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    Uu No 13 2003

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    © All Rights Reserved
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    Theory and Practice in Hospitality and Tourism Research ~ Radzi et al. (Eds) © 2015 Taylor & Francis Group, London, ISBN 978-1-138-02706-0 Blue Ocean strategies hotel industry NC. Ahmat, R. Abas & A.H. Ahmad-Ridzuan Faculty of Hotel and Tourism Management, Universiti Teknologi MARA, Penang, Malaysia ‘S.M. Radzi & M.S.M. Zahari Faculty of Hoteland Tourism Management, Universiti Teknologi MARA, Shah Alam, Malaysia ABSTRACT: In the face of intense competition, the merit of Blue Ocean strategy towards the crea- tion of value innovation and the ability to exploit the untapped market for firm’s survival is indubitable. Some outstanding companies have proven that Blue Ocean strategy contributed significantly towards the organizational growth and success. However, despite its long existence and its worth, the scantiness of the strategy adoption is eminent. In light of this, it is worth diagnosing the characteristics of Blue Ocean strategies in the hotel industry to enable the hoteli nthesize the relevant factors associated with the strategy for a long-term sustainability of the industry, Iso imperative to know to what extent the execution of such strategy will have an impact on hotel financial performances. Keywords: Blue Ocean strategy, hotel industry 1 INTRODUCTION In today’s saturated industries, competing head-to- head hasresulted toa bloody ‘red ocean’ of rivals fight- ing over a shrinking profit pools (Kim & Mauborgne, 2005a; Koo, Koo & Luk, 2008). Therefore, employ- ing the right strategy is vital for a firm's long-term survival particularly for the hotel industry (Awang, Ishak, Mohd Radzi & Taha, 2008). According to Yang (2012a), hotel operators should continuously provide new offerings in an uncontested market- place through the evolution of a great number of modifications of room-associated amenities and the development of hotel products, which consecutively result in greater customers’ satisfaction, acceptance, and loyalty. This strategy known as the blue ocean strategy emphasizes on “value innovation” with the aim of reducing company cost, yet increasing values to customer hence making competition irrelevant. With supply exceeding demand in the hotel industry, ‘competing for a share of contracting market will not besufficient enough to sustain high performance. For that reason, companies need to go beyond competing through grasping on new profit and improving the growth opportunities for their business. 2 THE CONCEPT OF BLUE OCEAN STRATEGIES Blue Ocean reflects the unknown or the unexploited market space. Numerous studies conducted on Red Ocean strategies indicated that as companies try to outperform their rivals to grab a greater share of existing demand, stiff competitions in a bloody red ocean is resulted. This contradicted with the Blue Ocean Strategy (BOS) where companies need to think beyond competing to seize new profit and increase growth opportunities. It is undeniable that regardless of the approach used, each strategy involves both opportunities and risks. It is impor- tant to clarify the aim of the Blue ocean strategy is, not to outperform the rivals in an existing industry but rather to create a new market space of a Blue Ocean by doing things that others disregard. Apart from that, tapping the niche areas, and reengineer- ing the product and service provisions are the cor- nerstone in making the competition irrelevant. Prior to discussing BOS, it is worth to distin- guish the traits of ROS and BOS as illustrated by Kim and Mauborgne (2005a) in Table 1. It is apparent that BOS is rather a silent mover and a trend setter than becoming a follower. Kim and Mauborgne (2005b) further established various tools and framework to formulate and execute the Blue Ocean Strategy (BOS) interalia include the Strategy canvas, the Four-Actions Framework and the Eliminate-Reduce-Raise-Create grid. The strat- egy canvas is an alignment of key competing fac- tors and the offering values to the customers. The vertical axis comprises of the values or the benefits rendered to the customers within the variables or the key competing factors as technology and prod- uct offerings and the competition currently invested ‘Souree: Kim and Mauborgne (200%) in which is positioned at the horizontal axis. The diagnosis enable firm to position it and measures its relative performance against the rivals across the industry: What distinguishes BOS with other ‘management strategies then? As BOS emphasizes fon value innovation, the strategy enables fim 10 ploy and galvanize the right actions to mancuver by shifting the focus from competitors to alterna- tives and from customers to non-customers “The Four-action ramework is an analytical tool ‘where the management team systematically estab- lishes a new value curve through series of insightful ‘questions by reducing factors below the standard; liminating factors that the company disregard, Taising factors well below the standard and creat- ing the untapped factors. Reconstructing the buyer value elements according to Yang (20126), enables hhotel operators to create customer value, innova tive product and service offerings for customers, ‘thus resulting to an uncontested marketplace. ‘The Eliminate-Reduce-Raise-Create.grid_on the other hand, is an extension of the four action framework, which can be presumed as another ver- sion of SWOT analysis with the Eliminate factors replacing the Weaknesses, Reduce substitutes the Threats, Raise to replace the Strengths and Create to replace the Opportunities. Apart from manipu- lating those factors as organization normally does when performing the SWOT analysis, BOS allows ‘organization to pursue product and service dlfer- entiation ata low cost through the eliminate-reduce factors to break the value-cost tradeof 3. SUCCESSFUL COMPANIES UNDER. BLUE OCEAN STRATEGIES It is said that Air Asia managed to avoid Red Ocean by competing with Malaysia Airlines (MAS) and other regional airlines by examining the factors that industry take for granted and fac- tors that are important for customers (Ahmad, 2010; Ahmad & Neal, 2006). With the four-action framework proposed in the Blue Ocean Strategy, Air Asia implemented various strategic moves to Censure the competition with Malaysia Aidines (MAS) ‘tnd regional companies are irelevant This includes elimination of over the counter booking system, free food/beverage on the plane seating class booking system. The company also ‘managed to reduce "luxury" facilities provided by Airport Lounge, inflight attendance service, and Seat quality. In addition, raising or increasing the flight Trequency and shifting the focus on several key destinations, cteating online booking system, ‘and creating point-to-point travel system (Source: hutps/EzineAticles com/1031603) proved that Air ‘Asia demonstrates a strong valve creation to ben efits customers whilst reducing the company cos Implicit, the introduction of the low cost carrer with its strategic moves, the alluring tagline of “now everyone ean fl and the cheaper price con- note that people from all walks of life are given the chance to experience what was once considered as luxury” ata value for money price. With the sue cessful implementation of ue Ocean Stratcay, ‘Air Asia has diversified their business into Tone Hotel and Tune Money maintaining the same con ‘cept, the Blue Ovean marketplace (INSEAD, 2007; ‘irasia.com website) Other examples of successful company that implemented Blue Ocean Strategy include Apple ‘and Google. Apple is currently the world’s most outstanding telocommunication brand as compet itors find it hard (o imitate the products, Despite rumours over imitation of Apple iPhone appica- tion by Samsung Galaxy SIL, to date, there is m0 other company could outperform Apple in tems ‘of security, antivirus, application and whatnot. Even the rumour is true, but with its current per- formance and credibility, itis not impossible for Apple to recreate another new Blue Ocean. In Addition, the death of Steve Job somehow helped the company to boost its profit as customers willing to queue up just to get the brand new hand phone. Past studies on the Blue Ocean Strstegy proved the effectiveness of the Blue Ocean stat- egy implementation in various multinational companies including Apple, Canon, IBM, Me Donalds and Air Asia (00 name a few) In short, the Blue Ocean will remain the engine of growth land prospects in most established market spaces land itis consistent across time regardless of the industry while Red Ocean are shrinking readily (Kim & Mauborgne, 2005b), Nonetheless, despite all the success stories proven by the aforemen- tioned companies, lack of studies provides the information pertaining to the impact of the Blue ‘Ocean Strategy on their financial performances. With that, it important to look at the impact of such strategy towards the financial aspect of the company. 5 OF BLUE OCEAN IN HOTEL INDUSTRY Inassessing the growth strategies of three Chinese Hotel Companies, Qin, Adler and Cai 2012) a ial elements of their strategies were innovative positioning, keeping cost Jow, rapid expansion, continuous innovation, focus tency, extensive training and sev- “hinese cultural operational prac- thoes these attributes are the key elements in the Blue Ocean Strategy. According to authors also aggregating and integrating with the indigenous operation practices could create a huge competitive advantages for the three hotels which allow them to outperform other domestic hotels and compete successfully with their foreign counterparts, Yang (2012b) further identified the attributes of Blue Ocean Strategies in selected hotels in Tai- wan as laid out in Table 2. Although the findings cannot be generalized to all contextual setting, the input somehow is influential precedent in deter- mining the intrinsic values to be considered when adapting BOS in hotel setting. Parvinen, Aspara, Heitanen, and Kajalo (2011), pointed out that different approaches to BOS work in different contexts and context combinations. Like other industry, the attributes of BOS in hotel industry may vary from one hotel to another due to differences in business scale, scope, spatial and cultural differences. As hotel is a labor-intensive industry, other internal and external factors such as staff turnover rate can be considered. Other attributes for example hotel theme, product and services offering, marketing intelligence and type ‘of delivery system employed may profoundly impact the company’s financial and non-financial performance. The most important thing is for organization to consider the factors that they have control over and those they could not or beyond control, These attributes however, should dwell within the three main features of BOS, namely focus, divergence, and offering gripping tagline to cre- ate value innovation and enable firm to occupy a strong branding image to the customers. As com- Petition is unavoided, firms need to find a way to reconstruct the market boundaries by focusing on various issues as the alternative industries, the business dyads, the network chain, complementary products and service offerings, functional or emo- tional appeal to buyers and time. At the level of sales management, the strategic seeking of uncon- ested space by creating totally new network roles, value creation logics and benefits for customers does indeed facilitate profitable growth (Parvinen etal, 2011), Table 2. Characteristics of BOS in Taiwan hotel. “Flimination | Removal of tavel bariers for prospective visiiors 1 Taiwan Redaction Stabilize use of guestroom products and serviees Esablish a regional brand fr the Asia Pacific Rim ‘New market segmentation to atract mainland tour- ‘Marke integration among regional hotels The development of hotel packages to accompany cultural urism ‘Brand development (Branding expansion, brand dif= ferentiation) ‘Market segmentation (expand the marketing terto- ‘ies, e-structure distribution channels) ‘The provision of products and services (innovation in in-room amenities, understand guest preferences,

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