Marriott International Case Study

4. Diversification

Marriot began its business as a first A&W root beer franchise. After including some hot Mexican food on the menu the business flourished and allowed for the Hot Shoppe brand to evolve. By carefully observing the consumer behavior, Marriott noticed that many of its customers bought their products in order to take them out for the airport Hoover that was nearby. Consequently, they decided to expand (diversify) the business into airline catering and later on to institutional food service. From family restaurants that offered root beer and popular Mexican food, Marriott diversified its business into fast-food, by introducing Hot Shoppe Jr. Later on, Marriott spread its business into hotel arena by opening a first 365-room Twin

The industry-based considerations that pose the highest risk for Marriott are entry barriers and threat of substitutes. Due to the fact that Marriott International often works in countries of uncertain political and economic forces (as in Protea case in Africa), contributes to the risk of difficult entry barriers (Cohen, 2012). Marriott is also not the only company with a wide global presence and good reputation. Its way of doing business is therefore threatened by others who can offer similar service at, perhaps, a lower price or with some extra offerings that will draw faithful customers away from Marriott. Nevertheless, Marriott still explores the industry growth very well and thus it persists on a leading worldwide position. On the other side, the resource-based considerations that are threatening Marriott International are value, rarity and imitability. Its competitors are constantly adding some new features that reduce the value of Marriott services. In order to stay competitive, Marriott International must constantly follow the trends and be opened to the idea to add more value. Marriott’s conduct of doing business is neither unique nor is it hard to copy. If we add to account the fact that it franchises nearly 50% of its premises, the risk of being not rare enough or imitable rises even more. However, Marriott International reduced these risks through clearly established rules of franchising; they assign their own people to be in charge on most vulnerable franchise points, such as finances and key account managers (Conger, 2007). Regarding institution-based considerations, Marriott International has the highest risk in formal institutions constraints that could enable its diversification. This goes particularly for international businesses in emerging or developing countries, where one cannot be certain