Accounting for strategic Management Control

10 Pages   |   1,159 Words
Table of Contents
Introduction................................................................................................................................. 3
Issues at BH Ltd............................................................................................................................ 3
Occupancy Rate........................................................................................................................ 5
Return on investment................................................................................................................ 6
Marketing Efforts...................................................................................................................... 6
Literature Review......................................................................................................................... 6
Recommendations........................................................................................................................ 7
Reflective Critique........................................................................................................................ 8
Bibliography............................................................................................................................... 10
 

Introduction

BH Ltd was acquired by Ave-Co four years ago. However, as the time progressed, this acquired hotel showed signs of unsatisfactory performance. This report focuses on the identification and solutions of the problem issues faced by BH Ltd. A special attention is given to the issues belonging to the finance functions, KPIs and long term growth. This report also includes two detailed mind maps, one of them showing the issue and the other one pointing towards the possible solutions.

Issues at BH Ltd

In relation to the current issues of BH Ltd, the following figure shows the mind map for management discribing key areas of concern followed by their supporting facts and figures:

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Occupancy Rate

As the finance function has tied a large portion of the salary to the two KPIs, therefore, it is important that the trend of these two factors is taken into account. The following graph shows the occupancy rate of BH Ltd for the last four years.

Occupancy rate (defined as rooms rented to total available rooms) has shown decreasing growth in the most recent years. In the last three years, the growth rate showed values of 3%, 5% and 1% respectively. Hence, it is clear that BH Ltd is facing serious stagnancy in occupancy. Additionally, in order for the management to examine closely, the regional and category wise occupancy rate is also required (Barros, 2005). A more detailed picture of category wise occupation rate (room category) will yield insights for proper marketing. Moreover, the available rooms are also almost constant for last four years.
 
 

Return on investment

ROI is the second KPI for managers of BH Ltd. The trend on the ROI is shown in the following graph:
 
Not only did the ROI decrease in the most recent year, its absolute values are also well below average. The primary cause of the decrease in ROI goes back to the decline of profits.

Marketing Efforts

A close look at the income statement shows that the marketing expenses of the company are largely inadequate. This might be the main reason why the occupancy rate, ROI and profits are decreasing. The lack of adequate marketing or promotions not only leads to a decrease in the number of existing customer, but it also fails to attract new customers (Jeffrey & Barden, 2000).

Literature Review

The issues of low occupancy rate, minimal marketing effort and decreasing profits were discussed in detail by Jeffrey, et al. (2002) in his study. The following point discussed the detailed components of the article.
1: The research comprised of the occupancy rate data for the last 15 years. More than 120 hotels were included in the hotel, and the data relating to occupancy rate was examined on a daily, weekly and monthly basis. The study is a continuation of the research of Jeffrey (1985). In order to make recommendations, four different trends were generated.
2: The key argument of the research revolves around the idea of increasing profits by not only examining the trend (either seasonal or other) in the occupancy rate but by also focusing on the key areas of improvements in occupancy rate (by dedicating marketing efforts).
3: The research pointed out that the following steps can be taken to solve the issues.
Table 1: Key Findings
Issue Key Conclusions for enhancing Performance
Occupancy Rate Use of statistical techniques to forecast occupation
Capitalizing on the seasonal component of trend
Gathering customer data and analysing it
Formulation of flexible policies focusing on the weak points of occupancy rate
Decreasing Profits and ROI Tactical and strategic price adjustments
Improving quality standard
 
Investment in hotel products and services 
Marketing Efforts Marketing efforts the yield measurable results
High marketing budgets
Positive word of mouth publicity
 

Recommendations

Considering the conclusions of Jeffrey, et al. (2002), the following mind map is formulated. The mind map provides key recommendations to the management for dealing with the issues.

 
For an increase in growth rate of occupancy, the acquisition of customer data is crucial and based in the data, forecasting will produce important information regarding the policies but also the seasonal factor and pricing strategy. Similarly, customer's segments should also be treated differently. For an increase in profits, the short term investment along with the changes in the pricing strategy will lead to improved performance. It should be noted the recommendations will improve the performance in the long run. Hence, the company might incur costs in the short term that might temporarily decrease its performance. For effective marketing, the use of the word of mouth marketing and an increase in budgets are crucial for success of the business.

Reflective Critique

The case study consists of a thorough research process and the whole process of study was comprehensive. Firstly, this work improved my research skills. There were three different issues for me, and I had to search for the relevant article. I selected the study of Jeffrey, et al. (2002) because it offered specific recommendations for all issues based on tangible market research. In fact, a large set of recommendations was proposed for the issues of occupancy rate; however, based on the business context, I only selected the relevant conclusions. Some of the arguments, like the issues caused by a sudden increase in occupancy rates, were not relevant. Therefore, I did not use them. Moreover, some of the recommendations, like the membership of marketing consortium, were not based on strong logic. All these recommendations were also rejected. Hence, I only choose the logical, relevant and research based arguments of the article. In relation to the work on the report is concerned, I also experienced the learning of important formatting for PowerPoint and word. Both mind maps were created in PowerPoint and took some good effort. However, due to the lack of detailed knowledge, I was not able to learn using Microsoft Publisher. The use of the this software may have increased the look of design and presentation of the mind maps. Even though of this limitation, the mind maps were created manually to attract the attention of readers and to make to the presentation more attractive.
 

Bibliography

Barros, C. P. (2005). Measuring Efficiency In The Hotel Sector. Annals of Tourism Research, 32(2), 456-477.
Jeffrey, D. (1985). Spatial And Temporal Patterns of Demand For Hotel Accomodation: Time Series Analysis In Yorkshire And Humberside, Uk. Tourism Management, 6(1), 8-22.
Jeffrey, D., Barden, R., Buckley, P. & Hubbard, N. (2002). What Makes For A Successful Hotel? Insights on Hotel Management Following 15 Years of Hotel Occupancy Analysis In England. Service Industries Journal , 22(2), 73-88.
Jeffrey, D. & Barden, R. R. (2000). An Analysis of Daily Occupancy Performance: A Basis For Effective Hotel Marketing?. International Journal of Contemporary Hospitality Management , 12(3), 179-189.

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