It is 2011 now, and the "The Taj" hotel, a privately owned, independent, 5-star deluxe hotel located in Delhi's commercial district, is faced with a turbulent external environment owing to the current global financial crisis. Since its inception 8 years ago, the hotel has grown in prominence during the bustling economy, and it has been one of the top performers in the luxury market segments over the 4 years preceding the current economic crisis. The hotel's main target market is the business traveler (75% of room bookings) who has no problem with paying $500 USD per night for a room.

However, the turbulence in the economic environment has resulted in policy changes such that banks, financial services firms, and automobile firms (which all form an important part of the hotel's target markets) have cut travel-related expenses for executives. Executives of these firms can no longer travel first class on their business visits and they must now use only economy class travel. Moreover, they are now required to cut hotel stay-related expenses, so they have to stay in 3- and 4-star hotels and not pay more than $300 USD per night. These restrictions have had a major impact on hotels like The Taj and have resulted in a significant reduction in room bookings from the business travel segment, and consequently a significant reduction in profits, to the extent that the hotel is no longer able to cover fixed costs.

The U.S. government is bailing out banks and financial institutions to help them remain profitable, and since a large portion of The Taj's customers are business travelers from U.S. firms, the hotel's management team will need to assess the impact of these changes on their strategy.

You have been asked by The Taj to assist their management team in strategic analysis, and assess the impact of these changes on their strategy.

QUESTION 1: 5 marks

What relevant external environment factors are impacting The Taj in this case? Explain the implications or considerations of each factor as it applies to The Taj's situation.

QUESTION 2: 15 marks

What are the strategic implications that The Taj should consider in this case and some potential courses of action? Some areas of concern you should include in your answer:

• Changes to corporate level, business level, and network level strategies
• Risks associated with foreign exchange rates or cash flow

You do not need to provide definite recommendations of courses of action, but your answer should include some possibilities that should be considered.