyze the above mentioned points. Also refer to the Excel Sheet –
Marriott;
What risk-free rate and risk premium should be used for cost of equity:
To increase shareholder value MC use shareholders' measure to estimate the cost of equity,
which is Capital Asset Pricing Model (CAPM). According to the CAPM, the cost of equity is
found by;
Cost of equity = (equity / capital) x [ Risk free rate + (Beta x Risk premium) ]
Risk free rate is the rate of return expected from high grade secured investments which are
considered the safest, as returns on Treasury bills, U.S. government bonds, and high-grade, long-
term corporate bonds. Risk premium is the difference between the expected return on a market
based portfolio and the risk-free rate. Thus the for the risk premium, spread between the market
based portfolio of S&P 500 Composite returns and the holding-period returns on Treasury bills,
U.S. government bonds, and high-grade, long-term corporate bonds is used.
For the purpose of determining the period to be compared for risk free return and risk premium,
investment life of the project should be considered. Because lodging assets, like hotels, had long
useful lives, return on long-term government bonds should be used for lodging calculations,
which should be from the period 1926 to 1987 (exhibit 5 of the case) as this effectively reflects
the bottom line nature of return with a long term view including all abnormalities during this
period. Short term returns on Treasury Bills should used as basis for restaurant’s and contract
services division’s risk free rate and risk premium because those assets had shorter useful lives.
This should also be the from 1926-1987 (exhibit 5 of the case).
Use of returns can be either arithmetic average or geometric average but geometric average is
more appropriate then arithmetic average as arithmetic average is reflecting simple return over a
period of time on initial investment, irrespective of the capital gain from period to period.
However, geometric average shows compound return, which makes balance of investment value
of previous year a principle base for calculation of next year’s return i.e. CAGR (compound
average growth return). A capital investor is actually interested in the net return gained year after
year, thus use of geometric is more appropriate. Hence we would use geometric average for risk
free rate and risk premium for each of the three divisions, as given in exhibit 5 of the case.
Therefore, Risk free rate and risk premium for the three divisions are;
- Lodging: Risk free rate is geometric average of Long term Government bonds rate during
1926-1987 which is 4.27%. Risk premium is the geometric average of spread (exhibit 5 of case)
between Long term Government bonds rate and S&P return during 1926-1987 which is 5.63%.
- Contract services and restaurants: Risk free rate is geometric average of Short term
Treasury Bills rate during 1926-1987 which is 3.48%. Risk premium is the geometric average of
spread (exhibit 5 of case) between Short term Treasury Bills rate and S&P return during 1926-
1987 which is 6.42%.

How does the cost of debt for Marriott should be calculated:

Cost of debt is calculated by;
Cost of debt = [debt / (debt + equity)] x [(1- tax) x debt servicing cost].
The two inputs are thus the debt ratio in total capital and the applicable debt servicing cost. The
cost of debt for all the divisions of MC is calculated using the below two inputs;
- Overall Debt component for all the divisions of MC in its total capital is which is 74%, 40%
and 42% for lodging, contract and restaurant divisions (Table A).
- Overall Cost of Debt servicing for each division of MC is a mixture of floating rate and
fixed rate. These debt servicing costs are 1.10%, 1.40% and 1.80% above the government rate
for lodging, contract and restaurant divisions, to induce investors to lend money to Marriott.
Lodging possess long term debt (due to lodging business assets are of long term nature i.e. 30
years versus the short term divisions of contract service 10 years and much more shorter life for
restaurants, which possess assets of more short term nature i.e. 1 years. Therefore government
rate for 30, 10 and 1 year bond is used from Table B, which is used with respective spreads to
arrive at the debt servicing cost of 10.05% for lodging, 10.12% for contract services and 8.7%
for restaurants.
Using the tax rate (found by tax expense for 1987 versus income before tax) of 44.1%, respective
debt levels and debt servicing costs, the debt cost for each of MC’s division is found to be
4.16%, 2.26% and 2.04%.
Thus, for estimating overall debt cost for MC, average of the individual debt costs of each of the
division is taken. Using this method, the overall debt cost for MC is found to be 2.82%...

Marriott Cost of Capital Valuation

Comparing the rate of your Marriott Hotels to that of the traditional hotels may seem like a
useless exercise, but you need to consider the long-term benefits that a simple valuation will give
you. When it comes to making long-term investment decisions, you need to always think about
long-term benefits and not just short-term gains. A valuation will give you great insights to
figure out what your true capital gains are with your investments, giving you a chance to make
better decisions.
If you invest in a business, you usually expect a profit in the future. You will also invest in a
hotel for the same reason, to get a profit in the future. If you own a Marriott Hotel today, you can
now determine what your book value would be if you were to sell it.
First, you need to find out how much your book value is when you go in the business. This book
value is the sum of all costs that were incurred during the year to purchase the property, add up
all of the costs associated with constructing the building, then add in all of the mortgage interest
charges as well as maintenance costs over the years. By doing this math, you will know exactly
how much your valuation is.
You have two ways to look at the Capital appreciation and depreciation of the property. One way
is the traditional and logical way. You look at the amount of changes that have occurred in the
market. This is the same methodology used by people who buy real estate; they purchase the
properties at fair market value and get paid for them at a higher price because of inflation.
The traditional method is not accurate because in the current market, properties have a lot more
depreciation that does not go into account. The second way to look at the difference between the
book value and the realized value is by considering the lower percentage depreciation and the
higher expenses. You can see the increase in the expenses, but not in the gross profit. So when
you buy a new Marriott Hotel for $100 million, you could buy it for less than half that if you
considered the expenses and book value. The book value will represent your true appreciation in
the business, and the higher expenses are taken into account, the better it will be for you to make
the best investment decision.
Once you have figured out the expenses and book value, you have to figure out the Capital
appreciation. The Capital appreciation is the difference between the estimated price and the
actual price at the end of the year. This is basically the difference between the gross profit and
the book value. Again, the reason why you need to use this methodology is because there is a lot
more depreciation in the market today.
For instance, while vacation homes and commercial properties have very little depreciation, most
real estate does have a significant amount of depreciation. Therefore, if you had to subtract out
all of the depreciation to get your net book value, you will discover that your real estate valuation
is significantly lower than that of a Marriott Hotel.
When you use a discounted cash flow valuation (DCF) and the Net Present Value (NPV), you
will discover that the NPV is more accurate than the DCF. Using a discounted cash flow
valuation is like using a spreadsheet and computing your net present value, while the DCF uses a
formula that you can't replicate easily on your own.
To figure out the price, you will need to estimate the net present value of the taxes paid on the
property. Of course, you cannot just project the tax liability for the next ten years and then make
a projection on the capital gain. The correct method is to make projections based on the current
tax code, then project the expenses.
Then, with all of these expenses and the Projected cash flow, you estimate your return on the
property. You should also include depreciation and amortization (depreciation) in your estimate,
because it is capital improvements that pay off over time. and amortization is just the incremental
cost of your improvements over time.

Mariott Hotels Case NPV

In any type of hotel, the management fees are usually higher compared to the cost of capital. The
higher the NPV, the lower the overall cost. This is why most traditional real estate operators
prefer properties that have a higher NPV.
For Marriott, the cost of capital is the total of the management fee and operating fee. The three
main operating costs are the cost of construction, investment and depreciation.
After the five years of occupancy, these fees are offset by the income from the rent, plus a profit
for the loss component, and some other expenses are included. As a result, the real estate
operator does not gain from the occupancy.
Once the five years are over, the capital will be paid in two forms: the first is a cash outflow
from the Marriott properties, and the second is an equivalent return. Even if the property stays in
the same form, the second option is often preferred.
The NPV, however, does not take into account the depreciation since it is the cost of capital.
However, this is part of the long-term management fee, which also includes the maintenance fee
and the depreciation element.
n most cases, the short-term management fee is associated with an additional percentage of
appreciation, known as the IRR. The IRR is simply the difference between the long-term
management fee and the long-term rent. While this may sound like a big difference, the fact is
that it represents a negligible portion of the overall cost of management.
One more factor that has a direct impact on the overall cost of ownership is the management
fees. These are the charges that Marriott hotels collect from their guests at the time they stay in
the hotel. These management fees are not really taxes but are an incentive to keep the guest's
rooms occupied.
The management fee is lower than the operation and depreciation costs. As a result, the overall
cost of ownership is higher compared to the capital. Therefore, the overall cost of management is
typically lower than the capital costs.
Management fees can also include long-term maintenance. Even when the hotel is sold, these
fees can still be built into the price. This allows the new owner to get a fair price without
considering these maintenance costs.
As in any hotel, the management fee will probably not be exactly equal to the capital cost. The
management fee is usually tied to the hotel's profit. However, the hotel's income will be smaller
compared to the capital so the management fee is often higher.
However, this is expected to change as the hotel appreciates in value, since the management fee
represents the current value of the property. Therefore, the annual fee will also be higher than the
management fee.
Most hotel operators will only focus on the present value of the properties, or the NPV. They do
not usually consider the long-term maintenance fees, which has a huge impact on the long-term
maintenance cost of the hotel.

Marriott Hotels Cost of Capital Case Analysis

Are you looking for a case study about Marriott hotels? Then this article is sure to help you. For
the sake of this article, we are going to look at the total occupancy percentage.
According to its annual report, the average occupancy percentage of the Marriott properties is
84%. So what does this number mean?
This figure refers to the number of rooms that can be filled during the year. Now, let's analyze
what Marriott hotels really mean when it comes to guest satisfaction. We need to be able to
answer some basic questions before we can find out whether or not this type of occupancy is
good. And by answering these questions, we will be able to gauge the overall satisfaction of
guests.
First of all, we need to know the quality of service. Even though Marriott hotels have excellent
value, the majority of customers still want to see greater value. They want to see exceptional
customer service.
Another thing to consider is customer service. If you are receiving excellent customer service in
your hotel, then you are probably getting what you pay for. After all, if the hotel has low quality
service, the guests won't stay. They will probably go elsewhere.
The janitorial services and the availability of facilities are also important to evaluate. Since these
things are usually provided free in most hotels, it means that the hotel is giving you a lot for the
money that you spend.
The next thing to think about is the availability of rooms during the peak season. The fact that
the hotels are able to accommodate a huge number of people during the busy times means that
they have higher total occupancy rate than the normal times.
The third thing to look at is the quality of the rooms that the hotel provides. The actual number of
rooms that you get might not be all that it is cracked up to be. You need to know the type of
mattress that you will be sleeping on, the comfort level that you should expect from the bed, the
type of linens that are available, and the types of room accessories.
In this case analysis, we are not dealing with customer service. We are just going to analyze the
overall satisfaction of the guests with the hotel.
Marriott is a part of the resort hotel companies. Most of them do not provide the hotel with free
rooms, which means that the price of the rooms does not come free.
In this case analysis, we are not going to focus on the actual amenities of the hotel. However, if
we are going to include the amenities and the standard of living provided, we should keep in
mind that the hotels do provide some basic amenities.
In the end, this case analysis will give you an idea on what to expect when you book your trip to
a Marriott. In fact, this case study can also help you determine the hotel that would best suit your
needs. By analyzing this case study, you will be able to see if a hotel that offers similar amenities
and standard of living would be more appropriate.
About Marriott International
Marriott International, Inc. is an American international hospitality company that operates a broad portfolio of
hotels and related lodging facilities.
Founded by J. Willard Marriott, the company was established back in 1927 and is based in Bethesda,
Maryland, USA.
Talking about its presence, Marriott International has established itself across 131 countries with 7,000+
properties that offer around 1.4 million guest rooms.
It is one of the most reputed organizations in the hospitality industry and has 30 brands diversified as per
convenience and comfort.

Brand Portfolio of Marriott International

Marriott International is a public company, traded on the NASDAQ stock exchange in the United States.
Now that we have understood the company in brief, let us go through the customer profile of Marriott
International by examining its target market.

Target Market of Marriott International

A Target Market refers to a group of individuals identified as being likely customers of a business. The target
market usually includes customers who share similar demographic traits.
This is how Mariott International segments its target market:

Target Market of Marriott International

Brand Target Group

Marriott Courtyard Over-the-road travellers

Ritz-Carlton Hotels Luxury travellers

Marriott Conference Centers Corporates that conduct meetings

Targeted at people needing month-long

Marriott ExecuStay
accommodations

Marriott Vacation Clubs Travellers seeking to shop for timeshares

The JW Marriot, created by Marriott International as a luxury brand, is meant to focus on customers who are
seeking a quiet and opulent atmosphere during their accommodation.
Marriott International has successfully built up different target markets within its industry by specifically
targeting the requirements of its customers.
Therefore their customers are mostly individualistic, sophisticated, and self-defined travellers who are willing
to spend extra money on their accommodations as well as people travelling on a business trip.
Now, let us study more about the company by going through Marriott’s 4Ps of the marketing mix in the next
section.

Marketing Mix of Marriott International

 The marketing mix is commonly used to describe the set of techniques a company uses to get its message to
the target market. Even more, a marketing mix can also be used to understand what a business is doing from a
marketing perspective. It includes 4Ps that cover a company on the parameters of Product, Price, Place, and
Promotion.
So this is how Marriott’s marketing mix pans out:

Product Strategy of Marriott International

Marriott is one of the foremost recognized luxury hotel chains. It has a unique product strategy that is centred
around luxury travellers.
For Marriott, the core product in its marketing mix is within the sort of hospitality services. Their product
strategy covers everything that goes into running the hotels. They have over 30 brands that include popular
hotels like Ritz-Carlton, Sheraton, Renaissance, and many others.
The company has categorized its brands under the following tags: Luxury, Premium, Select and Longer Stays.
This helps customers to choose hotels based on their travel plans and convenience.

Marriott International strives to deliver exceptional guest experiences that are consistent across all of its
branded hotels and resorts in all locations and on all channels. It also works extensively on launching new
brands based on different themes that cater to new and existing customers.

Price Strategy of Marriott International

Marriott International is one of the few organizations that has been successful in maintaining pricing power
despite significant competitive price discounting, volume shrinkage, and increased room supply.
In terms of pricing, Marriott International’s price varies with different hotels, customers, and locations. The
prime motive of the company is to deliver a top-notch experience that exceeds customer satisfaction for the
price they pay.
It has largely succeeded because the different hotel brands have been able to maintain differentiated value
propositions in terms of their brand promise and brand appeal.

Place Strategy of Marriott International

Marriott International is well-known and is one of the biggest hotel chain companies in the world regarding the
number of hotels they manage and operate both in different parts of the world and in the United States.
Choosing the ideal place and distribution strategy has played a vital role for Marriott in its journey over the
years. Since its foundation, it has established itself in more than 131 countries and the placements of its hotels
are mainly centred in and around major cities and towns of a country.

Presence of Marriott International

Promotion Strategy of Mariott International

Marriott International has been in the hospitality industry for almost a decade now and the name “Marriott”
speaks for itself. It is one of the positive beneficiaries of “word of mouth” promotion.
Apart from that, Marriott primarily focuses on promoting itself and its brands through digital mediums.
 It has a very well-designed website that showcases all of its brands in a detailed manner which entices
users to book the room immediately.
 It has also worked on User Generated Content strategy and also has been collaborating with various
influencers.
 It also has a customer loyalty program called Bonvoy, which provides its customers with a variety of
benefits.
Now that we have an understanding of the marketing mix of the hospitality giant, let us go through the
Marriott marketing strategies in the coming section.
Marketing Strategy of Mariott International
In recent years, Marriott International’s marketing strategy has revolved from offline to online. It has shifted
its focus to market itself more digitally than using the traditional marketing approach.
As rightly put by Arne Sorensen, President of Marriott International, on his blog, “What social media is
allowing us to do is not draw attention to ourselves, but to see our guests in their own spotlight”.
So let us understand the strategies and campaigns it has implemented to provide an overall better customer
connection and service.

Marriott International’s M Live

Marriott International’s M Live has been shaping the future of the hospitality industry with their communities
in Marriott Hotels.
M Live is a platform, wherein the M Live team tracks a variety of topics that are popular worldwide and
organizes its content around these topics. Furthermore, It also targets people on an individual level.
For example, recently a traveller tweeted a question about hotels in Nashville, USA, and received relevant
suggestions from M Live. Not only did the M Live team suggest hotels, but it also gave out relevant content
regarding how Nashville’s nightlife is to enhance the travelling experience even better.

Marriott International’s M Live Studios

Marketing & Advertising Campaigns of Marriott

International
The marketing campaign of Marriott revolves around showcasing the comfort, care and richness of Marriott’s
luxurious hotel chain. The advertisements focus on the hotel chain’s luxurious room and hospitality services,
as well as a relaxed atmosphere.
With memorable marketing campaigns that have drawn people’s attention towards the company, Marriott’s
marketing campaign strategy has so far succeeded in impacting its viewers positively and thus resulting
in constant customer engagement growth.

#GoldenRule – A Marketing Campaign of Marriott International

Marriott International has launched a campaign named “Golden Rule”, a category branding campaign that
features four of its brands — Courtyard by Marriott, Fairfield Inn & Suites, Four Points by Sheraton, and
SpringHill Suites — together for the primary time.
The idea behind the Golden Rule campaign is to showcase Marriott’s collective strength that stems from its
“classic select” brands, which together comprise a third of its 30-brand portfolio. It showcases a connection
between the four brands and how the service is rooted like human connections.
Marriott has made several commercials for this campaign which included 60-second and 30-second
commercials. This campaign launched back in 2017 and is one of the most well-appreciated campaigns
Marriott.

Marriott Bonvoy – A Marketing Campaign of Mariott International

Bonvoy – It is Marriott International’s worldwide campaign that promotes its travel program with the tagline
“Rewards Reimagined”.

Bonvoy is a new loyalty program that gives its customers a variety of benefits, such as one-time bonuses and
discounts. It also allows customers to earn points that can be further redeemed. It also provides members
access to a lot of sporting and entertainment events as well.
It has released Bonvoy App on both Android and iOS to enhance the experience of loyal customers.
The “Here” Anthem – A Marketing Campaign of Marriott
International
Marriot recently launched a campaign that builds on Marriott Bonvoy’s global tagline “Where Can We Take
You”, They also added “Here” as an expression for revealing the authentic, moments that are loved and missed
by travellers. The breathtaking ad film was shot across Malaysia, Indonesia, Japan and New Zealand. The ad
film is authentic and fast-paced – celebrates the power of travel.
It has also released various ad campaigns globally highlighting the benefits that Bonvoy membership offers. In
India, it partnered with Mumbai Indians as loyalty partners and thus promoting Bonvoy during Indian Premier
League (IPL) 2020.

These were one of the popular campaigns of Marriott International that it has incorporated to promote itself
and maintain the presence in the minds of the customers.
With this, our case study comes to an end, let us go through the final points in the next section.
Note: check out our Free Digital Marketing Masterclass by Karan Shah to get started in digital marketing.

Conclusion
Marriott International may be one of the most famous hotels around the world which is constantly in the news
because of its new hotel development deals. Needless to say, Marriott International’s network is also top-notch
with more than 7,000 properties across more than 100 countries and territories.
However, for the past three years, Marriott International has also been at the forefront of online travel
marketing. From its extensive global network to the proprietary technology platform, Marriott International
has worked well on integrating digital marketing into a well-curated strategy to turn its brand into a preferred
choice for individuals looking for luxury travel.
Liked our work? Interested in learning further? Do check our Online Digital Marketing Course if you’re
interested in starting your career in Digital Marketing.
Let us know your thoughts on this case study in the comment section down below. Thank you for reading, and
if you liked our then do share this in your circle.
Until then, See you next time!
Case Description of Marriott Corp. Case Study

Marriott is considering the repurchase of ten million shares. This is apparently at odds
with the financial policies that the Board of Directors passed two years earlier. Students
must discuss why the policies were passed and why changes are now necessary.
Includes a discussion of debt policy, financing policy and dividend policy. Students also
discover stock is currently undervalued.

Case Authors : Thomas R. Piper

Topic : Finance & Accounting

Related Areas : Business law, Change management, Costs, Financial analysis,

Financial markets, Strategy

What is the Case Study Method ? How can you use it to

write case solution for Marriott Corp. case study?

Almost all of the case studies contain well defined situations. MBA and EMBA
professional can take advantage of these situations to - apply theoretical framework,
recommend new processes, and use quantitative methods to suggest course of action.
Awareness of the common situations can help MBA & EMBA professionals read the case
study more efficiently, discuss it more effectively among the team members, narrow
down the options, and write cogently.

Case Study Solution Approaches

Three Step Approach to Marriott Corp. Case Study Solution

The three step case study solution approach comprises –

Conclusions – MBA & EMBA professionals should state their conclusions at the very
start. It helps in communicating the points directly and the direction one took.

Reasons – At the second stage provide the reasons for the conclusions. Why you choose
one course of action over the other. For example why the change effort failed in the
case and what can be done to rectify it. Or how the marketing budget can be better
spent using social media rather than traditional media.

Evidences – Finally you should provide evidences to support your reasons. It has to
come from the data provided within the case study rather than data from outside world.
Evidences should be both compelling and consistent. In case study method there is ‘no
right’ answer, just how effectively you analyzed the situation based on incomplete
information and multiple scenarios.

Case Study Solution of Marriott Corp.

We write Marriott Corp. case study solution using Harvard Business Review case writing
framework & HBR Finance & Accounting learning notes. We try to cover all the bases in
the field of Finance & Accounting, Business law, Change management, Costs, Financial
analysis, Financial markets, Strategy and other related areas.

Objectives of using various frameworks in Marriott Corp.

case study solution

By using the above frameworks for Marriott Corp. case study solutions, you can clearly
draw conclusions on the following areas –

What are the strength and weaknesses of Marriott Passed (SWOT Analysis)

What are external factors that are impacting the business environment (PESTEL
Analysis)

Should Marriott Passed enter new market or launch new product (Opportunities &
Threats from SWOT Analysis)

What will be the expected profitability of the new products or services (Porter Five
Forces Analysis)

How it can improve the profitability in a given industry (Porter Value Chain Analysis)

What are the resources needed to increase profitability (VRIO Analysis)

Finally which business to continue, where to invest further and from which to get
out (BCG Growth Share Analysis)
SWOT Analysis of Marriott Corp.

SWOT analysis stands for – Strengths, Weaknesses, Opportunities and Threats. Strengths
and Weaknesses are result of Marriott Passed internal factors, while opportunities and
threats arise from developments in external environment in which Marriott Passed
operates. SWOT analysis will help us in not only getting a better insight into Marriott
Passed present competitive advantage but also help us in how things have to evolve to
maintain and consolidate the competitive advantage.

Strengths
- Experienced and successful leadership team – Marriott Passed management team has
been a success over last decade by successfully predicting trends in the industry.

- Strong Balance Sheet – The financial statement of Marriott Passed looks strong and
will help the company going forward.

Weakness
- Low profitability which can hamper new project investment – Even though Marriott
Passed financial statement is stable, but going forward Marriott Passed 5-7%
profitability can lead to shortage of funds to invest into new projects.

- Marriott Passed business model can be easily replicated by competitors – According to

Thomas R. Piper , the business model of Marriott Passed can be easily replicated by
players in the industry.

Opportunities
- Developments in Artificial Intelligence – Marriott Passed can use developments in
artificial intelligence to better predict consumer demand, cater to niche segments, and
make better recommendation engines.

- E-Commerce and Social Media Oriented Business Models – E-commerce business

model can help Marriott Passed to tie up with local suppliers and logistics provider in
international market. Social media growth can help Marriott Passed to reduce the cost
of entering new market and reaching to customers at a significantly lower marketing
budget.

Threats
- Home market marketing technique won’t work in new markets such as India and China
where scale is prized over profitability.

- Growing dominance of digital players such as Amazon, Google, Microsoft etc can
reduce the manoeuvring space for Marriott Passed and put upward pressure on
marketing budget.

Once all the factors mentioned in the Marriott Corp. case study are organized based on
SWOT analysis, just remove the non essential factors. This will help you in building a
weighted SWOT analysis which reflects the real importance of factors rather than just
tabulation of all the factors mentioned in the case.

What is PESTEL Analysis

PESTEL /PEST / STEP Analysis of Marriott Corp. Case Study

PESTEL stands for – Political, Economic, Social, Technological, Environmental, and Legal
factors that impact the macro environment in which Marriott Passed operates in.
Thomas R. Piper provides extensive information about PESTEL factors in Marriott Corp.
case study.
Political Factors
- Little dangers of armed conflict – Based on the research done by international foreign
policy institutions, it is safe to conclude that there is very little probability of country
entering into an armed conflict with another state.

- Political consensus among various parties regarding taxation rate and investment
policies. Over the years the country has progressively worked to lower the entry of
barrier and streamline the tax structure.

Economic Factors
- Foreign Exchange movement is also an indicator of economic stability. Marriott Passed
should closely consider the forex inflow and outflow. A number of Marriott Passed
competitors have lost money in countries such as Brazil, Argentina, and Venezuela due
to volatile forex market.

- According to Thomas R. Piper . Marriott Passed should closely monitor consumer

disposable income level, household debt level, and level of efficiency of local financial
markets.

Social Factors
- Consumer buying behavior and consumer buying process – Marriott Passed should
closely follow the dynamics of why and how the consumers are buying the products
both in existing categories and in segments that Marriott Passed wants to enter.

- Leisure activities, social attitudes & power structures in society - are needed to be
analyzed by Marriott Passed before launching any new products as they will impact the
demand of the products.

Technological Factors
- 5G has potential to transform the business environment especially in terms of
marketing and promotion for Marriott Passed.
- Proliferation of mobile phones has created a generation whose primary tool of
entertainment and information consumption is mobile phone. Marriott Passed needs to
adjust its marketing strategy accordingly.

Environmental Factors
- Consumer activism is significantly impacting Marriott Passed branding, marketing and
corporate social responsibility (CSR) initiatives.

- Environmental regulations can impact the cost structure of Marriott Passed. It can
further impact the cost of doing business in certain markets.

Legal Factors
- Health and safety norms in number of markets that Marriott Passed operates in are lax
thus impact the competition playing field.

- Property rights are also an area of concern for Marriott Passed as it needs to make
significant Business law, Change management, Costs, Financial analysis, Financial
markets, Strategy infrastructure investment just to enter new market.

What are Porter Five Forces

Porter Five Forces Analysis of Marriott Corp.

You can use Porter Five Forces to analyze the industry in which Marriott Passed operates
in and what are the levers of profitability in those segments – differentiation, Business
law, Change management, Costs, Financial analysis, Financial markets, Strategy. Michael
Porter Five Forces of Strategy are –

Competition among existing players,

Bargaining power of suppliers,

Bargaining power of buyers,

Threat of new entrants, and

Threat of substitutes

Porter Five Forces can help in answering following questions for writing case study solution for
Marriott Corp. -

How attractive is the industry described in the Marriott Corp.?

Are some segments more attractive than others? Why? Identify, analyze, and evaluate the
strategy of the Marriott Passed featured in the Marriott Corp. case study.

What are the pros and Cons of each strategy? What impact Marriott Passed actions will have on
industry and economy on whole?

What is VRIO Analysis

VRIO Analysis of Marriott Corp.

VRIO stands for – Value of the resource that Marriott Passed possess, Rareness of those
resource, Imitation Risk that competitors pose, and Organizational Competence of
Marriott Passed. VRIO and VRIN analysis can help the firm.
 Competitive
Resources Value Rare Imitation Organization Advantage

Vision of the Yes No Can't be imitated Not based on Can Lead to

Leadership for by competitors information Strong
Next Set of provided in the Competitive
Challenges case Advantage

Ability to Yes, Marriott Yes, as talent Difficult to To a large extent Providing

Attract Talent Passed strategy is is critical to imitate yes Strong
in Various Local built on successful firm's growth Competitive
& Global innovation and Advantage
Markets localization of
products

Customer Yes, 23% of the Yes, firm has Has been tried by Company is Provide medium
Network and customers invested to competitors but leveraging the term
Loyalty contribute to more build a strong none of them are customer loyalty competitive
than 84% of the customer as successful to good effect advantage
sales revenue loyalty

What is Porter Value Chain

Porter Value Chain Analysis of Marriott Corp.

As the name suggests Value Chain framework is developed by Michael Porter in 1980’s
and it is primarily used for analyzing Marriott Passed relative cost and value structure.
Managers can use Porter Value Chain framework to disaggregate various processes and
their relative costs in the Marriott Passed.

This will help in answering – the related costs and various sources of competitive
advantages of Marriott Passed in the markets it operates in. The process can also be
done to competitors to understand their competitive advantages and competitive
strategies.
According to Michael Porter – Competitive Advantage is a relative term and has to be
understood in the context of rivalry within an industry. So Value Chain competitive
benchmarking should be done based on industry structure and bottlenecks.

What is BCG Growth Share Matrix

BCG Growth Share Matrix of Marriott Corp.

BCG Growth Share Matrix is very valuable tool to analyze Marriott Passed strategic
positioning in various sectors that it operates in and strategic options that are available
to it.

Product Market segmentation in BCG Growth Share matrix should be done with great
care as there can be a scenario where Marriott Passed can be market leader in the
industry without being a dominant player or segment leader in any of the segment.

BCG analysis should comprise not only growth share of industry & Marriott Passed
business unit but also Marriott Passed - overall profitability, level of debt, debt paying
capacity, growth potential, expansion expertise, dividend requirements from
shareholders, and overall competitive strength.

Two key considerations while using BCG Growth Share Matrix for Marriott Corp. case
study solution -