SWOT Analysis / TOWS Matrix for Choice Hotels (United States)
Based on various researches at Oak Spring University , Choice Hotels is operating in a macro-environment that has been destablized by – increasing commodity prices, wage bills are increasing, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, technology disruption, challanges to central banks by blockchain based private currencies,
increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Choice Hotels can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Choice Hotels, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Choice Hotels 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 Choice Hotels can be done for the following purposes –
1. Strategic planning of Choice Hotels
2. Improving business portfolio management of Choice Hotels
3. Assessing feasibility of the new initiative in United States
4. Making a Hotels & Motels sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Choice Hotels
Strengths of Choice Hotels | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Choice Hotels are -
Digital Transformation in Hotels & Motels industry
- digital transformation varies from industry to industry. For Choice Hotels digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Choice Hotels 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.
Superior customer experience
– The customer experience strategy of Choice Hotels in Hotels & Motels industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of Choice Hotels comprises – understanding the underlying the factors in the Hotels & Motels 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.
Analytics focus
– Choice Hotels is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Hotels & Motels industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Choice Hotels 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.
Innovation driven organization
– Choice Hotels is one of the most innovative firm in Hotels & Motels sector.
Training and development
– Choice Hotels has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Choice Hotels is present in almost all the verticals within the Hotels & Motels industry. This has provided Choice Hotels 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.
Learning organization
- Choice Hotels 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 Choice Hotels is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Choice Hotels emphasize – knowledge, initiative, and innovation.
Ability to lead change in Hotels & Motels
– Choice Hotels is one of the leading players in the Hotels & Motels industry in United States. Over the years it has not only transformed the business landscape in the Hotels & Motels industry in United States but also across the existing markets. The ability to lead change has enabled Choice Hotels in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Choice Hotels has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Choice Hotels 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.
Strong track record of project management in the Hotels & Motels industry
– Choice Hotels is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Choice Hotels | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Choice Hotels are -
High bargaining power of channel partners in Hotels & Motels industry
– because of the regulatory requirements in United States, Choice Hotels is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Hotels & Motels industry.
Capital Spending Reduction
– Even during the low interest decade, Choice Hotels has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Hotels & Motels industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Choice Hotels is dominated by functional specialists. It is not different from other players in the Hotels & Motels industry, but Choice Hotels needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Choice Hotels to focus more on services in the Hotels & Motels industry rather than just following the product oriented approach.
Lack of clear differentiation of Choice Hotels products
– To increase the profitability and margins on the products, Choice Hotels needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Hotels & Motels industry, Choice Hotels needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ less understanding of Choice Hotels strategy
– From the outside it seems that the employees of Choice Hotels don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of United States, Choice Hotels needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Choice Hotels supply chain. Even after few cautionary changes, Choice Hotels is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Choice Hotels vulnerable to further global disruptions in South East Asia.
High dependence on Choice Hotels ‘s star products
– The top 2 products and services of Choice Hotels still accounts for major business revenue. This dependence on star products in Hotels & Motels industry has resulted into insufficient focus on developing new products, even though Choice Hotels has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Choice Hotels has high operating costs in the Hotels & Motels industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Choice Hotels lucrative customers.
Aligning sales with marketing
– From the outside it seems that Choice Hotels needs to have more collaboration between its sales team and marketing team. Sales professionals in the Hotels & Motels industry have deep experience in developing customer relationships. Marketing department at Choice Hotels can leverage the sales team experience to cultivate customer relationships as Choice Hotels is planning to shift buying processes online.
Choice Hotels Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Choice Hotels are -
Developing new processes and practices
– Choice Hotels can develop new processes and procedures in Hotels & Motels 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, Choice Hotels is facing challenges because of the dominance of functional experts in the organization. Choice Hotels can utilize new technology in the field of Hotels & Motels industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Choice Hotels can use the latest technology developments to improve its manufacturing and designing process in Hotels & Motels sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Hotels & Motels industry, but it has also influenced the consumer preferences. Choice Hotels can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Choice Hotels 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 Hotels & Motels industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Choice Hotels in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Hotels & Motels industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Choice Hotels can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Choice Hotels 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 Choice Hotels to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Choice Hotels 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Choice Hotels to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Choice Hotels to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Choice Hotels has opened avenues for new revenue streams for the organization in Hotels & Motels industry. This can help Choice Hotels to build a more holistic ecosystem for Choice Hotels products in the Hotels & Motels industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Choice Hotels can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Choice Hotels to increase its market reach. Choice Hotels will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Choice Hotels External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Choice Hotels are -
Increasing wage structure of Choice Hotels
– 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 Choice Hotels.
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. Choice Hotels needs to understand the core reasons impacting the Hotels & Motels industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Choice Hotels 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 Choice Hotels prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Choice Hotels may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Hotels & Motels sector.
Technology acceleration in Forth Industrial Revolution
– Choice Hotels has witnessed rapid integration of technology during Covid-19 in the Hotels & Motels industry. As one of the leading players in the industry, Choice Hotels needs to keep up with the evolution of technology in the Hotels & Motels 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.
Shortening product life cycle
– it is one of the major threat that Choice Hotels is facing in Hotels & Motels sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Choice Hotels will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 Choice Hotels business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Choice Hotels 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 Hotels & Motels industry regulations.
Consumer confidence and its impact on Choice Hotels 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 Hotels & Motels industry and other sectors.
Stagnating economy with rate increase
– Choice Hotels 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 Hotels & Motels industry.
High dependence on third party suppliers
– Choice Hotels high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Choice Hotels 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. Choice Hotels can take advantage of this fund but it will also bring new competitors in the Hotels & Motels industry.
Weighted SWOT Analysis of Choice Hotels Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Choice Hotels 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 Choice Hotels 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 Choice Hotels 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 Choice Hotels 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 Choice Hotels needs to make to build a sustainable competitive advantage.