Vclub Med. Inc. (problem Case)

vClub Med. Inc. (Problem Case)

Overview

Club Med is a company that first offered all-inclusive (AI), club-style resorts, which differed from traditional hotels chains. This new concept of lodging gives it its first-mover advantages and it was also able to secure a reputation for its ability to satisfy its guests (GMs) in this industry. Its success is evident from its growing sales revenue and profits (as observed from Exhibit 2) and its ability to provide quality services that satisfy and exceed its guests’ expectations with majority of the guests rating as excellent/good (as observed from Exhibit 12). Although the occupancy rate might be decreasing, the decrease was due to increased capacity i.e. there is increase in the number of beds; the absolute number of beds occupied was still increasing. Their success suggests their competency and efficiency in management and marketing.

However, the management is worried about rising competition and this case would discuss the problem and any possible actions that Club Med could do.

SWOT analysis (refer to exhibit 13, 14)

S 1. Quality product and service that satisfy guests (satisfied customers)

- GOs

- All-inclusive concept

- “Family” spirit

2. Location

- Good locations distributed around the world in different continents

3. Experience and ability to manage in different places around the world

4. Economies of Scale

5. Good word-of-mouth of consumers

6. Great bargaining power with suppliers and labour

W 1. High GO turnover rate

2. Spartan accommodation

3. Broad market appeal allow competition in niche markets

O 1. Interests of governments in attracting investments from Club Med

2. Strong demand of work positions at low salaries in Club Med (Strength)

3. Low monopoly power of purchasers (private individuals) and suppliers (Airlines, food companies, etc.)

4. High growth potential of growth of number of customers in N.A.

5. Baby boomers entering core market group- more customers

T 1. Exchange rate fluctuations can lead unpredictable changes in costs, value of assets, etc.

2. Political and economical instability of host country

3. Increasing competition (be more precise-> like examples)

- Rising travel agencies commissions (travel agency industry turning to oligopoly)

- More companies copying the all-inclusive concept of Club Med

4. Unpredictable weather (weakness- subject to weather conditions)

5. Saturated market for a lot of European markets (look at exhibits)

Company Culture

Customer Values

Club Med places heavy emphasis on customer satisfaction and go against all odds, including Mother Nature such as bad weather, to make its guests happy. Not only does it depend on its guests for revenue for their stay in the resorts, it relies on the positive word-of-mouth of them to recommend their friends and family. According to the case article, first-timers accounts for 60% of all GMs. Of the 60%, previous guests recommended 65% of them and 25% of them subsequently become repeat customers with an average of 4 additional visits. This shows that customer is an essential source of both revenue and marketing and Club Med was successful in satisfying its customers and building a strong brand image. Its strong brand image in customers’ mind is also a strong asset of the company. It also acts as a barrier of entry to potential entrants as these loyal customers may not see other resorts as substitutes of Club Med resorts.

Club Med guests really are treated as members; they have to pay $25 for enrolment and $40 annually for membership and they would receive catalogues of Club Med. This system gives Club Med funding for printing catalogues and also chances to market the resorts. Moreover, since the guests consider themselves as “members”, they are more likely to have more emotional affiliation and thus loyalty to Club Med. This also exploits to the “consistency principle” where people like to keep consistent of what they did or thought. The fact that they signed up for the membership and even paid a fee for it meant that they liked it somehow, thus they are likely to be motivated to come here again to ensure consistency of their thoughts and actions.

Company Culture and Service

Club Med’s vacation concept is changing a group of stressed, city professionals who are strangers to one another to relaxed and carefree friends. As a result, to separate the GMs “from the demands of civilisation” (as quoted from the case article), the make clocks, TVs, radios, telephones, writing papers, etc. unavailable to the GMs. In addition, to promote social interaction, meals were buffet style where GMs and GOs were randomly seated together and eating away from the crowd requires prior reservation requests. Moreover, unaccompanied singles were also assigned roommates. This not only helped to facilitate social interactions but also reduce the costs and thus price of Club Med resorts. To foster a sense of trust, there were also no room keys but theft was a problem especially in some villages. Therefore, GMs could store their valuables in the village “banks” to minimise theft and potential loses.

Can they match the competition?

Club Med has some rival firms. One of which is Jack Tar Village. Jac Tar Village also offered AI resorts. It features its resorts as luxurious, grand and the completeness of facilities and recreational attractions such as first-class hotel rooms with all amenities and free flow of drinks at the bar compared to in contrast to “Spartan rooms” and drinks that have to be exchanged with drink beads in Club Med. In addition, they also have facilities like shopping areas, casino, beauty salon, movie theatre, aquarium, etc.

To respond to Jack Tar Village, Club