The Organizational CHAPTER 4

Context
Learning Objectives

After reading this chapter you should be able to:

• Identify different elements of an H&T organization's internal
environment.
• Discuss the complexity of H&T organizations' internal
environment.
• Analyze an H&T organization's internal environment.
• Evaluate the influence of organizational variables/factors on
strategy formulation and implementation, and provide
recommendations to overcome potential challenges in this process
CONTENTS

• Identifying Different Stakeholders

• Organizational Functions
• The Influence of Organizational Structure
• Influence of Leadership Influence of Organizational
Culture
• The Organizational Context in the International
Perspective
IDENTIFYING DIFFERENT STAKEHOLDERS

One of the main concerns of today’s H&T organizations

is how to manage the interests of different stakeholder
groups in its environment.
If managers are to act strategically and plan their
actions, they must have some ideas about how key
players both in the external environment and in their
organizations will act and respond to changes and
challenges.
IDENTIFYING DIFFERENT STAKEHOLDERS

A stakeholder is any group or individual who can affect

or is affected by the achievement of a firm’s objectives
(Freeman, 1984).
IDENTIFYING DIFFERENT STAKEHOLDERS

• To meeting the needs of these groups, you need to

answer three general questions about stakeholders:
1. Who are they? (This question concerns their
attributes.)
2. What do they want? (This question concerns their
ends.)
3. How are they going to try to get it? (This question
concerns their means.)
IDENTIFYING DIFFERENT STAKEHOLDERS

• Many of the answers to the question “Who are they?” are long lists of
different types of stakeholders. These include customers, shareholders,
employees, suppliers, bankers, and community and pressure groups,
including environmental groups or employee unions.
• In response to “What do they want?,” we can generate numerous lists of
their interests. Each of the preceding groups may have different
expectations. For example, the ultimate interest of shareholders is
economic welfare.
• Finally, answers to the question “How are they going to try to get it?”
require careful analysis of different stakeholder groups’ influence on the
organization and their means to achieve their needs and expectations.
IDENTIFYING DIFFERENT STAKEHOLDERS

Stakeholder interests are the foundation of

corporate strategy itself, representing “what we are” and
“what we stand for” as a company. Organizations therefore
need to establish certain fundamental principles that guide
how it does business—particularly with respect to how it treats
stakeholders—and use those principles to drive decision
making.
ORGANIZATIONAL FUNCTIONS

• Organizational functions influence an organization’s

ability to respond to the changes in the dynamic
external environment. They can be divided into four
main areas:
• operations function
• marketing function
• human resources
• finance function
Resources, Core Competencies, and Distinctive Competencies

• Hospitality and tourism organization's should first identify

their tangible and intangible resources.
• Core capabilities and distinctive competencies are built on
tangible (what the company has) and intangible (what the
company can do) assets. Core capabilities refer to those
areas that an H&T company does exceedingly well,
whereas distinctive competencies refer to those areas and
activities that an H&T company excels at and is better
than its competitors
THE INFLUENCE OF ORGANIZATIONAL STRUCTURE

• Several types of organizational structure can be seen

in H&T organizations, which can include functional,
multidivisional, and matrix
• A functional structure
• A multidivisional structure
• A matrix structure
INFLUENCE OF LEADERSHIP

Every H&T organization has key individuals—leaders

with skills, ability, and vision to nurture and enable the
organization to develop a business strategy, identify
the resources required, and nurture other employees to
turn their ideas into business reality
(Pittaway, Carmouche, and Chell, 1998; Testa, 2007).
Long-Term Objectives

• Long-term objectives represent the results expected from pursuing

certain strategies.
The Nature of Long-Term Objectives
Objectives should be quantitative, measurable, realistic,
understandable, challenging, hierarchical, obtainable, and
congruent among organizational units. Each objective should also be
associated with a timeline.
Long-term objectives are needed at the corporate, divisional, and
functional levels of an organization. They are an important measure
of managerial performance.
The Balanced Scorecard

Developed in 1993 by Harvard Business School professors Robert

Kaplan and David Norton, and refined continually through today,
the Balanced Scorecard is a strategy evaluation and control
technique. Balanced Scorecard derives its name from the
perceived need of firms to “balance” financial measures that are
oftentimes used exclusively in strategy evaluation and control
with nonfinancial measures such as product quality and customer
service. (Key Performance Area and Key Performance Indicator)
• The Balanced Scorecard concept is consistent with the notions of
continuous improvement in management (CIM) and total quality
management (TQM).
Total Quality Management
Continuous Process Improvement

Pareto Diagram / Pareto Chart

Pareto Chart are used to identify the most important problems.
Usually, 80% of the problems result from 20% of the causes.
Juran Trilogy – includes Quality Planning, Quality Control and Quality
Improvement
Kaizen Methods – 5’S (Seiri – Sort; Seiton – Straighten; Seiso – Scrub;
Seiketsu – Systematize; Shitsuke – Standardize) – eliminate Muda –
Waste; Muri-Strain; Mura-Discrepancy.
Taguchi Method – Genichi Taguchi – who advanced quality engineering
as a technology to reduce costs and improve quality at the same time.
Types of Strategies
Types of Strategies
Joint Venture/Partnering

Cooperation Among Competitors

Strategies that stress cooperation among competitors are
being used more. For collaboration between competitors to
succeed, both firms must contribute something distinctive,
such as technology, distribution, basic research, or
manufacturing capacity. But a major risk is that unintended
transfers of important skills or technology may occur at
organizational levels below where the deal was signed.
Joint Venture/Partnering

• Joint venture is a popular strategy that occurs when two or

more companies form a temporary partnership or consortium
for the purpose of capitalizing on some opportunity. Often,
the two or more sponsoring firms form a separate organization
and have shared equity ownership in the new entity.
• Other types of cooperative arrangements include research
and development partnerships, cross-distribution agreements,
cross-licensing agreements, cross-manufacturing agreements,
and joint-bidding consortia.
Joint Venture/Partnering

Example of Joint Venture / Partnering

• Nokia is also in discussion with Facebook Inc. to form
a partnership that would embed parts of the social
network into some Nokia phones.
• Microsoft, based in Redmond, Washington, and Yahoo,
based in Sunnyvale, California, recently resumed talks
about search and advertising partnerships as many
firms are doing the same
Merger/Acquisition

A merger (vertical and horizontal) occurs when two

organizations of about equal size unite to form one
enterprise. An acquisition occurs when a large
organization purchases (acquires) a smaller firm, or
vice versa. When a merger or acquisition is not desired
by both parties, it can be called a takeover or hostile
takeover.
• vertical merger
• horizontal merger
Merger/Acquisition
Outsourcing

• Business-process outsourcing (BPO) is a rapidly

growing new business that involves companies taking
over the functional operations, such as human
resources, information systems, payroll, accounting,
customer service, and even marketing of other firms.
 Outsourcing

• Companies are choosing to outsource their functional operations more and more
for several reasons:
(1) it is less expensive,
(2) it allows the firm to focus on its core businesses,
(3) it enables the firm to provide better services.
(4) allows the firm to align itself with “best-in-world” suppliers who focus on
performing the special task,
(5) provides the firm flexibility should customer needs shift unexpectedly, and
(6) allows the firm to concentrate on other internal value chain activities critical
to sustaining competitive advantage.
End…

• Exercise
• Assignments

Q&A
ACTIVITY 3

Please identify the stakeholders of an

H&T company, discuss what each
stakeholder may expect from this
company, and explain how they can try
EXPAN
to achieve their expectations. You may
compare and contrast different
D
stakeholders’ influences on this
company’s direction in terms of their YOUR
power and interest.
Activity 4

• Exercise
• Assignments
 ASSIGNMENT 3

• 1. What are the factors in an organization's internal

environment that have influence on and a bearing on its
functioning?
• 2. How important are these factors for an H&T organization?
• 3. How do organizational structure, culture, and leadership
influence the strategy development and implementation?
• 4. What are the implications of a centralized organizational
structure for an H&T organization operating internationally?
Thank you