Abstract partners in 1954. Trigano agreed and became

Abstract

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 better and brighter
direction