A key question in strategy research is why companies diverge in their conduct and profitability. Researchers have determined to view companies as autonomous entities, striving for competitive advantage from either external sources, or from internal resources and capabilities. (Gulati/Nohria/Zaheer (2000): 203)
Certainly, the objective of a company’s strategy is achieving competitive advantage, but additionally, the strategy itself is a source of competitive advantage. (Luffman/ Lea/ Sanderson/ Kenny (1996): 102)
The intensifying competition on the “world marketplace” (Wright/ Kroll/ Parnell (1998): 281) is a great challenge for strategic management. Understanding of how technology and globalization affect a company’s competitive positioning and creating global competitive advantage are the most important determinants of strategic management today.
European tourism is forced to respond to the pressure built by the globalisation of travel markets. Travel destinations become more and more remote while travel times become ever shorter. The developed tourism countries are consequently faced with cutthroat locational competition and forced to innovate and to lower prices. It is now widely understood in tourism locations that simply selling landscape, nature or comfortable hotel beds is no longer sufficient.
Adventure worlds, fun parks, visitor centres and theme parks are mushrooming. The objective is to create new attractions for visitors, and especially families with children will find that these facilities offer many advantages: entertainment, amusement and adventure.
Some of these artificial adventure and holiday worlds, such as Disneyland or CenterParcs, have meanwhile developed into so-called mega-tourism projects and are setting new standards in the fight for guests and visitors. Their size permits them to go in for global marketing and to substantially reduce the costs per visitor. The business formula is larger equal less expensive. This formula disregards the follow-up costs caused by growing traffic volumes, noise, accidents, landscape use, and environmental pollution. (Freyer (1998): 117)
Strategic management applies to managerial decisions that fuse the organization to its environment, guide internal activities, and concern organizational long-term performance. The strategy determines markets and products or services, it is about selecting where and how to compete, which organizational structure has to be established, how can employees be motivated, and how to allocate resources to create the greatest overall success. (Houlden (1996): 13; Stahl/Grigsby (1997): 21)
The point of implementing strategy is to fulfil stakeholder expectations in the long term that means to handle the uncertain future. To accomplish this purpose, the strategy has to give consistency and direction to the individual decisions of an organization and should continually be adapted according to environmental change. However, there are no concrete rules to perform this assignment, formulating and implementing strategies base on special techniques, frameworks, concepts and, more or less, on intuition and experience. (Grant (1996): 3; Johnson/Scholes (1999): 10-11)
“Strategy describes the way that the organisation will pursue its goals, given the threats and opportunities in the environment and the resources and capabilities of the organisation. As suggested by this definition, three factors that have a significant influence on strategy are the external environment, the internal resources, and the goals that are being pursued.” “When fundamental changes in the environment, the internal situation, or the goals of the organisation occur, it may be necessary to change the strategy itself. The strategy management process must be in place to ensure continuous re-evaluation of the key elements to determine whether changes are needed.” (Byars/Rue/Zahra (1996): 4-5)
The organisation being studied in this essay, is the European market leader in the provision of short break holidays, operating in the Netherlands, Belgium, Britain, France and Germany, a brief look at the background of this market leader itself is essential.
In 1976 Piet Derksen had a vision of how leisure time could be spent. It was a totally new concept something of a sports complex, a country club and a health spa. CenterParcs International had its origins in Holland, where the first village was built. Its success led to the building of another nine parks in Holland and two in Belgium. In 1987 the first English park opened, The Sherwood Forest Holiday Village. (Jennifer L Bentley (1988): 3)
Since the first CenterParcs village opened in Holland the company growth has been remarkable. The first task for CenterParcs was to recognise the needs and wants of the holiday visitor and present a product that permits the attainment of these. The individual purchases a holiday perceiving that will satisfy a need for some or all of the following: relaxation, status, appreciation of beauty, love and security.
CenterParcs is targeted primarily at the family market, and caters for all ages with the provision of ample facilities for babies and children. Its location in relation to significant population centres is extremely important to ensure that the villages are easily accessible for the short stay periods, which comprise its main business.
A major element of the philosophy of CenterParcs is the care and development of the environment, which guides and directs every aspect of the company's operations from its selection of new sites to its day-to-day operating procedures. (CenterParcs (a)(2002))
The strength of the CenterParcs environmental policies and its continuing regard for ecological matters are recognised by leading specialists and organisations throughout Europe, and a number of prestigious awards have been won by the company and its Villages as a result. (CenterParcs (a)(2002))
CenterParcs offers primarily short break stays, of weekends: Friday to Monday; and midweek: Monday to Friday. The option of longer stays at prime holiday times is also offered. Average stay 2000/01: 77 % weekend or midweek, 20 % week, 3 % week+. The success of the CenterParcs formula is demonstrated in its booking figures, which show occupancy levels of over 90% throughout the year; in 2001 the company had 3,2 million guests staying in its Villages. (29,4 % Dutch, 26,5 English, 18,3 % German, 16,7 % French, 9 % Belgian and 0,1 % other nationalities. Number of sleeper nights 13,7 million. Sales 2000/2001 approx. € 5 millions (CenterParcs (b) (2002))
CenterParcs as mentioned is the European market leader. The achieved position of a market leader is not a position to rest. CenterParcs must be constantly awake. Other companies look constantly to take a better position. The market leader must count on the fact that weaknesses are inexorably used. Leading companies such as CenterParcs would like to remain gladly number one.
The problems CenterParcs should be aware of are demonstrated by Porter’s ‘5 forces’ (1979 Mar/Apr, 'How competitive forces shape strategy', Harvard Business Review).
A framework for diagnosing industry structure, built around five competitive forces that erode long-term industry average profitability. The industry structure framework can be applied at the level of the industry, the strategic group (or group of firms with similar strategies) or even the individual firm. Its ultimate function is to explain the sustainability of profits against bargaining and against direct and indirect competition.
Porter's five forces, or factors that shape business strategy are:
- Threat of entry to the market from other organisations
- Supplier power
- Buyer power
- Availability of substitute products
- Existing competitors
Porter's 5 Forces
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Porter’s five forces framework (adapted from Porter, 1980)