Research Proposal on "Strategic Alliances in Hospitality Sector"

Research Proposal 16 pages (4558 words) Sources: 14

[EXCERPT] . . . .

Strategic Alliances in the Hospitality Sector

The proposed study will be guided by the following research question: "How can strategic alliances provide a competitive advantage, improved performance and profitability for companies competing in the hospitality sector today?" To this end, the theoretical perspective that will be used to answer this guiding research question and structure the problem situation involved is discussed further below.

Theoretical Perspective for Shedding Light on the Topic and Structuring the Problem Situation.

In an increasingly globalized marketplace, companies competing in industries of all types have sought strategic alliances that will provide them with a competitive advantage. For example, according to Wohlstetter, Smith and Malloy (2005), "Strategic alliances have emerged during the past several decades as a popular problem solving tool. Based on the benefits of collective action, strategic alliances are groups of organizations voluntarily working together to solve problems that are too large for any one organization to solve on its own" (p. 419). Thoughtfully implemented and administered, such strategic alliances can represent a win-win alternative for many organizations, but there remains a significant gap in the relevant literature concerning best industry practices for these purposes. As Culpan (2002) points out, there remains a paucity of relevant and timely studies concerning the theoretical perspectives that are used to evaluate the appropriateness of fit and selection of strategic partners in the globalized marketplace.

While there has been some on-point studies concerning how strategic alliances can be used in general to provide synergistic outcomes, additional research in this area is needed to help inform and illuminate the salient factors that are involved. In this regard, Culpan emphasizes that, "Although some literature has already been developed to address different dimensions of strategic alliances, further refinement is needed to understand and manage strategic alliances between firms in different industries" (2002, p. 2). Notwithstanding this gap in the body of knowledge, recent trends indicate that strategic alliances are proliferating in industries of all types around the world. In this regard, Wahab and Cooper report that there has been an increase in the type and levels of strategic alliances over the past two decades.

One of the primary reasons for this increasing proliferation of strategic alliances in general and within the hospital sector in particular is the synergistic beneficial effect they can have on all strategic partners. For instance, Wahab and Cooper (2001) also note that strategic alliances provide their members with specific types of so-called "rents." Such rents are exclusive to the strategic alliance framework because they are generated based solely from the strategic relationship and would not be generated by either member otherwise.

Even major corporations that enjoy vast resources and in-house expertise, though, are unable to realize the benefits that can accrue to such strategic alliances, and there is a need for cooperation between like-minded corporate leaders to forge partnerships with other companies in ways that are mutually advantageous. In this regard, Wahab and Cooper (2001) emphasize that cooperating with a strategic partner to achieve organizational goals can help each member achieve a competitive advantage that is directly associated with the relationship and which neither member could achieve absent the other.

As discussed further below, strategic alliances can be forged between companies competing in unrelated industries, or even between competitors in the same industry, but the primary focus in establishing viable strategic alliances is on mutually advantageous cooperation. As Wahab and Cooper conclude, "Alliances generate competitive advantages only as they move away from the attributes of market relationships. Such a proposition implies a move toward cooperation between firms (or other stakeholders) (Wahab & Cooper, 2001, p. 187). These trends in forging strategic alliances in recent years are largely in response to the increasingly fierce competition in the hospitality sector that has demanded new approaches to doing business.

Indeed, over the past three decades or so, the hospitality sector has experienced an increase in the level of competition causing a number of American companies to seek additional opportunities in the globalized marketplace (Jafari, 2000). This internationalization of companies in general and those competing in the hospitality sector in particular has been accompanied by the need for growth strategies that can help them become more agile in response to changes in consumer demand. For instance, Jafari also notes that, "Many [companies competing in the hospitality sector] compete at a global level in hopes to gain a greater market share and increased profits. There are several generic corporate growth strategies that tourism firms embark upon in order to gain both a competitive and sustainable advantage over its fierce competitors" (2000, p. 113).

Interestingly, strategic alliances are being forged by countries as well as private sector companies in ways that can be mutually beneficial for the hospitality sector as well. According to Laws, Faulkner and Moscardo (1998), such regional trading networks can help create an environment that is especially conducive to trade in general and the promotion of travel and tourism in particular by forging closer relationships in terms of cultural, political and economic ties.

By and large, though, the main focus in the strategic alliance literature remains on how companies can achieve synergism by creating partnerships with other companies, whether they are in the supply chain or in related industries in ways that can provide all stakeholders with some type of additional benefit that could not otherwise be attained. According to Wahab and Cooper (2001), these trends have also been fueled by the same forces that are driving globalization. For instance, Wahab and Cooper (2001) note that even small companies competing in the hospitality sector are increasingly able to compete with their larger counterparts due in large part to innovation in telecommunications and transportation.

These are important considerations for the hospitality sector where the vast majority of actors are SMEs. In this regard, Wahab and Cooper note that SMEs represents the most important component of the hospitality sector at present and these enterprises typically lack the in-house resources they need to launch and sustain global marketing campaigns on their own; by forging strategic alliances with partners that can share resources, though, these SMEs stand to benefit in a number of ways. This point is also made by Morrison who likewise reports that, "The rapid increase in the number of international strategic alliances is recognized as one of the most significant recent management trends. In particular, they may affect firms' cost structures, and provide access to important strategic resources. In this respect, strategic alliances are potentially important strategic options for the non-dominant small hotel firm" (p. 25).

The significance of strategic alliances in the hospitality sector is especially pronounced with respect to SMEs because these firms account for fully three-quarters of operations (Morrison, 1999, p. 25). By way of defining the sector, Lucas reports that, "The term hospitality industry serves as an overarching label for businesses whose primary purpose is to offer food, beverage and accommodation for sale on a commercial basis. The main activities or sub-sectors in the International Standard Industrial Classification of all Economic Activities (ISIC) Division 55 (Hotels and restaurants) are hotels, restaurants, bars (including pubs and clubs) and (contract) catering" (2003, p. 3).

Although every strategic alliance will be unique in some fashion, there are some commonalities involved in these relationships that can help provide a useful definition. For example, Sims (2002) reports that, "Strategic alliances are multifaceted targeted partnerships between synergistic organizations aiming at cooperatively sharing at lower risk and potentially increasing rewards for both. Sharing goals through strategic alliances can lead to effective commitment of resources and development of new creative options through sharing of ideas" (2002, p. 210). Before jumping into a strategic alliance, firms must take into account a number of factors that can spell the difference between success and failure of these initiatives. These factors will inevitably vary from company to company, but here again there are some commonalities involved that can serve as basic guidelines. In this regard, Sims (2002) reports that it is vitally important to analyze the potential relationship before taking steps to formalize a strategic alliance to ensure that partners contribute to the achievement of mutual and individual corporate goals.

Other factors that may require evaluation include how the strategic alliance will function and what attributes each of the alliance partners will be expected to contribute. According to Sims, "Related issues include pooling expertise to explore opportunity, increasing capacity for organizational skills / learning, adding value to products, or enhancing financial strength. These issues are not orthogonal and represent overlapping considerations" (2002, p. 210). Although the general purpose of any type of strategic alliance is to provide mutual benefits for all of the actors that are involved, there are a number of different specific purposes for which these partnerships are being established. Such context-specific considerations are also an important factor in for companies competing in the hospitality sector. For example, Sims (2002) reports that strategic alliances can be created that draw on the respective core competencies of each partner that facilitate the growth of the members' companies by improving market… READ MORE

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