The Role Of Strategic. Planning In The. Sustainability Of. Family Owned Hotel. Businesses In. Mombasa

Transcription

1 1 The Role Of Strategic Planning In The Sustainability Of Family Owned Hotel Businesses In Mombasa Christine Wawuda Mwamisha Student, School for Human Resource Development, Jomo Kenyatta University of Agriculture and Technology, P. O. Box , Mombasa- KENYA Dr. Fridah Simba Theuri Deputy Director, School for Human Resource Development, Jomo Kenyatta University of Agriculture and Technology, P. O. Box , Mombasa- KENYA Mr. George Mbugua Kariuki Tutorial Fellow, School for Economics, Kenyatta University, P.O. Box , Mombasa- KENYA

2 2 ABSTRACT A study was conducted to establish the role of strategic planning in the sustainability of family owned hotel businesses. Findings from the study show that strategic planning enables hotels to successfully employ competitive strategies that allow them to survive and increase their value over time. Competitor orientation through performance evaluation of customer satisfaction, innovation, employee retention and market share played a key role in the sustainability of the businesses. Keywords: Strategic planning, sustainability, family owned hotel businesses 1. INTRODUCTION 1.1 BACKGROUND OF THE STUDY Over the years, many researchers have tried to explain the meaning of strategic planning and some thought it is a strategic management tool that provides systematic processes and cohesion to organizational activities as organizations define their futures (Poister & Streib, 2005) while others believed it is a process by which an organization envisions its future, and develops tactics to achieve that future and it results in a pattern of purposes and goals, and major policies for achieving those goals. It defines the type of business an organization is to be involved with and the kind of organization it is to be. (Holbrow, 2009). Bryson in 2011 noted that it is a deliberative, disciplined approach to producing fundamental decisions and actions that shape and guide what an organization is, what it does and why. All these definitions have leaned towards what strategic planning is and the role it plays in organizational growth. They help in explaining that strategic planning is a process whereby an organization makes decisions and plans actions that affect its long-term performance helping it move from where it is to where it wants to be. Family owned hotel businesses are those businesses that are run by families. Many scholars have attempted to define family-owned businesses, and have focused primarily on distinguishing family-owned businesses from other businesses (e.g., Chua, Chrisman, & Sharma, 1999; Handler, 1989; Litz, 1995). However, none of their definitions appeared to have yet gained widespread recognition or approval (Sharma, 2004). The majority of definitions seem to focus on the vital role of family in terms of determining the management and control methods used in the business (e.g., Chrisman et al. 2003; Habbershon et al. 2003). It is important to note that family business and small business are not necessarily analogous. This study will be looking at the role of strategic planning in these hotels. 1.2 PROBLEM STATEMENT Strategic planning and its benefits to an organization has been widely researched and documented over the years. Peters & Buhalis (2004) noted the typical disadvantage and problem faced by family businesses is the informal business practice and lack of planning. The hospitality industry plays a key role in sustaining the

3 3 livelihoods of the people of Mombasa where the family business model seems to be dominant. In this model, working methods built around relationships and gut feeling are often used over modern, more formalized business practice; typically businesses are run by family members rather than professional managers. Lack of awareness of the professional business services available, the formal business planning and strategic planning may limit demand in the family owned hotel businesses in Mombasa. Cordeiro (2013) found out that while the benefits from effective strategic planning are evident to most businesses, small business owners/managers often plan poorly with many contending that the daily demand of running their businesses reduces their time available for effective strategic planning. According to (Nkulu, 2012) strategic planning is not appropriately implemented to assist small medium and micro enterprises in the acquisition of economic sustainability nor is it well comprehended by owners of retail businesses. However, despite a growing concentration to strategy research globally, strategic management in family businesses seems to be insufficient (Jiang & Peng, 2011; Liu et al. 2012; Sharma & Chua, 2013). The intention of this research was therefore to establish the extent to which family owned hotel businesses in Mombasa were using strategic planning, with particular reference to whether and how they were using strategies to ensure customer satisfaction, productivity, business efficiency and further, to gather ideas to expand such investments in future. This research looked at the role of strategic capabilities, competitor orientation and market orientation on the sustainability of family hotel businesses. 1.3 OBJECTIVES GENERAL OBJECTIVE To determine the role of strategic planning in the sustainability of family owned hotel businesses SPECIFIC OBJECTIVES To examine the strategic capabilities in the success of the family owned hotel businesses. To find out the role of competitor orientation in the sustainability of family owned hotel businesses. To investigate the role of market orientation in the sustainability of family owned hotel businesses. 2. LITERATURE REVIEW 2.1 INTRODUCTION This section begins with a summary of the theories of strategic planning. The section then continues with a review of the studies on strategic capabilities, competitor orientation and market orientation. The conceptual framework of this study follows and the critique of literature finalizes the chapter. 2.2 THEORIES RESOURCE BASED VIEW

4 4 The resource based view maintains that organizational capabilities may be a source of superior firm performance and competitive advantage when those capabilities create unique value for customers relative to value created by competitors. Dynamic capabilities research extended the resource based view by incorporating the role of the changing environment to assert that those firms that are able to continuously alter their resources and capabilities to improve the firm s fit with the environment will be more likely to achieve competitive advantage, growth, and survival (Eisenhardt & Martin, 2000; Helfat et al. 2007). Consequently, strategic management research has become increasingly concerned with how managers quickly and effectively alter their capabilities to improve a firm s fit with the environment (Helfat et al. 2007). Family owned hotel businesses do have both the tangible and intangible resources. The firms however need to transform their competitive advantages from short run to sustainable by making sure that their resources are heterogeneous and immobile THEORY X AND THEORY Y Theory X This theory assumes that employees are naturally unmotivated and this encourages an authoritarian style of management. According to this view, management must actively intervene to get things done. This style of management assumes that workers: dislike working, avoid responsibility and need to be directed, have to be controlled, forced, and threatened to deliver what's needed, need to be supervised at every step, with controls put in place and need to be enticed to produce results; otherwise they have no ambition or incentive to work. X-Type organizations tend to be top heavy, with managers and supervisors required at every step to control workers. There is little delegation of authority and control remains firmly centralized. McGregor recognized that X-Type workers are in fact usually the minority, and yet in mass organizations, such as large scale production environment, X Theory management may be required and can be unavoidable. Theory Y This theory expounds a participative style of management that is de-centralized. It assumes that employees are happy to work, are self-motivated and creative, enjoy working with greater responsibility, take responsibility and are motivated to fulfill the goals they are given, seek and accept responsibility and do not need much direction and consider work as a natural part of life and solve work problems imaginatively. In Y- Type organizations, people at lower levels of the organization are involved in decision making and have more responsibility. Family owned hotel businesses need to incorporate the two behaviours of people in the organization and work with them. They need to mentor and encourage those who have the behaviour of theory X so that they can adopt the theory Y behaviour.

5 5 2.3 REVIEW OF VARIABLES STRATEGIC CAPABILITIES Hoskisson et al. (2004) defines capabilities as the capacity to perform a task or activity in an integrated manner. This means that capabilities are able to influence strategic decisions. Barney et al. (2001) noted that competitive advantage only results from capabilities that are distinctive, costly and time-consuming to replicate. Walker et al. (2002) stated that to achieve desired performance levels, a firm s capabilities and the resources available to it must interact positively with the requirements of the firm s markets. O Regan & Ghobadian (2004) added that both the capabilities and market requirements need to be clearly defined, explicit and they need active consideration during strategy formulation. Strategic capabilities are therefore the business ability to employ competitive strategies that allow it to survive and increase its value over time successfully. They will hence focus on the organization s assets, resources and market position projecting how well it will be able to employ strategies in future. It is necessary therefore that family owned hotel businesses are able to identify their set of capacities, resources and skills that are unique to their business and incorporate them to the strategic plan so as to create a long term competitive advantage for an organization COMPETITOR ORIENTATION The ability of a business to reassess its strengths and weaknesses relative to its competitors is what is defined in this paper as competitor orientation. A business is supposed to know its strategic strengths and weaknesses and translate them into resources and capabilities so that the potential for creating competitive advantage is accomplished. Competitive advantage is ultimately built and maintained by adding value to customers. Value is added by cost leadership, i.e., offering equal quality products or services at a lower cost than competitors, or by differentiation, i.e., offering products or services that are perceived to be unique relative to some important characteristic. Understanding how each competitively relevant resource and capability affects costs and uniqueness is an important aspect of understanding how, or if, each adds value to the services provided. Competitor orientation is therefore able to help a family owned hotel business to be able to know how best it can position itself in the market and have an edge over its competitors MARKET ORIENTATION According to Dev et al. (2009) a firm s market orientation is the extent to which it implements the marketdriven concept whose power becomes clearer when its underlying rationale and that of the "selling concept" is compared. The selling concept is based on the premise that consumers are not naturally inclined to purchase a given brand s products. A brand must therefore undertake an aggressive selling effort. The market-driven concept, on the other hand, assumes that consumers will buy brands that satisfy their needs. An organization that attempts to understand its customers needs first (and keeps an eye on its competitors marketing efforts) and then creates and delivers the desired products will enjoy a competitive advantage. Some studies have found that market orientated firms have superior performance across a variety of industries and regional

6 6 locations such as small craft firms in Spain (Bigne & Blesa, 2003). Micheels & Gow (2008) argued that market orientation is important in either a commodity or value-added market. For strategic planning, in family owned hotel businesses, market orientation is important as it enables the hotels to identify and meet both the stated and hidden needs of the customers. 2.4 CONCEPTUAL FRAMEWORK Strategic Capabilities Competitor Orientation Sustainability of family owned hotel businesses Market Orientation Independent Variables Dependent Variable Figure 1.1: The conceptual framework 2.5 CRITIQUE OF LITERATURE Various articles on family owned businesses were used to come up with this research. However, the researcher will look at those fundamental to the role of strategic planning in family owned hotel businesses. Peters & Buhalis (2004) highlighted on the need and training of the family firms on strategic planning. This is a good step towards the acknowledgement of why family owned firms need strategic planning which concurs with this research. Cordeiro (2013) noted the benefits for effective strategic planning for all organizations and the success and failure of strategic planning in a small business. The information is insightful but he failed to explain the role of strategic planning though he insisted on firms having a formal strategic plan. Craig & Moores (2005) discussed the use of balance scorecards to drive the strategic plans of family firms. They focused on only the human perspective of the firms. In regards to this study, it failed to touch on the other strategic capabilities of a firm.

7 7 3. RESEARCH METHODOLOGY The research design employed was a descriptive one. The cases studied were family owned hotels in Mombasa. A desk research was conducted. Secondary sources of data including different articles, journals and books were used. 4. CONCLUSION Strategic planning plays a major role in the sustainability of family owned hotel businesses. This is because it ensures that the organizations develop strategic plans, use the plans to move in a strategic direction. According to Cordeiro (2013) the advantages of effective strategic planning to all organizations include understanding the environment including gaps, focusing resources on specific goals, maintaining/improving competitive position and preparing for future environments. As seen in the literature review, firms need to be able to incorporate strategic capabilities, competitor orientation and market orientation in their strategic plans in order for them to be able to sustain themselves. Family owned hotel businesses need strategic planning so as to develop strategic thinking and to foster strategic decision making for turning agency goods into results. They also need strategic planning so as to ensure the most effective use is made of the organization s resources by focusing the resources on the key priorities. With the current environment every organization has to do more with less and a well-developed strategic plan becomes the foundation for making all resource allocation decisions in a unified fashion. Strategic planning will show the direction in which the organization is going and it has various roles that have been explained. It is important for every organization to be able to engage in strategic planning as it will show the goals and strategies it has and its focus for the future. Planning is essential in helping to coordinate all the activities of the organization. Lack of strategic planning leads to failure of most organizations hence the need to do so. 5. RECOMMENDATION Family owned hotel businesses in Mombasa should be able to do the following in accordance to the role of strategic planning in the sustainability of their businesses. Firstly, they should be able to use the organizations resources like finances to be able to employ competitive strategies that will allow them to survive over time. To create a long term competitive advantage for their organizations, they should be able to use the skills of their personnel in order to achieve business sustainability.

8 8 The hotels should also be able to focus and identify the stated and hidden needs of their customers and to meet them so that their success is achieved. Being able to conduct market research in order for them to know what the innovation strategies to put in so as to have a competitive edge over their competitors will also be necessary for them. They should be able to evaluate themselves in terms of pricing, production efficiency, innovation, employee retention, customer satisfaction and market share against their competitors so as to gain a competitive advantage over them. Lastly, they should be able to eliminate the weaknesses that they have in the organization so as to be able to achieve sustainability. 6. REFERENCES Barney, J. B., Wright, M. & Ketchen, D. (2001). The resource based view of the firm: ten years after Journal of Management, 27, Bigne, E. & Blesa, A. (2003). Market orientation, trust and satisfaction in dyadic relationships: A manufacturer-retailer analysis. International Journal of Retail & Distribution Management. 31(11), Bryson, J. M., (4 th Ed.). (2011). Strategic planning for public and non-profit organizations: A guide to strengthening and sustaining organizational achievement. London: John Wiley & Sons. Chrisman, J. J., Chua, J. H., & Litz, R. A. (2003). Commentary: A unified perspective of family firm performance: An extension and integration. Journal of Business Venturing, 18(4), Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the family business by behavior. Entrepreneurship Theory and Practice, 23(4), Cordeiro, W. P. (2013). Small businesses ignore strategic planning at their peril. Academy of Business Research Journal, 3, Craig, J. & Moores, K. (2005). Balanced scorecards to drive the strategic planning of family firms. Family Business Review, 18(4), Dev, C. S., Agarwal, S. & Erramilli, M. K. (2009). "Market-driven hotel brands: Linking market orientation, innovation, and performance," Hospitality Review: Vol. 26: Iss. 1, Article 1 Eisenhardt, K. & Martin, J Dynamic capabilities: what are they? Strategic Management Journal. 21(10/11): Habbershon, T. G., Williams, M. L., & MacMillan, I. (2003). A unified systems perspective of family firm performance. Journal of Business Venturing, 18(4), Handler, W. C. (1989). Methodological issues and considerations in studying family businesses. Family Business Review, 2(3), Helfat, C.E., Finkelstein, S., Mitchell, W., Peteraf, M.A., Singh, H., Teece, D.J., & Winter, S.G. (2007). Dynamic capabilities: Understanding strategic change in organizations. Blackwell Publishing: Malden, MA. Holbrow, B. (2009). Strategic planning and governance. Board Development Program, 2. Hoskinsson, R.E., Hitt, M.A. & Ireland, R.D. (2004). Competing for Advantage. Thomson: South-Western, Cincinatti, OH. Jiang, Y., & Peng, M. W. (2011). Are family ownership and control in large firms good, bad, or irrelevant? Asia Pacific Journal of Management, 28(1): Liu, W., Yang, H., & Zhang, G. (2012). Does f amily business excel in firm performance? An institution - based view. Asia Pacific Journal of Management, 29(4):

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