Strategic Analysis Club Med (Upscaling)

After spending time in a rehabilitation center for concentration camps’ survivors, Gerard Blitz realized the recovery effect of a beautiful and tranquil environment; matching this with the Gilbert Trigano’s business skills resulted into the creation of Club Med, the Pioneer of “all-inclusive holiday”.

Nevertheless, the industry in which Club Med operates has evolved since the foundation of the company, passing through a difficult spiral of economic decline and internal issues. Recently Club Med, headed by Henri Giscard, has adopted an upscaling strategy, focusing in emerging markets.

Could these measurements increase their revenues 5 times in the next 10 years?

Since it is foundation in 1950, Club Med operates 71 villages, in 25 countries and with 1.2MLL clients. Their main goal is to influence people’s life and future. Before 2000’s there was a unique culture, relaxed, open-minded, rich in symbols, rituals and myths. They innovated by attacking guests’ economical worry when going on vacations, the uncertainty of extra expenses at the end.

After a rapid growth, their first difficulties arose in the 90’s, mainly related to external factors. Moreover, with social evolution the villages were unacceptable for family morals. By 2010 after changes of CEO, different inefficient strategies, deep cultural changes and turnaround costs, Henri Giscard d’Estaing took the leadership to conduct an upscale strategy, aiming to make China their second main market.

The industry in which Club Med operates can be defined as worldwide, year-round, all-inclusive holiday. According to a recent research, 49% travelers are planning to increase their travel budget for 2013, even though traveling has been becoming more affordable and accessible. Another trend are online channels acting as megaphones for “word of mouth”, tools as Expedia, Tripadvisor and Travelclick are empowering the hosts more than before. Now price, location and other traveler’s opinion are the most important criteria.

At the present time, they are aiming to grow on 4 continents and conquer an upscale, international clientele. Ceteris paribus, the reality is that with revenues of $1,421 in 2011 and $1,451 in 2012, the annual growth ratio is 1.021, the expected revenue for the next 10 years would be $1,786. With the limitations of uncertainty and high complexity of the financial skills needed to confidently predict a 5x growth, we can speculate a scenario in which the growth is constant trough these 10 years. The main issue would be reaching these segment and make them loyal, it is something new for them, they need to feel comfortable. Secondly keep leading the sector, since new companies are going for the same target. And thirdly, stay true to their goal of changing people’s life and future, it is important to be coherent to create confidence among the old and the customers.

CM’s competitive advantages are mainly threshold and unique resources. Additionally to the global presence and plenty villages, the capabilities of transportation, food, accommodation, sport and entertainment, they benefit from partnerships with airlines, offering transportation to customers.

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