Overview Med has over its competitors is the way

Overview

Founded in 1950 by a group of friends,
Club Mediterranee often referred to as “The Club” was the ninth largest hotel
company in the world in the year 1986. It was led by Gerard Blitz who was a
water polo champion and a Belgian diamond cutter. It was founded first as a
non-profit organization attracting people on tight budget who loved and enjoyed
sports along with a scenic seaside location. In 1954 Gilbert Trigano was
invited by Blitz to become the managing director. Trigano saw the business
potential of combing sports with vacation and scenic landscape and started to
transform the association into a business. In the year 1985 Club Mediterranee
was a publicly traded company on the Euronext Paris, hosting 820,000
vacationers annually and owning 108 resort villages throughput the year. In
1972 Club Mediterranee formed a U.S subsidiary as Club Med Inc., which sold
vacation packages and managed resort in North America, the Caribbean, South
America, Asia and the South Pacific. In 1984 25% of the shares for Club Med
Inc. were sold on NYSE which became a favorite of many influential Wall Street
analysts.

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Club Med’s Competitive Advantages
(Strengths)

One of the biggest competitive advantage
that Club Med has over its competitors is the way it operates its business in
comparison to the other resorts. How they have integrated the idea of “Family”
in their culture where the employees and the guests are a big family with open
communication grounds. The company understands what customer satisfaction means
to then thus offering one of kind experiences unlike any other resort or hotel
chains. They offer a rotation of their employees (nomadism) which helps in
generating different international experiences in different villages. They also
offer Spartan style rooms which don’t include any electronics which help its
guest to be involved in the social interaction and participating in activities
offered by the club. This also helps the guest to live in the moment and not
worry about their work and just have an amazing experience.

The company earned 3 million dollars just
in interest from the customers prepaid deposits for their vacation. Further the
company’s culture is to measure the capacity of their occupancy in the number
of beds available in villages instead of rooms. This leads to the increase in
their capacity for their occupancy which further leads to higher contribution
margin for their beds in villages.

The company also holds a strong position
when it comes to customers, suppliers and employees. According to the company
the customers can only buy the “true formula” of the vacation package from the
company itself and it would cost them 50% -100% if they tried to reproduce the
company’s experience through other vacation options. The company offers a full
package and a “Float” system where the customer pays everything beforehand and
it includes lodging, meals, activities, ground transportation and sports. This
helps them to operate at a lower cost than its competitors.

There are commercial airlines that sold
Club Med highly discounted air transportation which Club Med sold as a part of
the vacation packages with a substantial profit. The company also created jobs
and tourism revenue therefore economically unstable countries in exotic
location wanted to be a site for Club Med Village. Thus they offered low cast
financing, foreign worker agreements, tax breaks and in some cases, direct
equity investment. These gave Club Med an upper hand with its suppliers.

The company also attracted many young and
talented people than wanted to work with Club Med. In 19884 they received 35000
applications for 2000 work positions available worldwide. The company was also
able to attain a strong position when it came to negotiating wages for local
village workers.

The company is highly defensible as Club
Med has a unique culture and are able to offer its customers exceptional
experiences at lower cost which would deter its competitors. Also the company’s
competitors need a high capital to enter the market and compete with Club Med
at the level they are operating now.

Looking at their financial performance for
the year ending October 31st 1986 the company is doing really well
with an income of 19,087,000 dollars before tax and 18,055,000 as their net
income.

The company offers an experience unlike no
other which leads to word to mouth marketing which is a huge form of marketing
for the company as most of their guest do recommend Club Med because of the
experience they had. 65% of new guests decided to visit Club Med for the sole
reason that they were recommended to go by their friends and acquaintances. 25%
of guests became repeat customers and took an average of four additional Club
Med vacations, with an estimated contribution margin of 60%. Looking at the
satisfaction rate and follow up questionnaire most of the guests had an excellent
time and exceptional service and were happy with their vacation.

Areas Club Med Can Improve On (Weaknesses)

Club Med depends a lot on Word of Mouth
marketing strategy where their customers recommend Club Med to their friends
and people that they know. This is where they have a risk of losing business
from people who have never visited Club Med or have no friends that have
visited Club Med either.

The company has a high turnover rate of
46% amongst American employees and 26.7% overall. Even though the company is
looking for fresh talent the high turnover rate leads to new employees taking
time to adjust with the culture and increases expenditure on employee training
whereas an old employee would already know the ways to get their guests social.
The company also has fixed employees irrespective of the number of guests. This
leads to increase in expenses on wages which can be brought down if the
employees were numbered according to the guests.

Club Med offers single bed occupancies for
everyone and does not offer double beds for couples which could drive away a
big market of customers as they might think of Club Med as an experience only
catering the singles. The activities offered by Club Med became predictable
which might not appeal people who are looking for something different. The company
needs to adapt according to change in demands amongst customers.

Club Med villages are located in various
exotic locations worldwide leading to some villages having better design and
facilities which further lead to physical problems and difficulty in managing
some villages. The company also had problems keeping all of their facilities in
top conditions due to joint ventures with the government.

Growth Opportunities

Club Med offers single beds for everyone
who visits their villages. Thus emphasizing more on singles and their demands.
They can adapt according to the demands of the customers and come up with
occupancies including double beds for couples and also occupancies for
families. The company can further design activities for families and for
couples to socialize thus sticking true to the company’s culture. This would
help them capture a larger consumer market and attract more diverse crowd to
their villages.

The company highly depends on referral
program for their marketing. They can offer incentives and discounts to the
guests who return to club med and also the friends that they refer to who visit
Club Med village on the sole basis that their friends recommended it to them.
This will further motivate the guests to come back and to refer the experience
to other people.

Activities offered by Club Med became
predictable which might drive away customers looking for something different
and a different experience. The company should invest in different water sports
and other activities which would keep things different while maintain the
quality of service. The company should reduce their turnover rate and train
their current employees to provide better services and build up a relation with
the guests. This would help them cut costs in recruiting new employees. These
would lead to an increase in service quality for the company. The relative
costs that the company would incur would be investing in new sports and
activities.

Threats

One of the biggest threats that the
company possess is the lack of adaptability and stick to the old ways of work.
The company can provide an exceptional and a unique experience by adapting
according to the needs of the customers.

New competitors are a potential threat to
the company too. Both the competitors SuperClubs and Jack Tar villages offer
different Unique Selling Propositions for their company which are a potential
threat to Club Med. While SuperClubs sells their packages through tour
wholesalers, Club Med sells its packages through travel agencies and directly
to its customers. SuperClubs and Jack Tar Villages both include drinks in their
packages whereas Club Med keeps a tab on drinks. Jack Tar Village also offers
attractions like aquarium, casino, duty free shops and the largest swimming
pool in the western hemisphere. This can lead to customers comparing the
facilities and the quality of service provided by all the resorts in the price
they are asking. Though the competitors have their own USPs , they aren’t a bit
threat to the company because they do not offer the family like experience and
customer satisfaction that Club Med has to offer.

The major areas of concern for club med
are the lack of adaptability to new consumers and their demands, the quality of
service provided, predictable experiences/activities and the employee turnover
percentage.

Conclusion

After the analyzation of Club Med’s
Competitive Strengths. Areas of Improvement (Weaknesses), Growth Opportunities
and Threats the following case is a Decision Case. The company is really good
at making its guests feel like a family and providing an amazing and
unforgettable experience to them. The company’s culture and ways of operation
are unique which attracts a lot of people and they also have an advantage when
it comes to package deals and providing an experience with much lesser cost.
The company also has weaknesses including the lack of adaptability to customers
like couples and families, employee turnover, dependability on Word to Mouth
marketing and maintain top class services across villages. The growth
opportunities that Club Med possess includes adaptability to new customers and
their demands including families and couple, providing incentives to motivate
guest to recommend the experience to their friends and also increasing the
quality of service by including different activities/experiences. Threats
aren’t a big deal for Club Med other than lack of adaptability because the
company has penetrated the market and has created its brand equity amongst its
customers.

Recommendations

Club Med should keep and maintain their
culture and values as these are the company’s USPs which leads to an
exceptional experience for its customers and customer satisfaction. Along with
that the company should adapt according to change demand and be more inclusive
of couples and families in their villages, they should focus on ways to
increase the quality of service by creating and introducing new activities and
experiences to keep things different. The company should also decrease their
employee turnover as this would reduce the cost of new hires and older
employees are more comfortable with the guests and know how increase and
maintain customer satisfaction.