Vclub Med. Inc. (problem Case)

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Med has 2 options, to upgrade its facilities and copy the concept of free flow of drinks from bar or retain its original concept and do nothing. In response to this competitor, Club Med opted the second option and remarked that clients that are attracted to those free drinks are undesirable customers and not the target market of Club Med. I am in line with the management’s decision. By choosing the first option, Club Med could potentially attract those who are materially inclined. However, it has a lot to lose. Firstly, it is costly to upgrade and maintain those facilities, and to provide the drinks. These costs would ultimately translate to higher prices, making Club Med resorts less price competitive. The customer profile would be altered and its current fans might not like the change. The brand image that it carefully built over the year would also be ruined and altered as this contradicts with its original concept of being “away from civilisation”. This action would also expose it to direct competition with not only Jack Tar Village but also other traditional hotels, which offer similar facilities except for the all-inclusive concept. Since the selling point of Club Med is to have a relax holiday away from the busy city life and its guests like resorts despite their Spartan rooms and lack of those facilities, there is really no need for change.

Another rival firm is SuperClubs. Unlike Club Med, which focuses on the mainstream market, SuperClubs focus on niche markets. It has couple-only resorts and resorts known for being uninhibited and sex-oriented, which successfully attracted many guests and achieved high occupancy rate. While these markets may seem attractive, they are not be suitable for Club Med as entering these markets could jeopardise Club Med’s image. Moreover, it was clear that Club Med did not want to go into niche markets as it “worked hard to change the swinging-singles, sex-oriented image it had” in the 1970s. The general market is still a larger market and Club Med should not respond to this competitor by niching its markets. It could co-exist with this competitor. Moreover, most of the resorts of SuperClubs are in Jamaica where Club Med has no resorts around.

Club Med has resorts all around the world, which gave their GMs a diverse variety of places from different continents to choose from according to their tastes and preferences. It has reap economies of scale due to its large size and thus has strong bargaining power with its suppliers like airline companies and even governments, especially those of the less economically well-off countries. This allow it to keep its costs low and it was able to offer its service at a price 25 to 50% lower than its competitors, giving it price competitiveness (pricing mix of same for less). In addition, the threat of new entrants would also be low as it would be virtually impossible for any new firm to achieve such size and expertise in this area to be as cost-efficient and thus price competitive as Club Med. Moreover, huge capital input is required to establish a resort ($20million to $25million for a 600-bed club) and even higher for resort chains around the world to gain economies of scale. Thus, the barriers to entry are high and the probability of competitive potential entrants is low.

With Respect To GOs…

One sign that seem worrying is that there is high turnover rate for the GOs, which is “nearly 46% among newly recruited” in their first season and “27.6% overall”. This is a problem as it costs to recruit and train the GOs. Moreover, some guests may like certain GOs and may be disappointed to know if they have left. To this problem, Club Med could give them more incentives like monetary incentives or free or low price vacation at Club Med for their family members, etc. and could pay more attention to their GOs, to forge a sense of belongings among them and the resort and motivate them to stay in the company. On the other hand, it is sometimes good to have high turnover rate for the GOs. The job as GOs requires the employees to be highly energetic and enthusiastic, which is more likely to be found in new employees. Moreover, many do not see their job as a long-term job but see it is a job to have fun, which is also critical for the job. This high turnover rate could allow for constant change of fun events by GOs and also high energy among them. Moreover, since the number of applicants far exceeds the number it needed, Club Med does not have to worry about not finding a suitable candidate to replace any GOs leaving. In addition, as each village was organised along similar lines, Club Med could easily send GOs from one resort to another if certain villages are severely short of GOs.

Therefore, the high turnover rate of the GOs is not a problem and the management need to change anything to improve the situation.

Action Plan

Short term

In the short term, they could just do nothing as their performance was good was stimulating growth in the company. Changes to its current mix services could damage its image and cause loses or unnecessary costs outputs.

On the other hand, they could exploit more on their word-of-mouth by giving some small and interesting souvenirs to the guests. These souvenirs could be practical things like key chains, fridge magnets or other things that evoke guests’ memories at the resorts like photographs. As the GMs use these souvenirs or display them at home or in the office, these souvenirs could act as good marketing tools as friends of GMs who come across them may increase awareness of Club Med and the souvenirs are also a form of reminder advertising to the GMs.

Long term

In the long term, they could expand and build more similar resorts around Asia where it currently has few resorts since Asia has many growing economies. It should stay close to its current vacation style to uphold its image and brand even while expanding to other countries.

Reference:

1. Case article- Club Med

Escape from the city life

Social interaction

high GO turnover = new activities, freshness, GOs also on holiday-paid vacation, impart sense of fun to everyone else

don’t want booze all time, spring break crowd- you don’t want

BOE- 24 resorts everywhere, diversity

“There needed to be a detailed discussion on Club Med’s competitors.” – comment from TA