Peaceful Rest Motor Lodge
In this case, the businessman designs a product to satisfy himself for he has for a long time been traveling and had been in different motels. He looked what would satisfy him as a traveling businessman. In this idea, he thought that he would represent the overall quest of all traveling businessmen but his idea was unfortunately mistaken because most of his potential customers were mainly tourists and vacationers. This group of customers had only a few people who traveled for business. The motels were seen to be emergency products by some of the tourists and shopping products for other people who were for an economical place to reside into. He lost most people due to their perception regarding motels as heterogeneous products and others preferred special locations which made them have their reservation in advance.
Rest Motor Lodge is faced with a number of critical issues in its business. The current form of doing business in Motor Lodge is based on a traditional form of doing business. The organization has not taken into consideration of the new techniques of doing business and fully mechanizing its operation. The company does not have an advanced online booking which some of the clients considers very important. This is attributed to its convenience and the less time it would cost a client in looking for a room. The traditional marketing involves the use of newspapers, billboards, newspapers, local television channels in which they are limited to only a few people. This limits the number of people who get this information and does not apply to traveling businessmen. Businessmen are people who need international information as they travel from time to time in various regions.
E-commerce is an alternative for this business as its information will be readily available online. Businessmen will be able to know its locality earlier in advance and the price chargeable and the members of facilities they have and what kind of services they offer. According to Tristan, this will create a large number of the customer base as they are able to have a direct reservation due to its convenience (Shaw 2006). The adoption of this market strategy will lead to the business establishment because there are so many people using the internet nowadays. The adoption of this strategy will not only aim at customer’s convenience but will also be used to reach the most number of customers. The implementation of e-commerce will assist in taking full advantage of marketing in order to produce great content.
Through the adoption of e-commerce, there will be new intermediaries and facilities in the business. This means that value will be added due to the new channel of business information distribution. There will be the lack of geographical barriers, physical and temporally barriers. This indicates an increased advantage to competitors since its reputation will increase and its brand name strengthened. If the business adopts electronic commerce as a way of doing business social, political, cultural and economic barriers will be overcome. There will also be less channel of conflict which results into negative energies of doing business. The system will also create demand through direct promotion and advertisement (Shaw 2006). With an online business, there will be market separation due to the product individual targets and customization. Company’s organization will be developed in a manner that it can be able to deal with a large number of clients in a hierarchical manner. As a result, there will be proper management of data electronically this will increase business security. This, in turn, will increase customers trust-reducing the overall form of doing business.
The system will also manage business logistics through just in time concept that will ensure there are control and increased efficiency which will increase cash flows projections. There will also be better communication and interactivity with the clients directly. Digitalization of the business will also be enhanced will make the business easier to conduct.
Another critical issue of the business is based on the room prices. Prices do not entirely indicate the amount of revenue to be made by the business. Tristan Knaus, there is no point of giving away the room yet that will not mean that there will be an increase in the occupancy rate. This means that lowering the prices and making them affordable to all class of people and the businessmen will not attract people. Price is a relative sensitive area in a business but it cannot be used alone to attract businessmen. There are different strategies to use together to increase the occupancy rate and revenue in general. Price effect has an impact on the market based on how consumers will spend their money. The current form of business has not differentiated different classes of its customers as it has a general price on all the rooms. The income effect indicates that consumers use their money or demand for goods and services based on the increase and the decrease of their incomes and it is not affected by the price tagged on the commodities. Therefore lowering the prices will not mean that the occupancy rate will increase (Lu et al 2016).
To overcome this critic the business can adopt strategic pricing which will create a sustainable long-term solution. Promotional pricing may help the company in short term battles but will fade with time. Having an outward eye to the environment will be of great assistance but has to be used together with an inward eye. Through the pricing, model prices will be strategically placed in the different class of people in order to add value to its portfolio.
Adding value to its services despite varying prices will greatly stabilize the business generating more sales. Understanding the various market bases will result in right pricing. Intelligence analysis will give a clear understanding of pricing actions such as using non-price responses. This will involve matching of competitors prices and reveal the cost advantage, competing on the quality of the rooms and the adoption of co-opt contributors which involve strategic partnership with providers of related services. This means that lowering of prices should be the last thing to adopt as many businessmen and other people prefer to pay for value added service at an extra cost in order to get what they desire rather than pay low prices that will not give them the satisfaction they want (Lu et al 2016).
Franchising the business is another critical issue due to the amount of money used. The holiday inn alternative will require a great startup capital due to the required improvement. The location of the motel is not favorable as it can only be found looking for the resort area (Barkoff et al 2008). The cost of running the business will increase in order to form a centric culture for the customers. Franchising will include restrictions and create frequent monitoring. By franchising such services there also arises a risk of going out of business which can create a bad reputation. Profit realized will be shared among the different stakeholders who launched the holiday inn alternative. There is also a risk of inflexibility due to the restriction which may hinder business growth (ATER et al 2015).
The lodge may adopt cooperative organization which can be achieved through various strategies. The motel may create and develop recreation facilities such as a pool in order to avoid franchising as a way of providing the services. This will increase the completion as it will be able to offer the same services as its competitors.
Advertising of the locality using the billboards will also create awareness of where it is located rather than leaving it for the people to find by themselves (Blair et al 2005). This will also assist the motel not to associate its self with the already established business but will be able to establish itself despite the location.
Recommendation
As a result of the rate at which the company is losing money and also the low occupancy rate that is below the company’s average even though the prices are low. It is therefore recommended that the management should use ample time as well as funds so as to be able to fulfill the important operations that would enable the company to grow. The funds would enable the company to be able to advertise and also to be able to launch sales promotions that would result to a higher occupancy. Advertising would make it easier for the customers to be able to find the motel more easily and thus increasing the occupancy. It is also recommended that the motel should indicate signs that indicate the geographical location of the motel. This is the cheapest and effective form of advertisement that would help to save some cash and is used each and every day and helps to show the existence of the motel. The culture of the motel ought to be customer oriented and thus resulting to more online reviews from the customers so as to attract many more customers thus increasing the number of customers. In the current time in business most of the customers look for reviews online so as to make decisions on purchasing services from the motel.
Another recommendation is that there is need for the motel to increase its services by widening the selection of activities in the motel. For example, there should be the innovation of recreation facilities such as pooling activities in the motel.
This would help to increase on the range of customers who will visit the motel for various purposes. The adoption of this system in the motel will help to reduce on the unnecessary expenses in the company and also will help reduce direct competition from other people with similar line of business due to the full-service facilities in the motel. Franchising of the business will thus not be recommended since the business would have implemented on the above recommendations and thus no need for franchising. It is therefore important that the management of the motel should ensure that they have implemented all the recommendations and that they have increased quality and selection of their services.
References
ATER, I., & RIGBI, O. (2015). PRICE CONTROL AND ADVERTISING IN FRANCHISING CHAINS. Strategic Management Journal, 36(1), 148-158. doi:10.1002/smj.2212
Barkoff, R. M., Selden, A. C., & American Bar Association. (2008). Fundamentals of franchising. Chicago: American Bar Association, Forum on Franchising.
Blair, R. D., & Lafontaine, F. (2005). The economics of franchising. New York: Cambridge University Press.
Lu, L., Gou, Q., Tang, W., & Zhang, J. (2016). Joint pricing and advertising strategy with reference price effect. International Journal Of Production Research, 54(17), 5250-5270. doi:10.1080/00207543.2016.1165878
Shaw, M. J. (2006). E-commerce and the digital economy. Armonk, NY [u.a.: Sharpe.
