118-Two Companies Who Perform Well in Good or Bad Markets
The hotel industry is struggling today. Demand is off everywhere in the world. Everyone is suffering, including Marriott. But Marriott will survive, and even thrive, in this market. It has been through bad times before and always has emerged the leader in the industry. (See Audio Tip #31: Volatility in Hostile and Non-Hostile Industries on StrategyStreet.com.) It leads its industry because the top management of the company focuses all its energies on delivering a consistent, predictable product in each of its dozen or more brand names. It is known throughout the business travelers’ world as the most consistent and reliable of brands. A traveler knows exactly what to expect when staying at a Marriott branded hotel and virtually always gets what he expects.
Another company, who happens to be doing well today, with the same ability to thrive no matter what the market is McDonald’s. In its quick service restaurant industry, McDonald’s has the same kind of reputation that Marriott enjoys in the hotel industry. It is the most consistent and reliable of brands. Here again, the top management of McDonald’s pays close attention to the experience a customer has in any of its stores world-wide.
I have had the distinct pleasure of working closely with both of these companies during earlier difficult times. I have come to understand the reasons for their success and will outline just a couple of the more important reasons here. In Marriott’s case, the first reason is CEO Bill Marriott and the approach he brings to the management of the many hotels the company has. Marriott visits rooms, samples food, checks for cleanliness, visits competitors and then issues specific instructions on how to improve. The other senior managers, and their direct reports, emulate the boss with the same attention to detail. This attention produces consistency. The second reason for Marriott’s success is its core value. It is expressed roughly as follows: “If Marriott employees are well taken care of, they will take care of the customer, then the customer will come back.” The company treats employees well, trains them carefully and pays them competitively. These employees proudly deliver superb service to customers, who will return to Marriott in good and bad times.
Though in a different industry, McDonald’s is much the same. Everyone knows the story of Ray Kroc’s establishment of McDonald’s. He is certainly a seminal figure. He was followed as CEO by an equally legendary manager in the McDonald’s world named Fred Turner. Together, these fine leaders created the motto for McDonald’s, calling it QSV&C. These initials stand for Quality, Service, Value and Cleanliness. McDonald’s delivers on all four of these promises more consistently than any of its competitors. A customer knows exactly what he will get at every visit to a McDonald’s in any location in the world. And the customer is far more likely to get that same consistent quality, service, value and cleanliness with McDonald’s than with any other quick service restaurant company. While working at McDonald’s I interviewed every senior McDonald’s executive. In each of those conversations, a reference to QSV&C was an important part of our discussion. Those letters, and what they mean, are seared into the brains of every McDonald’s manager, all to the good of the customer. This focus produces consistency.
Both of these companies rely on franchisees for the overwhelming number of customer experiences. Each control their franchisees and the quality of service they deliver by being the most attractive company in the industry. Marriott and McDonalds’ franchisees make more money than their compatriots in competitive brands. Sometimes these franchisees may complain about the prices they pay to be a franchisee of Marriott or McDonald’s, but they know where their bread is buttered. These companies deliver more Reliability for their customers. Their franchisees, who are a major source of their quality delivery, get paid well for that better service.
Both of these companies lead their industries on Reliability in the Customer Buying Hierarchy (see Audio Tip #95: The Customer Buying Hierarchy on StrategyStreet.com). You can say the same thing about most strong industry leaders. (See Audio Tip #24: The Customer Buying Hierarchy as Markets Evolve on StrategyStreet.com.)
Both Marriott and McDonald’s have become worldwide leaders in their industries by offering consistent quality products efficiently delivered.
Before Covid hit most industries, hotel occupancy rates in the Americas increased from about 55% in 2009 to 65% in early 2020. The industry was growing and successful. Then, demand fell by half overnight and has struggled to regain its feet in 2022. Still, Marriott continues to thrive.
Marriott has grown to become the world’s largest hotel company. It offers a portfolio of 30 brands with 8000 properties, 1.4 million rooms in 139 countries. Marriott uses three tiers: Luxury, Premium, and Select, stratifying the brands into top-tier, mid-range, and lower-end properties respectively. Marriott International strives to deliver exceptional guest experiences that are consistent across all its branded hotels and resorts in all locations and on all channels. It also works extensively on launching new brands based on different themes that cater to new and existing customers.
In in 2022 McDonald’s is the biggest fast food chain in the world. It operates 37,000 locations in more than 115 countries. In 2021 its total revenues were about $23 billion. This revenue level is somewhat off from its peak of $28 billion in 2013 as the quick service restaurant industry becomes saturated. McDonald’s is known worldwide for its efficiency of operations and consistency of product and service. It has an enormously loyal following. A recent survey revealed that roughly 60% of US people had visited a McDonald’s within the previous three months.
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