Strategic Management Report on IGH.

Executive Summary

This report uses evidence-based information from reputable sources to examine InterContinental Group Hotel’s current internal and external forces and their present and potential impact on its strategy implementation. This valuable insight would help formulate future strategic recommendations for IHG to create value for its customers while impacting its shareholders. We combined various models to present high-quality information that could positively impact this multinational corporation. Firstly, we adopted the McKinsey 7-S model alongside the value creation and market performance approaches to understand IGH’s internal forces. Likewise, Porter’s five forces provided insight into IGH’s external forces. We also used the Global Knowledge Management Model to access data from Pawlowski and Bick 2021 to understand IHG’s strategy implementation.

Although our findings highlight IHG’s weaknesses, they outline many strengths and opportunities that this organization could use to achieve its strategic outcomes. Some of the factors, such as the fresh tourism sector in Africa and Asia, the benefits of an adequate cost leadership model and increasing technological advancements, could help optimize IGH’s strategy and general productivity. We suggest that IGH convert its threats and weaknesses into business opportunities to help achieve its strategy, increase shareholder’s investment and create value for its customers.

InterContinental Hotels Group’s History

InterContinental Hotels Group is among the top hotel groups globally based on the number of facilities. This England-based organization has more than 5 656 hotel chains with approximately 843000 rooms globally. Most of its facilities, which operate in the US, are franchises. IGH dates back to the 18^th century when Bass Brewery, a British brewing firm, turned into a hotel organization (Skift, 2019). After launching the Crest group of hotels, this brewery expanded its hotel activities for several decades before purchasing Holiday Inn International from its affiliate partner, followed by the 1998 acquisition of InterContinental Hotels from a Japanese business mogul. Later, this organization disposed of its brewing business before evolving into a Six Continent. However, the company became two business entities: Mitchells & Butlers and InterContinental Hotels (Skift, 2019). As the former invested more the in soft drinks and restaurant business, the InterContinental Hotels Group ventured inthe to hotel business.

As the firIGHH’s CEO, Cosslett Andy establishthe ed Hotel Indigo br,and followby ed the massive revamping and re-launching of the Holiday Inn and its many Express brands in 2007. Years later, Cosslett’s successor, Richard Solomons, who emphasized a majority-franchise model, received backlash after IGH’s poor performance (Skift, 2019). Critics argued that Solomon’s inadequate orientation to digital trends, such as Airbnb, contributed to the company’s underperformance. Instead of making deals to expand the business, IGH started giving its investors cash until its former chief commercial officer, Barr Keith, became its CEO.

This study used the McKinsey 7-S model, value creation, PESTLE Analysis and Five Forces models to articulate its theme efficiently. Likewise, researchers used the Global Knowledge management model to access data from Pawlowski and Bick 2021 to understand IHG’s strategy implementation. The four data experts from our research team analyzed this information before presenting it for use.

InterContinental Groups Hotel’s Mission and Vision

IGH’s mission statement is to become the greatest company in the world by expressing great employee values, good work ethic and excellence. More so, this organization aim to establish a chain of hotels that meets its clients’ expectations and aspirations. Its developmental roadmap relies on a high-performing and engaging workforce (Skift, 2019). As a result, IGH has a set of values titled The Winning Ways, a guide towards achieving long-term vision and future preparedness. In particular, the Winning Ways reinforces the relationship between IGH and its clients, business owners and colleagues, hence supporting business growth. In the same context, IGH’s vision is to become one of the world’s great companies (Skift, 2019). This principle presents IGH’s core aspiration as to having reputable brands.

Analysis Models

We use McKinney’s 7-S model to analyze and identify IGH’s internal factors of the entity that could influence the effective execution of its business strategy. This model’s components include the system, style, structure, human resources and expertise, and shared values. Besides, IGH’s comprehensive operating system has specific features which enable it to sustain the hotel industry’s demand (Sammut-Bonnici, 2015). These include the web presence, reward system, brands, reservation systems and hotel distribution. IGH’s divisional organizational structure enables it to organize and manage its operations depending on the geographical business areas: greater China, US, and EMEAA. This structure allows IGH’s managers to stimulate business growth and scale leveraging through proper resource distribution. Nevertheless, IGH should capitalize on the growing African and Asian markets, which are rapidly evolving into major tourist destinations (Wheelen et al., 2017). About style, IHG capitalizes on a transparent, collaborative working style and leadership to boost its strategy.

Accordingly, this firm uses work rotation to allow career advancement among its dedicated teams. However, inadequate collaboration among its departmental heads causes major problems. Likewise, internal career development, especially through promotion, can stimulate inbreeding (Wheelen et al., 2017). In the same context, IGH relies on vigorous in-service and induction programs through its Academies, People Tools, online training, forums and e-guides to achieve these objectives. Finally, IGH’s shared values aim to boost work satisfaction and organizational operations (Wheelen et al., 2017). Values such as celebrating differences and working better together drive this agenda. However, IGH managers could make shared values meaningful by listening to followers’ concerns and acting promptly. Generally, the above analysis could be less useful because it relies on a static model and the complexities of appraising the model elements’ fitness level. Likewise, this theory does not detect the gaps during strategy implementation.

IGH’s External Environment

PESTLE Macro Analysis

PESTLE analysis, which stands for political, economic, social, technological, legal, and environmental, is an approach applied to strategic management for assessing the environment. With more than 3,200 hotels in the US alone, IHG has more properties in North America than any other region in the globe (Marr, 2016). For this reason, the next section will concentrate on this region. This arrangement makes a distinction between the following factors:

Political factor: Limitations on visas

The democratic system and strict rule of law in the United States create a favourable atmosphere. This nation has a favourable impact on the world market. Nonetheless, there are a growing number of terrorist attacks in the United States, including the attacks of September 11 terrorist strike (Wheelen et al., 2017). As a result, getting a visa from someone else who wants to travel to the USA is more challenging. This constraint’s impact on some clients’ perceptions could significantly affect IHG operations and the bottom line.

Economic Factor

The Great Recession and Covid-19 Pandemic

The financial Crisis of 2007–2008 and the economic shutdown due to COVID-19-19 in 2020 caused the U.S. GDP to drop significantly. These are examples of an economic variable hampering business growth. IHG saw a decline in net income from 338 to -$294 million in the same year (2009). More so, this company reported a 53.4% revenue decline in the third quarter of 2020 due to the COVID-19-related shutdown (Makortoff, 2020). The pandemic restrictions barred people from travelling, hence leaving IGH’s rooms empty for more than one year. The US economy is doing well, as seen by this, and IHG can make money there, provided other factors don’t negatively impact earnings.

Rate of Unemployment: Recent studies have linked recent recessions and pandemic-related periods to increased joblessness. In this regard, IGH should expect this trend because increased joblessness translates into fewer traveller days and, consequently, fewer hotel stays.

Social media

People these days enjoy posting details of their everyday lives on social media sites like Instagram and Facebook. They would express their emotions in writing, share pictures, and offer comments. People would, therefore, indirectly benefit from advice because of this behaviour since they will post their experiences through their Facebook pages. Additionally, businesses can interact with the public via social media platforms like Instagram (Marr, 2016). People can get the most recent information on discounts and new products by visiting the fan page. It may increase awareness of IHG and encourage more individuals to visit.

Cultural disparities: It is imperative for hotels to take cultural variations into account when devising their strategies. Furthermore, as every client is unique in their demands and preferences, cultural differences can be used as a selling feature to draw clients. Based on this factor, customers’ desire for hotel brands has also increased (Marr, 2016). IHG may leverage these elements to strengthen its unique selling proposition by, for example, redesigning hotels and boosting local aspects.

The technological factor:

The creation of the Internet: The Internet is growing quickly, and people like using it whenever and wherever they choose. The internet is a great source of information for them. The advent of the internet led many businesses to decide to use it to market their goods (Marr, 2016). Additionally, employing an internal reservation system gives travellers the option to book hotels online rather than through a travel agency. IHG can advertise them more successfully and save more money on promotions as a result of this element.

The creation of Smartphone apps and smartphones: The Smartphone: King of Convergence source claims that the quick development of smartphones, along with the growing tendency in subsequent years, indicates that people are now reportedly carrying a minimum of one mobile device with them at all times. These trends have led to the development of numerous smartphone apps, including Instagram, WhatsApp, Facebook, and others, that make it simple for users to obtain the most recent data (Marr, 2016). As such, it provides IHG with a handy means of promotion and draws in more customers to buy their merchandise.

Legal consideration:Patent and trademark protection

In the United States, safeguarding a company’s intellectual property or brand is crucial. A corporation should register a trademark or patent even if it feels it lacks the resources to pursue legal action against trademark or patent infringement (Wheelen et al., 2017). IHG bases its security on the idea that third parties won’t use the trademark.

Environmental component

Environmental safeguarding: Environmental protection is a growing community problem these days, and practically every firm is making a contribution to corporate social responsibility by lowering their carbon emissions and interacting with the community. IHG may establish a favourable reputation by implementing sustainable practices.

Five Forces in Micro Analysis

To formulate a competitive strategy, managers must take into account and assess the five competitive factors that exist in the industry: substitutes, buyer power, supplier power, potential entrants and competition among current enterprises.

The threat of new entrants: Medium:

Although it would be extremely expensive to build a hotel, pay employees well, and conduct market research on demand, it is conceivable to get into the hotel business. Recent studies have claimed that “the starting capital for establishing a small hotel to compete against major players in the hotel and tourism sector is between $5,600,000, minus $60,000 for stocking a 62-room facility (Wheelen et al., 2017). Restricting new competitors can, therefore, be effective in promoting IHG’s interests.

Leader of the brand

Leading brands in the hotel sector that have a significant global impact include Marriot International, Starwood Hotels, Wyndham Worldwide, Accor SA, Best Western International, and Intercontinental Hotel Groups (Wheelen et al., 2017). IHG can differentiate itself from the competition and win over developers and consumers by using its brand names.

Level of Competition among Established Hotel Businesses: High

Porter’s model argues that the hotel and tourism sector can retain a high level of competition if many competitors have an equal balance. This trend stimulates gradual growth, inadequate switching costs, differentiation and high exit costs (Wheelen et al., 2017). Likewise, the hotel industry satisfies the stated statement, which indicates a high level of competition in the sector. Thus, it might be challenging for IHG to increase its market share.

Consumer’s bargaining authority: High

Rapid technological development has compelled companies like Expedia, an online travel agency, to offer a wide range of channels and details for clients who are booking hotels, including room costs, customer reviews, service, and standards of product quality. According to Wheelen et al. (2017), a low switching cost results from almost exclusively buyer decisions, which implies it is easy for buyers to transfer hotels. IGH must, therefore, take into account appropriate action or strategy to rectify this condition, even if it means raising costs.

Suppliers’ Bargaining Authority: Low

The hotel business has a vast supply chain, including firms that provide information and communication technology (ICT) and interior design and furnishings. As a result, suppliers have the least negotiating strength (Wheelen et al., 2017). Also, the hotel business is not dominated by a single supplier industry. As a result, it gave IHG a competitive advantage when dealing with suppliers.

Substitution Threat: Medium

Businesses promoting travelling, camping and other adventitious services, such as renting or owning a recreational vehicle, are evolving into IGH’s worst nightmare. Other threats include reduced switching expenses and affordable and advantageous alternatives pose a threat. As of 2011, Global Hotels & Motels IHG realized the significance of this factor when designing their approach.

IGH’s Internal Environment

IGH’s Financial Trends

We conduct an economic performance using a ratio to determine that IGH’s strategy is effective in creating value for shareholders. 2.2 The financial outcome. Over the past four years, IHG’s return on assets (ROA) has increased somewhat, with the exception of a single spike in 2015, when the ratio reached 32%. This trend resulted from revenue from the company’s other sources (Price, 2017). In a similar vein, IHG’s ROA, ROCE, and operating ratios all exhibit the same pattern. Due to its one-year age, this analysis has specific constraints and might not accurately represent IHG’s current financial performance.

Market Performance

We evaluate IGH’s market performance in this report based on changes in share price and market expansion. This strategy relies on IHG’s perception of both its place in the tourism industry and the prospects for growth therein.

Fluctuating share prices: Upon examining IHG’s stock activity during the previous five years, one can observe a fall in the share value starting in January 2018, when it reached its maximum point at $68.56, and ending in September 2018 at $53.44 (McCracken, 2018). This is a result of growing rivalry in the internet rental sector.

IGH’s Market Growth

When examining IHG’s revenue growth over the previous ten years, it is evident that revenue increased from $1.54 billion to 1$1.9 billion between 2009 and 2013 and declined in several years. However, this company reported a significant revenue increment of a whopping $0.06 billion in 2017 (from $1.72 to a total of $1.78 billion) (McCracken, 2018). The rise in room occupancy in 2017 was the main factor driving the improvement. Nevertheless, the market performance approach is constrained by the fact that market behaviour is extremely fluid and liable to change at any moment when investors get fresh data.

Value Creation

We chose this approach because it could provide information on how the company’s efforts or supplementary mechanisms drive strategic goals. Factors such as human and non-human resources and their input, technology and innovations, organization’s infrastructure, unit cost finances, and strategy can detect value creation (McCracken, 2018). Although IGH invests in five areas to stimulate value creation, this analysis does not prove that this company capitalizes on technology and innovation and humans or non-human resources to spur value creation.

Advantages in Comparison and Competition

Advantage in Comparison

IHG’s main competitors in the hospitality and tourism sector are Accor S.A., Hilton Hotels Corporation, Marriott International, and Starwood Hotels & Resorts Worldwide. Compared to the other four hotels, IHG operates in most countries and has the most rooms, hotels, pipeline hotels, and reward club members (Makortoff, 2020). In addition, IHG operates 4183 hotels under franchise agreements. Furthermore, research demonstrates that IHG has the largest operating mode and a potentially stronger reputation than the other competitors (Sammut-Bonnici, 2015). The fact that more consumers appear to be familiar with the IHG brand indicates that it is a well-known one. And in 2014, IHG brought in the most money.

Competitive Advantage

The four basic elements of superior efficiency, superior innovation, superior quality, and superior customer responsiveness will also be used to further describe competitive advantage.

IHG redesigned its online reservation system for superior efficiency, enabling its clients to make bookings online (Wheelen et al., 2017). The end result is a system that has increased customer satisfaction, driven further expansion of IHG’s customer base, and strengthened IHG’s presence within the hospitality ecosystem. More so, it has the capacity to enhance oversight authority and manage additional information regarding the anticipated expansion of IHG’s clientele in the future years (Sammut-Bonnici, 2015). Also, the revamped display and transaction tier of IHG’s updated website could positively impact its future activities. Besides, HGI’s ability to decrease internet-based reservation costs could help manage and decrease its expenses (Wheelen et al., 2017). Concerning innovation, IGH established “Holidex”, the first direct link with travel agents’ reservations and airlines beginning in 1977.

In addition, IHG launched the first regular customer club, Priority Club, which currently has 33 million subscribers worldwide, and Candlewood Suites, which was the first to provide complimentary guest laundry.” Furthermore, IHG welcomed the opening of its innovative hotels, which include The Holiday Inn Express Singapore Orchard Road, which received the BCA Green Mark Platinum Award and opened to customers and staying guests in 2008 (Makortoff, 2020). IHG received the 2010 Torchbearer Award for its excellent service to customers and quality. That included the Crowne Plaza Milwaukee West. In response, IHG’s General Manager clarified that that the company was proud of guests for acknowledging its associate teams’ effort in enhancing services and quality.

In order to provide customers with outstanding service, IHG applauded its Customer Information Control System (CICS), which is a transaction processing facility running 700 tips for database management and Casper, which is a friendly case tracking system using Web Logic Server 8.1 for guest complaints as part of the customer retention program. Likewise, IHG designed a web page so that guests could leave comments and recommendations on how to make IHG better and guarantee a more sustainable stay (Makortoff, 2020). More so, IHG established a section dedicated to Corporate Responsibility (CR) and employed a Sustainability Coordinator to oversee the location. Additionally, IHG runs the Guest Heartbeat program, which gauges brand loyalty and customer contentment.

IGH’s Strategy and Strategic Direction

IGH relies on the asset-light business model to stimulate significant growth. This approach enables IGH to establish brands that meet client needs and prioritize strong delivery trends. That occurs through franchizing and managing hotels instead of being part of its owned asset. Although IGH considers cost leadership strategy as part of the asset-light model, it isolates it during implementation (Makortoff, 2020). As a result, its 2018 report consisted of an initiative to raise $125 million for its 2020 annual savings for investment. IGH should make cost leadership strategy part of its daily activities by implementing each of its components. This approach would help strengthen the brand reputation by aligning all the departmental operations with consumer aspirations.

Conclusions and Recommendations

The above analysis provides insights into IGH’s strengths, limitations and opportunities. Whereas some factors threaten IGH’s strategy implementation, others offer an opportunity to achieve its primary objective. As a result, we recommend that IGH capitalizes on its strengths to mitigate certain limitations threatening its operations. That entails investing in a cost leadership model and expanding in African and Asian hospitality and tourist markets. Likewise, IGH should address corporate inbreeding and bridging the interdepartmental cooperation gaps could also eliminate IGH’s business limitations. Adequate mitigation of the highlighted threats and weaknesses could enable IGH to reap big from its strategy while creating value for customers and shareholders.

References

Makortoff, K. (2020). Holiday Inn Hotel group revenue falls as COVID-19 keeps people at home. The Guardian, October 23. https://www.theguardian.com/business/2020/oct/23/holiday-inn-hotel-group-sees-revenue-fall-as-covid-19-keeps-people-at-home

Marr, B. (2016). How big data and analytics are changing hotels and the hospitality industry. Forbes.com, June 18.https://www.forbes.com/sites/bernardmarr/2016/01/26/how-big-data-and-analytics-changing-hotels-and-the-hospitality-industry/

McCracken S. (2018). HGI announces strategic growth plan and efficiency program. Hotel News Now, October 20.http://www.hotelnewsnow.com/Articles/274856/IHG-announces-strategic-growth-plan-efficiency-program

Price K. (2017). IGH reports: Solid revenue growth in half-year results. The Caterer, June 18.https://www.thecaterer.com/articles/508906/ihg-reports-solid-revenue-growth-in-half-year-results

Sammut-Bonnici T. (2015). Strategic management. John Wiley & Sons, Ltd, January 14. http://dx.doi.org/10.1002/9781118785317.weom060194

Skift C. I. (2019). Understanding Hotel Giant IHG. Skift, June 20. https://skift.com/2019/06/20/understanding-hotel-giant-ihg/

Wheelen T. L., Hunger J. D., Hoffman A. N. & Bamford C. E. (2017). Strategic management and business policy. Pearson.