Case Study Description of 7 Days Inn: Operations Strategy
7 Days Inn, a leading hotel group in China, was established in 2005 and was listed on the New York Stock Exchange in 2009. It now operates more than 1,000 hotels in 168 major Chinese cities and has enrolled more than 30 million customers in its membership club. Its success is largely due to its innovative business model and operations strategy, which includes designing product services with the vertical cutting approach, enhancing customer loyalty through a membership system and direct sales, managing a hotel chain with different governance structures and expanding a hotel chain with an innovative franchised-and-managed model. In particular, the case introduces the company's shepherd management philosophy. However, as the company expands, it has become difficult for headquarters to manage and supervise all the hotels. In addition, the resignation rate of hotel managers has gone up to 30 per cent in the past few years. What should 7 Days Inn do to deal with these challenges? Does the company need to break the rules again and innovate its business model, operations strategy or operating model - or all of them?
Swot Analysis of "7 Days Inn: Operations Strategy" written by Gang Chen, Liang Xu includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Inn Hotel facing as an external strategic factors. Some of the topics covered in 7 Days Inn: Operations Strategy case study are - Strategic Management Strategies, Operations management and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the 7 Days Inn: Operations Strategy casestudy better are - – talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, technology disruption, increasing energy prices, increasing household debt because of falling income levels,
increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of 7 Days Inn: Operations Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in 7 Days Inn: Operations Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Inn Hotel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Inn Hotel operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of 7 Days Inn: Operations Strategy can be done for the following purposes –
1. Strategic planning using facts provided in 7 Days Inn: Operations Strategy case study
2. Improving business portfolio management of Inn Hotel
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Inn Hotel
Strengths 7 Days Inn: Operations Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Inn Hotel in 7 Days Inn: Operations Strategy Harvard Business Review case study are -
Learning organization
- Inn Hotel is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Inn Hotel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in 7 Days Inn: Operations Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Inn Hotel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study 7 Days Inn: Operations Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Inn Hotel has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in 7 Days Inn: Operations Strategy Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Inn Hotel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Inn Hotel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the 7 Days Inn: Operations Strategy Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Inn Hotel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Inn Hotel has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Inn Hotel has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in 7 Days Inn: Operations Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Inn Hotel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Inn Hotel is one of the most innovative firm in sector. Manager in 7 Days Inn: Operations Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Inn Hotel is present in almost all the verticals within the industry. This has provided firm in 7 Days Inn: Operations Strategy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High switching costs
– The high switching costs that Inn Hotel has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Inn Hotel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Inn Hotel has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses 7 Days Inn: Operations Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of 7 Days Inn: Operations Strategy are -
Skills based hiring
– The stress on hiring functional specialists at Inn Hotel has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Inn Hotel has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
No frontier risks strategy
– After analyzing the HBR case study 7 Days Inn: Operations Strategy, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though Inn Hotel has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - 7 Days Inn: Operations Strategy should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Inn Hotel has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As 7 Days Inn: Operations Strategy HBR case study mentions - Inn Hotel takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Aligning sales with marketing
– It come across in the case study 7 Days Inn: Operations Strategy that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case 7 Days Inn: Operations Strategy can leverage the sales team experience to cultivate customer relationships as Inn Hotel is planning to shift buying processes online.
Lack of clear differentiation of Inn Hotel products
– To increase the profitability and margins on the products, Inn Hotel needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study 7 Days Inn: Operations Strategy, is just above the industry average. Inn Hotel needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Inn Hotel is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study 7 Days Inn: Operations Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Inn Hotel has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Inn Hotel even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Opportunities 7 Days Inn: Operations Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study 7 Days Inn: Operations Strategy are -
Learning at scale
– Online learning technologies has now opened space for Inn Hotel to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– Inn Hotel has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Inn Hotel in the consumer business. Now Inn Hotel can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Inn Hotel in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Inn Hotel can develop new processes and procedures in Innovation & Entrepreneurship industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Inn Hotel is facing challenges because of the dominance of functional experts in the organization. 7 Days Inn: Operations Strategy case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Inn Hotel can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Innovation & Entrepreneurship segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Inn Hotel can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, 7 Days Inn: Operations Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Inn Hotel to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Inn Hotel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Inn Hotel has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study 7 Days Inn: Operations Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Inn Hotel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Inn Hotel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Inn Hotel has opened avenues for new revenue streams for the organization in the industry. This can help Inn Hotel to build a more holistic ecosystem as suggested in the 7 Days Inn: Operations Strategy case study. Inn Hotel can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats 7 Days Inn: Operations Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study 7 Days Inn: Operations Strategy are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Inn Hotel in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Inn Hotel demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Inn Hotel has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Inn Hotel needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– Inn Hotel can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Inn Hotel needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Inn Hotel business can come under increasing regulations regarding data privacy, data security, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Inn Hotel needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Environmental challenges
– Inn Hotel needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Inn Hotel can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Increasing wage structure of Inn Hotel
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Inn Hotel.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Inn Hotel.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Inn Hotel in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Inn Hotel can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study 7 Days Inn: Operations Strategy .
Weighted SWOT Analysis of 7 Days Inn: Operations Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study 7 Days Inn: Operations Strategy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study 7 Days Inn: Operations Strategy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study 7 Days Inn: Operations Strategy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of 7 Days Inn: Operations Strategy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Inn Hotel needs to make to build a sustainable competitive advantage.
