Style on Budget

Business

Strategy

Strategy | Zaina Ibrahim

44,547 charaters with
spaces

Contents
Introduction ............................................................................................................................................ 3
Problem formulation............................................................................................................................... 4
Methodology........................................................................................................................................... 4
Sources criticism ..................................................................................................................................... 5
Delimitation ............................................................................................................................................ 5
Strategic analysis..................................................................................................................................... 6
External analysis.................................................................................................................................. 6
The environment ............................................................................................................................ 6
The macro-environment - Berlin..................................................................................................... 6
PESTEL analysis................................................................................................................................ 7
Scenarios for Moxy in Berlin, Germany .......................................................................................... 7
Industry analysis Porters five forces framework......................................................................... 8
Strategic Group ................................................................................................................................. 11
Internal analysis ................................................................................................................................ 13
Core competence analysis ............................................................................................................ 13
VRIN analysis of Marriot ............................................................................................................... 13
Summary ....................................................................................................................................... 14
Strategic position .................................................................................................................................. 15
SWOT ................................................................................................................................................ 15
TOWS Matrix ..................................................................................................................................... 15
Strategic choice ..................................................................................................................................... 17
Generic competitive strategy............................................................................................................ 17
Differentiation focus ......................................................................................................................... 17
Moxys LifeStyle concept .............................................................................................................. 18
Strategy in action .................................................................................................................................. 19
McKinsey 7-S framework .................................................................................................................. 19
Key performance indicator (KPIs) .................................................................................................... 20
Balanced Score Card Perspectives ................................................................................................ 21
Strategic map ................................................................................................................................ 21
Conclusion ............................................................................................................................................. 22
List of Literature .................................................................................................................................... 23
Enclosures ............................................................................................................................................. 24
Appendix 1 ........................................................................................................................................ 24
1

PESTEL Analysis Berlin ................................................................................................................ 24

Appendix 2 ........................................................................................................................................ 28
Belrlin Fact Sheet .......................................................................................................................... 28

Introduction
The framework of this business strategy plan is based on a case, whereby Ikea and Marriot
International decides to partner making a new hotel management company. The opening of Moxy
Hotels was announced in March 2013, a European economy 3-star concept that appeals to the fast
emerging millennial traveller, combining contemporary stylish design, approach-able service and
affordable prices.
The tech-savvy Millennial Generation is an age group that is beginning to outpace the Baby Boomers
76 million populations with their own 79 million, and forecasted to reach even larger population gap
at 78 million in comparison to the Boomers 58 million by 2030. Born from 1980 and 1999, this age
bracket is the fastest growing segment for travel spending due to the increase of 20% in 2010 based
on American Express Business Insights (Lee, 2013). They are here now and are spending billions of
dollars and yet they have not reached their spending peak which is expected in 2017. Moxy is the
only hotel brand that is specifically targeting the millennial and publicly announcing it (Lee, 2013).
The investor Inter Hospitality, is part of the Property Division of the Inter IKEA Group. The aim of the
Inter IKEA Property Division is to create long term value through property investments. The division
is not associated to any IKEA retail operations (Brink,2013). Inter Hospitality is the main developer,
owner of Moxy and is investing US$500 million for 50 hotels in Germany, the United Kingdom, Italy,
Netherlands, Belgium and Austria (ibtimes, 2013).
Inter Hospitality has entered into an agreement with Marriott to develop hotel properties for the
MOXY brand on the European market. MOXY Hotels is a new brand by Marriott. Under the
agreement Inter Hospitality will invest in, develop and own the hotel properties. For clarity, no hotels
will be operated by Inter Hospitality or under the IKEA Brand. - An email from Linda van den Brink,
Marketing and office manager, Inter Hospitality Holding BV
In the beginning, the research project was about the combination of Ikea and Marriotts core
capabilities and how the synergy will affect Moxys strategy development. Due to the doubt of Ikeas
involvement in Moxys operation, it prompted me to email Inter Hospitality. Receiving an email from
Linda van den Brink, the marketing manager for Inter Hospitality and knowing that Inter Hospitality
will only invest and not operate Moxy, made the research change the focus towards Marriots
strategic capabilities instead.
Marriott is well known for their luxury and five star hotels, the challenge is how they are going to
enter the fierce rivalry within the economy segment in Europe particularly Berlin and still build
Moxys strategy on what Marriot International does best.

Problem formulation

How can Moxys strategy development in Berlin be shaped by using the core capabilities of Marriot
International?

Methodology
Theoretical lens
The angle of this project will be explained in order to guide the reader through this strategy project.
Furthermore this chapter will explain the use of models and theories used.
The Exploring Strategy Model is used to structure the project in studying Moxys future situation in
Berlin. The model has 3 phases that covers issues of context, content and process. Exploring strategy
model is chosen because it provides comprehensive and integrated framework for analysing Moxy
and understanding the strategic position; considering the choices Moxy has by exploring and
assessing strategic option for the future; lastly managing and putting strategies in action.
To understand Moxys strategic position in Berlin, external and internal analysis is fundamental. The
environment assessment is divided into three sections, the macro-environment, industry and the
competitors. PESTEL factors is used to analyse the macro-environment which is Berlin, from which
key drivers of change is identified. According to the identified key drivers, alternative scenarios
about the future can be constructed. Porters five forces are utilized in assessing the budget hotel
industry sector based on barriers of entry, substitutes, buyer power, supplier power and rivalry. The
combination of these will determine the budget hotel industry attractiveness. Strategic group
analysis is the inner layer of the environment; it helps to identify strategic gaps and opportunities.
Internally, the assessment of Marriotts strategic capabilities is to understand the organisations
strengths and weaknesses. VRIN will be used to analyse Marriotts capabilities and what might
provide sustainable competitive advantage based on their value, rarity, inimitability and nonsubstitutability. As Marriott is managing Moxys future operations, their capability therefore will be
diagnosed using SWOT in order to summarise the strengths, weaknesses, opportunities and threats.
SWOT is useful to generate strategic options. TOWS matrix which builds directly on the information
from the SWOT exercise, helps to focus the discussion on future choices. Strategic options discuss
the main influences that Moxy has to take into account in developing strategies. The environment is
complex and uncertain; assessing using strategic lens could help in rational approach to the
development of Moxys future strategy. The Design lens also provides a logical and structured way in
order to understand the forces.
Once Moxy has been positioned strategically, the research will then move to strategic choice. It is
concerned in responding to Moxys positioning issues by deciding how to compete in the market.

Business strategy has been chosen because it seeks competitive advantage in a market at the
business which introduces competitive strategy in Moxys domain activity. The purpose is to obtain
competitive advantage and create value for the customers both greater than the cost of supplying
them and superior to Moxys rivals (Johnson, 20 11). And one of the three generic strategies the
research will look at is focus differentiation strategy, targeting the narrow segment which is The
Millennial and tailor Moxys products and services to their needs, whereby broader differentiators
do not serve well. The purpose is to improve brand recognition and gain loyalty. Focus
differentiation is important because Moxy can defend themselves against Porters competitive forces
whilst reducing competition from the rivals.
The most important section is strategy in action, it is concerned with how Moxys strategy actually
being implemented. McKinsey 7-S framework is chosen because it highlights the importance of fit
between strategy, structure, system, staff, style, skills and superordinate goals. The purpose is to
form coherent reinforcing configuration by summarizing all the seven important elements. Lastly, to
measure the performance of Moxys strategic implementation, key performance indicators (KPIs)
will be utilized. KPIs is important because they focus on the outputs of Moxy, such as product
quality, revenue and profits.

Sources criticism
Sam Bowers from The Guardian wrote that according to Peter Andrews, managing director of Ikea's
property arm:
"This gives us a great opportunity to use our development expertise to build a high-quality hotel
property investment portfolio".
The data provided was less valid and irrelevant because the information is contradicting with the
email I have received from Linda van Brink, Marketing and office manager for Inter Hospitality.
According to the primary source, no hotels will be operated by Inter Hospitality or under the Ikea
brand. The primary resource in the mode of email was appropriate for my topic because the
problem formulations concern is about the core capabilities of Ikea and how it can shape Moxys
business strategy. In relation to her email, the problem formulation was change and the strategy
plan has to re-write again for quality purposes.
Moreover variety of sources provided from the online news are almost the same if you compare
them together, it seems that the journalist has been doing copy paste. The information was less
organized and the quality was not reliable.

Delimitation
The research have not analyse Ikea, due to the primary resource received which is an email from the
marketing manager of Inter Hospitality. According to her, Inter hospitality and Ikea brand act only as
an investor and owner and no Moxy hotels will be operated by Ikea.

Strategic analysis
This section will focus on what Marriot can do in shaping Moxys strategic potential. The purpose is
to understand Moxys strategic position in Berlin.

External analysis
Comment [J1]: Why do you choose to
do external analysis first and what does
this analysis lead to (make it short)

The environment
The purpose of doing the external analysis is to have a clear understanding of the environment
in which Moxy will operate. The research will analyse the environment which encompasses in 3
layers; the macro-environment, industry and the competitors.

The macro-environment

(Berlin)
Industry
(Budget chain hotel)

Competitors/Market

Moxy

The macro-environment - Berlin

Berlin is a fascinating and unique cultural metropolis city in the heart of Europe. Berlin is home to
almost 180 nationalities. The diversity of Berlin makes it a magnet for leisure destination with a
global reputation for its festival, nightlife, contemporary architecture and arts. The capital city of
Germany is a hub for individuals who are attracted by its liberal lifestyle and artistic freedom. The
vibrant city of Berlin is characterised by continuous change and at the same time preserving the
historical elements of the city (VisitBerlin, 2013.

PESTEL analysis

PESTEL analysis is a framework categorises environmental influences into six main types: political,
economic, social, technological and legal (Johnson 2011). The purpose of analysing the macroenvironment is to explore and give an overview of how future issues of these six main types might
affect the organisation. It is Important in shaping Moxys strategy because it will be used to position
Moxy strategically as well as identify the trends and changes. Furthermore PESTEL can gain insight
and meet the needs of the future hotel industry through seeking attractive opportunities and raise
threat awareness in the market place. (Appendix 1)

Scenarios for Moxy in Berlin, Germany

Scenario analysis shows different possibilities and offer alternative views of how the economy hotel
environment might develop in the future. It is built on PESTEL and key drivers for change which is
governed by high uncertainty.
Key drivers for change are;
1)

Demanding educated consumers

2)

Technology

The purpose of building the scenario process is to encourage managers to be alert to a range of
possible futures, because debating and learning is valuable, it deals with trends, issues and
challenges in the future. The value lies in the process of exploration and therefore the more
scenarios provided the better.
Gaining new and retaining customers will be a future challenge
Slow economic growth and oversupply in Berlin means the future is challenging for Moxy. Because it
applies a downward pressure on rates and gaining new customers is going to be difficult. An intense
competition is expected whereby the rivals are concentrating on looking after and retaining existing
business and leisure customers. Connecting and reaching out is the key.
Digital media is transforming choosing, booking, experiencing and sharing
How hotel consumers decide, compare rates, book and share opinions about their travel experience
is revolutionising. Research by HVS into Top 10 trends and the next generation of travel: The
Millennials revealed that they have a shorter booking window consisting of 75 days compared to 93
days, the rule for older generation. Last minute decision in real time due to an online bad review
because for them there is a certain level of authenticity and trust in a friends or peers review.
Instant email confirmation is highly expected and brand websites content combined with mobileoptimized webpages and apps are a must. Mobile websites and apps should provide the same
quality of content, along with easier navigation and booking. Because of technology, Millennials are
capable to conduct more research and comparison shopping. Real time information is significant as
7

they want the information as it occurs; therefore Twitter, Facebook and Instagram status are an
integral component in the lives of The Millennials. They regularly upload photos so they may share
their news in real time and they expect this from hoteliers as well. Millennials are accustomed in
sharing their lifes activities and opinions instantly with friends through social media.
Going beyond research and buy
Concentrating on the consumers research and buy is a norm among the hotelier, why not follow up
on the Millennials after they check out and return home. The use of social media to innovate around
experience could be taken up further, rather than just research and buy (i.e. website and
reservation). Engaging with the consumer by providing an application that empower the consumer
to share their photos and create video clips. It could be an opportunity to differentiate Moxy from
the rest.

Industry analysis Porters five forces framework

The purpose of conducting Porters five forces analysis is to identify the attractiveness of the
economy hotel industry in terms of the five competitive forces. The research will explore 5 forces
which are: threat of entrance, competitive rivalry, bargaining power, supplier and substitutes.

The power of suppliers

Marriot is already running three hotel properties in Berlin, meaning it is an organization which is part
of a value network; they have the links and relationships necessary to create products and services.
Therefore, Moxy will be a complimentary to Marriot, more over Marriots competence is optimizing
their value chain hence the power of suppliers is low.
The threat of substitutes
Substitutes are the products and services that offer similar benefits to the Moxys products and
services, but by a different process (Johnson, 2013). Due to the digital technology, finding a
replacement other than staying in hotel is possible nowadays. Home swapping among young
travellers is very common and trendy. The price conscious young traveller could save a lot of money
because there are no costs involved and still they achieve to explore and travel the city. Gaining
popularity among Millennials at the moment is airbnb.com, rooms and apartment are for rent in the
centre of the city.
The threat of entry
If Marriot is to compete in a new industry, Barriers to entry are the factors that need to be overcome
by this new entrance (Johnson,2011) Economies of scale is moderate, because compared to other
European capitals, the price per square meter for real estate in the centre of Berlin is relatively low
(Cushman&Wakefield, 2011), representing an attractive proposition for international investors.
Capital requirements are high, being a capital intensive industry with a large amount of investment,
tied down in fixed cost makes entry difficult. Similarly high exit barriers due to specialized asset
make the industry less attractive. However, Moxys financial strength could overcome the
8

investment requirements. Also it has the scale of experience in entering Berlin as they have already
established players in Berlin with three brands located in the city itself.
Product and service differentiation is high, a contemporary style budget chain hotel, differentiate
itself from the other budget hotels by specifically targeting the Millennials. Moreover, as the
industry leader in hosting meetings, Marriott is introducing new concepts designed for the new
mobile worker. (Hospitalitynet,2013)
Moxy set itself apart because Marriot, a hotel operator that has a strong brand in satisfying their
guests needs and well known for brand distinction, an organisation that is well known for its
strengths on investing in innovation in order to differentiate and ahead of positioning the brand
according to the market change. Hospitalitynet.org published on 31st May 2013, that Marriot
announced the opening of a new 10,000 square foot Innovation Lab. It shows that Marriot is
investing and dedicated in transforming the brand.
"Marriott is dedicated to transform the brand to make it relevant for the next generation of travellers
and we want these travellers to be a part of our transformative journey." - Karim Khalifa, Senior
vice president, architecture & construction, Marriott (Hotelnewsnow, 2013).
However, Moxy being under the Marriot brand could also mislead in positioning itself in the mind of
the budget conscious guests, because Marriot has already positioned themselves as a luxury and upscale hotel among the young generation.
Access to labour, land and other essentials are easy to obtain as Marriot have established their
supplier in Berlin through their 3 other hotel properties operating in the city; The Ritz- Carlton Berlin,
Berlin Marriot Hotel and Courtyard Berlin City Venter.
Moxy could directly access The Millennials, because Marriots capabilities are in technology where
they empower connections for their guests and associates, second Marriot competence on next
generation traveller gives a great advantage. The nature of Millennial being an online social creature
makes it easier for Moxy to reach them directly. Hence in terms of entry of barriers, the industry is
moderately attractive.

The power of buyer

The bargaining power of buyers determines how much customers can impose pressure on margins
and volumes. According to Amy McPherson, Marriots President and Managing director in Europe,
Moxy is aiming to capture those looking for style on budget. Concentrated buyer high because the
number of buyers are enormous, sources from UN department of economic and social affairs finding
show that Millennial 76 million population will reach 78 million population by 2030 (appendix).
A survey about young travellers that was released during the ITB 2013 travel convention in Berlin,
showed that the main factor for travelling is value for money and as the global traveller becomes
more sophisticated, brand affiliation may not be important as it once was. Furthermore with Berlin
having 20,972 rooms in their 3 star hotels with additional 800 rooms on the pipeline by the end of
9

2013 (Appendix 2), buyers are in a very good position to negotiate and can switch from one hotel to
another. Losing or gaining loyalty of one millennial makes a big different, because using word of
mouse media to express their good or bad experiences is a norm, for example review sites such as
TripAdvisor. Hence low cost switching is high.
The buyers have also the capability or possibility to supply accommodation themselves. The sources
of supply does not have to be a hotel, this could be done via online swapping home which is
becoming trendy among the young travellers because its the best way to save money . Besides
generation Y or the millennial generation is not afraid of trying and exploring new experiences,
instead it is fun for this type of buyers. Therefore buyer competition threat is high. Overall the
bargaining power of buyers is high.
Competitive rivalry
This force describes the intensity of competition between existing economy budget hotels in Berlin.
The more competitive the rivalry is, the worse it is for Moxy to compete.
STR Global data suggests existing supply totals 612 hotels and 60,000 rooms. And the November
2012 pipeline showed there are 4,955 guestrooms in the active pipeline in Berlin, making it an 8.2%
increase in existing supply should all those projects were to be finish. Furthermore, according to
HVSs researcher approximately 40% of the new hotels will be in the budget segment, the significant
increase in pressure on already burgeoning budget segment in the city makes it high on competitive
rivalry for Moxy. Vast new supply that has entered Berlin over the past few years, it has caused a
price pressure. This is supported by Marcus Smola, CEO of Best Western Hotels Germany, who says
that Berlin is one of the most difficult markets because of the oversupply (Spiegel,2013).
According to STR Global, the average occupancy for 2012 in Berlin was 73,7%, an increase growth of
4.9% over the same time frame in 2011. Average daily rate has increased 3.9% over 2011 with an
ADR of 88.34 ($116.48). Lastly, revenue per available room was 65.08, 9% growth over 2011.
The 2013 forecast according to PWC are, average occupancy 73.5%, up 1.1% over last year, average
daily room rate 90.27%, up 2% over last year and finally revenue per available room 66.36, up 3.2%
over the last year. It is reasonably good performance when compared to the other European country
which is struggling such as Spain, Italy and Greece. However, Berlins performance is lacking when
compared to the other German market like Hamburg and Munich.
Rivalry is intense due to the high exit barrier; the high fixed cost on obtaining a building to operate a
hotel makes it not easier to disinvest and the fight to maintain market share is an obligatory
challenge.
Looking at Maslows hierarchy needs (Maslow, 2011), they have achieved providing esteem needs
for their target market. Being a hip and stylish hotel, it provides status and reputation to their
demanding millennial consumer and other emerging markets. Whereas the other competitors
provide safety needs. Rivalry is low due to high product differentiation. Hence overall competitive
rivalry is moderate. Overall the economy hotel industry in Berlin is moderate.

10

Strategic Group
Strategic group purpose is the organisations in the budget hotel industry with similar strategic
characteristic, following similar strategies or competing on similar bases (Johnson, 2011). Analysing
the competitors will help Moxys manager to know where their rivals stand in the market place and
where Moxy needs to be. The map is a very useful way to graphically display competition in an
industry and to see how industry changes or how trends might affect it. It is a map of strategy
space. In doing this, Moxys 5 top competitors will be listed; factors will be based on travels life
cycle as shown below. Factors have been influences and extracted from two most important factors
in the budget segment; price and digital engagement intensity with the hotels. Digital engagement
will be measured based on four customers lifecycle;

Experience

The
first
digital
wave

Buy

Using digital
to focus on
research and
buy

Travel's
lifecycle

Research

Return
Home

The
second
digital
wave

Using digital
to innovate
around
experience

1) Research the intensity of engagement focus on website

2) Buy the intensity of engagement focus on reservation and booking,
3) Experience the intensity of engagement focus on the consumers experienced (reviews)
4) Return home the intensity of engagement focus on using digital to innovate around consumers
experience
The four processes are chosen because of the key drivers for changes that was identified in HVSs
top 10 trends new generation of travellers: The Millennials. It will be analysed on how intense the
competitors involve the four processes through digital engagement in order to reach the market.

11

10
Budget chain hotels - Berlin 2013
Strategic group map

Digital engagement

8
7
6
5
4
3
2
1
0

10

20

30

40

50

60

70

80

90

Room rate ( Euro)

The strategy map shows that there is not a bigger gap on prices which ranges between 65- 69,
except for Best Western which is 55 per night.
There are two major rivals in Berlin, Motel one, Germans best budget chain and number one budget
hotel in Tripadvisor in 2011, not only it has good design and distinctive features which are affordable
at 69 Euro, most importantly Motel One connects and reaches to their customers not only through
their research and buying process, but they thoroughly focus on consumers after experiences. They
have an app directly on the hotels website that encourage their previous guests to rate them based
on friendliness, responsiveness, cleanliness, quality of breakfast, atmosphere, room size, rooms
equipment and hotels equipment. However, even though they are active on facebook, they only use
German language and few complains in Tripadvisor have not being replied. CitizenM is a dutch
budget chain with an outstanding innovation on the hospitality industry and hotel design in Europe.
CitizenM have future plans to open in Berlin and with a price that also starts approximately at 69
Euro. CitizenM have the ability to engage digitally with their guests specially in the checking-in
process whereby guests have the option to self-check-in via kiosk in the lobby without going to the
front desk. However the return home digital engagement was quite low. Ibis budget at 65 Euro,
overall digital engagement is average, focusing only on research and buying process. The other rivals
are Holiday Inn Express at 68 Euro and Best Western which also focuses on research and buying
process.

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Internal analysis
Core competence analysis
In shaping Moxys business strategy, it is essential to analyse the distinctive resources and distinctive
competences of Ikea and Marriot. Defining the core competence of Ikea and Marriot could give a
valuable insight in forming an effective strategic business plan for Moxy. Moreover the combination
of Ikea and Marriots core competence could generate a very competitive advantage for Moxy in a
fierce and highly competitive market.
The linked set of skills, activities and resources that deliver customer value, differentiate the
business from the competitors and potentially can be extended and developed is best to explain the
meaning of core competence. These capabilities can be assessed in terms of their providing basis for
achieving such competitive advantage: Value in a sense that the capabilities exist are valued by the
customers and provide potential competitive advantage. Rarity meaning that the capabilities exist
and no or few competitors possess it. Inimitability, that the capabilities are difficult for the
competitors to imitate. Non-substitutability meaning the risk of substitution is low. This assessing
tool that explores the increasing bases of sustainable competitive advantage of an organization is
called VRIN (Johnson, 2011).

VRIN analysis of Marriot

Dynamic capabilities
Value | Yes Marriots capability in rapidly and efficiently adapting to changes in market and
business environment has enabled them to spot trends and changes and take advantage of the
opportunities. One of the good examples is due to the rapid globalisation, Marriot recognized that
being able to attract new customers and interact with them in their local language via the web
channel would be critical to drive international growth and reinforce the companys brand. Marriots
flexibility to adapt and invest into change has made Marriot one of the top consumer retail sites in
the world which contributed for more than $8.1 billion in property-level gross revenues in 2012. It is
a capability that provides Marriot the competitive advantage.
Rarity | Yes The agility possess by Marriot is rare capability; it is a long lasting competitive
advantage because it is a competence that was develop through special relationship with Marriots
customers and suppliers.
Moreover such as leaders in hotel technology whereby they embraced change through empowering
their guests, associates, owners and franchisees through technologies that provide secure
connectivity through multiple devices. Second brand distinction whereby the organization invests to
differentiate and to innovate their brands in order to meet the market demands.
Inimitability | Yes Marriots agility creates and develops linked competences whereby it integrates
skills, activities and knowledge to create value to customers. These linkages are difficult to imitate
because of four reasons; first the complexity of internal linkages whereby Marriots caring for people
and the community is part of their identity because the organization believes that if employees are
valued and respected, it helps the Marriot guest feel the same. It has become custom and practice
built for 85 years since it was founded by J. Willard Marriot, who build the philosophy Take care of
13

your associates and theyll take care of the guests. External interconnectedness of Marriot is that
the organization has developed activities with their customers online through exceptional efficient
technology which made customers dependant to Marriot which resulted in becoming loyal
customers through their loyalty programme such as Marriot Rewards and The Ritz-Carlton Rewards,
together surpassed 41 million members accounting for more than half of their room nights
worldwide. Secondly, causal ambiguity in the sense it will be difficult for competitors to find the
cause and effects underpinning Marriots advantage, because the significance of the characteristic is
rooted in the organizational culture. In characteristic ambiguity for example, Marriots know how
in successful brand distinction in the hotel industry can only be seen through their high revenue and
increasing Revpar. But it will be difficult to decipher the meaning or nature just what that know-how
is. Linkage ambiguity describes how difficult it is for the competitors to comprehend which activities
and processes that are dependent on creating the linkages that develop Marriots core
competences. It is a challenge to understand because Marriot creates customer value by optimizing
their value chain which enables the organization to adapt to the changes in their target market and
the hotel industry. Third, culture and history that span over 85 years have embedded in the
organizational culture. Lastly, the ability to change and not being static has made Marriot as an
organization that has the competences to renew and recreate its strategic capabilities to meet the
needs of changing environment. The linked of competences that is made from complexity, casual
ambiguity, change, culture and history is impossible to replicate.
Non-substitutability | Yes Based on Marriots historical timeline from 1927 until 2012 (appendix),
the organization is constantly reinventing its capabilities. It is a link of specific resources and
capabilities that cannot be easily imitated or substituted.

Summary
After analysing all the core capabilities of Marriot, we can get the conclusion that this organization is
fully aware of the hotel and lodging situation and is quite successful in adapting to changes in
market and environment demands over the last 85 years by optimizing the value chain in order to
differentiate.

14

Strategic position
SWOT
To summarise the internal and external analysis, SWOT analysis will be used to gain an overall
understanding of Moxys strategic position.

SWOT

External

Internal

Strenght
Brand distinction
Agile
Wider value network
Technology
Global portfolio
Understand Gen X, Y and future guests
Financial strenght
Opportunities
Market accessibility
Less economy hotel brand
Millennial is growing - spending peak 2017
Emerging market

Weakness
Branded
Less experienced - Economy hotel
High exit barrier
Virtual engagement- after buying process

Threats
Intense competition
Substitutes
Power of buyer

Based on the findings above, it definitely shows that Moxy has a lot of strengths reap from Marriots
dynamic capabilities. Brand distinction is one of Moxys dominating strengths, however due to the
emerging and growing educated consumers, known for changing their minds last minute, may not
like to be branded in order to be different. Moreover less experienced in economy tier is a weakness
especially in an intense competition environment. Despite of the threats from the macroenvironment, rivals and demanding consumers, the future opportunities look promising. With the
new airport opening soon, it will be an easy access for emerging market and new business and
leisure traveller. The majority of the hotels in Berlin are budget, surprisingly only 20% of these hotels
are brand names. Moreover with the generation millennial growing and dictating billions of dollar in
spending, the possibilities are there to open Moxy in Berlin.

TOWS Matrix
The data collected from SWOT will be utilized to further discuss Moxys future choice. TOWS matrix
will be used to identify options that address the combination internal factors (strength and
weakness) and the external factors (opportunities and threat).

15

Strengths / Opportunities
Berlin Brandenburg International opening in October 2013, contributes a future surge of 27 million
passengers a year, which is 7 million more than last year meaning additional business and leisure
travellers coming to Berlin. Marriot can utilize the organisations wider value network by
collaborating with the airlines responsible for the extra 7 million travellers. Emirates and Easy Jet are
the two airlines considering moving to BIB, working together with the product development and
marketing team of these airlines could give a valuable insight which could be used to create several
pathways in providing solution to capture the market. Marriots agility, consumers knowledge and
brand distinction could be used to harness the immense travel potential from growing millennial
also called generation Y. The enormous funding from Inter hospitality, property division of the Inter
IKEA group is a financial strength. Marriot could seize the opportunity to open Moxy because there is
still space in chain budget hotel.
Strengths / Threats
Expected intense rivalry will come from Accors Ibis budget, Intercontinental Hotel Groups Holiday
Inn Express, Best Western and most importantly the stylish and good design Motel One and future
upcoming CitizenM. Marriot could utilize their wider value network to integrate technology in
interacting with the travellers life cycle; research, buy, experience and return home. Marriot could
collaborate with global management in technology service like Accenture and provide variety of
languages in Moxys web and mobile content to guests in each of those markets is a key
differentiator in a competitive marketplace.
Weakness / Opportunity
Global portfolio with a long standing reputation for excellent customer service could be used to
capitalize on the emerging market from Middle East, Russia, Ukraine, China, India, South Africa,
Indonesia, Philippines and Taiwan could be key to success for Moxy. These emerging markets are
from countries that are largely from a collectivist society and high power distance, meaning image,
status and recognition are very important. Brand affiliation can maybe a weakness to the young
travellers market, however in these countries, brand is significant to gain a stylish and luxury image
which contributes to a high social status. Therefore Marriots global portfolio strength could
overcome it.
Weakness / Threats
To invest in innovation and differentiation through revolutionising the use of mobile technology to
connect with the four processes of travellers life cycle, will be the future solution that could also
overcome threats from substitute and the power of buyer. Distinctive segment value chains make it
difficult or costly for substitutes and rivals to construct and it will be high switching cost for the
traveller because of their dependency to their virtual engagement through mobile phones.
Furthermore, word of mouth and mobile compliments each other in marketing, distribution,
travellers engagement and real time information lessen the buyers power. Travellers life cycle
mobile application can be called Moxys Life, it could make Moxy more connected to the world.

16

Strategic choice
The next move now is how Moxy at a business level, positions itself in relation to competitors. The
purpose of this section is exploring the variety of choices and options, potentially available to Moxy
in responding to the positioning issues (Johnson, 2012).

Generic competitive strategy

Competitive strategy is concerned with how Moxy can gain a competitive advantage through a
distinctive way of competing. Competitive business strategy is chosen because of the today's
dynamic markets; the emerging of The Millennial who has low switching cost; and the competitive
environment of Berlin. To have an advantage, Moxy needs to create a greater value than their rivals.
This is important because without competitive advantage, Moxy will be vulnerable to attacks by
competitors like Motel One and CitizenM with a stylish design at a lower rate and could be driven
out of business. Moxys fundamental means of achieving competitive advantage are to create a
service that is exceptionally valuable to travellers that it can charge higher prices than competitors.

Differentiation focus
Moxy will seek differentiation in The Millennial. This market has a distinct preference and demand
therefore focus strategy fits in. It is concerned on specific needs that broader differentiators do not
serve so well. The purpose of choosing focus differentiation is to obtain customers loyalty and brand
recognition which are synonymous with Marriotts strategic capabilities; brand distinction. Moreover
Moxy can defend themselves against Porters competitive forces whilst reducing competition from
the rivals. Threat from the substitutes is reduced and the bargaining power of the demanding and
educated customers is also reduced. Lastly it could increase market share if combined with low-cost
and differentiation.
The choice of focus differentiation is important because it will be effective in the case of Moxy.
Below are the reasons why focus strategy will be efficient:
1)
2)
3)
4)
5)
6)

The Millennial is large enough to be profitable

The Millennial has a good growth potential
Moxy has efficient resources
Moxy has the ability to defend against challenges
Moxy is able to choose from different segments
Moxy has distinctive segment value chain through Marriot therefore it will be a challenge for
competitors to replicate.

17

Moxys LifeStyle concept

Experience

The
first
digital
wave

Buy

Using digital
to focus on
research and
buy

Moxy's
LifeStyle

Research

Return
Home

The
second
digital
wave

Using digital
to innovate
around
experience

Moxys differentiation focus strategy will be best view under the variety lens because it encourage
ideas, entertain innovative and partially formed ideas. Moxys LifeStyle concept will be focusing in
customizing and personalizing the virtual engagement by investing in mobile technologies. This could
be done by creating an application for mobile users to support and provide multi languages of the
travellers life cycle. In other words, to support all the travellers interactions through an easy mobile
navigation system, from the research, consideration, decision-making process, booking, cancel, inhouse experience, check-in, check-out and through the post visit period. The communication from
country to country varies, but the technology should enable the conversation to happen regardless
of location or language. Most importantly it should easily link and compliment with facebook mobile
users. It is significantly important to get notice because there are 2.7 billion likes and comment per
day in facebook. Travellers around the world can book from Moxys Life with an entire global
portfolio as well as connect and engage with Moxy after the buying process, by empowering
travellers to contribute their reviews to the hotel easily from their mobile. Take guests interaction
to an even higher level, Moxys LifeStyle mobile app should have a section where current, previous
and potential guests could engage with Moxy. While staying at Moxy, travellers could share cultural
and life experience through photos in real time because we all know, before we go to sleep we
browse to our mobile. Guests could do all this during their visit to the city of Berlin and if they need
help or curious about the city, guests could also see what the other in-house guests been sharing
latest update, for example on how they find a new trendy caf. Most of all guests will have fun
virtually in Moxy. It would be costly however with the organisations financial strength and wider
value network, it is possible. Moreover Moxy will reach an enormous market and the mobile app
can maybe become the primary digital channel for Moxys guests. According to the International
Data Corporation (IDC) Worldwide quarterly Mobile phone tracker, the number of worldwide
subscription for mobile wireless reached 6.6 billion in October 2012, 73.4% of the Earths population
subscribe to wireless services. Nearly half (45%) of young adults between the ages of 18 and 29
who use their cell phones to access the Internet do most of their online browsing on their mobile
device. (Watkins, 2013)

18

Strategy in action
In this last section, the focus moves to strategic in action, it is how Moxys strategy takes shape in
reality. It will explore how successful organising requires various elements to work together to
create mutual reinforcing configuration of systems and structures that are matched to Moxys
strategies.

McKinsey 7-S framework

To propose future situation, it is important to highlight the connections between strategy, structure,
systems, staff, style, skills and superordinate goals. The McKinsey 7-S framework is chosen because
these seven elements could serve as a checklist for Moxy. It is suitable because it determines the
best way to implement Moxys proposed strategy. The purpose of this is to relate Moxys proposed
strategy to a strategic management perspective (Johnson, 2011).

It involves seven interdependent factors which are categorized as hard or soft elements: Hard
elements are easier to define and management could influence them directly, whilst Soft elements
can be quite challenging to describe as they are less tangible and more influenced by culture
(Johnson, 2011).

Hard elements
Strategy
Structure
Systems

Soft elements
Shared values
Skills
Style
Staff

19

STRATEGY

SYSTEM
Empower staff through digital
connection, to make the decision
making process quicker.
Empowering guests through
efficient and easy mobile
navigation system by depicting the
travellers life cycle research, buy,
experience (check-in and checkout) return home.

Brand distinction
invest in innovation and
differentiation
Next generation travellers
The Millennial and future guests
Technology leadership
empower mobile navigation
connections for guests through
mobile

STRUCTURE
Transnational structure
combines local responsiveness with
high global coordination.
Area managers act as sensors of
local needs and give feedback to
those responsible internationally
Local decentralization

Style on a budget
SKILLS

STYLE

Ability to get things done

Versatile
STAFF
Creative
Interest in other people
Social media
Good humour

Recruitment
personality, uniqueness, friendly,
honesty, passionate, caring, style
Socialisation
Moxy way training program unique training program in the
language and lifestyle of Moxy
whilst still be you. Casual working
environment, decentralize

Moxy way culture

Growing Moxy Together
informal, togetherness, honest,
humble, give and take
responsibility
Diversity
allows creativity and innovation
Flexibility and freedom
to allow creativity among staff

The inconsistencies can be revealed between some of the elements identified, if there is something
within Moxys organisation or team that is not working. Once revealed, Moxys manager can work to
align the internal elements to make sure they are all contributing to the shared values and goals. To
determine the ultimate state for each of the above factors, this analysis should be taken to another
level and placed into action. It is also acknowledge that the softer components are difficult to
change in the future.

Key performance indicator (KPIs)

In order to facilitate and control the strategy, the use of KPIs is suitable. The purpose of using KPIs
is to measure the performance of Moxys strategy. KPIs is also known as targets. Performance
targets focus on the outputs of Moxys organisation such as product quality, revenues and profits
(Johnson, 2011). To achieve this, balance scorecards will set performance targets according to a
range of perspectives (Johnson, 2011).
20

Balanced Score Card Perspectives

Balance score card is important because it make sure Moxys manager does not fail to impliment the
strategies. Suitable because it is effective tool to translate Moxys strategic goals into meaningful
objectives for themanagement perspectives, therefore allowing for the strategy to be successfully
implimented (Johnson, 2011).

Financial perspective
Improve operating efficiences
Grow revenue through new services
Increase shareholder value

Customer perspective
Improve guests satisfaction
Improve brand perception

Internal processes perspective

Cross-sell products and services
Improve core processes
Develop new product and services

Learning and growth perspective

Enhance staffc ompetencies and satisfaction
enhance knowledge sharing& understanding The Millennials &
markets

Strategic map
Strategic map link different performance targets into mutually supportive causal chain supporting
Moxys strategic objectives (Johnson, 2011). The purpose of using this map is to communicate
Moxys strategy to the management perspective, because it gives employees a clear over view into
how their jobs are linked to the overall objectives of Moxys organization. It is important because it
shows the cause-and-effect links and the map provide visual representation of Moxys critical
objectives and the relationships among them that drive Moxys organizational performance-

21

Conclusion
After analysing what Marriot can do in terms of how the organisation make used of the available
resources and how well Marriot manage the organisations resources, it showed the strategic
capabilities of Marriot is not static . Meaning the organisation has the ability to recreate and renew
its strategic capabilities which enables Marriot to adapt to the changing market and environment.
The dynamic capabilities Marriot possess are divided into three generic types: First, the eighty five
years experienced in the hotel industry has enabled Marriott to develop sensing capabilities. The
ability to sense opportunities and threats will plays an important role in understanding Moxys
strategic position in Berlin. Second, based on Marriots timeline (appendix), it has proven from their
continuous success that the organisation is effective in seizing opportunities; it is a competence that
will influence in making strategic choice for Moxy. Lastly and most importantly, Marriots reconfiguration capabilities will influence Moxy in enacting strategies. Overall Marriotts core
capabilities will strengthen Moxys strategic position in Berlins economy hotel industry based on
Marriotts experienced lens.

22

List of Literature
Johnson, Gerry, Whittington, Richard, Scholes, Kevan, 2011. Exploring Strategy, 9th edition, Essex,
Financial Times Prentice Hall
Maslow, Abraham, 2011, Hierarchy of Needs : A Theory of Human Motivation, Kindle
Pott, Luisa, Tipping scales Economy Vs Luxury in the German Hotel Market, HVS, 2012
Hall, Liz, Thriving or surviving European cities hotel forecast 2013, PWC, 2nd Edition, 2013
Lee, Teresa, Top 10 Trends of the next generation of travel: The Millennials, HVS, 2013
McCarty, Fergus, European Cities Monitor 2011, Cushman & Wakefields Global Real Estate Solutions,
2011
Rankings of top internet websites are from Internet Retailer (Top 500 Guide, 2009 edition), various
public earnings reports and Marriott estimates
Travel Weekly Asia Industry Awards 2008, Online & Technology: Best Online Presence potential

http://www.spiegel.de/international/germany/special-commission-calls-for-internet-commissionerin-germany-a-895412.html
http://www.etoa.org/policyareas/tourist-taxes/germany
http://www.thelocal.de/politics/20111116-38899.html
http://newsroom.itb-berlin.de/en/news/emirates-remains-interested-berlin-and-stuttgart
Economy - http://www.thelocal.de/travel/20130304-48317.html
http://newsroom.itb-berlin.de/en/news/survey-young-travellers-2013
http://www.thelocal.de/national/20130523-49867.html
http://www.thelocal.de/jobs/?site=tlse&AID=49851#.UaWokUBgdhw
http://www.spiegel.de/international/germany/wing-of-berlin-airport-ber-may-open-in-october2013-a-902289.html#ref=rss?utm_source=twitterfeed&utm_medium=twitter
http://www.hotelnewsnow.com/Articles.aspx/5285/Continued-supply-growth-slows-Berlin-recovery
http://www.hotelnewsnow.com/Articles.aspx/8893/IKEA-looks-to-join-Europes-budget-brand-boom
http://www.hotelnewsnow.com/Articles.aspx/10035/Marriott-dives-into-economy-segment-withMoxy
http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a#subscribers
http://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm

23

Enclosures
Appendix 1
PESTEL Analysis Berlin

Political The opening of Berlin Brandenburg International (BBI) airport has been delayed to 27
October 2013. This has caused political and public uproar, whereby delay after another has dragged
the building cost up. Volker Greinier, Emirate airlines vice president representing Northern central
Europe announced at ITB Berlin 2013 that the airline remains interested in Berlin. All that was said
was that regarding talks with the Federal Ministry of Transport things had got quieter. However,
following the postponement of the opening of the new airport, Berlin was now a bit further down
the agenda.( Greiner, 2013). This is an important issue for Moxy because once the high-tech BBI is
expected to bring in additional business travelers, tourists and companies with better connections
and more international flights, market accessibility is gonna be obtained. The airport expects up to
27 million passengers in 2012, compared to 20 million passengers annually at both Berlin airports
(Tegel and Schoenefeld) today. With the investment of BBI, it makes Berlin a city of hope for hotel
investments. Berlin is the centre for the German governments, and therefore the political activities
through meetings and congresses influence the demand of overnight stays of inbound corporate and
busin
The tourism and hotel industry have high support from the government in promoting Berlin as the
world class convention for example ITB travel convention, moreover it also pushes the project
development of the upcoming Berlins international airport. It also means better accessibility for
new emerging markets due to the future interest shown both from budget airlines like easy jet and
the well established and strong airline like Emirates.
However the latest move of government of future plan to implement 5% bed tax to leisure travellers
might not be popular for Moxy, because pricing is very important for the budget conscious and they
might choose to stay at another country. ess travellers.

Economic The economy tier in Europe represents nearly half of the total room supply, yet only
20% is branded, according to Marriott. In association to this, it is interesting to find out whether
Moxys target market cares about branding (refer to chapter, page)?
According to PWV consultancy, Germany had looked immune to the Eurozone crisis; it has pushed its
way through the crisis and is trading at record highs since year 2000. Based on the economic
outlook, Berlins service industry is dominating the business in the city, with approximately 80% of all
the companies doing business in the service sector.
24

However, as the occupancy is already very high, it is indicated that the growth may slow down in
2013 which was based on the Berlins annual hotel statistic; the percentage of occupancy, ADR and
Revpar from the actual result of 2010 until 2013 which is forecasted (Appendix). This is also
supported by Punnet Chhatwa, CEO of Steigenberger Hotel Group that despite the slow growth in
Berlin, the city has a huge potential for its tourism and hospitality industry, as they expect a positive
turn out on hotel performance in 2013 (Spiegel,2013). Furthermore, there is a significant increase in
hotel supply in the recent years. STR Global data suggests that the existing supply amounting to 612
hotels and 60,000 rooms. A trend could be seen among the supplier, as many international hotel
groups have opened in Berlin and 30 hotels are on the way, with 3000 rooms still under
construction.
The worlds leading travel trade shows, ITB tourism fair 2013 revealed, Germany has been named
Europe's most popular holiday destination for the fifth year in a row. Total of 407.3 million overnight
stays in Germany are made by holidaymakers in 2012. The figures from German Tourism Association
suggest that in 2012, there was an increase by 3.6 percent, or 14 million more stays in comparison
with 2011. The good result is driven by the Germans staying in their own country to go for holiday,
whereby domestic tourism rose by 2.7 per cent between 2011 and 2012, furthermore tourist from
abroad rose by 8.1 per cent between 2011 and 2012 (itberlin, 2013).
The research company, European Cities Monitor have made a research in 2011 and rank Berlin as
number 5 as best cities to locate a business today (appendix).
Social In 2010, a research conducted by European Tour Operators Association, shows that
Germany was considered as top three most popular destinations in Europe among the emerging
market surveyed. The travel pattern of emerging leisure markets are for Middle East, Russia,
Ukraine, China, India, South Africa, Indonesia, Philippines and Taiwan. Middle East had placed
Germany on first spot, while second on Russia and Ukraines list and third place on the Indonesian
and Indian market.
On April 2013, it was highlighted by HVS consultancy that there is a big emerging market which will
transform the trends of the next generation of travellers. The Millennial Generation was born
between 1980 and 1999, tech-savvy and will never travel in the same way as their parents. They are
not afraid of trying new products and utilizing new ways of booking, furthermore The Millennial are
social creatures online and offline. The trends that they are bringing will revolutionize the future of
the hospitality industry. For example, word of mouse is a term used for word of mouth through
social media, and is how The Millennial share their good and bad hotel experiences. American
Express Business Insight stresses that with an increase of 20% in 2010, this age bracket is the fastest
growing segment for travel spending. Moreover the millennial have not yet reached their spending
and yet they are already spending billions of dollars. It is forecasted that the spending will peak in
2017 (Lee, 2013).
Technological Local German media reports on 22nd May 2013, that German Economy Minister
Philipp Rsler is calling for dual citizenship for IT talents. He appeals to top US university students
who wants to start their IT careers to consider Germany as a stepping stone for their IT careers and
callsfor tech entrepreneurs to be offered dual citizenship. Rsler appeals students to Think big,
think better, think Berlin.

25

Digital networking is the key topic at VIR Online Innovation Days 2013. The VIR stands for Verband
Internet Reisevertrieb, a trade association for the German online travel portals and an organisation
promoting internet travel marketing. The highlight during the meetings held on the 10th and 11th
June 2013 was on changes in the way that customers are approached, with a focus on the increased
use of the mobile internet. This is accompanied by a growing demand for a way of locating and
meeting the requirements of specific customers. This could be via an in-car computer or embedded
in an e-book
Environmental In a bid to help fight global climate change, melting ice caps and rising seas,
Germany's goal for 2020 is to slash carbon emissions by 40 percent from 1990. In association to this,
nuclear power will be replaced with energy from renewable sources which is Germany's energy
transition project. Moreover Germany has set a goal to be nuclear-free by 2022 and to combat
pollution and climate change (speigel, 2013).
Legal In November 2011 local authorities in Berlin announced bed tax should be introduced in the
future. Although it is not yet introduced, the policy on a tourism tax which is five per-cent of their
hotel bill from 2013 continues to be a subject of great debate throughout Germany. The federal
administrative court ruled that the tax can be charged to leisure guests but not to business travellers
(speigel, 2013).
A commission convened by Germanys parliament believes that a greater political priority in the
country should be given to the internet. On the 19th of April 2013, the German News Agency reports
that the special internet and digital society commission has submitted a final report and suggested
the German government should take internet-related issues seriously and to establish a permanent
internet commissioner. The main recommendation out of hundreds is to solidly anchor internet
related policies and to create a minister state position.

26

27

Appendix 2
Belrlin Fact Sheet

28

29