Strategy Scenario Planning for Premier Inn HSBS Assessment Answer

Section 1

Introduction

The term strategy is defined as the plan of action that is needed for the attainment of the vision and objectives that will act as a guide for the decision-making process for the improvisation of the financial stability of the organization within the competing market. It is the plan through which business acquire their goals. Scenario planning refers to the process of formulation of assumptions on what the future will be and how the business environment will alter considering this (Pieroni, McAloone and Pigosso, 2019). It allows decision-makers to determine the probable outcomes and anticipated impact that will be made on them. Scenario planning is an essential aspect as it furnishes a competitive edge by allowing the leaders to decisively and quickly react to the prevailing situations as the actions were documented. Through this, the team can formulate nonemergency decisions efficiently by having insight into budgets, forecasting the needs and having a clear image of the present working scenario.

Background to Premier Inn

Premier Inn is a private limited firm that was founded in 1987 by Whitebread with its headquarters in England, UK. The firm deal in the hospitality sector and are delivering operations in the United Kingdom, Ireland, Germany, UAE, Qatar and many more. Premier In accounts for around 70% of the total earning of Whitebread (parent company). The brand positioning of the firm is based on the promise that the guests will have a good night's sleep and if they did not get this experience then money will be returned. It acts as an advantage for them within the highly competitive marketplace. As per the Brand Finance ranking, Premier Inn is one of the strongest hotel chains that is delivering their operations. They are delivering their services to more than 800 hotels in the UK and beyond. The organization has updated their decarbonisation strategy that involves a net zero target by 2040 and they have also formulated the strategy for a 90% decline in the Scope 3 emissions from their supply chains by the year 2050. Further, they will be making purchases of 100% renewable electricity in all their properties by the year 2026 wherever it can be done.

Applications of Pestle Analysis

Pestle analysis implies the acronym for the tool that is being utilised for the identification of the external or macro forces that are being experienced by the firm. It enables the firm to have the impression of the critical factors that creates a relevant impact on the industry or the business that is delivering their operations in the marketplace (Ritter and Schanz, 2019). Premier Inn is delivering their operations in the global marketplace, so it becomes essential for the firm to determine the environment in which they are operating so that they can formulate their strategies. In this context the Pestle analysis for Premier Inn is illustrated below:

Section 2

Scenario Planning

The term scenario planning is defined as the means to prepare for uncertainties through development of the plans for probable changes within the processes, personnel or environment through which can be kept running. It aids the organization in addressing the errors that occur within the strategic analysis, it involves underprediction and overprediction of the future of the organisation. It will assist decision-makers in Premier Inn in the identification of the probable results and influence by evaluating the responses and management of the possibilities. It is ensured that the future of business cannot be predicted and most of the time it is uncertain. Scenario planning is utilized as a strategic management tool for identification of the future scenarios, development of the strategic directions, and combatting uncertainties (Bocken, Boons and Baldassarre, 2019). It is the technique for integration of the perception of one regarding the alternative working environments in which the decisions of an individual might be played out. It is liable for offering a competitive business edge as they have been prepared with distinct actions and scenarios that might be appropriate for all situations. It will avoid the confusions, panic or chaos that might occur while delivering the services.

The critical limitation of scenario planning is that the entire process is time-consuming and complex as it is based on assumptions. The two-stage process comprises the identification of the time frame and focal question. These two aspects cover different factors that might aid Premier Inn in ensuring the formulation of the strategies. In focal question, it can be what are the factors that can impact the future competitiveness of Premier Inn in the coming 10 years. The next stage involved within the scenario planning is referred to as environmental scanning which is related to the identification of the external and internal factors that can create relevant influence on the business operations (Bocken et al., 2019). In this, the internal forces can be determined through the usage of VRIO or SWOT analysis and external factors with the usage of Porter’s five forces and Pestle analysis. Organizations need efficient planning to acknowledge how the organisation and industry dynamics can respond to the changes that might occur in their working structure. Scenario planning assists Premier Inn in determining the possibilities, whether the firm will succeed in these situations or not and how they will be affected by these conditions.

Considering the above perspective, Porter's five forces analysis can be utilised by Premier Inn to determine the external forces that are impacting its functioning. It is utilized for the identification of the industry structure for determining corporate strategies. With respect to Premier Inn, the firm need to identify the market in which they are operating so that the strategies can be developed considering those aspects (Bocken and Geradts, 2020). It will assist management to ensure that they will sustain themselves in the future and can deal with the situations that might occur. In this context, Porter’s five-force analysis for Premier Inn is presented below:

Identification of Key Drivers

The next stage involved within the process is identification of the key drivers through which the factors influencing the organization can be determined (Sjödin et al., 2020). The forces are determined with the usage of the Porters and pestle analysis to understand the influence that is being created. The key drivers along with their ranking are specified below:

The above ranking illustrates that the number of competitors has been kept in the top and there is high probability that the number of competitions within the marketplace will incline in future. When it will happen then the profitability margin of the Premier Inn will be declined as they have to decline their prices to match the market requirements. The next step that is involved within the scenario planning is construction of the distinct scenario with the usage of the scenario matrix (Bouwman, Nikou and de Reuver, 2019). Under this the two critical uncertainties are considered that have been taken along with the two axes that XY plain. The uncertainties that are experienced by Premier Inn are specified below:

Critical uncertainty 1: Customer loyalty

Critical uncertainty 2: Direct competition in the market

The uncertainty 1 is placed on the Y-axis and other is on X-axis, considering this the scenario matrix is provided below:

Illustration 1: Scenario matrix for Premier Inn

Infographics And Illustrations of the 4 Worlds

The four different worlds that have been identified in above scenario are analysed briefly in the section below:

Full-Fledged world (World 1)

In this world, the two aspects are taken into consideration, they are consumer loyalty and rivalry among competitors. It illustrates the maturity stage within the lifecycle of the industry and thus it is referred to as the fully-fledged or the matured world as it involves the critical assets through which organization can acquire success within the marketplace. In this the industry has attained the saturation or maturity point (Gil-Gomez et al., 2020). Within the matrix, it illustrates that the competitive rivalry within the marketplace is medium and in this it is essential that organizations prefer to formulate the joint and collaborative decisions through which collective decisions can be formulated.

When the demand increases then it illustrates that the profits and revenues inclines, but there is restricted scope for expansion, and this will be alarming. It has the minimal scope for addressing the future market growth which can create the negative impact on the functioning of the Premier Inn. It has to be considered that the market rivalry is increasing alarmingly which pose huge threat for the firm due to the inclined innovations that are brought in by the competitors within the hospitality sector. The bargaining power possessed by consumers or buyers is moderate as they are considerate and loyal towards the organization but there are competitors present within the market who are delivering standardised services. For addressing this, the competitive pricing strategies are being provided by the Premier In through which they can meet the potential requirements of the consumers and market in which they are delivering their offerings (Keiningham et al., 2020). Premier Inn can formulate the pricing strategies through which they can beat the competition prevailing within the marketplace. They can also opt for being the cost leader and as it will decline the cost of inclining the revenue through the formulation of the efficient pricing strategies.

Domination (World 2)

It comprises of the few competitors and high consumer loyalty and it is critical for the organizations to attain this position through which they became the potential choice of their consumers. As the competition is low then the customer base the organization will have will be loyal through which Premier Inn can attain significant high sales along with the profitability. Premier Inn will be dominating the market and thus it is known as domination world. The threat from the new entrants will vary from moderate to high due to the attractiveness that they will bring into the marketplace (Lee et al., 2019). Premier Inn must prepare themselves for addressing the massive traffic for addressing the requirements of their consumers exceptionally.

Illustration 3: World 2: Domination

Considering this, the total quality management approach must be utilised by the firm for enhancing the service quality that they will be delivering. It depends on the assumption that the new rivalry will be making use of the different alternative pricing strategies that might shift the interest of their loyal consumers (McDonald and Eisenhardt, 2020). The differentiation strategy must be utilised by Premier Inn that will furnish them to deliver their consumers with the superior quality services.

Scarcity of Buyers (World 3)

This world comprises of the low loyal consumers and competitors. The situation will not be favourable for Premier Inn in terms of low loyalty as switching cost will be high. Thus, it is essential for the firm to reorganize or rethink the existent target market as it does not illustrate the loyal consumer base. The firm can determine the more customer segments through making significant investments within the advertisements and marketing of their services. The emphasis must be made on the creation of branding and brand awareness through which the buyers can be attracted towards their offerings. The organization might bear huge losses because of the high expenses that they have to go through in the process.'

Illustration 4: World 3: Scarcity of Buyers

Premier Inn can have the chatbots through which they can deliver automated and quick response rather investing on employees for answering the queries raised by potential customers that will further decline the labour costs (Müller, 2019). The cost-plus strategy must be adopted by Premier Inn that is referred to mark-up pricing in which per unit production is set up. It enables to make sure that cost is covered and profit is also attained.

Alarming World (World 4)

It is characterized through the intensive rivalry and consumer loyalty. Alarming world denotes where survival is difficult as the intense competition will make the entire situation worse. Due to the large competition that prevails within the market, Premier Inn might not acquire high sales or turnover, it will also prevent them from having profitable prices. Due to this, the firm need to decrease their prices that will further impact their profit margins. As the consumer loyalty is low, it becomes important to make inclined efforts for creation of the loyal customer base (Pieroni, McAloone and Pigosso, 2019). The expensive promotional efforts might be required for attracting customers towards their offerings and organizational survival within this world is uncertain and it becomes difficult to attain certainty.

Illustration 5: World 4: Alarming World

The firms with enormous amount can sustain in this world. The Premier Inn can burn their cash heavily to sustain in this market and it will be the introduction stage within the industry lifecycle. Under this, the bargaining power possessed by the consumers is intensively high as compared to the identical services (Ritter and Schanz, 2019). Considering this, the penetration strategy can be utilized by Premium Inn for penetrating within the critical market for attracting the customers towards their offerings. Thus, it will be appropriate to decline the associated prices. Premier Inn can opt for the cost-plus strategies once they are done with the relevant consumers. Another strategy that can be adopted the hotel chain for addressing this aspect is minimize the cost where focus must be on low-cost. In this perspective, they can outsource non-key operations in the other countries for attaining the cost leverage.

Section 3

Recommendations

Based on the above analysis, it is determined that the organizations are delivering their operations in the evolving marketplace which makes it necessary for them to determine the scenario that prevail within the marketplace. Depending on this, it is essential that firms must formulate the strategies beforehand as they will have the significant time where they can conduct the in-depth analysis and based on this they can have precise outcome when the situation will occur. Considering the above aspect, the four worlds have been determined, based on this certain recommendation are provided below:

The initial world that is being considered in this study is full-fledged world that depends on the assumption that it is the maturity stage within the lifecycle through which firm can deliver their operations efficiently. It is recommended that firm must make use of the diversification strategy through which the firm can deal with the prevailing scenario. It is the method of growth or expansion that is being followed via a business that comprises launch the new product line or product within the new marketplace. It will assist organizations within the identification of new opportunities, incline within the sales revenue, boost the profit, and expansion of the market shares. Through the usage of this strategy Premier Inn can attain an edge over their competitors within the marketplace. The diversification strategy allows firms to take into consideration the new industries or products through which they might bring in product innovations that might enable them to intensify the industries or the markets that have not been explored yet. It is recommended that the Premier Inn must not be limited to the usage of the competitive pricing strategies rather than this they might determine the new industries or markets where they can offer and attain the inclined opportunities. It implies that the organization can make investment within the markets where the rivalry is less and it will enable them to attain the premium pricing strategies.

The second world that is being considered in the above scenario is domination that is the adequate scenario in which Premium In can deliver their operations efficiently. Considering this aspect, it is identified that the bargaining power of consumers is moderate and loyalty is high. It is recommended that the firm must make use of the Premium pricing strategies as there will be few competitions present within the marketplace. It comprises setting up the product or services price high as compared to the identical service or product providers within the marketplace. The organization can charge high as compared to their offerings due to the loyal consumer base which will allow them to have inclined sales and profitability. It will enable to formulate the favourable impression among the buyers and acquire the high-end sales and profitability levels. The emphasis must be made building up the capacity as it will allow to have massive traffic towards their offerings. Under this, the quality is the differential tool that will be considered by the organization. It is recommended that the Premier Inn must ensure that the customers are provided with the inclined quality services and for this they must consider having the feedback from them.

The third world is scarcity of the resources that involves less consumer loyalty and competitors, in terms of competitors the situation if favourable for the firm but the loyalty can be an issue for the organization. It is recommended that Premier Inn must utilize the cost-plus strategy for ensuring the relevant expenses are made on the promotion and inclining the attractiveness. Under this, firm can make respective investment through which they can retain customers towards their services, it will assist them to incline their overall services and reach the potential consumers. Based on this analysis, it is recommended that the market penetration technique can also be utilised by the firm to attain the required assets. It is the critical aspect of the Ansoff Matrix that can be applied within the settings.

The fourth world considered above is alarming world, that is situation which can be a difficult for the Premier Inn and various other organization. It is recommended that Premier Inn can make use of the secured venture capital through which the awareness regarding their offerings will be created within the marketplace. It is suggested that organization must make investment within creation of awareness and promotions through which they can reach the potential customers. It will assist them to attain the desired branding, market positioning and customer reach that will have overall positive impact on their operations.

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