Introduction
This case study breakdown is designed to help IB Business Management students prepare for the November 2024 exam based on the OneWay Ltd (OWL) case study. You’ll be given an in-depth exploration of the company, its context, and the key business concepts relevant to the case.
This is meant to help you prepare for your exam in an organized, intuitive way, where a top-down overview of the different concepts and key terms you should have a grasp of is loaded.
Company Overview
OneWay Ltd (OWL) is a family-owned chain of hotels located on the island of Xanadu, off the coast of Utopia. Key facts:
- 8 hotels, one in each of Xanadu's beach resorts
- Each hotel capacity: 450 guests (125 twin rooms, 50 family rooms)
- Employee structure: Full-time, part-time, and temporary workers
- Majority of employees are migrant workers from Utopia
Recent history:
- 2010-2020: Faced increased competition, stagnant profit growth
- 2020-2021: COVID-19 impact, temporary closure of 7 hotels, financial losses
- 2022: Reopened all hotels, returned to profitability
- 2023: Considering closing one hotel and building a theme park
Industry Context
Tourism and Hospitality Sector:
- Xanadu attracted 4.2 million tourists in 2023
- Slow growth anticipated in coming years
- No existing theme parks on Xanadu
Global Factors:
- Recovery from COVID-19 pandemic
- Changing consumer preferences in travel and leisure
- Increasing importance of sustainability in tourism
Key Business Concepts
Family-owned business
A company where the majority ownership or control lies within a family.
Application to OWL:
- OWL is described as a family-owned chain of hotels.
- This structure can influence decision-making processes, long-term planning, and company culture.
- Potential advantages: quick decision-making, strong company values, long-term perspective.
- Potential challenges: succession planning, balancing family and business interests, access to capital.
Hotel management
The operation and oversight of lodging facilities, including staffing, guest services, revenue management, and facility maintenance.
Application to OWL:
- OWL manages eight hotels across Xanadu's beach resorts.
- Each hotel accommodates 450 guests in 125 twin rooms and 50 family rooms.
- Key aspects include managing seasonal demand, maintaining service quality, and optimizing occupancy rates.
- Challenges include coordinating a mix of full-time, part-time, and temporary staff.
Theme park operations
The management and running of large-scale entertainment facilities with rides, attractions, and other amusements.
Application to OWL:
- OWL is considering building a theme park, potentially diversifying from its core hotel business.
- This would require new skills in areas such as attraction management, crowd control, and safety regulations.
- Synergies could be created between the hotels and theme park (e.g., package deals).
- Challenges include high initial investment, operational complexity, and seasonal demand fluctuations.
Tourism industry dynamics
The patterns, trends, and forces that shape the travel and tourism sector.
Application to OWL:
- Xanadu attracted 4.2 million tourists in 2023, but growth is slow.
- OWL must navigate changing consumer preferences, economic fluctuations, and global events (e.g., pandemics).
- Understanding these dynamics is crucial for strategic planning and forecasting.
Migrant labor
Workers who move from one country or area to another for employment.
Application to OWL:
- The majority of OWL's employees are migrant workers from Utopia.
- This presents both opportunities (e.g., flexible workforce) and challenges (e.g., legal compliance, cultural integration).
- OWL must ensure fair treatment and manage potential issues related to temporary residency and work permits.
Seasonal employment
Hiring workers for specific periods of high demand, often in industries with cyclical business patterns.
Application to OWL:
- OWL hires temporary employees during busy summer months.
- This requires effective HR strategies for recruitment, training, and management of short-term staff.
- Challenges include maintaining service quality with a fluctuating workforce and managing the costs of repeated hiring and training.
Post-pandemic recovery strategies
Approaches businesses use to rebuild and adapt following major disruptions like the COVID-19 pandemic.
Application to OWL:
- OWL faced significant challenges during the pandemic, including temporary hotel closures and financial losses.
- Recovery strategies may include cost management, service diversification, and adapting to new health and safety norms.
- OWL's consideration of a theme park could be part of its post-pandemic strategy to diversify revenue streams.
Diversification
A strategy where a company enters into a new market or industry in which it does not currently operate, while also creating a new product for that new market.
Application to OWL:
- OWL is considering diversifying into theme park operations.
- This could help spread risk, create new revenue streams, and potentially attract more visitors to Xanadu.
- Challenges include the need for new expertise, significant capital investment, and managing a more complex business model.
Competition in the hospitality industry
The rivalry among businesses in the accommodation and tourism sector for market share and customer loyalty.
Application to OWL:
- OWL faced increased competition between 2010 and 2020, preventing profit growth.
- Understanding competitive forces is crucial for OWL's pricing strategies, service offerings, and marketing efforts.
- The potential theme park could be a way to gain a competitive advantage in Xanadu's tourism market.
Environmental sustainability in tourism
Practices that minimize the negative impacts of tourism on the natural environment while supporting local economies and communities.
Application to OWL:
- As a major player in Xanadu's tourism industry, OWL has a responsibility to consider its environmental impact.
- This could involve energy-efficient practices in hotels, waste reduction strategies, and sustainable design in any new developments (like the theme park).
- Sustainability initiatives could also be a marketing advantage, appealing to environmentally conscious tourists.
Breakdown by function
Human resource management
- Reliance on migrant workers from Utopia
- Seasonal employment patterns (temporary employees in summer)
- Managing a mix of full-time, part-time, and temporary staff
- Training and development needs for diverse workforce
- Cultural diversity management
- Employment law considerations for international workforce
Strategies to consider:
- Developing a robust training program for seasonal workers
- Implementing fair labor practices for migrant workers
- Creating a positive work culture that integrates diverse employees
- Establishing clear communication channels across all levels of staff
- Developing career progression paths to retain skilled workers
Marketing
- Differentiation in a competitive market
- Branding and positioning of OWL hotels
- Marketing mix for hospitality services
- Digital marketing and use of technology (e.g., phone app)
- Customer relationship management
- Promoting Xanadu as a unique tourist destination
Competitive analysis:
- Nature of competition in Xanadu's tourism market
- Competitive advantages of OWL
- Benchmarking against other hotel chains
- Potential impact of a new theme park on competitiveness
Operations
- Capacity management in hotels (450 guests per hotel)
- Quality control in hospitality services
- Supply chain management for hotel operations
- Efficiency improvements (e.g., self-service buffets)
- Integration of technology in operations
- Seasonal adjustments to operations (busy summer months)
- Potential theme park operations and integration with existing hotels
Finance
Detailed financial data is not provided but you should be prepared to analyze:
- Profitability trends (losses in 2020-2021, profit in 2022)
- Investment requirements for potential theme park development
- Impact of interest rates on investment decisions
- Cost structure analysis (fixed vs. variable costs in hospitality)
- Revenue management strategies
- Financial implications of closing one hotel
- Budgeting for seasonal fluctuations in demand
Broad themes
Key strategic decisions
- Whether to close one hotel and build a theme park
- How to stimulate growth in a slow-growing market
- Diversification vs. concentration strategies
- International expansion possibilities
- Innovation strategies in hospitality (e.g., all-inclusive offerings, technology integration)
- Balancing short-term profitability with long-term sustainability
Ethics and Sustainability
- Employment practices for migrant workers
- Environmental impact of hotel operations
- Sustainable tourism practices
- Corporate social responsibility initiatives
- Balancing profitability with ethical considerations
- Potential environmental impact of theme park development
Cultural Factors
- Managing a multicultural workforce (migrant workers from Utopia)
- Adapting services to meet the needs of international tourists
- Respecting local Xanadu culture while catering to global tourists
- Potential cultural implications of theme park development
The OWL case study presents you a business scenario in the dynamic hospitality industry. Doing well in the exam will depend on your ability to apply business concepts to the specific context of OWL, analyze the company's strategic options, and provide well-reasoned recommendations.
It's important to consider multiple perspectives, the potential long-term implications of decisions, and the unique challenges and opportunities presented by OWL's location on Xanadu, showing this line of thought in your answers (short and long).