Marriott began in the restaurant business in Washington D.C. Because its customers often ordered takeouts on the way to the national airport, Marriott eventually entered airline catering. From there, it jumped into food service management for institutions. Marriott then began broadening its base of family restaurants and entered the hotel industry. More recently, it has moved into restaurants, snack bars and merchandise shops in airport terminals and into gourmet restaurants.
In addition, Marriott has branched out from its hotel business into cruise ships, theme parks, wholesale travel agencies, budget motels, and retirement centers.
Marriott’s diversification has exploited well developed sills in food service and hospitality. Marriott’s kitchens prepare food according to more than 6,000 standardized recipe cards; hotel procedures are also standardized and painstakingly documented in elaborate manuals. Marriott shares a number of important activities across units.
A shared procurement and distribution system for food serves all Marriott units through nine regional procurement centers. As a result, Marriott earns 50% higher margins on food service than any other hotel company. Marriott also has a fully integrated real estate unit that brings corporate wide power to bear on site acquisitions as well as on the designing and building of all Marriott locations.
Marriott’s diversification strategy balances acquisitions and start-ups. Start-ups or small acquisitions are used for initial entry, depending on how close the opportunities for sharing are. To expand its geographic base, Marriott acquires companies and then disposes of the parts do not fit.
Apart from this success, it is important to note that Marriott has divested 36% of both its acquisition and its start-ups. While this is an above average record, Marriott’s mistakes are quite illuminating. Marriott has largely failed in diversifying into gourmet restaurants, theme parks, cruise ships, and wholesale travel agencies.
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