CHAPTER 1

THE NATURE OF STRATEGIC PLANNING: AN OVERVIEW TO

TOURISM AND HOSPITALITY

Objectives
At the end of the Chapter, the learner should be able to:
1. ensure a regular and adequate supply of funds to the concerned;
2. provide sufficient returns to the shareholders, which will depend upon the earning capacity,
market price of the shareholders' share, and expectations;
3. pursue optimum funds utilization, Once the funds are procured, they should be utilized in the
maximum possible way at the least cost;
4. ensure safety on investment, i.e. funds should be invested in safe ventures to achieve an
adequate rate of return;
5. plan a sound capital structure. There should be a sound and fair composition of capital to
balance long-term with short-term concerns, financial with nonfinancial problems, and internal
with external issues;
6. describe the strategic management process;
7. discuss the nature of strategy formulation, implementation, and evaluation activities;
8. describe the benefits of good strategic management; and
9. explain how a firm may achieve sustained competitive advantage.

Introduction
Managers of the Tourism and Hospitality companies must address and have timely
answers to ree central questions: What's the company's present situation? Where does the
company need to go from here? How should it go there? The question "What's the company's
present situation?" pushes managers to evaluate industry conditions and competitive pressures,
the company's current performance market standing, its resources' strengths and capabilities, and
its competitive weaknesses. The question "Where does the need to go from here?" forces
management to think strategically about the direction the company should be headed to grow the
business and strengthen the company's market think and financial performance. The question
"How should it get there?" challenges managers to craft and execute a strategy to move the
company down the chosen strategic path and achieve the targeted outcomes.
What is Strategy?
A company's strategy is management's game plan for growing the business, staking out a
market position, attracting and pleasing customers, competing successfully, conducting
operations, achieving targeted objectives. In crafting a strategy, management effect saying,
"Among all the strategic paths we could have chosen and all the strategic actions we could have
taken, we have decided to focus on these markets and customer needs, compete in this fashion,
allocate our resources and energies in these ways, and use these particular approaches to do ing
business. "A company's strategy thus indicates its managers' choices about the specific actions it
is taking and plans to take to move the company in the intended direction and achieve the
targeted outcomes. It is the partly the result of trial and error organizational learning about what
worked in the past and what didn’t and partly the product of managerial analysis and strategic
thinking about what actions need to be taken in light of all the circumstances surrounding the
company's situation.
What is all about strategic management in tourism and hospitality industry?
Strategic management is an inconstant process where any change in the environment
where the organization is operating will result in a change in the strategies of the organization.
Strategic manage works on the business model of an organization to create competitive
advantage in the industry.
Strategic Planning in Tourism Industry is the development of priorities based on
strategies for planning developing and marketing of a destination. There are many other names
given for this including destination management planning and tourism action planning across the
globe. Preparing a strategic management plan is an essential step in creating long-term success
and sustainable tourism around c destination.
Though proper consideration of the visitor statistics, the environment in which it is being
operated, capacity of the resources related to the destination the strategic planning can be
implemented successfully. The strategic management of the tourism destination also involves the
collaboration between stakeholders in contributing to the overall development of the destination.
Strategic Planning related to hospitality is a continuous process which requires analyzing
and monitoring and making necessary changes with related to the data obtained subjected to the
environmental conditions.
A long-term vision is needed in strategic planning and it should go in terms with the
image of the destination among the public. Identifying and making priorities for further
development of the destination also need to be included in the strategic plan. The goals of the
plan should clearly be quoted and these goals should be made measurable in terms of
performance.
Strategy and the Quest for Competitive Advantage
Typically, the central thrust of a company's strategy involves crafting moves to
strengthen the company's long term competitive position and financial performance. Indeed,
what separates a robust approach from an ordinary or weak one is management's ability to forge
a series of moves, both in the marketplace and internally, that makes the company distinctive,
tilts the playing field in the company’s favor by giving buyers a reason to prefer its products or
services, and produces a sustainable competitive advantage over rivals.
Four of the most frequently used strategic approaches to setting a company apart from rival
and achieving a sustainable competitive advantage are:
1. Strive to be the industry's low-cost provider, thereby aiming for a cost-based competitive
advantage over rivals
 2. Out-competing rivals based on such differentiating features as higher quality, broader
product and service selection, added performance, better service, more attractive styling,
technological superiority, or excellent value for the money.
3. Focusing on a narrow market niche and winning a competitive edge by doing a better job
than serving buyer’s unique needs and tastes constituting the niche
4. Developing expertise and resource strengths give the company competitive capabilities
that rivals can't easily imitate or trump their abilities.
What makes a strategy a winner?
Three questions can be used to test the merits of one strategy versus another and
distinguish a winning strategy from a losing or mediocre strategy:

1.How well does the strategy fit the company's situation? To qualify as a winner, a strategy must
be well-matched to industry and competitive conditions, a company's best market opportunities,
and other aspects of the external enterprise environment.
2. Is the strategy helping the company achieve a sustainable competitive advantage? Winning
strategies enable a company to gain a durable competitive advantage
3. Is the strategy resulting in better company performance?
a. gains in profitability and financial strength
b. gains in the company's competitive strength and market standing.

A company's strategy is reflected in its action in the marketplace and the statements of
senior managers about the company's current business approaches, plans, and efforts to
strengthen its competitiveness and performance.
Once it is clear what to look for, identifying a company's strategy is mainly one of
researching information about the company's actions in the marketplace and its business
approaches. Let us start by laying out the critical elements of their strategies.
I. WHAT IS STRATEGIC MANAGEMENT?
A. Strategic management can be defined as the art and science of formulating,
implementing, and evaluating cross-functional decisions that enable an organization to
achieve its objectives.
1. The term strategic management is used synonymously with strategic planning.
2. Strategic management aims to exploit and create new and different opportunities for tomorrow
while long-range planning tries to optimize for tomorrow the trends of today.
B. Stages of Strategic Management
1. The strategic-management process consists of three stages.
a. Strategy formulation includes developing a vision and mission, identifying an organization's
external opportunities and threats, determining internal strengths and weaknesses, establishing
long-term objectives, generating alternative strategies, and choosing particular strategies to
pursue.
b. Strategy implementation requires a firm to establish annual objectives, devise policies,
motivate employees, and allocate resources so that formulated strategies can be executed. In
addition, strategy implementation includes developing a strategy-supportive culture, creating an
effective organizational structure, redirecting marketing efforts, preparing budgets, developing
and utilizing information system, and linking employee to organizational performance.
c. Strategy evaluation is the final stage in strategic management. Managers desperately need to
know when particular strategies are not working well; strategy evaluation is the primary means
for obtaining this information.
2. Three fundamental strategy evaluation activities are provided below:
a. Reviewing external and internal factors that are the bases for current strategies
b. Measuring performance
c. Taking corrective action

3. Strategy formulation, implementation, and evaluation activities occur at three hierarchical

levels in a large organization: corporate, divisional, and functional. Smaller businesses may only
have the corporate and functional levels.
C. Integrating Intuition and Analysis
1. Integrating Intuition and Analysis
1. The strategic-management process can be described as an objective, logical, systematic
approach for making significant organizational decisions. It attempts to organize qualitative and
quantitative information in a way that allows effective decisions to be made under conditions of
uncertainty.
2. Most people recognize that intuition is essential to making good strategic management
decisions. Intuition is particularly useful for making decisions in situations of great uncertainty
or little precedent.
D. Adapting to Change
1. The strategic management process is based on the belief that organizations should continually
monitor internal and external events and trends to make timely changes as needed. The rate and
magnitude of changes that affect organizations are increasing dramatically.
2. By eliminating boundaries and speeding the flow of information, e-commerce and
globalization are transforming business and society.
3. The need to adapt to change leads organizations to key strategic-management questions, such
as, "What kind of business should we become?" "Are we in the right field? ."Should we reshape
our business?" "What new competitors are entering our industry?"
4. The Internet has changed how we organize our lives, inhabit our homes, and interact with
family friends, neighbors, and ourselves. Consumers today are flocking to blogs, forums, video
sites, and social networking sites instead of television, radio, newspapers, and magazines
II. KEY TERMS IN STRATEGIC MANAGEMENT
A. Competitive Advantage
1. Competitive advantage in defined as anything that a firm does exceptionally well compared to
rival firms
2. Firms should seek a sustained competitive advantage by continually adapting to changes in
external trends and internal capabilities and evaluating strategies that capitalize on those factors.
3. An increasing number of companies are gaining a competitive advantage by using the Internet
for direct selling and communication with suppliers, customers, creditors, partners, shareholders.
clients, and competitors who may be dispersed globally.
B. Strategies
1. Strategists are individuals who are most responsible for the success or failure of an
organization. 2. Strategists hold various job titles, such as chief executive offices, president,
owner, chair of the board, executive director, chancellor, dean, or entrepreneur.
3. Strategists help an organization gather, analyze, and organize information. They track industry
and competitive trends, develop forecasting models and scenario analyses, evaluate corporate
and divisional performance, spot emerging market opportunities, identity business threats, and
develop creative action plan.
C. Vision and Mission Statements
1. Vision statements answer the question: "What do we want to become?"
2. Mission statements are "enduring statements of purpose that distinguish one business from
other similar firms. A mission statement identifies the sense of a firm's operations in product and
market terms." It addresses the fundamental question that faces all strategists: "What is our
business. It should include the values and priorities of an organization.
D. External Opportunities and Threats
1. External opportunities and external threats refer to economic, social, cultural, demographic,
environmental, political, legal, governmental, technological, and competitive trends and events
that could significantly benefit or harm an organization in the future.
2. Opportunities and threats are largely beyond the control of a single organization, thus the term
external.
3. To survive in a global economic recession, firms must be aware of the new opportunities and
threats that have surfaced as a result.
4. A basic tenet of strategic management is that firms need to formulate strategies to take
advantage of external opportunities and avoid or reduce external threats.
5. The process of conducting research and gathering and assimilating external information is
called environmental stunning or industry analysis.
E. Internal Strengths and Weaknesses
1. Internal strengths and internal weaknesses are an organization's controllable activities that are
performed exceptionally well or poorly
2. Identifying and evaluating organizational strengths and weaknesses in the functional areas an
essential strategic management activity
3. Strengths and weaknesses are determined relative to competitors and may be determined by
performance and elements
F. Long-Term Objectives
1. Objectives can be defined as specific results that an organization seeks to achieve in pursuing
its primary mission
2. Long-term means more than one year
3. Objectives state direction, aid in evaluation, create synergy, reveal priorities, focus
coordination, and provide a basis for effective planning, organizing, motivating, and controlling
activities.
4. Objectives should be challenging, measurable, consistent, reasonable, and straightforward.
G. Strategies
1. Strategies are how long-term objectives will be achieved. For example, business strategies
may include geographic expansion, diversification, acquisition, product development, market
penetration, retrenchment, divestiture, liquidation, and joint venture.
H. Annual Objectives
1. Annual objectives are short-term milestones that organizations must achieve to reach long
term objectives.
2. Like long-term objectives, annual objectives should be measurable, quantitative, challenging.
realistic, consistent, and prioritized.
I. Policies
1. Policies are how annual objectives will be achieved. Policies include guidelines, rules, and
procedures established to support efforts to achieve stated goals.
2. Policies are most often stated in management, marketing, finance/accounting,
production/operations, research and development, and computer information systems activities
3. Substantial research shows that a healthier workforce can more effectively and efficiently
implement strategies. Because smoking is a huge burden on companies worldwide, some firms
are implementing policies to curtail smoking.
III. BENEFITS OF STRATEGIC MANAGEMENT
The principal benefit of strategic management has been to help organizations formulate
better strategies by using a more systematic, logical, and rational approach to strategic choice.
Communication is a key to successful strategic management. The principal aim of the
communication process is to achieve understanding and commitment throughout the
organization. It results in the great benefit of empowerment. As a result, more and more
organizations are decentralizing the strategic management process
A. Financial Benefits
1. Research indicates that organizations using strategic-management concepts are more
profitable and successful than those that do not.
2 High-performing firms tend to do systematic planning to prepare for future fluctuations in the
external and internal environments.
B. Nonfinancial Benefits
1. Besides offers other thir As a result, firms with planning systems more c resembling strategic
management theory exhibit superior long-term financial perfoman relative to their industries.
1. Besides helping firms avoid financial demise, strategic management benefits, offers other
tangible benefits, such as an enhanced awareness of external threats, an improved understanding
of competitors’ strengths, increased employee productivity, reduced resistance to change, and a
clearer understanding of performance-reward relationships.
2. In addition to empowering managers and employees, strategic management often brings order
and discipline to an otherwise floundering firm,
3. Greeley (Greenley GF. "Does Strategic Planning Improve Company Performance?. Long-
range Planning 19 no.2 (April 1986:106) stated that strategic management offers these benefits:
a. It allows for identification, prioritization, and exploitation of opportunities
b. It provides an objective view of management problems.
c. It represents a framework for improved coordination and control of activities
d. It minimizes the effects of adverse conditions and changes.
e. It allows major decisions to better support established objectives.
f. It allows a more effective allocation of time and resources to identified opportunities.
g. It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc
decisions.
h. It creates a framework for internal communication among personnel.
i. It helps integrate the behavior of individuals into a total effort.
j. It provides a basis for clarifying individual responsibilities.
k. It encourages forward-thinking.
l. It provides a cooperative, integrated, and enthusiastic approach to tackling problems and
opportunities.
m. It encourages a favorable attitude toward change.
n. It gives a degree of discipline and formality to the management of a business.
IV. WHY SOME FIRMS DO NOT DO STRATEGIC PLANNING
Some reasons for poor or no strategic planning are as follows:
 Lack of knowledge or experience
 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Content with success
 Fear of failure
 Over confidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Honest difference of opinion
 Suspicion

V. PITFALLS IN STRATEGIC PLANNING

Some pitfalls to watch for and avoid in strategic planning are provided below.
 Using strategic planning to gain control over decisions and resources.
 Doing strategic planning only to satisfy accreditation or regulatory requirements.
 Too hastily moving from mission development to strategy formulation.
 Failing to communicate the plan to employees, who continue working in the dark.
 Top managers making many intuitive decisions that conflict with the formal plan.
 Top managers not actively supporting the strategic planning process.
  Failing to use plans as a standard for measuring performance.
 Delegating planning to a "planner" rather than involving all managers.
 Failing to involve key employees in all phases of planning.
 Failing to create a collaborative climate supportive of change.
 Viewing planning as unnecessary or unimportant.
 Becoming so engrossed in current problems that insufficient or no planning is done.
 Being so formal in planning that flexibility and creativity are stifled

VI. GUIDELINES FOR EFFECTIVE STRATEGIC MANAGEMENT

Failure to Follow Certain Guidelines in Planning Can Cause Problems
1. An integral part of strategy evaluation must be to evaluate the quality of the strategic
management process. Issues such as "Is strategic management in our firm a people process or a
paper process? should be addressed.
2. An important guideline for effective strategic management is open-mindedness. A willingness
to consider new information, viewpoints, ideas, and possibilities are essential.
3. Strategic decisions require trade-offs such as long-range versus short-range considerations
maximizing profits versus increasing share holders wealth.
4. Subjective factors such as attitudes toward risk, concern for social responsibility, and
organizational or culture will always affect strategy-formulation decisions, but organizations
must remain an objective as possible.
VII. COMPARING BUSINESS AND MILITARY STRATEGY
A Strong Military Heritage Underlies the Study of Strategic Management
1. Terms such as objectives, mission, strengths, and weaknesses were first formulated to address
problems on the battlefield.
2. A fundamental difference between military and business strategy is that business strategy
formulated, implemented, and evaluated with the assumption of competition. In contrast, military
strategy is based on an assumption of conflict.
3. The similarities between military and business strategy can be seen in Sun Tzu's The Art of
War.