Club Med Case Analysis Introduction Club Mediterranee was founded by a group of friends in the year 1959 as a nonprofit association, and it became the ninth-largest hotel company in the world in 1986. Also, “Family Spirit” has become an indispensable culture as a part of this company. During it is development of the company and industry.
Club Med’s “All-inclusive, club-style” resort model has achieved overwhelming advantages in this industry. As a result, due to Club Med’s great influence in travel and hotel industry, it has been in a strong position with respect to buyers, suppliers and labor. Those advantages has extended Club Med’s elative advantages among its competitors, therefore, over the years, many companies that had tried to compete with Club Med, and failed.
However, with the development of travel and hotel industry, increasing number of hotel and travel companies and agencies keep entering and exiting this field, which bring unpredictable challenges and threats to Club Med, for example, as a result of airline deregulation, more and more agencies entering the market, which lead to higher and higher turnover of agency top-seller for Club Med, this company has reconsidered its distribution network and came out a solution to this problem. Nevertheless, this is not the first challenge nor the last challenge to Club Med.
Now, by the year of 1 986, Club Med was no longer the only successful chain of “All-inclusive, club-style” resorts. Other companies, such as Jack Tar Village and Superclubs, have provided much more attractive advertisement and services than Club Med to customers, and taken a big market share from Club Med. Because of increasingly tense of competition and fast rapid change of industry environment, the dominance of the company, Club Med, is no longer as obvious as before. Currently, this company is facing a problem, that is how to maintain or even increase its arket and finance performance in the future?
Analysis In the early years that Club Med entered this industry. It brought in a brand new business model and resorts style named “All-inclusive” and “Club-style”. That made Club Med a leader in this hotel and travel area. This blue-ocean market strategy gives this company advantage to develop as many as customers they can. Therefore, as the increase of customer volume increase, and scale extended. The company has developed three main relative advantages among its competitors in hotel and travel industry. 1 .
Price, Club Med provides its customers a “True formula” option which akes the price Of vacation package much lower than its competitors providing. 2. Strong power to bargain price with suppliers. In order to make its price down, Club Med must make its cost as low as possible. Commercial airlines give special volume discount to sell seats to Club Med at volume discounts, which Club Med sold as part of vacation packages at a substantial profit. 3. Leverage with labor. The position of “GOs” attracted a surprisingly large number of young and talented people.
Additionally, the company enjoyed a strong bargaining position in negotiating the wages of local village workers Those three advantages make Club Med stand out among in competition, however, comparing with its competitors, what differentiate Club Med is the internal culture and its service concept. Club Med trying to make its guests feel like in a small group. That is also the mission of “GOs” position. Therefore, the competitive advantages of Club Med are relative low price for a certain service, and strong power to bargain price with supplier, large volume of customers, and good leverage with labor.
When external environment changes, Club Med also made its strategy change to defence. During the 1 970s and early 1 980s, as the number of travel gencies increase enormously, the stability of distribution network of Club Med experienced a shock. The company took a prompt reaction to maintain its position and sales stable. after realized that loyalty was the key to solve the problem. In 1983, Club Med new strategy took action, which is proved defensible to the market shock.
This in time reaction to the market shock of distribution network reflected that Club Med is defensible to external environment changes, the internal operation of the company works very well. Overall, Club Med achieved a great success in the industry before the year of 986 when new competitors entered the market. According to the company’s financial report. The sales of the company grown rapidly from 1981 to 1986, the number Of customers are also enormously increasing during those years, and the company successfully maintained the sales per guest ratio stable, even under the shock of airline deregulation.
In general, Club Med is still the 9th-largest hotel company. The company makes $3 million of interest on prepaid holidays, which give confidence to potential investors. Also the return on Investment is All the data show the company is healthy and growing. As for non-financial factors. The most ignificant strength of Club Med is great word of mouth. Most people have heard of Club Med in one way or another. They have also been around the longest and have a lot of return customers because of all the entertainment the Club Med provide.
However the company is heavily rely on reputation for marketing strategy, currently, this is a great strength over its competitors, as it has brought Club Med large customers and return customers, but in the future, the customer market may reach a saturation, just as one Club Med executive said:Traditionally, Club Med’s strength has been that our customers recommend us to their friends. Word-of-mouth business is very important to us. Where we risk losing business is with people who had never visited a Club Med and who don’t have any friends who’ve come here.
Therefore, the company has to begin to think of putting more emphasize on developing new customers and compete with its competitors. As for the new competition Club Med is facing. By the year of 1 986, this company was no longer the only all-inclusive resort. Many of the firm’s competitors were realizing similar success. In 1 986, most of the all-inclusive competitors had adopted Club Med’s style of recreational activities, with staff embers acting as directors of these organized games. The only major difference that Club Med maintained was the fact that their price did not include drinks.
Caribbean The threats is becoming obvious to Club Med. First and foremost, they could not dominate the “All-inclusive, club-styl‚’ resorts market anymore due to the duplication of its business model by other firms, such as SuperCIubs, Jack Tar Villages, which are also based in Caribbean. Therefore, this situation has forced Club Med to transform its blue-ocean marketing to red-ocean. It is time for the company to consider nd develop new strategies to react to competitions as they have never thought of.
Second, “advertising on mouth” marketing strategy is not applicable in the new competition environment, since new competitors are all providing similar services to customers, which would make customers indifferent to advocate or speak up any of them to others. In addition, its competitors are using much more attractive method and advertisement to appeal potential customers, for example, Jack Tar’s glossy colour advertisements, implicitly criticizing Club Med’s spartan rooms and its methods of operation. Therefore, Club Med should wake up and develop ositive strategy to attract customers rather than waiting customers coming.
Third, consumers preferences have changed. Club Med found out that its all- inclusive price is not as widely accepted today as it was in the past. Vacationers are not willing to spend large amounts of money for vacations that include many activities they are not using as much as they had been in the past. This change in preference poses a problem for the company because Club Med’s competition has been able to customize travel packages for each consumer at prices that vacationers feel more comfortable with. Club Med value new customers very much.
The company is confidence for its service and environment, therefore, they view each new customer as a opportunity to develop his or her families or friends as its next guest. In fact, it worked pretty well and actually brought great reputation to this company. That is why the contribution Of internal culture in the company can not be ignored. Out of “Family Spirit” culture and service concept , Club Med aims to create harmonious and free community to all guests. Actually, service concept is one of the greatest strength Jacques Giraud concerned.
It enhances customers’ experience and appeals to broad market. Also, the company knows how to evelop customers’ needs and cater to their demands. This company is not only just providing a place to stay or just a vacation package, but also a vacation life-style and a community. Nevertheless, it is time for Club Med to consider improve its service quality to compete with its competitors. Even though the bundle price provided by Club Med is relatively lower than its competitors, the service quality is not as good as its competitor provides, or even worse.
That may be the reason why its competitor could put threats on Club Med. According to pricing theory, customers are recline to accept a high price condignly a higher service, this is he only price strategy that Club Med may adapt now, it should bring a more high-level customers to Club Med and boom its sales. In addition, the company should also consider the change of customers’ preferences, they may think of build a ladder of service, rather than just provide a uniform packages. This is a great opportunity for Club Med to extend its market.
For example, the company may develop more bundles that are just include hotel or transportation, rather than vacation packages which includes everything, since increasing number of customers are prefer to specialize and personalize their own vacation. This competitive option would be popular among customers. As for the relative cost of this kind of option, it is hard to tell, since suppliers are tend to give higher discount to large volume client. More personalize, more expensive.
However, as long as the company could gather and investigate all customers’ information appropriately, through big data analysis, the company would be able to develop profitable bundles to customers. Concerns & Recommendations Jacques Giraud concerns the overall performance of the company very much. Therefore, currently, the greatest threat is not coming from the competitors, ut from the market. This is the demands change of customers. However, if Club Med could not deal with it properly, its customers will flow to other firms, that would be a disaster for this company.
Right now, Jacques Giraud needs to focus on the improvement of internal products and marketing strategy, since this company relies too much on its return customers to bring them new customers, Club Med should be able to attract much more customers through its unique products and services. That would require this company to develop more customize possibilities to its guests. In addition, Jacques Giraud should also put marketing and price strategy on his agenda in order to competing with competitors, for example, media advertisement or colour flyers or promotion coupons are all good alternatives to attract customers and extend market shares.
Based on above analysis and considering the strengths, weaknesses, opportunities and threats summered by Jacques Giraud. Also considering his concerns that how to maintain the overall performance of the company. Following 2 alternatives may applicable. 1. Remain in the market of “All- inclusive, club-style” resorts, still providing vacation packages and other undles as they do now, but put more efforts on extend ing the market in more countries and regions, as well as competing with other new competitors in native area.
Since Club Med has accumulated so much experiences and great reputation, and considering its reliability among majority of customers, in the short term future, this company is most likely to maintain its current position, market performance and sales unless it made significant mistakes. 2. Develop more customize and personalize products and services to customers, at the same time, keep the relative advantages such as company culture and life-style to ompete with other competitors. Also, develop new marketing strategy to attract new customers.
Personally, recommend the second alternative, as it would give the company sustained profitable products, and enable the company to adapt to market demands. Thanks to the accumulated customer resources and suppliers as well as agencies during the past years, Club Med has the great relative advantage for accessing to big data to track customers preferences than its competitors. Therefore, it is much more easier for this company to develop customer-wanted products and services, and win the majority of the market in the future.