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Mod.7: Corporate-Level Strategy: Horizontal Integration, Vertical Integration and Strategic Alliances
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Mod.7: Corporate-Level Strategy: Horizontal Integration, Vertical Integration and Strategic Alliances

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  • 1. Corporate-Level Strategy:Horizontal Integration, Vertical Integration and Strategic Alliances in the Ski Business Essentials of Tourism Destination Management
  • 2. A strategy is a plan of action designed to achieve a vision Essentials of Tourism Destination Management
  • 3. Strategy is all about gaining a position of advantage over adversaries Essentials of Tourism Destination Management
  • 4. The choice of corporate-level strategies is the final part of the strategy formulation process. Corporate-level strategies drive a company’s business model over time and determine which type of business- and functional-level strategies managers will choose to maximize long-run profitability. Essentials of Tourism Destination Management
  • 5. Vertical Integration In strategic management, the term vertical integration describes a style of management control,when a company expands its business into areas that are at different points of the same production path. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to satisfy a common need. Essentials of Tourism Destination Management
  • 6. Horizontal Integration In strategic management, the term describes a type of ownership/management control consisting in the acquisition of additional business activities that are at the same level of the value chain in similar or different industries. Horizontal integration occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm. If the products offered by the companies are the same or similar, it is a merger of competitors. Horizontal expansion. This is the expansion of a firm within an industryin which it is already active for the purpose of increasing its share of the market for a particular service. Essentials of Tourism Destination Management
  • 7. Essentials of Tourism Destination Management
  • 8. Strategic AllianceIn strategic management, the term describes a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. Strategic alliance is a primary form of cooperative strategies to enable companies to gain competitive advantage . A strategic alliance is a partnership between firms whereby resources, capabilities, and core competences are combined to pursue mutual interests. Alliances can be structured in various ways, depending on their purpose. Nonequity strategic alliances, equity strategic alliances, and joint ventures are the three basic types of strategic alliances. Essentials of Tourism Destination Management
  • 9. In the Ski Business Vertical Integration means resorts buying related businesses: Hotels, transportation companies, rental shops, ski schools; they buy any company that is involved in the business. They do this to coordinate service levels, to control the guest experience, to offer packages and to attract more customers. “A key component of the Company’s business strategy has been to expand and enhance its core ski operations while at the same time increasing the scope, diversity and quality of the complementary activities and services offered to its skiing and non skiing guests throughout the year (…) The Company’s business strategy is not only to increase skier days but also to increase Resort Revenue per skier day by capturing a higher percentage of the total spending of its year round destination and day guest by continuingto expand the range and enhance the quality of activities and services offered by the Company” (Vail Resorts Inc. Annual Report, fiscal year 1998, p. I.). Essentials of Tourism Destination Management
  • 10. In the Ski Business Horizontal Integration describes a company managing ski resorts acquiring other ski resorts. Essentials of Tourism Destination Management
  • 11. The Ski Industry uses Strategic Alliances to benefit from more-established channels of distribution, marketing, or brand reputation. As competition grows, small and midsize ski resortsneed to be increasingly creative about how and with whom they align themselves to go to the market. Marketing efforts must be coordinated to maximize the overall sales of the partners. Essentials of Tourism Destination Management
  • 12. The Ski Industry  The ski industry is a mature market. Organic growth is weak “volume-wise”Over the last 20 years there has been no significant growth in terms of total skier visits in the ski industry. Skier visits have been estimated to reach a figure of about 400 million worldwide.  Huge competition  The ski business has become capital intensive  The ski business is complex and innovation is the key to success Essentials of Tourism Destination Management
  • 13. North AmericaEssentials of Tourism Destination Management
  • 14. The North American market is heavily fragmented; however, restructuring has taken place during recent years, with a shift taking place towards fewer, increasingly larger companies. From the 80s until the 2000-01 winter season we have seen a significant decline in the number of stations and ski resorts in the US, down from 735 in 1982 to 490 in 2000.From that year onwards up to the present we see a stabilization in the number of ski resorts in the US. The National Ski Areas Association (NSAA) reports 486 ski areas operated on the 2020/11 season, according to the Kottke National End of Season SurveySource: NSAA, http://www.nsaa.org/nsaa/press/operating-ski-areas.asp Essentials of Tourism Destination Management
  • 15. Vail Resorts is the leading mountain resort operator in the United States.Vail Resorts operates the mountain resorts of Vail, Beaver Creek, Breckenridge and Keystone in Colorado, and Heavenly, Northstar and now Kirkwood in the Lake Tahoe area of California and Nevada. Vail Resorts, like other American companies, operates many businesses outside of ski lifts: ski-schools, accommodation, restaurants, and real estate promotions. Essentials of Tourism Destination Management
  • 16. Intrawest is a developer and operator of destination resorts and a luxury adventure travel company. The company owns and operates the mountain resorts of Whistler Blackcomb (at 25%) in British Columbia (Canada), Blue Mountain in Ontario (at 50%), Snowshoe in West Virginia, Steamboat Ski & Resort Corporation in Colorado, Stratton in Vermont, Tremblant in Quebec (Canada), and Winter Park Resort in Colorado. The company owns Canadian Mountain Holidays, the largest heli-skiing operation in the world. Essentials of Tourism Destination Management
  • 17. Boyne Resorts was founded by Everett Kircher in 1947. Boyne Resorts is still a family owned company, based in Boyne Falls, Michigan. Boyne resorts is the third largest owner and operator of ski and golf resorts in the United States and is the longest running management team at nearly 60 years. The company employs over 7,000 fulltime and seasonal staff.It operates 13 resort properties - 10 ski resorts (Big Sky Resort in Montana, Brighton Ski Resort in Utah (2), Boyne Highlands Resort and Boyne Mountain Resort in Michigan, Crystal Mountain Resort in Washington, Cypress Mountain in British Columbia (Canada) (2), Loon Mountain in New Hampshire (2), Sugarloaf in, Maine (2), Summit at Snoqualmie in Washington (2), Sunday River Ski Resort in Maine (2) and 11 golf courses. The company, based in Boyne Falls, Michigan, operates several resorts (2) under long-term agreements. Resorts are owned by CNL Lifestyle Corp. The organizations goal is to become the "best four-season resort company in the world by 2015". Essentials of Tourism Destination Management
  • 18. Powdr Corporation is one of the largest ski resort operators in North America,.Unlike its competitors, Powdr focuses on ski area operations rather than real estate development. It is owned by the Cumming family and headquartered in Park City, Utah. John Cumming, who co-founded the clothing company Mountain Hardwear, is the current CEO. Powdr Corporation owns and operates the mountain resorts of Boreal Mountain Resort and Soda Springs Ski Area in California, Copper Mountain in Colorado, Park City Mountain Resort and Gorgoza Park in Utah, Pico Mountain Resort and Killington Resort in Vermont, Las Vegas Ski & Snowboard Resort in Nevada, and Mt. Bachelor in Oregon. Essentials of Tourism Destination Management
  • 19. Despite the consolidation trend the North American market remains a fragmented and small industrywith basically 3 types of resorts : Small family owned resorts. Large Independents resorts. Consolidated mega resort companies.In the 70s, only two companies owned two or more resorts in the US. Today less than 20 companiesown multiresorts.Source: NSAA, http://www.nsaa.org/nsaa/press/who-owns-who.asp Essentials of Tourism Destination Management
  • 20. EuropeEssentials of Tourism Destination Management
  • 21. In Europe, the markets dominant business model is one company operating one site (the ski lifts).
  • 22. The ownership of ski resorts is very fragmented, many are family owned and many companies are small. In Austria, the industry is dominated entirely by privately-owned, smaller companies. In Italy, the ownership profile includes a strong element of credit institutions. In Switzerland and France, there are a few larger limited companies with broad ownership. Essentials of Tourism Destination Management
  • 23. Compagnie des Alpes (CDA is Europes market leader, with about 8% of sales and 6% of skier visits. It is also one of Europes major players in leisure parks with 15 sites) and the Swedish Skistar are exceptions as holdings with multiple sites. Essentials of Tourism Destination Management
  • 24. Compagnie des Alpes is a major player in the field of leisure production in Europe. The company operates 26 leisure sites, with 11 leading ski areas in the Alps (La Plagne, Les Arcs, Peisey Vallandry,Tignes, Val d’Isère, Les Menuires, Méribel, Flaine, Giffre -Samoëns, Morillon and Sixt-, Serre-Chevalier, and Les 2Alpes, ) and 15 leisure parks (including Parc Astérix, Grévin, Walibi, Futuroscope, …) in Europe: France, the Netherlands, Belgium, Germany.In addition, CDA has minority stakes in 4 ski areas (Chamonix, Avoriaz, Valmorel and La Rosière) and 7 leisure parks, in France, Switzerland, Belgium, and the U.K. Essentials of Tourism Destination Management
  • 25. SkiStar is listed on Nasdaq OMX Mid Cap Stockholm. The Group owns and operates alpine destinationsin Sälen, Åre and Vemdalen in Sweden, and Hemsedal and Trysil in Norway. The Company’s market share of SkiPass sales in Scandinavia amounts to 39%. The core business is alpine skiing, with a focus on the guest’s overall skiing experience. Operations are divided into two business areas: Destinations, which consists of skiing, accommodation services, ski school and ski rentals, as well as Property Development, which includes construction and development. Essentials of Tourism Destination Management
  • 26. SwitzerlandEssentials of Tourism Destination Management
  • 27. Zermatt Bergbahnen AG ZERMATT, SWITZERLAND The village and the mountain: Zermatt and the Matterhorn. Both are legendary.The Matterhorn is the most beautiful mountain in the Alps, perhaps even in the whole world.
  • 28. On February 15th, 2002 the shareholders of the three mountain railway companies operating in Zermatt(the Matterhornbahnen AG, the Zermatter Rothornbahn AG and the funicular Zermatt-Sunnegga AG, with the sports area of the Gornergrat-Monte Rosa-Bahnen) approved a merger agreement to create one of the largest aerial cableway companies in Switzerland: Zermatt Bergbahnen AG. Essentials of Tourism Destination Management
  • 29. Saas-Fee Bergbahnen AGEssentials of Tourism Destination Management
  • 30. The privately owned ski lift company was founded in 1948 and the first lift opened in 1954. The new millennium marked a new start for Bergbahnen Saas-Fee AG.In 2001 its shareholders approved the new name and voted to allow it to raise its share capital from CHF 7 million to CHF 14 million. Compagnie des Alpes became a shareholder of SFB in 2001 through participation in a capital increase, and raised its stake from 35% to 41.6% (2007) via share purchases. SwissAlp SA, a wholly-owned Swiss subsidiary of Compagnie des Alpes (CDA), concluded a memorandum of understanding on October 21, 2009, with a group of buyers headed by the municipality of Saas Fee. The buyersincluded the municipality, local business leaders, and an individual investor, Edmund Offermann. This memorandum of understanding covers the sale for €10.4 million of the entire stake SwissAlp SA (41.6%) in Saas Fee Bergbahnen (SFB). Essentials of Tourism Destination Management
  • 31. Laax: The Weisse Arena Gruppe Essentials of Tourism Destination Management
  • 32. Weisse Arena Gruppe is an integrated service company. The Business Model is unique within Switzerland and the Alpine Region. The group includes a cable car and liftcompany, hotel and gastronomy businesses, a sports equipment sale and rental business, a ski & snowboarding school and a management company. Weisse Arena Gruppe is also responsible for marketing the Flims Laax Falera tourist destination. The names LAAX and Flims are used for brand positioning. Essentials of Tourism Destination Management
  • 33. Andermatt Swiss Alps AG
  • 34. SkiStar and Andermatt Swiss Alps AG, owned by Orascom Development (listed on the SIX Swiss Exchange), signed an agreement regarding ownership and development of the ski areas in Andermatt and Sedrun in Switzerland.Investments amounting to approximately SEK 1 billion are planned to modernise and link the ski areas together. Essentials of Tourism Destination Management
  • 35. Essentials of Tourism Destination Management
  • 36. Marketing Alliances Ski lift companies co-operate with each other to offer customers access to more slopes and varied terrainSki lift companies have sought to offer greater value through partnerships giving access to more ‘skiable’ kilometres, in a single resort or aggregation of resorts. Essentials of Tourism Destination Management
  • 37. The French-Swiss Portes du Soleil area is home to 20 winter sports resorts providing access to a ski area with 650 kilometres of slopes. Essentials of Tourism Destination Management
  • 38. Essentials of Tourism Destination Management
  • 39. The Four Valleys area meanwhile is the largest ski domain located entirely in Switzerland, with 410 kilometres of skiable slopes. Essentials of Tourism Destination Management
  • 40. Essentials of Tourism Destination Management
  • 41. Management is important…But it’s nothing without Passion Essentials of Tourism Destination Management