Appendix 1. Case study Coco Dive Lodges
This chapter starts with a further introduction of the case, followed by the implementation of the framework. The implementation starts with an external analysis in appendix 1.1 to get aware of the environment. Second is the internal analysis to obtain a good understanding of the competences, resources and constrains of the organization. The initial service idea is used in the idea generation and modeling in sub‐appendix 3 followed with a testing and reconciliation of the service model to provide the best fit with the market. This contains three phases; the proof of concept, service and business. When the service design passes all the testing and is adapted to provide an optimal fit with the operations resources and the market requirements, the launch plan can be deployed. Finally is in sub‐chapter 6 is the continuous improvement treated to provide a constant optimal service providing according to the organizational strategy, the resources and the market requirements.
1.1 The external analysis
The framework starts with an external analysis to obtain a good view on the environment. The analysis contains a general trend and forecasting analysis, a PESTEL analysis, a market assessment, the analysis of the porter five forces model, a competitor analysis and a risk analysis. These are all performed and attached in appendix 2A‐E. Only the important conclusions are mentioned here. Trend analysis A trend analysis is a forecasting technique that relies primarily on historical time series data or events to predict the future. Because the world around us is always changing, all habits are also changing. Good examples of a trends in the last decade is people are taking more holidays, yet because of the economical crisis in the western part op the world from the last couple of years, grow is less than could be expected on historical data. It is not possible to predict the future; however keeping a close eye on trends and developments is possible. The general trend and forecasting analysis is attached in appendix 2A. Resulting from the analysis, the conclusion is that the country market to target has to be The Netherlands. The United States is the second country on the list. This place of departure is much larger in population and size, therefore a higher amount of effort is necessary to reach the same percentage of people. From Venezuela came a lot of people because of the internal rumors in their country and these can not be seen as touristic visits. The German visitors form a smaller group, however there is a good travel connection between Germany, the Netherlands and Curacao. Also, the current economical advantage gives a rising amount of Germans visiting Curacao. This is not visible in the statistics, this information is obtained by research and interviewing in the area. The statistical information is based in the county of departure and not of living. Therefore, exact numbers are not available, still the German visitors can possibly be served as well.
PESTEL
danger the tourists in any possible way. This will be inspected by the Curacao Tourist Board before they give their permit for touristic rental and adoption in their program.
Initial market assessment
In the market assessment are the estimated profits calculated based on the initial plan. This provides insight in the financial side of the project and is attached in appendix 2C. Based on this calculation a decision can be made to continue, stop of change the plan. Based on the obtained information, the average occupancy is about 75 per cent. Subtracting all costs for managing making the refund period of this investment about 7 years when the regular costs are about 40 per cent of the turnover. These costs include all regular posts.
Porter six forces model
Porter described a model that describes how competitiveness can be viewed as a composite of five forces. However, in 1998 a sixth force is added for evaluating the power of complementing forces in an industry. The six forces model enables the analyst to consider all the issues facing a new entrant by describing the key industry factors. In the context of Apple Pie Realty or any other service, the complementors (such as cleaners, repairers, financial banks as well as flying companies) are of importance, or perhaps even crucial, to get the service to end customers and therefore important to evaluate. The complete analysis is attached in appendix 2D. In order to derive any finding from the analysis, the data has to be interpreted because a quantifiable defense is hard to do on qualitative data. The complementors can make or break the service as experienced is therefore of major importance and results in a high risk. Bargaining power of the customers is also rated a high risk, because this is a major tread of the organization. Because the service is a luxury product and there are no switching costs involved, there is no essential need for the customer to buy the service and a good experience is of major importance for customers to return. The threat of substitute products is set at medium. This is mainly due to the limited possibility of copying the service because of the necessary facility (a barrier of entrance), however there is competition in the near area and on other places as well on Curacao. Entry of new competitors and the intensity of competitive rivalry are both assessed as being medium, because of the same reasons as above. The bargaining power of suppliers is quite low, since the threats that are present are only low and medium because the number suppliers in the service are limited and exchangeable and the environment is rich. Competitor analysis
To gain a clear view on the competition, the research was started on the internet. Potential customers that want to make a reservation will search themselves or go to a travel agency. When customers will search themselves to a location in or near Lagun, they will find the in appendix 2E listed possibilities.
A summary of the field research is listed in table 1 below. The average price is about € 35 per person per night. The overall impression is interpreted to have an idea of the overall performance.
Name Number of persons Price for a week Impression x/7
Lagun Blou 4 1050 4
Bahia apartments 2 475 3
Dolphin hearthouse 2 420 5
Table 1 Overview of competition
The analysis shows that the competition in the direct area is limited. Though Lagun Blou and Bahia serve more customers than Coco Dive Lodges can, the accommodations are smaller and less luxury. Especially Bahia offers small and older rooms. This is contracting with their own restaurant, bar and rental of diving materials. This facility offers less luxury and privacy and is therefore not a direct competitor. Lagun Blou offers some more privacy and more luxury though the terrace is open to all sides and the interior is old. They are fixing it up, unfortunate this will take several years to accomplish completely. Dolphin hearthouse is the closest competitor. They serve more customers, offer almost the same privacy as Coco Dive Lodges. The facility itself is smaller, while having some good alternatives outside, like a double terrace etc. They do also have a shared stairway to the sea for diving and swimming. The direct competition in the area is limited. Though there are some developments that can cause more in the near future. The developments of Lagun Blou will capture some of the market share and because they have an already stabilized name and brand image, it is good when Coco Dive Lodges can capture the market share as first.
Risk analysis
Political and economical environment
Curacao is a small island with its own government. The size of this government is also small and procedures are less regulated as in the western part of Europe. This makes it possible to adapt or completely change the system and regulations more easily. However because the tourist industry is one of the main businesses in Curacao aside of oil‐ refinery and the offshore sector, caution will be taken by major influencing decisions. However, his can also mean that when the government stimulates the tourist sector even more with subsidies, the competition may grow. It still will take time to build a facility and during that period can Coco Dive Lodges build and stabilize its brand name and possible even expand.
Nature
Complementors
One other risk in the service is the complementors. These people deliver the service to the end customer. It is important to carefully pick managing and cleaning partners to offer a premium service level. Because there are only a few renowned organizations that can do this, it can be that bankruptcy of such organization causes shifts in the market and a scarcity of offers.
Conclusion
The direct risks for Coco Dive Lodges are limited however nature can not be controlled. The barriers of entry, as well in time as finance prevent easy entry of competitors in the market. The financial risks by nature can be minimized with insurance, while the brand image will still be damaged.
1.2 Internal analysis
Core competence analysisA core‐competence analysis is a method to identify the unique strengths of the organization. These core‐competences have to provide potential access to the obtained markets, should make significant contribution to the customer perceived value and should be difficult to imitate (Prahalad and Hamel 1996). If an organization is able to offer something with a unique value, customers will choose these products and will be willing to pay more for them.
The complete analysis is attached in appendix 3A. One of the competences of Apple Pie Realty is their experience in the branch, the knowledge in the field of real estate and rental gives them a competitive advantage. Holding an efficient continuous premium service system facilitates the customer experience. Their first mover advantage is also a huge competitive advantage.
SWOT analysis and Value Proposition House
SWOT analysis Coco Dive Lodges
Helpful
Harmful
Organizational (internal)
1. Strengths
Environmental (external)
3. Opportunities
Internal - Expertise in real estate - Very special location & privacy - High quality service - Few competitors - Expanding touristic market - Richness in resources2. Weaknesses
4. Threats
Exte rnal - Limited portfolio - No expertise in touristic rentals - Customers can switch easily, especially when unavailable. - Possible increase of competition due to attractive marketTable 2 SWOT analysis for Coco Dive Lodges
Value Proposition Coco Dive Lodges
1. Target Group
2. End user insight
3. Competitive
Environment
- Nature and diving tourist groups and families and business incentives. - Primary market: the Netherlands. - Secondary market: the surrounding countries - Relaxation, nature and diving. - To enjoy the environment and have a great experience. - Temporal residences - Bungalow parks4. End-user benefit
5. Reasons to believe
6. Discriminator
- Coco Dive Lodges offers a great, rich and unforgettable experience.
Environment:
- Excellent diving area - Beautiful nature - Quiet surroundingExperience:
- Great, luxury facility - Customable service - Coco Dive Lodges offers a great luxury experience in a quiet surrounding with beautiful nature and great diving areas at the side of the Caribbean Sea in tropical Curacao.Table 3 Value proposition house for Coco Dive Lodges
The focus of the strategy has to be on the customer experience and the premium service, this is crucial to survive. The location and facility are good and not quick changing. However, the complementors needed to serve a premium quality are a tread because of the interaction with the customer, fulfilling the delivery of the service to give the customer the great experience.
1.3 Idea generation & modeling
The external and internal analysis shows that there is a positive trend in the tourist sector. The competitor analysis showed that there are a limited number of direct competitors in the area and Apple Pie Realty can have a first mover advantage. In order to give a suitable advice to Apple Pie Realty boundaries have to be made to the system and the focus of the advice should be made clear. A schematic overview of the supply chain of Apple Pie Realty is depicted in figure 15 below.
The service provided by Apple Pie Realty is a combination of a product and a service, though the customer only buys the service while the product is facilitating, making it a pure service (like a plane flight). More precise, the actual products are the apartments of Coco Dive Lodges while the service is the rental and experience by the tourists. In between are the complementors that bring the service to the customer. Therefore, Apple Pie realty does not provide the service directly to the customer , it assists by providing the facilities and is responsible for the quality provided to the customer. A service only aspect is the website and the online booking system. The website will have to provide the potential customers with general information and attract the customer. These are technological more challenging for a small service provider in case of Coco Dive Lodges.
The idea generation and selection is attached in appendix 3B. First, the customer preferences are identified and ranked and then given a weight factor. The generated ideas are valued and combined with the previous stated factors. The ideas are valued on the basis of appearance, cleanness, communication, coordination, hospitality, price and security. The ideas are about the level of included service, security and arrangements. The analysis points out that though all options are close in ranking, the full service option is highest in value. Despite that this might be the best idea by this analysis, it is also the most expensive for the customer. Now the difference in price with hotels will become small or possible even higher, which seems not to be a good option for capturing market share. Though hotels are no direct competition of a apartment rental, making the apartments comparable to hotels in service, means that it has to be competing on a different market. The extra secure option is the second highest option. This option is lower in appearance because additional exterior security options have to be added, like fences, a camera security system and a alarm with a horn. Based on the selection there is concluded that the extra security option is the most appropriate for further research.
Supply chain
Figure 1 Schematic overview of the supply chain
Blue print
In the blueprint in the actual service design described. A service can not be described as precise as a product because of the interaction with the customer which behavior is unknown. This incurs variability to the service and needs mutual adjustment. Procedures can be written and used, yet the customer needs to experience the interaction as freely and not structured in an unpleasant way. The blueprint can describe the procedures in a graphic way, or can also be stated in a textual method. In this case we use first the textual method to describe the material part of the service, the apartments and second the graphical method to provide an overview of the proposed service. This gives a quick overview and understanding of the service procedures.
In the blueprint in appendix 3C are the apartments and service described in more detail from the selected concept of raised security. The blueprint is still open for a lot of interpretation, which is necessary for the mutual adjustment with the customer and it is descriptive enough for the start of the next phase. In the description of the facility is stated what the apartments should contain to serve the target groups and how security is improved by addition of camera’s. The steps of the service providing from ordering, arriving and departure are graphically described.
1.4 Service testing and reconciliation
The new service has to be tested and reconciled before officially established and launched. During this phase can the service, based in the service testing, be adjusted before launched into the market. It is best to reinforce involvement of users in real life to prevent a bad image and additional costs when the service is not optimal designed before launch. The advantage of this testing is to ensure service can be launched to the market with the minimal risks after the service testing is executed in completion.
- Proof of concept
The proof of concept is a process to prove the application feasibility of a certain service. The proof of concept is focused on the testing of technological facility. Architecture designIn the situation of Apple Pie Realty is the case of Coco Dive Lodges clear and can be verified. The demand is already analyzed in the initial market assessment giving an occupancy result of 75 percent and a profit margin of 40 percent. The average time of rental will be one week. By the occupancy rate can be calculated that each apartment is rented for 39 weeks a year, resulting in 78 service usages.
Prototyping
facility and the intangible service itself. The facility has to be tested, as well as the service and the website. The best way of verification is to experience the service in real life, by going trough the complete process from ordering to usage of the service. In this way, all the weak spots can be found and a list constructed to solve all these issues.
Technological competence and acceptance
The verification part of the technological competence has to answer if the employees understand and can handle the new equipments. It is important to evaluate the feasibility and adoptability of the technical concept in the chosen cases. When the prototyping system is analyzed, it aims to test if the functional aspect of prototyping system can be operated normally (Hsiao & Yang, 2010). The competences of the employees have to be enough to serve the customers well. In the case of Coco Dive Lodges, the property manager also has to handle the contacts with the customers, keep track of the orders, handle finances, update the website with new information etc. The person of persons that will clean the facility will have to be capable of the work. However, when a professional service organization will be hired, this is not expected to create any problems. The property manager possible needs a course for the maintenance of the website but anything else is common competences for a property manager.
The used technologies have to be accepted and adopted by the employees to complete and use them. The operations have to be performed in favour of the customer by the complementors. A applicable model in the case of Coco Dive Lodges is the technology acceptance model of Davis (1989) (figure 2) shows how users come to accept a technology based on the perceived usefulness and perceived ease of use. The first is defined as the degree to which a person believes that using a particular system would enhance his or her job performance" and the second "the degree to which a person believes that using a particular system would be free from effort" (Davis, 1989).
Figure 2 Technology acceptance model by Davis (1989)
From the analysis are not much ethical or other problems found. However, because the facility is surrounded by nature, toxic chemicals for cleaning might cause problems with the acceptance among the employees. This might possibly cause some problems, which can easily be avoided by choosing other, less toxic materials.
- Proof of service
Service model design Firstly the critical issue of the proof of service is analyzed to ensure the purpose of the service. The end of this design phase is a service model description to be verified. A critical service model chosen to verify should be analyzed and planned in accordance with the purpose of the issue analysis and service experiments. The blueprint of the service is already proposed in appendix 3C. The template of the Institute of Public Care of the UKi is used to structurally describe the service specifications and is attached in appendix 4C. The resulting targets are: ‐ Offering a premium service, based on high standards and in compliance with the CTB and CASHA. ‐ The aim for 75 per cent occupation in one year after the launch of the service. ‐ Complains taken care of within 24 hours if possible. ‐ High customer satisfaction, measured by feedback with an aim of 90 per cent positive. The high quality should be monitored, based on customer feedback. The efficiency of the service can be monitored based on the reaction time to customer complains and an overall monitoring of the service. The acceptance of the service can be monitored by the occupation rate and the loyal returning customers. The systems for this monitoring and verification are more deeply described in the coming sections.
Service quality
Following the previous stated definition of service quality, the discrepancy between customers’ expectations and their perceptions of the service performance, verification should be performed to ensure the perceived quality. Customers should have the possibility to express their perception in feedback given during any moment of the service usage or afterwards.
Now, a decision can be to lower the expectations of the customer and thereby automatically raising the perception of the quality. However, this construction will have a negative impact on attracting customers for a premium service with a premium price; this can not be done with low expectations at the side of the customer. Therefore, as well the expectations as the perceptions of the customer on the quality of the service should be high to attract the right customer group and obtain a high quality service. The expectations and perceptions are subjective and influenced by many factors and only a few can be controlled or manipulated by the service organization. To monitor the service quality, the framework below (figure 3) was designed.
Customer expectations Customer perceptions Perceived value Influence Feedback
Figure 3 Perceived value by the customer
To ensure a good quality perception, while holding on to creating high expectations, is to influence the perception of the customer. The perceived quality of the customer is most influenced by the aspects that are most valued by the customer. To find these aspects, the customer can express this in the feedback, giving the service provider the possibility to improve the service efficient. The first stage of influencing the perception of the customer is by the option to add additional services on request. This way, the service gets customized and customers adapt their expectations to the real service offering, thereby raising the perception when the expectation becomes fulfilled.
Service efficiency
Time to order Responce time to order Responce time to complain Effective time per booking Efficiency for customer Efficiency for organization Efficiency Effective time per complain Effective time per service
Figure 4 efficiency structure
Service acceptance
The aim of the Service Acceptance is to verify the user acceptance of the service as provided. For instance, is it the right pricing? And, will the user buy a service as provided by the designed concept? Risks for failure are always involved, which are tried to minimize.
The tourism business is one of the three important sectors on Curacao, besides offshore and petrochemical industry. The touristic market is increasing as shown in the part ‘trend analysis’ and the occupation fraction as well. At Curacao are premium touristic services offered by hotels and apartments, all of these are located near the busy city center of Willemstad. There are also a lot of apartments and bungalow parks outside the city, more close to the nature, still these are not as luxury as the service of Coco Dive Lodges. From contact with property managing firms turned out that the market for divers is under‐manned, specially in the higher class. They state that property owners think that divers do not care on luxury and comfort. However, their experience is that most divers complain that the appropriate locations, which for instance have an additional storage room, are sober, old and offer not much luxury and comfort. In general, in or near the area of Coco Dive Lodges are none really luxury accommodations situated. Coco Dive Lodges is will be the first, taking the full market share on premium service in the area. A research was performed in the ‘external analysis’ on the accommodations and price settings of the competitors. The prices for the apartments of Coco Dive Lodges are based on this research. Customers are accepting these prices to other accommodations, however Coco Dive Lodges offers a unique combination, it is expected that customers are accepting comparable prices to these accommodations.
The constant grow in the tourism market, few luxury residences for divers on the island and none luxury residences in the area of Lagun, creates the market oppurtunityfor Coco Dive Lodges, with comparable prices of competitors.
- Proof of business
In the phase of proof of business is the more administrative part of the development verified. This includes the business model evaluation, the demo kit development, the strategic partner buildup and the globalization of the service.Business model evaluation
Net Present Value
The time value of money holds the fact that money devalues in time. A certain amount of money in the future is worth less than the same amount of money today. For that reason and the risk included in any investment, Apple Pie Realty uses a desired rate of return of 7 per cent on all the investments. The investment in the facility is €450000 and an additional €5000 is added for the market introduction. The construction is expected to last a year, and in the second year the finalization is done and the interior is placed. The costs are expected to increase with 3 per cent each year and the rental price is raised with the same rate. During the first year is an occupation expected that is half as high as the regular fraction.
The calculation displayed in Appendix 4B shows that the investment starts to return money after year 10, this is 9 years of rental. The net present value of the investment is €153132 in 15 years after the initial investment as displayed in graph 1.
NPV Coco Dive Lodges
-500000 -400000 -300000 -200000 -100000 0 100000 200000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years Va lu e s in €
Cumul disc cash flow PV time period 0
Graph 1 Value flows for Coco Dive Lodges NPV
Scenario analysis
Figure 5 : possible interpretation for the scenario analysis for Coco Dive Lodges
The best case scenario for any organization in the tourism sector is a high growth in the tourism market with limited competition. This scenario results in a ‘black market’, where the occupation fraction will rise and the consumer demand higher is than service and facility capacity. Unlike a production organization, a service provider can not use alternative facilities to meet the demand, like a production organization can do with the production channels. Therefore, Apple Pie Realty must take care of an optimal service and not lower the standards under time pressure by, for example, postponing the maintenance. When scarcity in the market rises, prices can rise accordingly, also caution should be taken with this aspect because it can bring a negative image on the organization. The worst case scenario for Coco Dive Lodges is a situation with almost no touristic growth, or even a decline, in combination with fierce competition. This scenario results to a ‘price pressure’, where holding the level of market share can be very tough and the occupation fraction is likely to drop. To deal with the scenario, Apple Pie Realty has to keep costs low and provide an excellent service to the customer. In the moderate case scenarios Coco Dive Lodges services are operating in the ‘brands rule’ or ‘gadget niche’, which depends on some developing market conditions. It is essential for Coco Dive Lodges that a good roadmap will be developed to secure profit margins and a stable sales volume for the future (Ulrich & Eppinger 2008, Branscomb & Auerswald, 2001).
Interactions
strengths and limitations of the techniques and should be aware of how the models work and on what assumptions they are based.
Ulrich and Eppinger (2008) define three interactions from the project. First to the firm as a whole, second to the market where to product or service will be sold and third to the macro environment. Project – organization Two different key interactions between the products and the firm can be linked to externalities and strategic fit (Ulrich & Eppinger 2008). The services of Allple Pie Realty by Coco Dive Lodges bring the following un‐priced costs and benefits: Benefits: • There are lower development costs and time for next generation facilities and services with the similar features. • Apple Pie Realty has the first mover advantage, capturing the full market share for the first period and is market leader. • Creating a brand image in the touristic sector. Costs: • When competitors move in, Apple Pie Realty will have lower revenues because competitors can force to lower the prices. • Apple Pie Realty needs more time and resources for the first facility, because of the size of the organization and the innovativeness. Project – market
Apple Pie Realty has to take care off of three market environment variables; a required shift in partners, competitors and customer thinking because it may develop major possibilities. The tourism sector is new for Apple Pie Realty, forcing to build relations with strategic partners, to attract new customers and also possible attraction of competitors. The unique product‐service combination of the product may create a new market segment (Ulrich & Eppinger 2008).
Project - macro environment
Apple Pie Realty has to take care of the three macro environment variables; major economic shifts, Government regulations and social trends. The economic shifts can be caused by material prices, labor costs, and also changes for flight operators that bring the tourists. New regulations by the government can destroy a development opportunity while it also create completely new ones. Social trends, like environmental awareness can stimulate or decrease the success of the project. Paying close attention to these variables can help to develop new possibilities or improvements for the product (Ulrich & Eppinger, 2008).
Scenario description
Scenario Action
1. Touristic growth / declining competition
Apple Pie Realty will benefit from touristic growth because consumers will have the currency to pay for the residence and service and the luxury services will be more popular. Because of the low competition Apple Pie Realty should not have to worry about the price. NPV € 233468 2. Touristic growth / increasing competition Apple Pie Realty will benefit from high economic growth because consumers will have the currency to pay for the residence and service and the luxury services will be more popular. Because of the high competition Apple Pie realty has to make sure their product is unique and although competition is high it is clear for consumers that Apple Pie Realty has those features they most benefit from. NPV € 153132
3. Touristic decline / declining competition
The high price of Apple Pie Realty will give lower revenues, still because of the low competition it will be one of the few alternatives for a luxury accommodation, especially for divers. € 153132
4. Touristic decline / Increasing competition
This scenario seems unlikely to happen, because why would large investments be made while the market is declining? Though, this scenario can happen. The high price of the accommodation combined with high competition the accomodation will likely not sell and this is a quarter that should be avoided at all cost. When happening, Apple Pie Realty should consider to lower the prices to keep a market share. NPV € 72795
Table 4 scenario analysis versus possible linked actions
However the price pressure scenario is unlikely to happen, it is definitely worth trying to avoid. The calculation shows that even in the situation that with a 10 per cent drop in occupation, the net present value is still positive. The black market situation is very favorable for Apple Pie Realty, because also customers from less luxury accommodations that are not available anymore will search for another accommodation in the same area.
Demo kit development
Therefore, information should be provided on Curacao, the surrounding area, attractions on the island and also practical information for ordering, payment etcetera.
Strategic partner buildup
1.5 Launch plan
When the development activities of the service design come to an end, it is time to realize the plans made. When designing a service without physical required parts to provide the service, the launch can start right when the design is finished. However, when a major physical part is involved, whether it is a pure service or not, it should be ready before the launch.
Marketing
A early launch can be useful to shorten the adoption of ramp up time and presales can help with this. Before finishing the development of construction activities the launch phase should e planned concurrently. In the case of the project Coco Dive Lodges, the service providing includes a facility that has to be ready before the customers can come. Therefore, when a contractor is constructing the facility, the launch can be completely planned and executed. In the case of Coco Dive Lodges, the complete launch can be performed, when setting a starting date for the arrivals. The promotion companies can already adopt the project in their campaigns and the website with order system can already be put online. However, the risk can be that on the last moment there are problems with the completion of the construction, this can be disastrous for the first customers. This risk has to be dealt with. A safety margin can be used, or chances can be taken and additional manpower has to be hired for the last period. The final pictures including the last details can not put on the website when the facility is still unfinished, all the other can be placed. This will result in traffic on the website and attention of potential customers. A big commercial campaign would be inappropriate for this size of offer, though additional attention can be in the form of banners on websites of promotion offices and other websites that focus on the same target market. In appendix 4D is a list of possible websites that have the same target groups and offer possibilities by information or banners to get the project Coco Dive Lodges under attention.
Ramp up
Customer feedback The goal of the capturing of the voice of the customer is to find out what elements are valued by the customer and which not. When known, non value adding elements can be eliminated of the service providing. Also can new element be introduced to add additional value to the service. This way will the service increase in value and prices can be adapt accordingly. The service provided at Coco Dive Lodges is focussed on the customer experience. Because it is not possible to develop a system to real life test the service with the customer, all the information should be obtained from the interviews with potential customers and research performed among other organizations. On these results will the initial service providing be designed. When the service is launched, it is important to capture the voice of the customer on the first impressions. This will help to adapt and fine tune the service providing to what the customer really values. However, caution should be taken for this feedback, because the feedback of a customer can be influenced by previous experiences and other factors that are not able to adapt by Apple Pie Realty. Methods to capture the voice of the customer can be in direct feedback, feedback forms of based in their complaints.
1.6 Continuous improvement
To keep improving a premium pure service, it is necessary to evaluate the service as it is provided and reconcile it. For this evaluation, any kind of appropriate model can be used. To evaluate the service performance, the focus of the evaluation should be on the fit with the customer because it is their opinion that brings them to reorder or tell others about it. Environmental changes can have their impact on the service as perceived, even as trends in the particular sector.
Evaluation model
There is a range of diverse methods that can be used to capture customer feedback in services management. It includes customer satisfaction surveys, mystery‐shopping scores, operational measures (e.g. stock turnover, customer throughput), sales data, profitability, and customer retention information (Harris, et al. 2011). When the service is performed for over a week, which is possible in the case of Coco Dive Lodges, a questionnaire at the end of the stay might not include the most all the details of what took place during the full length of the stay because customers are not able to recollect all what happened. To counteract this lack of detailed recollection, many operators have turned to mystery shopping as a method of assessing the performance (Harris, et al. 2011). Mystery shopping is a research method where a researcher acts like a customer and uses the service in the same way. During the service, the disguised researcher makes notes of everything happening and with this information the performance research can be better completed. Though the service provider wants to obtain a lot of information from the customer during the questionnaire at the end of the service, the questionnaire should not take much time from the customer. Keeping it short, the customer will have more attention to the questions, which might not be the case in long lists of questions. The questionnaire should have some closed questions and also a couple of open ended questions. Not all customers have to respond the questionnaire, smaller sample sizes can be used. In the questionnaire can also be asked for new ideas or improvement points. In appendix 4E is an example design of a questionnaire placed, which possibly has to be adapted when the service is launched.
Reconciliation
To respond and adapt to the environmental circumstances appropriately, the service offering has to be reconciled. The information on the market is for a major part obtained by the evaluation that is performed during the customer survey and a possible mystery shopping report and the other targets as mentioned in the part on the evaluation model. Now a lot of information is obtained from the market, the organization has to reflect this on the current service offering and the strategy, which can be adapted after the results of the information gathering. The strategy has to reconcile the requirements of the market with the capabilities of operations resources to provide the best fit between both.
Appendix 2A. Statistics and trend analysis
A trend analysis is a forecasting technique that relies primarily on historical time series data or events to predict the future. Because the world around us is always changing, all habits are also changing. Good examples of a trends in the last decade is people are taking more holidays but because of the economical crisis in the western part op the world from the last couple of years, grow is less than could be expected on historical data. It is not possible to predict the future, however keeping an close eye on trends and developments is possible.
From the attained statistical information, analyses can be made. As made visible in graph 2, visitors from the Netherlands are by far the biggest group with a intended quantity of over 1.5 million nights stay over. Second and third are the United States and Venezuela with over 390 thousand and 316 thousand stay over nights. Fourth and fifth are Colombia and Germany with just over 110 thousand and 94 thousand nights of stay in 2011. The Netherlands were responsible for almost 50 per cent of the stay nights in 2011. The season planning from the top five countries is displayed in graph 3 and 4. These graphs display that for the Netherlands there is a high rate in July and August as well as with the start of the new year, however this is likely to already be started in December but not visible due to the aggregation level. From the other countries it is less clear and significant that there are major differences between the monthly nights of stay.
Intended nights of stayover 2011 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 Can ada Uni ted state s Arge ntin a Braz il Colom bia Ecua dor Guy ana Sur iname Venez uela Othe r (2. So uth Am erica ) Aru ba Barb ado s Dom .rep. Haiti Jama ica Puer to ri co Trin & tob Othe r (3. Ca ribbea n) Aust ria Belg ium Denm ark Finland Germ any Italy
Neth erla nds Norw ay Portu gal Spa in Swe den Switz erla nd Unite d kin gdom Oth er (4 . Eur ope) Not stat ed Other (5. O ther s) Country To ta l vi si to rs
Graph 2 Number of arriving tourists per country
Season planning 2011 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Jan uary Fe bruary Ma rch Ap ril May June Ju ly Au gust Se pte mbe r Oc tober No vemb er De cemb er Months A rr iv a ls in % Netherlands United states Venezuela Colombia Germany
Graph 3 Relative arrivals per month from five most represented countries
Season planning in absolute numbers
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 Janu ary Feb ruar y Ma rch Apr il May Ju ne Ju ly Au gust Se pte mbe r Oc tob er No vem ber De cem ber Months Q u an ti ty Netherlands United states Venezuela Colombia Germany
Growth stay nights compared to 2002 -100 -50 0 50 100 150 200 250 300 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year G ro w th in % Netherlands United states Venezuela Colombia Germany
Graph 5 Relative growth in nights of stay compared to 2002
Growth stay nights compared to before year
-60 -40 -20 0 20 40 60 80 100 120 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year Gr o w i n % Netherlands United states Venezuela Colombia Germany
Graph 6 Relative growth in nights of stay compared to the prior year
Absolute numers of visitor nights
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Years Qu a n ti ty Netherlands United states Venezuela Colombia Germany
Appendix 2B. PESTEL analysis
A PESTEL analysisi is a method to analyze the external environment at a certain moment. The model categorizes relevant factors of this environment; this is done with the following classification.
Political
The government stimulates the touristic development and growth. They provide information with the board of Curacao Tourist Information and provide quality checks and free marketing. Because Curacao has little production and a minimal export the income has to come from the touristic market for the most. Economical Though there is a worldwide economical crisis, the tourists market is still not declining. The growth is minimal and there are some slight shifts in the areas of departure. Even more, now people are more curious about the money they spend, instead of renting an more expensive hotel room, they can rent an apartment. However, there are still enough tourists to demand the apartments and hotel rooms for about 80 per cent throughout the year. The other economical factors seem stable, there is no high inflation, no tax change proposals etcetera.
Social
Because of the economic decline from the last few years there is a decrease in consumption.ii On the other hand, the amount of Dutch inhabits that spend their vacation in outside their own country is still increasingiii. The number of vacations outside the country did increase from 16.8 million in 2002 up to 18.6 million in 2011. The ratio of in country and outside the country vacations did increase as well, from 47.2 up to 51.1 per cent in the same period.
Despite of the economical crisis, the wages of the employees are rising but unfortunately the inflation is doing the same making the first undoneiv as can be seen in figure 6. It is possible to spot a trend that the wages will rise more than the inflation giving a net rise. All these statistics together makes that even now the Dutch inhabits have less to spend, the amount and ratio of vacations outside the country are still increasing. Therefore, a conclusion might be that there is a trend that the Dutch inhabits value their vacations more.
Figure 6 Wages minus inflation for the Dutch market (Source CBS)
Technological
There are several techniques involved in a service. Marketing and websites, online booking systems, digital payments but also the construction and maintenance of the facility and the service and cleaning for the tourists. New trends and groundbreaking technological changes are not spotted recently, and all necessary technology is available. Therefore there are no direct problems expected in the development of this case study.
Environmental
The environment involves all climate changes bus also the impact of the tourist sector on, for example, the surrounding nature. The construction of the apartments will of course have its impact on nature but this is minimal because the apartments are constructed on a for building eligible lot. The climate change can have its consequences for the building and the direct area. Because the facility is located aside of the Caribbean Sea, the impact of a storm can be of major importance. Curacao is officially outside of the tornado area and the apartments are located on eight meters above sea level. But despite of this, every couple of years does a storm pass by closely, making the sea very rough. Only in case of very extreme weather will the building be in danger, but the stairs to the sea end on a much lower level, close to the water. This must be very well constructed. The impact on the near by coral reef is minimal, it stays untouched and only a relative few divers more will visit, causing no problems.
Legal
For the construction of a building and a stairway to the sea is it required to obtain the necessary permits. The construction of the building should not be a problem because of the set destination of the building lot, but the sea stairs involve a more complex procedure. This is because the delicate reef and the rock bottom. The construction should not be able to harm the coral reef or bottom of the sea and the cliff to the sea exists of porous rock making it hard to mount something well. Carmabi, the organization that protects and manages nature, will have to approve the proposal and the Curacao Tourist Board will check as well before granting the permit for rental.
Appendix 2C. Initial Market Assessment
In order to gain some insight on the so‐called diffusion of innovation, the ATAR concept can be used (Crawford & Di Benedetto, 2008). But because there is a physical boundary in the number of sold service, it is not possible to use this model.
The customer groups targeted by Coco Dive Lodges can be defines as people that take their vacation with their family or in a group and like to be outside of the crowded town, prefer silence and privacy and enjoy nature and diving. This is a smaller selection of the arriving tourist but the number of service providers in this category is also less. The average occupation rate of apartments is not available but the hotel rooms are taken as a reverence. The hotels on Curacao are booked for 75 to 80 per cent, slightly depending on the seasonv. The facility now contains two apartments, with a proposed rental price of 200 Euro per night, not depending on the occupation and having a maximum of 6 persons. An easy calculation gives a maximum turnover of € 145600 and with occupancy of 75 per cent a turnover of € 109200.
The initial investment for this facility was about € 450000. Though the coming period the costs for marketing, water, electricity, tv‐connection, cleaning, maintenance and managing the property have to be paid for. Cleaning, managing and basic marketing costs usually about 25 per cent of the turn over. The marketing can be expanded as much as desired with according costs and maintenance is hard to define up front. However, this post should not be large because the renter has to pay for the damage made. Therefore, only regular, periodic maintenance should be low but painting etc has to be done. Normal usage of water and electricity is included in the rental price. For all these things, we assume a 10 per cent of the rental price. For the new marketing we calculate another 5 percent of the turnover. These are only periodically costs because the design of a website is included in the initial investment. The estimated yearly profit becomes now €65520 to refund the initial investment. Subtracting the tax of 7 per cent makes the refund period just over 7 years.
Appendix 2D. Porters six forces model
Each force exists of different variables and these are linked with a level of risk for Coco Dive Lodges (low, medium or high). The six forces are: (1) intensity of firm rivalry, (2) threat of entry by new competitors, (3) threat of substitute products, (4) bargaining power of customers, (5) bargaining power of complementors and (6) bargaining power of suppliers (displayed in figure 7) (Byers et. al, 2010). Each force exists of different variables and these are linked with a level of risk for Coco Dive Lodges (low, medium or high). In this section, the analysis is presented and the six forces are described in detail and explained. Each force exists of different variables and these are linked with a level of risk for this service of Apple Pie realty (low, medium or high).
Figure 7 The six forces by Porter
The intensity of competitive rivalry
What is the number and capability of your competitors? If there are many competitors, and they offer equally attractive products and services, will this result in less power in the situation. On the other hand, if the offered service differentiated will this increase the strength.
On one hand, Apple Pie realty offers a service that is rather unique in combining the elements of location, facility and a premium service. In that sense the risk is low. However, because of the attractive market, competition can possibly increase but a only with a delay of years because of the establishment of the facility. • Level of advertising expense: Low risk
Expenditures on new touristic services of this size are relatively limited because the marketing will mostly focus on web‐advertisement and online booking.
The threat of the entry of new competitors
Power is affected by the ability of people to enter the market. If it costs little in time or money to enter the market and compete effectively, new competitors can quickly enter the market and start competing. If there are strong and durable barriers to entry, then the service can preserve a favorable position and take fair advantage of it.
• Existence of barriers to entry: Medium risk The service makes use of a unique located facility, so the linked starting costs are high and the location is hard to imitate. However, because of the high amount of tourism, this can be an interesting investment area for others as well. • Access to distribution: High risk
Because in tourism service, most marketing, information gathering and booking is done by the internet or travel agencies. This is easy to access for any competitor.
• Sunk costs: Medium risk
The development is done Apple Pie Realty owns already the facility. Marketing and promotion cannot be recovered when started.
• Learning curve advantages: High risk
However Apple Pie Realty had experience with real estate, this tourism facility is new build and different from all before. Therefore the strategic partners and alliances have to be founded and the learning curve will be high.
• Government policies: Low risk
The government has influence on permits etcetera. Because the service facility is already build and permitted, the government has not much of influence any more.
• Industry profitability: Medium risk
The industry will be more profitable if less competition is realized. However, because of the attractive business, a price skimming competitor can influence the margins and lower the profitability of the industry.
• Expected retaliation by incumbents: low risk
• Brand equity: High risk
Since Apple Pie Realty is a relatively unknown brand for consumers, there is a danger of other companies entering the market. These companies might have higher brand equity and have more resources to successfully exploit the market to leverage this advantage. This can be in the same way or in the form of a hotel or tourism park.
• Capital requirements: Low risk
Before incumbents can start a equal service, a service facility needs to be set up, the materials need to be purchased and knowledge has to be gained. Therefore the capital requirement to start is high and the risk of a new competitor will enter the market is limited. The threat of substitute products
Substitutions affected by the ability of potential customers to find a different way of getting the same experience. If substitution is easy and substitution is viable, then this weakens the power of the service.
• Buyer propensity to a substitute product: High risk The buyer of the service could also use the service of a competitor. Because the size of the offered service is limited, the customer can be attained to switch to a competitor when the service is fully booked. • Relative price performance of a substitute product: medium risk
Because the offered service is a premium service, price differences with competitors will occur. However, because of the location of the facility, the direct competition will be limited. • Number of substitute services that are available in the market: Medium risk
The amount of substitute services on the same location which claim to give the same experience are limited. However, the number of diving areas in Curacao is larger and substitutes are there as well. Though, the tourism market is still growing which lowers the risk. • Ease of substitution: Medium risk Because of the limited number of servings this facility of Apple Pie Realty can offer, the buyer can easily switch to competitors products when the service is not available at the requested moment of the experience was not as expected. • Service quality: Low risk
The new service must have a premium quality because it is new on the market and customers must ‘promote’ the company name.
• Buyer switching costs: Not Relevant risk
The buyer does not need to invest in special product equipment and is therefore not physically bounded to this product. Therefore, the buyer can switch more easy.
There are other products that can offer the customer the same experience. These can be in the same area and offering the same service.
The bargaining power of customers (buyers)
How easy it is for buyers to drive prices down? Driven by the number of potential buyers, the importance of each individual buyer to the business, the cost to them of switching from the offered products and services to those of a competitor.
• Buyer concentration to firm concentration ratio: low risk The tourism sector is still expanding and the offerings are limited. For this reason the ratio is high, and thus the risk is low. • Degree of dependency upon existing channels of distribution: medium risk
Distribution channels are very important in the tourism services. At the moment, competitors already have these and Apple Pie realty has to found them. However, the possible number of channels is high which reduces the dependency.
• Buyer volume: Low risk
The market potential for touristic services on Curacao is large. Therefore the offering of a premium service on such unique location in a limited facility will result in a low risk. • Buyer information availability: Low risk The most information will be distributed by the internet. Because this can be seen as a easy to access information stream, the information will be available for all potential buyers. • Buyer price sensitivity: Medium risk The service offered is a premium one and the price will be accordingly. Because the offered service is a not storable, luxury experience it is not required for surviving of the customer and therefore it can be chosen to find a lower quality version or can be skipped. • Buyer switching costs relative to firm switching costs: High risk The buyer can easily switch to another service. The firm will have major problems to switch to other services that can offer the same kind of experience. • Availability of existing substitute products: High risk There are a lot of substitute’s that offer experiences that can equal the one of this service. However, this is one of the few services that offer this kind of premium experience. • Differential advantage (uniqueness) of industry products: Low risk Our service is quite unique, because of the location and the facility that is offered. However the real differentiating, valuable points have to be further worked out.
The bargaining power of complementors
A service is dependent on the complementors, the last value adding components in the chain. It important to closely monitor these and if there is a scarcity of those resources they gain in power over the offered service.
