Wayside Inns, Inc - Internal Environmental Analysis

Case 12-4: Wayside Inns, Inc.

Internal Environmental Analysis

Wayside Inns, Inc., located in Kansas City Missouri, was formed in 1980 as the successor corporation to United Motel Enterprises. United operated a number of franchised motels under licensing agreements from two national motel chains. United was unable to expand either of the two national chains through geographical dispersion because of complicated and restrictive contract covenants. Wayside Inns was formed to own, operate and license a chain of motels as well as continue to operate the franchises already held by United.

Wayside Inns is a public corporation listed on the American Stock exchange with 1,542,850 shares outstanding. The common stock price had appreciated greatly. The firm had grown substantially since inception and predicted favourable growth for the future. Wayside's enjoyed occupancy rates which were 10 to 20 percent higher than competitive motels.

Kevin Gray is the regional general manager for Wayside Inns Inc. Layne Rembert is the unit Manager of the Wayside Inn at the Memphis Airport. The unit manager always lived on the premises of the motel.

External Environment /Industry Analysis

1) The intensity of rivalry among existing competitors: There is a high intensity among competitors. There are 10 competitive motels, which were franchises of the major national chains, within a two mile radius of the Memphis Airport Inn. There also existed a number of independent motels within the area. Expansion plans by the major chains were expected to account for an additional 800 rooms across the whole city in the next 18 months.

2) The bargaining power of customers: There is a moderate bargaining power for customers as they have many choices for accommodation. Vacancy rates ran about 28 percent.

3) The threat from substitutes: There is a high threat of substitutes. Hotels, hostels, as well as bed and breakfast establishments are among many alternative to motels.

Business Strategy Identification

Corporate Level Strategy: Wayside Inns Inc. follows a Single Industry Corporate level strategy.

Extent of Diversification: Wayside Inns operates exclusively in the service industry.

Business Unit Strategy

The Mission

* It was management's belief that the strategy of developing the company's own motel chain would present greater flexibility in attaining a long-term growth strategy.

* Once several hotels had been built in a particular region, management would seek new properties in regions commercially linked to that city.

* The company's expansion strategy was a three-tiered attack: 1) management actively pursued the construction of new motels seeking an ever widening geographical distribution; 2) properties were expanded if analysis demonstrated that they were operating near or at full capacity; 3) old properties that became a financial burden or did not contribute the required rate of return were sold

The overall objective of Wayside Inns Inc. is a build mission.

Competitive Advantage

Wayside Inns can accomplish their mission by using a low cost advantage. The company's fundamental strategy was to cater to those business travellers who were generally not interested in elaborate settings. The chain emphasized clean rooms, dependable service, and rates that are generally 15 to 20 percent lower than other national motel