bstract over a few decades. Secondly, the SWOT

bstract

The following case analysis focuses on a
firm called Club Med. Inc., which was
constructed as a U.S. subsidiary under its parent company Club Mediterranee in
1972. Background and some useful facts of Club Mediterranee will be provided as
an introduction. After that, this report will proceed to demonstrate three
things. Firstly, SWOT analysis will be used to show how successful Club Med has
been and how Club Med managed to develop a competitive advantage to gain great
success in the industry, as well as to defense their market share for over a
few decades. Secondly, the SWOT analysis will point out a few things that Club
Med should pay attention in order to protect their market share and expand
their business. A company evaluation will be provided to see if there is
anything Club Med should do or not do which cause them to attract more value
customers or lose existing and potential customers. Lastly, some guidelines and
recommendations will be given to Club Med in order to keep them competing in
the fast-paced market.

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Summary of
Company Background

Club Mediterranee,
commonly known as “The Club”, was found in 1950 as a non-profit sports
association by a group of friends who were fond of travelling to the seaside
locations for different fun activities on a tight budget. Gerard Blitz, the
active group member of “The Club”, was able to see the potential business
opportunity and growth of the association, which then he led the group and
invited his close friend Gilbert Trigano to join the association as their
business partners in 1954. Trigano agreed and became the managing director and
proceeded to transform the association into an actual business. Not long after
the transformation, they were experience a great success with their
all-inclusive and quality holidays experience at an a economical price among
the industry. What made them very successful sis that they understood the
importance of providing an all-in-one service to their customers with a price
that is better than reasonable. They managed to maintain their quality by
providing customers explicitly well-planned travelling experiences, which
granted them the ninth-largest hotel company in the world in 1986.

 

SWOT Analysis

Strengths

Club Med. developed its competitive
advantage and demonstrated its entrepreneurial spirit an by being the first
company offering the all-inclusive travelling experience. They focus on giving
its customers to best experience in the resort by providing the most end-to-end
services at an economical price. It might seem to people that Club Med solely
relied on this “blue ocean” strategy to take most of the market share and
achieved great success, however, this is not the case. It is obvious that when
a new business opportunity is being initiated, there will be a lot of other
entrepreneurs trying to copy the idea and compete for the market share. With
that being said, Club Med was able to maintain its dominant position in the
industry for a few decades based on two main strengths.

Financial performance

First of all, Club Med’s pricing strategy
allows them to take a huge market share as well as to defense its position in
the market. It was shown that Club Med had a strong position and ability to
bargain with its suppliers. For instance, there would be commercial airlines
took the initiative to do business with Club Med because of its huge market
sales potential. Those airlines would sell seats to Club Med at certain volume
discounts, and Club Med would sell these seats as part of their sales packages
to generate huge profit. After Club Med Club Med. will deal business with
different commercial airlines and buy seats at volume discounts. Due to the
cost advantages from its suppliers, Club Med was said to have the greatest deal
among its competitors. Furthermore, the Club’s villages were said to provide a
lot of jobs opportunities and generate tourism revenue. This means many
economically depressed areas and locations would be willing to compete and host
new resort villages for Club Med. From a financial performance point of view,
looking at the lodging industry sales volume in 1986, Club Med had a $227.6
million revenue and a profit margin of 4%, which is 1% higher than the industry
average. For air transport industry in 1986, Club Med generated a total of
$92.6 million revenue with a profit margin of 11%, which is 9% higher than the
industry average.

Non-Financial Measure of success

Second of all, Club Med understands that
its core business is to provide services to customers. From that, Club Med has
always been focusing on training their travel agencies and GOs. In 1983, Club
Med was determined to increase its loyalty to Club Med and they started it with
targeting the top-selling travel agencies. For example, they would give
explicit and specific training to the agents to make sure they understand what
the company was selling. Most importantly, how to provide the most satisfactory
experience to their customers. Furthermore, the GOs staff are dedicated to creating
“family spirit” to the customers, which they can finally get to live a few days
of complete and only enjoyment. This is the culture that Club Med has always
been trying to hardest to promote to their customers. For one, it increased the
interactions between the company and the customers. Using a warm, relaxing, and
caring culture to demonstrate the welcoming atmosphere to their guests, not
only will this strategy attract more customers, it will also make the customers
come back again. This explains why the guests’ occupancy jumped from 169,000 in
1981 to 332,000 in 1986. Looking at the nonfinancial measures, it is clear to
see that from Exhibit 9, the likelihood of vacationing at Club Med in the
future, extremely/likely from the questionnaire that customers answered was
dominating the chart, which implies that customers were extremely satisfied
with the services Club Med provided.     

As a result of their pricing strategy and
focuses on customer loyalty, Club Med did a great job securing its market share
as well as expanding its business.

 

Weaknesses

One of the weaknesses that Club Med has is
very obvious; the turnover of the GOs staff. Forecast for revenue is definitely
the most important part of a business, however, most companies neglect the fact
that even expenses require forecasting. Here, report showed that there were 35,000
GO applications for 2,000 positions, as much as it seems that those jobs are
very desirable, the turnover rate just seems way too high. It might have
something to do with the company’s preference to stay a strong bargaining
position in negotiating wages or working condition with its employees. High
turnover rate would damage the company’s reputation and operational efficiency
considering training requires times and money. Club Med might need to focus
more on how to retain talent and employees.

Another weakness that Club Med has is its
focus on word-of-mouth marketing strategy. It is true that customers
recommendations come in a huge part to Club Med’s business. However, even
though it was proven to be successful to their business, instability and uncertainty
might restrict Club Med to achieve even more in the industry. Even worse, it
might result in loss of  potential
customers when they only focus on word-of-mouth marketing.

 

Opportunities

Looking straight
at the potential size of markets in various countries (exhibit 5), there is a
few comments to be made. Firstly, the forecast of approximately 1.4 million
potential customers is tremendous. By this numbers, management should
immediately react to what they can do to capture as many customers as possible.
Secondly, to narrow down to the biggest growth areas, North America and
Asia/South Africa are showing 334% and 618% growth respectively. This means
that the Europe/Middle East market share is growing steadily and requires less
focus than the other two areas. To further look at the growth in terms of
people count, even though Asia/South Africa demonstrates a bigger percentage
change, North America actually has a greater number of potential customers of
approximately 600,000 potential customers, while only approximately 260,000 for
Asia/South Africa. North America is undoubtedly growing in a rapid fashion and
needs immediate respond.

Relative cost of increasing service
quality

One thing that Club
Med should think about is to open up more facilities or even making greater
bundle deals to capture all these potential customers. One good way to start
off with is to target customers demographically. Just like its competitor the
SuperClubs, if Club Med would be willing to pay some commission to the
travel-agency chains and target the niche market, the relative costs can easily
be cover by the future potential revenue. If Club Med is reacting fast enough
to catch as much revenue as possible, market share will expand rapidly, and
this will result a better positioning in the industry.

 

Threat

The biggest threat
to all businesses will always be competitors. Even though Club Med was the
innovator of the all-inclusive and club-style resort business, there would
always be other entrepreneurs trying to copy the idea and compete for the
market share.

Threat
to new competitions

With Jack Tar
Village company and SuperClubs organization (both being Jamaican-based
companies operating in the Caribbean area) being the two biggest competitors,
Club Med seems not to be reacting fast enough to match up with some of the
services and features its competitors are offering. For example, Jack Tar
instantly became a big threat the Club Med when they promote themselves as the
actual and genuine “all-inclusive” travelling experience which none of the
guests need to use any tokens or beads to purchase cigarettes or drinks in the
resort.

On the other hand,
SuperClubs also included all drinks in the AI price. But the biggest
distinction between Club Med and SuperClubs is the bundling packages strategy.
While Club Med packaged their services with air transportation and sold them
through agents or directly to customers, SuperClubs were able to target the
market through large tour wholesalers. SuperClubs would bundle the airline
seats with the ground packages and sell the whole packages through
travel-agency chains. This way of SuperClubs selling strategy also created a
big threat to Club Med mainly because they were able to capture the market
where certain groups of people can choose a more suitable package for them. To
put it simply, SuperClubs was able to target the niche market where Club Med
could have easily done it if they had thought about giving more options to
their customers.

 

Recommendations

Concerns and areas to improve

There are two things
that Jacque Giraud should concern the most about and react as soon as possible.
First, the word-of-mouth marketing strategy can drag Club Med from advancing in
the industry. Second, the GO’s turnover rate is way too high as it may be a
result of the six-month rotations in different villages

 

Changes

1)
Word-of-mouth marketing strategy

As mentioned above
in the SWOT analysis, word-of-mouth marketing strategy is definitely a
important part of where Club Med’s business is coming from. However, even an
executive from Club Med admits that they would be losing potential customers
who have never visited Club Med or do not have any friends who have come to
Club Med before. Not able to capture potential customers may result in losing
revenue, however, losing potential customers to competitors will result in
severe threat to Club Med’s positioning. Club Med should consider focusing more
on attracting new customers through media because the word-of-mouth passing
idea can only be very limited. If any external factors to cause customers to
start switching to other competitors, drop in customers occupancy will be very
tremendous.

2)
GO’s turnover rate

It may seem to
Club Med that over 35,000 applications were submitted for 2,000 positions is a
good sign of their desirable jobs. However, the high turnover rate of nearly
46% will result in significant damage to their brand as well as the financial
strength. It is obvious that training employees cost a lot of time and money.
To prevent turnover from happening, removing the need of the GO members to
rotate to different villages every six months may help them to remain in the
company for a longer period. It is not ideal to rotate them right after they
just get comfortable and used to the work environment, which may result in
turnover.

Implementing these two changes should result in
some form of improvements in the business. One of the changes focus on how to
generate more revenue, whilst the other change will result in providing better
services and increase employees’ loyalty. Combining them both should give Club
Med a big picture of how to keep their business moving in a 

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