As part of this reposition, the company now targets the Top 20 income segment in France and Europe, and the Top 30 segment in North America.
In October 2012, Club Med got a new CEO: Henri Giscard d’Estaing. Replacing Philippe Bourguignon, the guy with prominent background in UK and in Danone mineral water branch would be tackling to save the stagnating company.
Henri Giscard d’Estaing quickly moved to change the direction of Club Med: going to upscale market. While shutting down unprofitable resorts, he focused on the Club Med’s core value, namely all-inclusive system, and developed it. He could be described as a clear example of Planning approach; he had a clear vision, decided a change, implemented it, and assessed it. His vision was shared like below:
“…but we want more worldwide destinations and our ambition is to become the worldwide all-inclusive specialist”
After deciding the change, he immediately implemented it: renovating the existing resorts with fine dining, customized service, and luxury amenities, and reorganizing the resort portfolio by reducing the number of resorts, and opening new resorts targeting upper class.
Also, his leadership was combined with strong rationality. When he was assigned as CEO, the global tourism industry, obviously including Club Med, was being shaking by September 11: middle class were stagnated, whereas the new super-wealthy class was emerging. As a result, the direction that he took, moving from diversification as a leisure service operator to luxury all-inclusive resort, led Club Med to refloating.
During implementation process, the CEO get employees involved in the transformation. Information was shared to his team and employees, including financial numbers. He also meet directly with employees to explain what’s up and get feedbacks from subordinates.
Touch with the roots
During such a transformational process, the management still kept the core value of Club Med since being founded. Particularly, the upscale reposition targets to high-class segment of customer but remained the same Club Med’s philosophy of happiness and unique destinations. They attempt to make every vacationer’s experience a memorable one. “Club Med – where happiness mean the world” has become the most meaningful slogan of Club Med.
It is clearly seen that Club Med’s management has deliberately implemented steps of transformational strategy, take advantage of current strengths (such as: international presence with wide network, good atmosphere and exceptional places, large offer of activities, partnership…), improve weaknesses and reduce uncertainty. Moreover, regarding internal resources for this change process, it is clearly seen that GOs (Gentile Organizers) has played an central role leading to the success of Club Med. Based on their experience, the management kept asking for feedback and contribution for the new approach, giving higher-performance training to meet high expectations of the clients.
Taking into account the added factor of encroaching competition, Club Med settled for a restructuring campaign, returning to what it does best, holidays for the well-heeled clientele and their families.
CLUB MED, best known as the first to introduce the famous “all-inclusive” concept in its holiday villages, appears to be one of the successful transformational organizations during the last 2 decades.
Back to 1950s when Club Med was founded, its all-inclusive approach received competitive advantage due to customer preferences and lack of competitors. What made this concept become attractive was that customers could entirely enjoy their holidays with food, drink, outside activities in fun atmosphere without being worried about extra payment or using credit cards. Club Med’s strong position in the market still remained until the end of 1980s.
Drivers for restructuring campaign
Quickly in 1990s, Club Med faced competition from a growing group of rivals who adapted the Club Med village concept targeting the more family-oriented spirit favored by consumers, especially tour operators (Nouvelles Frontières, Marmara, Thomas Cook etc.). Those fierce competitors were selling the same concept of all-inclusive holidays but with lower price. Simultaneously, Europe area crisis and European slow growth rate could lead to a significant decrease in European tourists and had a significant effect on travel agents and tour operators.
Responding to these external influences, Philippe Bourguignon – CEO of Club Med in 1998, saw the tough situation as a chance for the company to find solutions to stay competitive. He decided to renovate the hotel and villa chain; upgrade, refurbish the group’s aging villages, even close down if necessary.
However, factors had been building toward Club Mediterranée's reversal of fortune still occurred at the end of 2001 when terrorist attacks in the United States cast a pall across the global tourism industry. Club Med once again posted a loss of nearly $64 million in 2002.
Thinking differently, Henri Giscard d’Estaing – CEO of Club Med in 2002, found out that Club Med could benefit from its excellent reputation. He then made a major shift to differentiate the strategy by repositioning Club Med’s services to high-end position (4 and 5 trident), focusing on value rather than volume approach. As analysis of customer’s insight, he was quite confident with the new strategy as Club Med would deal with less-price sensitive, affluent clientele - “during economic crisis, the top-op-the-range clientele continues to go on holiday and still afford it”. Besides that, the favorable impact of technology development, digital marketing in particular, also brings Club Med more opportunities to approach high-end family audience instead of mass market.
As a result, Club Med ‘s revenue reached 1,494 € millions in 2008, an increase of 9% compared to 2006. In the same period, the number of customers rose by 2.5% while the number of 4 and 5 trident customers met an increase about 42%.
Looking at Club Med’s turn around process through contingent approach helps us have deep analysis about the contexts led to their success. Until now, they haven’t give up innovating their services and finding new opportunities all over the world (Asia, America, Africa,…). Hope that they may keep their spirit and value in top-of-the-range hospitality market.
Scoop.it provides us of new opportunity for reaching information, expressing myself and sharing ideas with over the world. It initially seems a social networking service, as well as a platform of blog; however, Scoop.it offers us more interactive activities integrating existing articles with individual ideas, and opportunity to connect with people over the world having similar interests. Moreover, This new service gives to you many chances to gather information according to your interests; topics of walls on Scoop.it allow you to reach relevant information more quickly than search engines like google which pick up all information on the internet according to key words.
Nevertheless, while working for getting the bottom of the organizational change in Club Med, we have faced some challenges.
Firstly, although the elements on the internet are strong in quantity, many of them are focusing on the surface such as the sales performance before and after change and business strategy. There is no or little information which help us go into depth; for instance, what the organization internally really went through. We can't really analyze it with the tools discussed in the class. The lack of criteria for examining whether or not the quality of elements as well as the commentaries are reliable has made confusions while we were selecting elements. Furthermore, if we try to search specific information by putting numerous key words, the search system of Scoop.it seemed less efficient; indeed, we had to go firstly to google to find elements relevant to topics, and then to back to Scoop.it and paste the link on it.
We faced another issue when we sought to go into the core of Club Med organizational change. Limited information on the internet pushed us to refer research articles; however, the issue is that we don’t have right to publish it, even if it could help understanding what was going on in Club Med. Moreover, even though we got an article offered publicly, the system of Scoop.it don’t allow us to upload a PDF file on the wall.
Last but not least, time is too short to expand the scoop network and create exchange with change management experts. Such a pity!
In short, finding out the secret of organizational change in Club Med was a tough work. As given above, limitation of access to the information shackled us developing ideas. Meanwhile, the activity gave to us opportunities, challenges and other crucial factors of implementing organizational change, as well as a possibility of a new way of social networking.
Club Mediterranée, popularly known as Club Med was founded in 1950 by Gerarld Blitz. The concept of low price - high entertainment became a success with people getting a chance to vacation and take time off in post war Europe. Gradually, the company started expanding and by 1965, had 14 summer villages and 11 winter resorts. However, like any business, success is not permanent which was also the case with Club Med. What should a company which has a good potential market but faces stiff competition and an economic crisis do? What struck to me here was how, Club Med was able to tackle this tough situation by : re-innovating itself!
The concept of re-innovation was often thought of by companies in the manufacturing and other industrial sectors. Innovation in the services industry like tourism was not given much emphasis and it has been off - late that this phenomenon has been growing rapidly with the advancement of technology and social media, with even the government supporting tourism initiatives in their respective countries.
The concept that had been initiated by Club Med was a hit in the late 90s and the company did little to re-create its brand. However, in the next decade with consumer choices re-evolving, it was not before long that Club Med realised that inspite of having been able to establish itself outside Europe and even collaborating with governments as it did in Mexico, that something was amiss. Problems such as increased competition, devaluation of currencies, global footprint but no strong revenues, economic slowdown had struck the business hard!
- Club Med was perceived as a singles resort / outdated
- Competition had better offers, ambience, facilities
- Some people found Club Med expensive as the all inclusive club charged for its facilities which consumers felt they wouldn't even use
1998: Enter Philippe Bourguignon (known for turning around Euro Disney)
- initiatied a three year, $350 million dollar restructuring plan
- Brand image of Club Med was to position itself a cool, upscale, fun and entertainment resort
- restructure and organize advertising efforts and make them more consistent
The company worked on it by re-innovating itself and re-inventing its services. It integrated its core values with a stronger brand name which emphasized on luxury, freedom and happiness. With the advent of technology, it positioned itself creatively across all the means available as a one spot - luxury and relax resort. Club Med positioned itself in the two, three and four trident (stars) category which depicted the amenities and comfort level and gave the people a chance to choose the type of holidays they wanted. Their main idea, for every individual who came was for them to be able to 'share their happiness and make their experience at Club Med a happy one' connected well with the public.
It is said, that change in life is constant. Similarly, I believe that change along with innovation in a business is constant and that it shouldn't be ignored. The primary benefit of innovation is to provide customers with something that they wouldn't get elsewhere, and if the same is combined well with good and systematic marketing initiatives, it is surely a win-win combination.
To me, Club Med is a very good example of how it re-innovated itself and integrated the wants and needs of the consumers in their business plan. Not only did it expand further with Europe, US and Japan being strong areas of operation, it has also been able to expand to Asia and Africa which shows that this step taken by the company to transform itself has indeed been a success.
What struck me as one of the best testaments to Club Med’s successful transition was how Gilles, a normal GO in one resort village, was able to explain the new priorities and rattle off the Core Values without hesitation (Freedom, Multiculturalism, Responsibility, Pioneer Spirit, and Kindness). if it is clear to him, it is also clear to thousands of other employees. Change happens, first of all, the communication is made clear.
Having been very successful for around 40 years, Club Med was in difficulty in 1990s facing the challenges like the competition from the low priced copycats, the rundown of the properties, a mediocre food and facility reputation, and change of customers’ preference. The rescue plan was realized by two CEOs, Philippe Bourguignon and the successor, Henry Giscard d’Estaing. Nowadays, Club Med serves 1.2 million customers and achieved €2 billion turnover, and also is transformed to serve family oriented high-end market.
How Club Med managed to change itself so quickly and successfully?
An overall downturn in travel industry helped Club Med’s leadership to overcome the individual barriers of change among the stakeholders, like GOs (Gentile Organizers) and other employees. GOs, working as the frontline interactions with the customers in the villages, knew very well that the customers were less and less, and customer satisfaction with the old facilities were not high, and recognized the urgent need for change. The initial changes having achieved some positive outcome gave a hope that a change might be a way out both for company to gain business and for individuals to prevent their unemployment and economic loss.
Club Med didn’t face strong organizational barriers. The company was founded in 1950s by a Belgian water polo champion. Starting from the beginning, GOs, which was invented by Club Med, have been given a lot of autonomy and role to play. It seems to me that Club Med had no heavy senior or middle management. There was little structural and work group inertia. It is not clear that Henry Giscard d’Estaing’s identity as the President’s son played a role or not. But both Henry and Philippe had very successful management experience before joining in Club Med, which I believe helps the organization follow their directions and make collective efforts.
Henry Giscard d’Estaing had good tactics to manage the potential resistances during the transformation times. As the article exemplified, Gilles, a normal GO, was able to explain company’s new priorities and Core Values without hesitation. The leadership made the change communicated clearly to every employee: why there must be change and where we will go, in order to have the solidarity and collective efforts. The GOs are also given the opportunities to participate into change. Though following the standard service from the headquarter, they also can make new ideas a case in their own villages, and to make them scale up as "the best practice" if with good results being shown, to mobilize the GOs’ creativity and ownership. Gilles knows very well about mobility policies and benefits and promotion conditions, which make me believe Club Med has transparent human resource policies and intends to manage it with consistency and procedural fairness.
Club Med’s transformation success is associated with its history, its culture and work organization, and its leaders’ and employees’ personality features, to remove the individual and organizational barriers. But it also shows us that, this company didn’t lose the control when employees are autonomous. In contrast, the proper management skills, allowing good communication, strong ownership and supports, and fair implementation, can contribute to the change process, pulling the operation out from the difficult times.
All the worries of a holiday are removed at Club Med. They literally think of everything. Once you enter the big gates you leave your cares behind. There is a fully stocked pharmacy, mini supermarket and even an onsite infirmary should you get ill.
All the worries of a holiday from the past are removed at Club Med now! A dramatic change in market positionning, supported with the operation decisions.
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