Bnayan Tree Case Analysis

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from cheap substitutes – Mitigation

- Banyan Tree has successfully launched two brands (Banyan Tree and Angsana) to counter competition and target different market segments. Cheap substitutes can spoil the market than being a direct competition. They can be addressed by either creating a cheaper brand or by creating awareness through Marketing and Promotion activities. The target audience need to be made aware of the quality differentiation and experience that they will be deprived off by going for cheaper substitutes.

Risk of Innovation – Enhancement.

- Risk of Innovation is a positive risk which means trying different products, techniques and different markets. Banyan Tree has to innovate and experiment to suit the needs of the new markets. Extensive survey of the markets, consumer consumption pattern, purchasing power and tastes need to be studied. Products based on these researches need to be tried and tested on Pilot basis before launching. Thus risk of Innovation has to be enhanced to get the positive benefits.

Brand Dilution - Mitigation and Avoidance.

- Extensive study of the market, Pilot testing, skilled expertise and high service levels are required to mitigate or avoid the risk which will not impact the Brand Image.

High operations costs – Mitigation

- Higher cost of operations, Infrastructure cost, Capital expenditure is a risk which needs to mitigate. Management agreement, leases and strategic alliances need to be worked upon. Existing resources and techniques need to be utilized.

Paucity of Skilled Resources – Mitigation and Transfer

- Skilled labor force is critical as the Human Capital dominates as the key differentiator. Experience at Banyan Tree depends on the service level and happiness quotient of the employees. Hiring skilled employees from the market, training the new employees and motivating existing employee base by internal promotions has to be adopted. Thus this risk is mitigated by training and motivating and by recruiting skilled force.

Natural and man-made disasters- Acceptance, Mitigation and Transfer

- Natural disasters can be countered by proper study, taking precautionary measures and avoiding high risk markets. Insuring to an extent can mitigate the risk by transferring it to the insurance companies.

Political unrest – Avoidance

- Political risk can be mitigated by abiding by the laws and norms of the states and markets with high political risks need to be avoided as they may have negative impacts.

Financial crises – Acceptance

- Tourism industry depends on the financial conditions of the countries in which it is operating. Financial crises affect the purchasing power as well enhance cost of operation. This risk has to be accepted and mitigated by adopting techniques like extending credit facilities to tourists aiding their travels.

Risk of identifying non-strategic locations – Mitigated

- Critical risk which needs to be mitigated by intensive market survey, market demand and level of competition. Senior management has to make various trips to study the viability plans, do SWOT analysis to weight the benefits and the threats. The response strategy is mitigation.

Less impactful CSR in Non-Asian countries – Acceptance

- Corporate Governance is predominant in most of the Non - Asian countries. Thus Banyan Tree may not enjoy the same level of goodwill by its CSR practices however it is imperative. This risk has to be accepted.

Contingency Plan for the Medium level and Critical Risks.

Avoiding Brand Dilution and countering Competition

Goal: To retain the Brand Image of Banyan Tree is critical and the level of service and experience enjoyed by the guests is important. The service standards cannot fall and need to be higher to establish grounds in new markets.

Time Period: Initial six months to a year.

Trigger: Brand Image needs to be checked by customer survey and feedbacks from the loyal customers. Regular inspections, customer feedbacks, market surveys and weekly and monthly sales reports. Threshold of operating profits should be at least 10% and the debt to equity ratio should be 2:1 to ensure there is no over leveraging for expansion.

Success: Exuberant profits should not the emphasized. Marginal profits and recovery of day to day operations cost need to be ensured. Threshold limit of 15% of operating profits needs to be achieved.

Manage Risks: Strategic locations are the key locations which would make Banyan Tree more accessible to existing loyal customer base. Repeat customers can be encouraged by discount and free holiday plans to visit new locations. Loyal customers are brand ambassadors and honest feedback can be obtained from them.

Identify operational inefficiencies: Expert and Skilled employees need to be deputed incase the services level do not match up and the performance charts need to be monitored.

Identification of Strategic Location:

Goal: Low cost of operations, basic infrastructure, potential market demand and accessibility of the location. The contingency plan would involve launching Spa operations in the identified locations.

Trigger: The success of the Spa operations would be the deciding factor for the launch of resorts. Operating profits of 10% to 12%

Success: If the operating profits cross 15% in first six months for Spa operations.

Manage Risks and Identify operational Inefficiencies: Contingency plan would involve identifying only those locations where there is possibility of residential and property sales. If the performance of resort is not to the desired levels the property can be developed for property and residential sales. Thus the risk of choosing a non-strategic location can be mitigated.

Skilled Workforce:

Goal: To train and retain the existing skilled employees and recruit new skilled work force.

Trigger: High employee turnover, employee performance reports, customer survey.

Success: Employee turnover to be restricted to 15%.

Manage Risks: Employee benefit schemes,