04 May WHAT WERE THE FUNDAMENTAL PRINCIPLES BEHIND THE GROWTH OF HOLIDAY INN?
Holiday Inns improved on the franchise idea by applying stricter operating standards than had previously been common among franchise companies. Ritzer (1996) sees this as an obvious manifestation of a “McDonaldized” company. There was a tight central control, and this could be viewed in terms of the high level of standardization, uniformity, and consistency on which Holiday Inn made its reputation (Nickson, 1997). In order to maintain the quality of the brand, Holiday Inn placed special emphasis on the training of both franchisees and the employees. The book written by Wilson (1968), The Holiday Inn Story, describes the practices of Holiday Inn to develop “system-wide rules of operation” which allowed franchisees to feel part of a team. For instance, franchise holders were organized into a National Association of Holiday Inns. Additionally, the franchisees were trained at the Holiday Inn University. Holiday Inns expansion strategy has also been supported by a strong infrastructure. The company benefited from its early use of marketing and reservation networks through the Holidex reservation system, which helped book new inns even before they were constructed. Reservation systems were used as a selling tool to further expand the scope and size of the chain, particularly in franchising (Lee, 1985).
With the saturation of the U.S. market, the company decided to expand overseas. However, the companys adopted strategies were shaped by its home-country culture and the company assumed the existence of a mass market, and tended to ignore the fundamental cultural, social, perceptual, and economic differences in a foreign country (Crawford-Welch and Tse, 1990). Holiday Inn set the standards for the rest of the world and its founders application of franchising sought expansion overseas. It was Nickson (1997) who claimed that this expansion approach stemmed from Holiday Inns envisioning of cultural homogeneity and a belief that “The world was coming to resemble the United States.” Luxenberg (1985) summarized the Holiday Inns way of operating as “The formula that proved successful in Pittsburgh would surely win followers in Paris” (p. 213). The latter also stated that this failure to make any concessions to local tastes or ways of operating meant Holiday Inn lost $28 million between 1971 and 1975.
Discussion Questions
1. How was Holiday Inn Brand born?
2. What were the fundamental principles behind the growth of Holiday Inn?
3. Were these principles global and therefore could they be applied to different country markets?
4. How can hospitality companies strike a balance between a heritage-driven corporate strategy and the changing dynamic environment?
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