The Club Med (A) case study tells the success of Club Med, a rapidly growing American subsidiary of an international resort company. It looks into the various factors which contributed to the success of the firm. It discusses the possible sources where the firm could establish a more competitive advantage.
Christopher W.L. Hart, Dan Arczynski, Dan Maher
Harvard Business Review (687046-PDF-ENG)
December 08, 1986
Case questions answered:
Case study questions answered in the first solution:
- Discuss the accommodation quality of Club Med compared to other hotel chains around the world.
- Why was there a high turnover ratio with the staff
- What is the effect of theft and heavy socialization with strangers to the organization?
- Analyze the communication and culture of the employees.
Case study questions answered in the second and third solutions:
- In what areas has Club Med developed a competitive advantage?
- How defensible are they?
- How successful is Club Med? What do you conclude from its financial performance? What are the non-financial measures of the company’s performance, and what do you conclude from them?
- How serious a threat is a new competition?
- What is the expected value of a new customer?
- What is the company’s culture and what is its impact on the firm’s performance?
- What impact on sales would an increase in service quality have (i.e., what are the “external” economics of quality)?
- What opportunity actually exists for Club Med to increase service quality? What are the relative costs of its options?
- What areas should Jacques Giraud be most concerned about, areas that he should put on his strategic agenda?
- What are your recommendations? Jacques Giraud is interested in knowing what changes would have the most leverage on performance.
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Case answers for Club Med (A)
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Club Mediterranee (Club Med) was founded in the year 1950 by a group of friends as a nonprofit sports association. The group was led by the talented Gerard Blitz, who was also a water polo champion and diamond cutter. Over time this organization grew, and running it as an informal organization become increasingly hard. To push towards a more rigid organizational structure, Blitz in 1954, invited his friend Gilbert Trigano, to join the organization on a full-time basis. Trigano saw the enormous commercial potential in this concept, and in time become managing director and set out to change this association into a successful business.
Almost 30 years later, Club Mediterranee SA, now a publicly owned company traded on the Paris Stock Exchange, had about 108 resorts villages throughout the world and has hosted almost 820,000 vacationers annually. These resort villages can be found in countries alongside the African coast, islands in Southeast Asia, and even in the USA. (Appx. 1)
The Club Mediterranee Group
One of the main ideas that separate Club Med and other top resort companies is its culture. Throughout the growth of the company, Club Med has an enduring “family spirit” amongst all its managers. All of the top managers at the business headquarters in Paris had formerly worked in the villages. Many of them had the position of general manager, thus showcasing its close culture with all its employees. During Club Med’s growth in 1972, Club Med. Inc. was formed as a US subsidiary of parent company, Club Mediterranee. The subsidiary was in charge of selling the vacation packages and the operation of the resorts in North America, the Caribbean, South America, Asia, and the South Pacific. By the year 1982, Gilbert Trigano’s son Serge, aged 39, become the new President and CEO of Club Med Inc.
By the 1980s, with the company being publicly traded on the stock exchange, several analysts realized why Club med stood out from the rest, and it was due to there unique methods of operation compared to traditional hotel/resort chains. Club Med earned almost $3 million per year just from the interest from customers’ prepaid deposits. Also, the capacity in every village was measured as the number of beds, not the number of rooms, as singles were assigned roommates. Also, many Wall Street analysts have projected a strong growth rate for the US subsidiary at the time.
Coming to present times, in 1985, Jacques Giraud was appointed as the new President and CEO of Club Med Inc. Serge Trigano, the previous president and CEO, moved back to Paris to charge of the parent firm.
Type of Case
This case is most appropriately a problem case. A problem case is similar to a decision case in the sense that they ask to assume the role of the case protagonist and make recommendations, but do not provide specific and clear alternatives to choose from. Instead, problem cases describe a problem the protagonist (in this case, Club Med and Jacques Giraud) must confront and for the analyst to justify an action plan to deal with the problem. This case is a problem case as the case does not provide clear alternatives to choose from but does have several small problems that should be investigated to keep the company successful in the long run and also to develop an action plan to deal with these problems. This is why this case, Club Med (A), is a problem case.
Main Issues and Problems of Structure of Club Med
Even though Club Med was the main and only competitor in the all-inclusive, club-style resort market for several decades, in recent years, many more companies in the Western Hemisphere have entered this market. They have been aggressively trying to push Club Med out of there position. Some positive ideas and concepts are used in Club Med, which should still stay in place to ensure that the company can regain its lost market share. The main concern now is that more and more companies around the world can duplicate Club Med’s experience, sometimes for a lower price, which is a serious threat.
To move into the future years in the late 80s and early 90s and to able to gain the lost market share from the new Caribbean based resort companies, Club Med should first…