Strategic Management Science

Assignment - OPS 3605B

Strategic Management Science - 2014 Page 2

Strategic Management Science - 2014 Page 3

Table of Contents
1.0 Introduction.......................................................................................................... 3

2.0 Competitive advantage........................................................................................ 3

2.1 Broad definition of Information Technology.......................................................4

3.0 Importance of information technology in hospitality industry..............................5

3.1 Examples of technology use in Hotels...............................................................5

3.2 Information technologys impact in the restaurant industry..............................6

3.3 Social networking to attract customers through information technology..........7

4.0 Conclusion............................................................................................................ 8

References.................................................................................................................. 9

List of Acronyms
IT Information Technology
CRM Customer Relationship Management
POS Point of sale

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Information technology is increasingly being used by organisations to develop strategic

competitive advantage.
Using examples, discuss how the information technology can be used in this way?

1.0 Introduction
Hospitality organizations attempt to understand what and how technologies can lead to
competitive advantage through enhanced productivity and value. Some firms invest in IT and
enjoy competitive advantage whereas some are struggling to gain competitive advantage from IT.
(Buhalis,1998).
However, technologies in organizations can be used in various levels which result in different
impacts on the firm depending on a plethora of organizational factors such as an organizations
mission, vision, technology innovation, resources, technology integration and skills. (Peppard &
Ward, 2004).
Hospitality industry worldwide is investing a tremendous amount of financial resources on IT
and this deserves better forethought, perception, and vision, into how ITs lead to a competitive
advantage. On the other hand, some organizations do not invest in IT because they are not certain
if they will benefit from IT.
According to a study conducted by Andersen Hospitality Consulting, the lodging industrys
primary focus would shift to customers from physical assets. Technology plays an important role
in helping lodging industry to reach and maintain customer focus. At the backdrop of the
changing requirements as well as increasing transactions, hotels need powerful and integrative IT
tools not only to achieve a competitive advantage but also to survive. However, there is no
framework that would assist practitioners to understand how to achieve IT-induced competitive
advantage in hospitality industry. (Cline et al,1996).

2.0 Competitive advantage

Professor Michael Porter (1985) defines competitive advantage as obtaining a unique position
relative to its competitors that allows it to consistently outperform them. According to Professor
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Michael Porter (1985), competitive advantage is to implement a value creating strategy not
simultaneously implemented by any current and potential competitors.
Competitive advantage can also result from a superior execution of strategies, speed, agility, and
implementation of resources above and beyond the competitions approach Low cost, value
added, speed, agility, innovation, and customer service are key competitive advantages discussed
extensively in the many research. ITs also yield to these key competitive advantages. For
instance, by implementing a CRM, a hotel may increase customer service, or by utilizing
revenue management system, the agility of the hotel increases. (Barney, 1991;Bharadwaj, 2000).
Success of IT usage is supported by high management skills. Many researchers indicate that
technology usage is influenced by organizational properties, personal characteristics of the
leader, and the fit between technology and organizational activities. In order to implement and
use IT applications managerial skills are needed.
Hotels and restaurants are continually competing for employees, locations, and more recently
information about customers. As more people are using the Internet there is a high amount of
information that is being captured on web server logs. Proper extraction of this information
coupled with high levels of service is what will help the hotel and restaurant industry build
competitive advantage in a troubled economy. An organizations ability to take advantage of
external environmental factors will help the firm sustain and grow in economically challenging
times. (Garver, 2002).

2.1 Broad definition of Information Technology

Tansey et al (2001) defined Information Technology as any form of computer-based
information system including mainframe and microcomputer applications. Some researchers
define IT as a set of technology that creates, saves, acquires, transmits, reconfigures, analyses
and communicates data and information. They understand hardware, software and
telecommunications as its key components. Some other researchers characterize Information
Technology as fuzzy, which is understandable since an overview of terminology shows that
scholars and practitioners understand and use the subject differently. (Orlikowski and Gash,
1992)

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3.0 Importance of information technology in hospitality

industry
Generally speaking, there is no doubt that IT is a backbone of todays society. It has reshaped our
way of living and working and become embedded in every sphere of our lives. The use of IT
radically changes business operations and reshapes products and services themselves.
Hotel executives understand the importance and power of information, especially in troubled
financial times. The development and use of information systems can additionally aid in hotels
ability to develop concepts for new development, target better locations, identify potential
franchisees, locate new labour markets, track employee performance, and, most importantly,
track customer satisfaction.
Magnini, et al. (2003) have identified six essential factors that can help build successful
marketing strategies through the use of data mining, a statistical technique that builds models
from vast data bases. They include, (a) creating direct mail campaigns, (b) planning seasonal
promotions, (c) planning the timing and placement of ad campaigns, (d) create personal
advertisements, (e) define growing and emerging markets, (f) help in room reservations
(wholesale and business customers). The factors are recommended to be used in conjunction
with other statistical modelling tools and help build competitive advantage.
Furthermore companies that effectively use technology will have the biggest effect on the
customer satisfaction. Researched on three hotels which were awarded best practices for their
technological innovations have showed that these programs were specifically designed to
improve service. (Siguaw and Enz, 1999)

3.1 Examples of technology use in Hotels

At the Balsams Grand Resort Hotel in New Hampshire, technology was used to help develop a
guest history log. The Balsams Grand used the guest history logs to capture customized
information on the guests that had already made reservations at the hotel. The program was one
of the first attempts to use an expert system model to gauge the needs and wants of the guests.
Information was generated in regards to hotel inquiries, rooms, room types and numbers, special
requests, times of year visited, any special requests, service personnel requested, etc. All of this
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information was stored into an individuals personal file. The expert system then can anticipate
almost any guest request. The success of this program has generated approximately 85% repeat
business for the hotel. Additionally, new business has been generated from previous guest
recommendations. (Siguaw & Enz, 1999).
Bostons, Fairmont Copley Plazas property management system was adopted and incorporated
to expedite the concierge service at the hotel. Property management system enabled to get guest
information such as newspaper preference, wake up time, overnight laundry service, restaurants
with distance and directions from hotel as well as many other options. The result was an
overwhelming, 90% satisfaction rate of the concierge service at this hotel, with an increased
revisiting rate. (Siguaw & Enz, 1999).
At the Ritz Carlton in Chicago, customer demand of technical help with computers in the rooms
was on the rise. With most guests making inquiries to the concierge office, both guests and
employees were getting frustrated due to lack of technical knowledge. In response Ritz
management created a new position, pulling from the hotel management information systems
department, called the concierge. With services being offered Monday through Friday, guests
were able to obtain any technical support they need in conducting business requiring computers
or computer technology. Customer service has improved overall, as well as the moral of the staff
at the Ritz Carlton. (Siguaw & Enz, 1999).
In addition to improving customer service and satisfaction several hotels
were

given

Best

Practices

Awards

for

information

technology

by

implementing systems that helped in the increased efficiency of hotel

operations. (Lee, Barker & Kandampully, 2003).

3.2 Information technologys impact in the restaurant industry.

There has been significant improvement in the technological build up in the
restaurant industry as well. Historically restaurants have been slow to adopt
new technology. Viewed simply as adding costs to the profit and loss
statements, restaurants tended to shy away from new technological
advances, because they added costs to already slim profit margins. In the
past 10 years there has been a steady increase in restaurants realizing the
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importance of increasing their level of technology to become more

competitive in managing the business. The technological transition phase
has seen restaurants shift from the cash register as the premier technology
to todays high tech online reservation systems as well as automated
ordering systems. (Leahy, 2008; Ansel & Dyer, 1999)
The first revolutionizing technology implemented by restaurants, was the
well-known point of sale (POS) systems. Developed in the early 1980s the
systems fit into the restaurant industry well by automating the jobs of the
service staff and kitchen staff. No longer was handwriting orders and hand
delivering them to the kitchen the means by which guest orders were
processed. The POS was able to save valuable time and was a much more
efficient way of executing this function. A major advance in this initial POS
system was that the servers no longer had to remember or input pricing on
hand written checks. The POS system was programmed with menu items
corresponding with price, increasing efficiency to new levels. Ultimately the
POS system had a positive effect on service quality. In the 1990s the
technology progressed again still utilizing POS technology and upgrading
ability to handle accounting and payroll functions. (Rubinstein, 1997).
Today the restaurant industry is still comfortable with, and utilizes POS
systems, although the technology has grown more complex and useful from
a managerial perspective. Vendors are continually trying to outperform and
win over business from each other by striving to add many upgraded
features to their systems. (Ansel & Dyer, 1999).

3.3 Social networking to attract customers through

information technology
Social networking is one strategy that can help the independents bridge this
gap. There is minimal cost attributed with social networking which allows
business of any size to participate. (Luebke, 2010). The driving factor of the
success of this vehicle is in the continual need for participation by the
restaurateur. Many of the operators are wary of participating because lack of
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knowledge and ability to navigate within the existing social networks.

Professor Michael Porter (1985) stated, the social media are here to stay a
new paradigm of how we communicate with one another and how we market
our businesses. Its time to get smart about how you may use social media
to your advantage.

4.0 Conclusion
It is evident through the literature reviewed that technology has played,
plays, and will continue to play a key strategic role in the growth and
progression of the hospitality industry. From its slow beginnings the entire
industry has progressed using technology to forge forward in many facets of
their industry (Griffin, 1998). Technological advances initially developed to aid
in the efficiency of operation and reduction in labor, food and other
operational

costs

have

ultimately

aided

these

organizations

in

the

attainment of the ultimate goal, customer satisfaction and repeat business.

Studies have successfully shown the industries drive to improve customer
service and quality through the use of technology. In this context there have
been positive effects technology has on the ability of organizations to gain
strategic competitive advantage. ( Garver, 2002; Siguaw & Enz, 1999).
External, strategic environmental analysis is critical in enabling organizations
to take advantage of opportunities. (David, 2009)
Nevertheless cost (of the technology) is one of the main restrictors as to why
the hospitality industry, both hotels and restaurants, have been laggards in
the adaptation of new technology. The industry consists of many types of
ownerships, both at the hotel and restaurant levels, ranging from national
and regional chains to independently owned operations. Smaller companies
more than likely will not be able to afford to invest in the latest type of
technology, creating an additional barrier to competition. The best hopes for
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these types of organizations will be to try and obtain second hand

information via the Internet or consulting service to make an attempt to
remain competitive. Technology has already broadened the scope of how the
hospitality industry functions today and will continue to forge forward in the
future aiding in the development of strategic competitive advantage within
the industry.
In todays environment IT represents a critical success factor in knowledge
management and plays a dominant role in the decision-making process.
Accordingly, many scientists argued that the understanding, interpretation
and use of IT may enable fundamentals to be created so as to sustain
competitive advantage.

References
Ansel, D., & Dyer, C. (1999). A framework for restaurant information technology. Cornell Hotel
and Restaurant Administration Quarterly , 40, (3), 74-84.
Barney, J.B., 1991. Firm resources and sustained competitive advantage, Journal of
Management, 17, 99-120
Bharadwaj, A., 2000. A resource-based perspective on information technology and firm
performance: an empirical investigation, MIS Quarterly, 24 (1), 169-196.
Buhalis, Dimitrios., (1998). Strategic Use of Information Technologies in the Tourism Industry.
Tourism Management 19(5): 409-421.
Cline, Roger S. and Rach, Lalia. (1996). Hospitality 2000A view to the next
millennium: A study of the key issues facing the international hospitality
industry in the next millennium. Arthur Andersen.

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David, F. R. (2009). Strategic management: concepts and cases (11th ed.,

Rev.). Upper Saddle River, NJ: Pearson Education
Garver, M. (2002). Using data mining for customer satisfaction research.
Marketing Research, 14, (1), 8-13.
Magnini, V., Honeycutt, E., & Hodge, K. (2003). Data mining for hotel firms:
Use and limitations. Cornell Hotel and Restaurant Administration Quarterly,
44, (2), 94-105.
Lee, S. C., Barker, S. & Kandampully, J.(2003). Technology, service quality,
and

customer

loyalty

in

hotels:

Australian

managerial

perspectives.

Managing Service Quality, 13, (5), 423-432

Leahy K. (2008). Chain links. Restaurants & Institutions,118, (18) 48.
Luebke, P. (2010). Social Media 101 for independent operators. Restaurant
Startup and Growth, 17-23.
Orlikowski, W.J. & Gash, D.C. (1992). Changing frames: Understanding
technological change in organizations.Working paper. Sloan School of
Management: Center for Information Systems Research.
Peppard J., Ward J., (2004). Beyond strategic information systems: towards an
IS capability. Journal of Strategic Information Systems 13 (2004) 167194.
2004 Elsevier B.V.
Porter, M.E., (1985). How information gives you a competitive advantage.
Harvard Business Review. JulyAugust, 149160.
Rubinstein, E., (1997). Outsourcing IT functions. Nations Restaurant News,
31, (27) 11.

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Siguaw, J. A., & Enz, C. A. (1999). Best practices in information technology.

Cornell Hotel and
Restaurant Administration Quarterly, 40, (5), 58-71.
Tansey, S.D., Darnton, G. & Wateridge, J.(2003). Business, information
technology, and society. London: Routledge

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