Innovation Club Med free essay sample

Mediterranee Club Mediterranee or Club Med, is an originally French corporation of vacation resorts found in more than 80 countries of the world. Its resorts do their job under the Valtur, Club Med, Club Med Affaires (developed for business travellers), and Club Aquarius. At the same time it operates two cruise liners: Club Med 1 sails the Pacific and Club Med 2 Mediterranee and Caribbean’s clients. Club Med’s history begins from 1930x, when Gerald Blitz, a Belgian athlete and fighter, decided to visit Olympique’s village based in Corsica. The tent impressed him that he made a decision to establish Club med as non-profit organization with a main purpose to popularize open air life and sport education. The goal population was oriented on youth and young adults. At that time the vacation was usually local and when people wanted to have a rest they just do picnics at the gardens or going to relatives for a while, where all families came together. But Club Med idea was to establish resorts in exotic locations, which was absolutely innovative for that time. The innovation of Club Med combines three elements: cash free system where guests can buy extra services without taking cash all the time, just special card, which every guests receives after registration in the resort. â€Å"all-inclusive† concept, which still doesn’t mean that everything is free on the resort territory, but basically such services like food and drinks, transportation and entertainment are free of charge. This innovation provides 20% guest return every year and 83% guest return every three years. Inside resorts of Club Med there are special nicknames for the staff â€Å"GO† (Gentle Organizers) for the guests â€Å"GM† (Gentle Members), and for the employees GE (Gentle Employees). Because of no competitors and loyal guests who wanted to make a prepayment for their vacation, Club Med scaled very fast. In 80x chain’s management decided to make resorts more comfortable and replaced village tends with bungalows and hotels. The new marketing strategy was adopted to make Club Med family-friendly profile and deep understanding of what their guests want to see and what they want to get from the resort. In 1950, no matter for a long journey by bus, boat and train, the first Club Med resort welcomed guests and the hotel was full, even more to say, there was more than 10, 000 requests more but resort was able to accept only 2,300 guests at the same time. First and the most historically important innovation for the Club Med is â€Å"all-inclusive† idea. Club Med is originally the first hotel chain who took a risk use such innovation like â€Å"all inclusive concept†. Basically, the innovation means that guest should make a prepayment for the vacation, but as soon as he arriving to the resort he is offered unlimited food, drinks, some spa and sport activities, etc. Club Med created so-called â€Å"four pillars† capabilities: accommodation, food, transportation, sports and entertainment. Such pillars became identification of Club Med’s value opportunities, which were modified with new technologies: variation of transportation services was diluted with chartered boats, planes and trains, in food fishing and hunting were included, and numbers of sport facilities were extended. But still all inclusive doesn’t mean that everything is free, still some options and extras are not free of charge. With launching this innovation Club Med received â€Å"all-inclusive international vacation† profile. Other most remarkable innovations of Club Med: Cash has been replaced by cards. Guest doesn’t need taking their cash money every time when they want to buy extra services, but a card only. Club Med makes it more comfortable and free for members about buying cocktails or else. To the free food and drinks Club Med includes wine. Club Med introduced its first ski resort Actors and writers started to create professional entertainment programs for the guests. Buffet-style dining Convention services for businesses Basically, business strategy of Club Med was concentrated on its original members young adults. Year by year Club Med made technological internal and external developments. Also marketing strategy changed from word-of-mouth to the globally recognized brand of family vacations. Geographically Club Med expanded rapidly fast. In 1950s hotels were located only in Montenegro, Italy, Spain, Mexico, Israel, Morocco, Tunisia, France, Switzerland and Greece, and now Club Med resorts located in more than 80 countries. Business model of Club Med concentrated to create the most value for hotel guests. It is working very well in a view that 20% of guests return every year and 83% return to the Club Med every three years. 1980s brought some competitors for Club Med, like Super Club and Sandals in Caribbean and USA. These two hotel chains are good examples of competitors that well exploited Club Med strategy. Sandals focused more on guests segmentation strategy. They took resort’s differentiation of Club Med like in families and couples, and made more specialized by divided them into different economic classes. Guests with low level of income goes to resorts Sandals Inn and guests with high level of income goes to more upscale category of hotels Sandals Spa. Sandals resorts also differ according target age and specific needs:   Grande Sport or very active members, Beaches for kids and Beaches for adults. Sandals had similar to Club Med concept with bigger rooms and the food was served with a help of waiters comparing to Club Med’s self-service. Sandals was the first hotel chain which include alcohol in the â€Å"all-inclusive† concept. Also Sandals focused on more close relations with tour operators and travel agencies. Sandals’ resorts primly located in the Caribbean Islands, when Club Med’s hotels located all of the words. It is easy to concentrate hotels at one resort place than having hotels all over the word and be competitive all over the word. Therefore, the average price for the week starts from $ 1,600 comparing with Club Med $1400. Close to 1986 the all-inclusive industry started forming another level of competition. Its started easy to copy Club Med’s style where staff members organized and led recreation activities. The strategic differentiation was that Club Med did not include alcoholic drinks in the vacation prices. Super Club Organization, Jamaica-based resorts, known being the most sexuality oriented and inhibited resort option. Super Club includes alcoholic beverages in the package prices. Another competitor was Jack Tar Village, also Jamaica-based Company that located primly in the Caribbean territory. Jack Tar has more modern and glam image than Club Med. At the same time they launched advertising program against Club Med. Super Clubs and Jack Tar have the same activities as Club Med, but they also had some extra which were not included in the main package. This option allows them to low the total prices, because some potential clients do not want to pay the whole price for the all-inclusive package, so now they don’t have to. Club Med wasn’t able to manage a global footprint. The company had strong sales growth till 1996, but then it has been severely impacted by economic, political and ecological factors. Club Med faced many difficulties by that time and was not able to keep sustainable growth for sales and market shares to save their top position as all-inclusive resort company. Afterwards, Club Med competitors are more local companies, and they don’t have strong international image in the world arena, where Club Med has already made a name. The strategy of Club Med did not focused against its competitors, but concentrated more on customer segment. They got an idea that singles and adults don’t want much children at the resorts, at the same time families don’t want noise and drunken youth. Definitely, during the period of two decades of 1980s and 1990s Club Med didn’t innovate and renovate its resorts and had a lot of losses. They learned from this and started from creating new grading system, which reflects the comfort of resort Trident system. Club Med renovated 70 resorts and close some under-performing ones. The other thing they did was new type of resorts for â€Å"adults only†. By the same time, they created the Millesia loyalty card and add more recreation activities in their resorts. In 1990s Club Med chain expanded to North America. In 1999, they owned the fourth largest French tour operator Jet Tour. The operator continued working as its own brand, but promoting a lot Club Med’s propositions. Club Med has image as healthy and fit resorts, so they continued their developing in this direction by opening gyms under Club Med’s brand. Global Marketing relations played a very important role for Club Med’s resorts. Such factors like political and economic issues, Ecological and Natural Disasters made strategic impact on the whole company. In order to succeed in other countries, Club Med usually signs contracts with a government of the country. Such agreements mean that government allows Club Med to enter their market, and Club Med will increase tourism in that area. In the return for that, the government will help financially and pay for the costs of maintaining resort facilities. But such agreements wasn’t always been successful. For example, in Mexico, after Mexican Peso diminished, the resorts of Club Med were run-down. Furthermore, losses of the company also connected with the fact that France had been conducting nuclear tests in the South Pacific in 1996. Therefore, relations between Tahiti and France weren’t friendly, and tourists tried to choose other destinations for the vacation. Other global and not less important event which created problems for Club Med was terroristic attacks in the New York city September 11th. People reduced their flights in the world, especially in a vacation purposes, it caused of closing 15 resorts worldwide. Hurricanes in the Caribbean in the 2004, and tsunami in Malaysia, Phuket and the Maldives damaged or even destroyed several Club Med’s resorts. Global promotional strategy of Club Med was very difficult because they have eight advertising agencies worldwide. Club Med lose their brand image, because of weak advertising campaign. Therefore, Club Med’s name associated with other un-down properties. The new Growth Strategy has been built in 1998, when Philippe Bourguignon took a position of CEO. The rescue three years plan has been launched with total cost of $500 million. Club Med closed non-profit properties and renewed some others resorts. The company changed its standard approach by adding more customized according to and innovative program. The company also changed market segments. Sales and marketing efforts were focused now to attract customers from Canada, Belgium, Japan, Italy, Germany, Switzerland and, of course, USA. By 2012, according to the data from Annual Club Med financial report, they have better performance comparing to previous several years. Customers market grow up to 1, 9%, at the same time customer satisfaction is up to 3, 7% compare to the last three years. The company was successful by revenue data also, Club Med’s managers made it up to 2,6% in comparing with 2011. Club Med resorts operated under different systems: Management contract (12%), Owned (39%) and Leased (49%). When village is operated under â€Å"owned† method, it is owned and operated by the Club Mediterranee Group. When the village is operated under â€Å"leased† method, it is operated by Club Mediterranee, which pays rent to the owner of premises. Club Med is entrusted with the management and marketing of a Village by its owner (when Club Med did not invest in the asset). In this situation income and expenses resulting from the operation of the Village are recorded in the income statement of the owner-operator company. In management contracted for management and marketing activities, Club Med receives a management fee, alculated as a percentage from revenues, and shares profit, calculated as a percentage of gross operating profit (GOP). As the exclusive marketer of the Villa through its distribution network, Club Med is also paid for its distribution and promotion services. The major advantage of manager contracted type of village is that they make the model flexible, beca use the payment is based on percentage of revenues related to the rate. New destinations were chosen for the Club Med expansion in next several years: China, Brazil and Russia. Club Med’s caution for 2013 catch up attention in Europe, especially in France. Strategic outlook contains: speeding up process in high-growth markets; continue to win market share in mature markets; highlighting the uniqueness of the Club Med brand; optimizing the business model. Club Med is going further with up scaling with the aim of having in 4- and 5- Trident Villages in 2015, starting with new opening in 2013 in Belek in Turkey, Guilin in China and Pragelato in Italy. Season that lasts long time in these locations allows to increase capacity in Villages. In risk factors sector Club Med includes: 1. Risks related to the Group’s activities: global economic risk: economic slowdowns in the regions where Club Med does business adversely affect demand for leisure activities in general and for vacation travel i particular;   Risk related to competition: company operates in highly competitive markets, where the distinguishing factors are brand recognition, corporate image, and the price and quality of services offered;   Weather risk, risk related to seasonality: the significant percentage of sales during summer and winter time;    Risks related to acts or threats of terrorism, risk of war or other adverse political events; suppliers and supply risks: presence in over 40 countries, which increases geopolitical risks and the threat of terrorism; Suppliers and supply risks: purchasing policy, implemented in the Country Offices, centres on the notion of responsible procurement, including compliance by suppliers with local regulations and environmental protection (such principles included in the Ethic Charter in contacts); Quality and reputation risks: concentrated deeply on customer satisfaction and providing high-quality services and products. 2. Risks related to the environment, safety and hygiene: Environmental risk prevention and management: wasted water, technical facilities and storage of hazardous products; Risks related to regulatory constraints in terms of prevention and compliance: environmental regulations are con stantly changing condition; Risks related to global health disasters such as epidemics; Risks related to changes i availability of price of raw materials and energy; 3. Organizational risks: accounting and financial risks: in order to obtain the company’s Audit Committee every six month reviews the financial statements and verifies the reliability of financial information; Risk of fraud: to overcome this Club Med established an Ethics Charter in order to avoid the risk of corruption; risks related to Human Resources: the same Ethics Charter contains the information that Club Med principles include the conduct and behavior to promote a set of preventive and informative measures applicable to the safe, health, comfort and proper conduct of its employees; Information systems risks: importance of system reliability and to minimize the risks of system downtime; Risks related to the geographical location of subsidiaries: all managerial staff have been educated on the various types of operational risk. 4. Legal risks: regulatory risks: changes in laws and regulations applicable to the Club Med’s entities in countries where the resorts are presented may restrict ability to grow and may also involve significant compliance costs which could negatively impact the Group’s results and outlook. 5. Insurance risks coverage: the worldwide organization of financial coverage depends primarily on the transfer of these risks to insurance markets in reasonable financial conditions, as part of the insurance available in these markets in terms of guarantees and coverage limits, without using a captive insurance or reinsurance company. 6. Financial risk management: Market risks: currency risk, interest rate risk and equity risk; Credit and counterparty risk; Liquidity risks: managed by using diversified sources of financing. Sustainable Development From 2006 to 2012, the Sustainable Development Department operated on the basis of a roadmap developed in 2006, which include such background studies: Life Cycle Analysis, a general public survey, a desired non-financial rating and an initial summary and environmental benchmark of the Villages. For over more than thirty years, Club Mediterranee has been the top innovator in the hotel industry until the late 1980s, when the real competitors have arrived on the global hospitality market. While Club Med located its resorts all over the world, its key competitors were more local companies, so it was more easily for them to win competitive advantage because of their concentration with only few locations. At the same time Club Mediterranee understood that people now are not widely accept all-inclusive price like it was in the past. Clients preferences have been significantly changed. In order to stay sustainable competitive company, Club Med managed their travelling packages. Another significant idea Club Med has realized was dividing its resorts by customer segmentation: resorts for families, resorts for singles, resorts for adults and for children. Later, Club Med changed its world map in a view of profitability of places: close non profitable, rebuilt old properties and opened new. INNOVATION For the Club Med three innovations were selected, which focused on the service the company can provide. To be successful and competitive on the market in order to be the best the company usually can offer something exclusive, that no one else is offering by that moment or sell the same service or product as others do, but for lower price. In this situation new innovative service has been chosen for Club Med, which can attract more potential clients because of its exclusive value. First innovation is about such service like hotel for dogs. Club Med associated themselves as family oriented resorts. And if we pay attention to the facilities Club Med is offering, so the guests might be healthy and fit. This picture of family with good and right traditions and habits can be assumed with pets in the house. And when such family with all members is going to the vacation it is always a question where to put their dog. Sometimes it could be a big problem, even though a numbers of pets nursery where you can leave you dog for a while during you out of the city. But a lot of people simply do not trust such places and prefer to take their beloved dogs with them. Therefore, the service like hotel for dogs is an answer. The idea that guests can take their dog with them is always a benefit for both, like for the pet’s owner and for the hotel too. The hotel’s benefit is that this service can attract more potential clients. Dogs could train with the professional instructors, and have breakfasts, lunches and dinners with other dogs at the special dog’s restaurant. Spa for dogs is also a good option. The owners will be given a GPS collar for a dog; therefore they could always find their dog by sensor. This service is not new in terms of the hospitality, but it is new in terms of the all-inclusive hospitality. For the Club Med it could be a significant benefit that they can propose such an option for their guests in comparison to its key competitors. Second innovation service I chose for Club Med is â€Å"Adventure Trip†. This option is concentrated on a segment of guests who find lying on the beach and play ordinary sports games simply boring. A plan for Adventure Trip assumed to have a playing and competition image. The audience could vary from couples to a group of friends. Participants will try their fearless, their body limits, and their physical abilities. The travel will last for a week or less. It will be a competition; therefore there should be a winner, who will have some unforgettable prizes from the hotel. All participants will receive photo album and video after the competition will complete. Such type of vacation can attract like just married pairs, who wants to add some pepper to their honeymoon, and a companies of active friends who wants to try something fresh and new. Adventure vacations could be really challenging for those who wants to add some spices to their life! And the last innovation option which could be the winner is Online Marathons. Actually Club Med is doing some competitions like marathons or even triathlons in their resorts already. But Online Marathons it is much more global idea. Sportsmen could start running in different countries in different Club Med’s resorts at the same date and at the same time. To be able supervise the marathon all over the world a live TV or internet translation will be provided. The winner will have a membership of Club Med and can choose any resort for two weeks to stay during next year. Of course, prizes are flexible. Such sport facilities oriented on a semi-professional and professional sportsmen who do not want to travel far to try their limits, but want to be a part of some global sport event. It is also exclusive type of service which competitors of Club Med don’t have. I concentrated innovations in the service sector, because company organization has a good structure already and there is no need to make some changes there. Main strategic issue for the company in a view to be sustainable competitive is to be able to innovate and to propose to their clients something fresh and new. Club Med has more than 60 types of sports from entry level to the professional level. But its competitors do the same. My vision of how to win the market is all in innovation. References 1. Annual Financial Report, 2012 http://www. clubmed-corporate. com/wp-content/uploads/2013/03/2012-Annual-Report_Club-Med_ENG. pdf 2. Club Med goes upscale, http://globalmarketingtoday. wordpress. com/the-real-world/club-med-goes-upscale/ 3. Official website of Club Med http://www. clubmed. com/cm/jsp/clubmed_welcome. jsp 4. Case study, Club Med: The party is over, http://www. wiley. com/college/mar/kotabe372897/pdf/case01. pdf