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Chapter 5
Chapter 5 Strategic Management Model
Environmental Events
Remote
Task
Industry
Firm
Functional
Comparison of Inductive and Deductive
Approaches to Environmental Scanning
Inductive
Deductive
A theory is formulated about
how this pattern will affect the firm
The scanner observes activities
in the environment
The scanner suggests a hypothesis
about these patterns
The activities form a pattern of events
that will probably shape a trend
The scanner observes activities
in the environment
The scanner suggests a hypothesis
about these patterns
The scanner confirms
the observations with research
A theory is formulated about
how this pattern will affect the firm
Tracking Value Drivers
Subcategories
Key
measures of
economic
well being
Identify the
primary
sources of
information
World Bank
OECD
Domestic
Statistic
Offices – US
Department
of Census
How often
do you
review
this information?
Monthly
Based upon your information sources used, list and briefly describe
the key value drivers you believe are important to monitor in
understanding the cause and effect relationship with your firm.
KEY value drivers:
GDP (Gross Domestic Product)
Private consumption
Brief outlook on the key value drivers
Real GDP growth is projected to decline from 3.4% in 2000 to a range from
2.2 to 2.8% in 2001, and to remain in a range from 2.1 to 3.1% in 2002.
Domestic demand is expected to decelerate and the contribution of external
trade to growth is projected to weaken significantly in 2001 and to be
broadly neutral in both 2001 and 2002.
Private consumption growth is expected to decline from 2.7% in 2000 to 2.22.6% in 2001, and to be 2.0-2.3% in 2002. This reflects continued strong
growth of real disposable income, mainly due to the implementation of tax
reductions in a number of countries.
After a year of particularly strong performance, economic growth in the
OECD area has been weakening since the autumn of 2000. The 2001
growth rate is projected to be half that of 2000, at around 2% and the longrunning reduction in unemployment is projected to come to a halt. However,
the forces dampening economic growth are projected to dissipate in the
second half of 2001, leading to a growth rate of 2.5% to 3% over the
following twelve months. Inflation is expected to remain low.
Cause and Effect Relationships of Value Drivers
From the Remote Environment to the Impact upon the Firm
The Relationship of Value Drivers and Possible
Outcomes in the Remote and Task Environments
of the Hospitality Enterprise
Likelihood of Wage Increase due to Settlement
with the Union
Event
(A)
Possible wage
increase
percentage (B)
Probability of
wage increase (C)
Expected value
(D) = (B) x (C)
Low increase
2%
30%
.6 %
Medium increase
2.5%
60%
1.5 %
High increase
3.5%
10%
.35%
Total expected percentage increase in wages due
to settlement with union
2.45%
Hotel Industry Cycle Curve
High
1967
1972
1976
1980
1984
1989
Low
1969
1974
1977
1981
1986
1991
Mean
Standard Deviation
Hotel Industry Cycle Duration (years)
High to High
Low to Low
Expansion
5
4
4
4
5
4.4
0.5
5
3
4
5
5
4.4
0.9
3
2
3
3
3
2.8
0.4
Contraction
2
2
1
1
2
2
1.7
0.5
Leading and Lagging Indicators
for the Hotel Industry
Competitive Methods of Multinational Hotel Companies
Over the Ten Year Period of Analysis
Number of Competitive Methods
•Frequent Stay
Programs
•Strategic
Alliances
•Computer
Reservation
Systems
•1985
•Brand
Proliferation
•Amenity
Programs
•Use of
Technology
1986
•Service Concept
•Yield Mgt.
•Cost
Containment
•Price
Discounting
•Niche Marketing
•Purpose of visit
marketing and
advertising
1987
•Limited
Service
•Resort
Brands
•Going Global
•Meetings
Market
1988
•Courting
Travel
•Agents
•Management
Contract
1989
•Human
Resource
Programs
•Revenue
Max.
Programs
•Frequent Stay
Perks
1990
Decade of Analysis
•Database
Systems
•Business
Services
•Environment/
Conservation
1991
•Return to
Core Business
1992
•Direct to
Consumer
Marketing
1993
1994