Application of Information Technology: Michael Porter Generic Competitive Strategies in Hospitality Management

Question:

Explain how Information technology can be used to gain Michael Porter Generic Competitive Strategies in Hospitality Management. Explain with help of competing on knowledge strategic hospitality technology information.

Answer:

Michael Porter's Generic Competitive Strategies:

Also known as Porter's Generic Strategies, are a set of three basic strategies that businesses can adopt to gain a competitive advantage in their industry. These strategies were introduced by Michael Porter in his book "Competitive Strategy: Techniques for Analyzing Industries and Competitors" published in 1980. Porter argued that companies need to choose one of these strategies to position themselves in the market and achieve sustainable competitive advantage. The three generic strategies are:

Cost Leadership Strategy:

The cost leadership strategy aims to become the lowest-cost producer in the industry while offering products or services at a competitive price. The key focus is on achieving operational efficiency, cost reduction, and economies of scale. By having lower production costs than competitors, the company can either offer its products at lower prices to attract price-sensitive customers or maintain industry-average prices while enjoying higher profit margins. The cost leadership strategy works well in markets where customers are highly price-sensitive, and there is intense competition.

Differentiation Strategy:

The differentiation strategy focuses on creating a unique and distinctive product or service that is perceived as superior by customers. The company aims to differentiate itself from competitors through features, design, quality, customer service, brand image, or other attributes that customers value. Differentiation allows the company to command premium prices for its products or services, leading to higher profit margins. It also creates customer loyalty and reduces the impact of price competition. Successful differentiation requires continuous innovation and a deep understanding of customer preferences.

Focus Strategy:

The focus strategy emphasizes serving a specific target market segment or niche effectively. Rather than trying to compete broadly across the entire market, the company concentrates its efforts on a limited customer group, geographic area, or product line. By focusing on a narrow segment, the company can better meet the unique needs and preferences of those customers and establish a strong competitive position in that specific area. The focus strategy can be pursued either through cost leadership (focused cost leadership) or differentiation (focused differentiation) within the chosen niche.

It's important to note that Porter's Generic Strategies are mutually exclusive, meaning that a company should typically adopt only one of these strategies rather than attempting to pursue all three simultaneously. Attempting to implement multiple strategies at once could lead to strategic drift and undermine the effectiveness of each strategy.

Use of Information Technology to gain Michael Porter Generic Competitive Strategies in Hospitality Management

Information technology (IT) plays a crucial role in helping hospitality management businesses implement Michael Porter's Generic Competitive Strategies and gain a competitive advantage. In the context of the hospitality industry, "competing on knowledge" refers to leveraging technology to collect, analyze, and utilize data and information to make informed decisions and provide a superior customer experience. Let's explore how IT can support each of the generic strategies:

Cost Leadership Strategy:

IT can be used to achieve cost leadership in the hospitality industry by streamlining operations, optimizing resource allocation, and reducing wastage. Here's how IT helps:

• Automated Processes: Implementing IT systems for reservation management, check-ins, and check-outs can automate routine tasks, reducing the need for manual intervention and saving labor costs.
• Inventory Management: IT solutions for inventory management can help monitor and control supplies more efficiently, preventing overstocking or stockouts, which can lead to cost savings.
• Energy Management: Smart energy management systems and IoT devices can help control and optimize energy usage in hotels, leading to reduced utility costs.
• Data Analytics: Utilizing data analytics tools, hospitality businesses can identify cost-saving opportunities, optimize pricing strategies, and forecast demand accurately.

Differentiation Strategy:

IT can enable hospitality businesses to offer unique and differentiated experiences to their guests, setting them apart from competitors. Here's how IT supports differentiation:

• Personalization: IT can collect guest data and preferences, allowing hotels to personalize guest experiences, such as room amenities, dining choices, and entertainment options.
• Mobile Apps and Websites: Developing user-friendly mobile apps and websites can enhance the guest booking experience, provide real-time information, and facilitate seamless communication.
• Virtual Reality (VR) and Augmented Reality (AR): By using VR and AR technologies, hotels can create immersive experiences, such as virtual tours of rooms and amenities, to entice potential guests.
• Customer Feedback Management: IT tools can be employed to capture and analyze guest feedback, enabling hotels to continuously improve services based on customer insights.

Focus Strategy:

IT can assist in implementing a focused strategy by catering to the specific needs and preferences of the chosen target market segment. Here's how IT facilitates focus:

• Customer Relationship Management (CRM): CRM systems can help hotels maintain detailed records of guest interactions, enabling personalized communication and targeted marketing efforts.
• Online Reputation Management: Utilizing IT tools for monitoring and responding to online reviews and feedback allows hotels to build a positive reputation among their target audience.
• Geolocation Services: Integrating geolocation services into mobile apps can help hotels provide localized information and special offers for guests in specific locations.
• Digital Marketing: Digital marketing strategies, including targeted online advertising and email campaigns, can focus on reaching the identified niche market effectively.

In addition to these generic strategies, IT can also be used to compete on knowledge in the hospitality industry. This involves using IT to collect, store, and analyze data in order to gain insights into customer behavior and preferences. This information can then be used to improve the customer experience, increase sales, and reduce costs.

For example, IT can be used to collect data on guest preferences, such as their favorite restaurants, activities, and amenities. This data can then be used to recommend similar experiences to other guests. IT can also be used to track guest spending habits, which can help businesses to identify opportunities to cross-sell and upsell products and services.

By competing on knowledge, hospitality businesses can gain a competitive advantage by providing a more personalized and relevant experience to their guests. This can help to attract and retain guests, which can lead to increased sales and profits.