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Candidate Details

Assessment – BSBLDR811 Lead Strategic Transformation

Please complete the following activities and hand in to your trainer/assessor for marking. This forms part of your assessment for BSBLDR811 Lead Strategic Transformation

Name: _____________________________________________________________

Date: ____________________________________________________________

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Case Study: Prune the Brand Portfolio?

by Chekitan S. Dev

INTRODUCTION

The business-casual dress code had Troy Freeman stumped. As the long-time CEO of Otto Hotels & Resorts, now the second-largest lodging company in the world, he’d packed for hundreds of work trips before, but without suits as an option, he was having a much harder time. His flight was leaving first thing in the morning for Carmel, where he would meet his newly expanded executive team for an off-site to discuss the company’s portfolio strategy. The facilitator, Caroline Dvorjak, was a marketing professor and a seasoned consultant. Otto had just finished a $9 billion acquisition of Beekman Hotels, which meant it now had nearly 4,800 hotels and slightly more than a million rooms in 100 countries 1. Like most of the big hoteliers, however, Otto owned few of those properties; instead it franchised and managed them, with the bulk of the real estate owned by independent companies that licensed Otto’s brands. The addition of Beekman’s eight brands had increased the number now under Otto’s umbrella to 21. The question on everyone’s mind, especially investors’, was how Troy would manage this much larger portfolio2, given the overlap between existing and acquired brands in terms of positioning, price tier, and geography

Troy shooed his dog, Tanker, off the bed so that he could take a look at the clothes he’d laid out. “Too much here, Tank,” he said aloud. Then he laughed. He needed to streamline his wardrobe to attend a meeting where he would work out how to do the same with Otto’s brands.3

Hotels are not the only industry to be faced with whether or not to prune brand portfolios. Large consumer packaged goods companies such as Procter & Gamble and Unilever, spirits companies such as Diageo, and food businesses such as Nestlé have struggled with similar questions. 3

As soon as Troy passed through security the next morning, he saw Kent and Khalil in the line at Starbucks. He hadn’t realized they were on his flight but was pleasantly surprised. They waved him over, and Khalil pointed to his phone. “Did you do your homework?” he said, teasing. “We didn’t get your statement.” “I think we have enough opinions to go around,” Troy replied, “so I’m still Switzerland—at least for now.” Khalil and Kent had been close allies ever since Khalil’s ascension to the top of Piper, five years earlier. When Caroline had mentioned wanting to avoid politicking, Troy had immediately thought of these two. They’d always seen the acquisition as a way to grow Otto’s existing brands. “I guess you know where we all stand anyway,” Kent said. “Meena wants to save costs. Rick and the other Beekman folks want to save their brands.” He was referring to Rick Guerrero, the manager for Evenstar, Beekman’s largest chain, which had the most overlap with Piper and was therefore a target for absorption. Rick had indeed defended his brand but also said he would be willing to take a step down and work for Khalil and Piper 5 if that’s what it came to.

5 Multibrand strategies at companies that have several brands in the same category can suffer from diseconomies of scale. Has Otto considered all the potentially hidden costs?

“OK,” Troy said, “let’s wrap up the lobbying efforts for now. We can debate this with the group later. I’m going to get a coffee and read the Journal.” Khalil clearly had more to say, but he took the hint.

In Carmel

9 Loyalty programs add another complication. When you phase out brands, you risk losing members loyal to them, and, as the postmerger experience of airlines has shown, it’s no easy task to migrate customers from one program to another.

“I guess we knew that,” Troy said. “One thing the research shows for sure, though, is that it’s better to make a decision soon,” Caroline continued. “Investors are waiting to see where you go with this, and you have a passionate team”—this prompted laughter—“that needs its marching orders.” They all nodded, but Troy wondered if everyone would support whatever call he made. “So,” Kent said. “Are you still Switzerland? Or are you ready to take a stand?”

What do you think should be done in the case and why? (250-300 words)

Question 3:

Case Study: Prune the Brand Portfolio?

https://hbr.org/2018/03/case-study-should-a-hotel-giant-eliminate-some-brands-and-refocus