Strategic Reconstruction and Practice of Tourism Enterprises

Strategic Reconstruction and Practice of Tourism Enterprises
Based on the Value Innovation
ZHANG Xin
College of Business, Jianghan University, Wuhan, P.R.China, 430000
[email protected]
Abstract: This article analyzes the principle and characteristics of value innovation, proposes the
approach of the strategic reconstruction of tourism enterprises. And to economic-type hotel as an
example, discusses the strategic reconstruction of tourism enterprises based on the value innovation. It
comes to the conclusion that by four steps of removing, reducing, increasing, and the created, tourism
enterprises are able to draw a new value curve and provide completely new and superior customer value,
or to make a significant improvement of customer value in order to open up new market space for their
own.
Keywords: value innovation, strategic reconstruction, value curve
1. Introduction
Value innovation theory is made in the "Blue Ocean Strategy" book by W . Chan Kim and Renee
Mauborgne, which means while enterprises or industries reduce costs, they can create the value for
consumers in order to achieve to simultaneously enhance business value and consumer value. The value
innovation is hailed as providing a new management paradigm for the global business to seek new
strategy means. So exploring the principles of the value innovation and seeking the new strategy path of
enterprises have become a hot research in tourism management.
2. THE Basic Principles and Characteristics of the Value Innovation
The value innovation is that based on customer needs, by providing totally new and superior customer
value for existing market or make significant improvements in customer value, enterprises get rid of the
original areas of competition. This is generally achieved through the three channels. First, improving
cognitive benefits of products and services and getting rid of the original region of competition; Second,
reducing the cognitive prices of products or services and getting rid of the original region of competition;
Third, reducing the cognitive prices, improving the cognitive interests and getting rid of the original
region of competition. In practice, the above-mentioned three methods are often used in an integrated
Cost
BuyerValue
Figure 1.
The Simultaneous Pursuit of Differentiation and Low Cost
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Data sources reference [1]
manner so to enable the customer value on behalf of enterprises’ products or services to be innovative.
The value innovation will enable the enterprises which have been committed to this business to stand on
a new strategic height and to create not mimic core competitiveness.
The value innovation simultaneously pursues of differentiation and low cost. Enterprises are creating
value for customers while reducing their costs to achieve sync upgrade in business value and consumer
value. When a firm's strategic actions have had a positive a positive effect to their own cost structure
and customer value, the value innovation will be able to achieve in the intersection region. As shown in
Figure 1.
The value innovation is first an idea or concept of innovation. Its most distinctive slogan is: Do not do
the "first" in "Red Sea" and do the "only" in "Blue Ocean". Through breaking through the set of thinking
and using reverse thinking, enterprises look for a breakthrough of the value innovation in the common
occurrence or convention, and then implement it
3. The Strategic Logic of Value Innovation
The value innovative strategies achieves the change of enterprise’s growth mode from the
competition-driven to the value innovation. In accordance with the value innovation theory, this change
is mainly reflected in the five strategic elements of the logic reconstruction[2].
The value innovation strategy abandons to think over the industry conditions as given exogenous
variables. Enterprises should strive to create new industry opportunity through the value innovation.
The value innovation strategy dispenses with the traditional strategy of establishing it’s own competitive
advantage to competitors as the transfer. Enterprises should be committed how to provide users with
new and superior value and gains a dominant market position in order to make effective use of
resources.
The value innovation strategy is unfettered by the traditional concept of analysizing and identifing
market opportunities to dependent on existing resources. Enterprises should be objective look at and
accurately grasp the dynamic of demand value based on new market entrants, and timely take the
countermeasures.
the value innovation abandons the traditional focus on the pursuit of differentiation market segmentation,
and is committed to exploring the core demand of the mass market so as to achieve a leap in the key
value of the user and get scale economies of the value innovation at the same time.
The value innovation strategy breaks through the shackles of focusing on the value of the industry
products and services. Enterprises should systematically consider the value innovation.
4. Practice of the Strategic Reconstruction of Tourism Enterprises Based on the
Value Innovation
The face of fierce competition, China's tourism enterprises should be based on the value innovation
theory, and implement of the strategic reconstruction to create a "Blue Ocean". Jinjiang Inn Co., Ltd. is
the success behalf of China's economy hotels. It can be found that the successful experience of Jinjiang
is in line with the core of "Blue Ocean" strategy ---the value innovation, and shows a typical strategy
reconstruction of tourism enterprises based on the value innovation. Jinjiang provides a lively fresh
blueprint for the strategy reconstruction of China’s tourism enterprises.
4.1 Jinjiang Inn’s strategy reconstruction based on the value innovation
Jinjiang Inn Co., Ltd. was founded in 1997 by Jin Jiang International Group. After a decade of efforts, it
had chain hotels more than 200 in 2007. They are located in Shanghai, Beijing and other 70 large and
medium-sized cities nationwide and are all over the East China, North China, Northeast Region, such as
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7. Jinjiang Inn Co., Ltd.has a total of more than 35,000 rooms and the reception was nearly 500 million
passengers. It is China's economy hotel brand to has the most extensive coverage.
For China's increasingly competitive hotel industry, high-star hotels and many guest houses exist side by
side. The gap between former high-level and latter service lefts a huge market space for economy hotels.
With the buyers’ idea of a more rational consumption, to get the most out of the delivered value is the
core of their demands in the purchase decision-making. They constitute the major consumer groups of
economy hotels. Jinjiang was targeting this market segment and first entered China's hotel industry by
economic-type hotel business model
Figure 2 the curve of the value innovation in economic hotels
value curve of
five-stars
hotels
value curve of
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hotels
value cerve of
three-strars
hotels
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With its comfortable, affordable, clean and convenient, Jinjiang becomes the first choice for consumers.
"A good sleep to sleep and a good bath to wash" has become Jinjiang’s demands points Combining
analytical framework of Blue Ocean Strategy, this article will carry out the comparison and analysis of
the value curves of economic-type hotels, the three-star hotels and the following hotels, and high-star
hotels.
Affordable. Jinjiang average price is slightly lower than the three-star hotel. Its Price positioning is
about 200 yuan. And traveling abroad 70 percent of China's white-collar sectors are acceptable to the
average price per night 150 - 200 RPM. This indicates that Jinjiang development of the price is able to
attract a considerable number of small and medium-sized business guests and holiday visitors. It let
Customers feel the value innovation in the possibility level of consumer.
Clean and comfortable. To pay more attention to toilet rooms and the health situation and highlight the
comfort of bed, is the core value of Jinjiang. It is not luxurious decoration of the room. The area is
smaller than the three-star hotel. However, Jinjiang renders the focus of the rooms’ comfort and meets
the guest needs of the pursuit of comfortable sleep so as to ensure the best interests of consumers
"Economic" is the soul. This is reflected in the limited services, simple facilities, professional operation
and the operation of large-scale. Although Jinjiang provides only limited services and removes such as
luxury restaurants, shopping malls, entertainment facilities and other facilities, it explores the theme of
the hotel to find a selling point. Although there is not luxury decoration but are acultural accessories to
create an atmosphere and manufacture moved in the rooms for guests to create an experience and
atmosphere at home. This gives guests the pleasure psychological. Jinjiang created brand standards,
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played a brand effect and realized “a copy of the value"[3].
Jinjiang has created a new value for customers rom the three levels of the possibility of consume, the
protection of the interests of consume and the pleasure psychological of consume. These has created the
high-growth profit for itself, a new industry rules for China's hotel industry and a piece of blue ocean for
their own business. In this paper, a grid coordinates of "delete - reduce - increase - create" is used to
analyse Jinjiang how to go beyond the rules of the hotel industry and show its’ value innovation in
Figure 3
price war
luxury decoration
multi-purpose facilities
Remove
high-grade indoor facilities,
luxury decorated rooms
personnel costs,
administrative costs
Reduce:
service
comfort, cleanliness
standardization of services, industry
standards and norms
market Segmentation
intensive and large-scale
Increase
the theme of a selling point
network systems,
concise and practical brand
Create:
Figure 3
Jinjiang’s redefinition of industry rules
Jinjiang value innovation gives us a new way of the development thinking. It provides a range of
possible analysis anf research framework. So that operators have the opportunity to allow the industry to
research the accustomed issues in operation of services business form a new perspective,and is likely to
find valuable ideas. This contributes to re-rejuvenate in enterprise management and strategic
positioning,and to provide customers with better and more excellent buyer value.
4.2 Based on the Value Innovation the Construction of a Sustainable Competitive Advantage of
Jinjiang
For innovators, to create a blue ocean is not enough. In the era of global integration, information flow,
the rapid development of science and technology, businesses pay no attention to the protection of Blue
Ocean, then, sooner or later they will lose the strategic interests brought by innovation. Therefore, it
becomes the starting point of a new corporate strategy from creating a Blue Ocean to defending the Blue
Ocean.
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Through the implementation of economies of scale, brand optimization and financial barriers and other
measures, Jinjiang has established high barriers to entry for their own enterprise market segments and
achieved the sustained competitive advantage[4].
4.2.1Chain operations to achieve economies of scale
In 2000, Jinjiang began the implementation of chain management by way of "join" and "entrusted". At
present, Jinjiang has had more than 200 of hotel chain and achieved a large-scale operation. The use of
economies of scale forces the new entrants to must be large-scale production from the beginning, thus
increasing the investment risk, forces them not to dare to enter.
4.2.2 Brand optimization, the realization of specialization, Network and standardization
Jinjiang has always insisted on the brand development strategy. In 2003, it was as well-known
trademarks in Shanghai, and implementaed the professional management, network-based chain, uniform
operating standards and quality assurance system to ensure that the guests can feel the same service in
every one hotel of Jinjiang
4.2.3 Financial barriers
Competition often requires a large number of investment. The demand for such funds constitutes
barriers to entry. At present the total assets of Jinjiang has reached 1.5 billion,and in 2006, it
successfully listed on the Main Board in Hong Kong. The listing will raise funds total about 1.2 billion
capital to inject Jinjiang. It’s huge funds and assets to discourage potential entrants. in order to build
fund barriers to maintain the sustainable competitive advantage for the fenterprise
5. Conclusion
The research shows that, by means of the value innovation, tourism enterprises are able to achieve their
strategic reconstruction and provide completely new type and superior customer value for existing
market, or make significant improvements in customer value and get greater market space. Jinjiang’s
practice of value innovation shows us the actual significance of strategic reconstruction in tourism
enterprises.
References
[1]. W.ChanKim, Renée Mauborgne (2005) Blue Ocean Strategy——How to Create Uncontested
Market Space and Make the Competition Irrelevant, Harvard Business School Press
[2]. Dailiping (2008) The Value Innovation Analysis Based on Blue Ocean Strategy, Economic
Research,.12, (in Chinese)
[3]. Shuijing.(2007) Analysis of Blue Ocean Strategy for the Tourism Industry. Economic-Type Hotel
as an Example. Weekly Market Theoretical Study, 1:42-43 (in Chinese)
[4]. Xuting, Chenliping, (2007) The Value Innovation connotation of Blue Ocean Strategy and Case
Analysis, Science and Management of Science and Technology,.7., 54-58(in Chinese)
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