Expert answer:Case Study

Solved by verified expert:GUIDELINES FOR WRITING A CASE STUDY ANALYSISA case study analysis requires you to investigate a business problem, examine the alternative solutions, and propose the most effective solution using supporting evidence. Please limit case study analysis to 3 pages maximum. Preparing the CaseBefore you write, here are guidelines to help you prepare and understand the case study:1.Read and examine the case thoroughlyTake notes and highlight relevant factsNote key problems.2.Focus your analysisIdentify 2-4 problemsWhy do the problems exist?How do these problems impact the organization?Who is responsible for them?3.Uncover possible solutionsUse course readings, discussions, research, & your personal experience.4.Select the best solutionConsider supporting evidence, pros & cons, and how realistic your solution isWriting the CaseOnce you have gathered the necessary information, a draft of your analysis should include these sections:1.IntroductionIdentify the key problems and issues Formulate and include a thesis statement, summarizing the outcome of your analysis in 1-2 sentences.2.BackgroundBrief overview of background information, relevant facts, and the most important issues3.AlternativesOutline possible alternatives (not necessarily all of them)Explain why alternatives were rejectedDiscuss constraints/reasons4.Proposed SolutionProvide one specific and realistic solution & explain why this is the solution you choseSupport this solution with solid evidenceInclude concepts from class (text readings, discussions, lectures), outside research, & personal experience 5.RecommendationsDetermine and discuss specific strategies for accomplishing the proposed solution.If applicable, recommend further action to resolve some of the issuesWhat do you recommend be done and who should be responsible for doing it?
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For the exclusive use of B. Khan, 2018.
Indian School of Business
ISB016
June 30, 2013
Tonya Boone | Nalin Kant Srivastava | Arohini Narain
ITC Hotels: Designing Responsible Luxury
The ability of a business corporation to adopt low carbon operations as well as
sustainable business practices will be one of the key determinants of competitiveness in
the years to come.
 Y. C. Deveshwar, Chairman, ITC
1
Returning from the Annual General Meeting of ITC Limited in July 2009, Nakul Anand, the
2
FRPSDQ¶VExecutive Director , contemplated WKHIXWXUHRI,7&+RWHOVDQGKRZWRDOLJQWKHGLYLVLRQ¶V
efforts with those of the entire corporation. The Chairman, Y.C. Deveshwar¶V annual speech had
emphasized the need for Indian businesses to respond to climate change and social inequality:
Going forward, competitiveness and profitability will be increasingly linked to the ability of
businesses to make carbon reduction and the creation of sustainable livelihoods an
integral part of their value proposition to consumers.
The corporation was aggressively pursuing its vision of attaining a national leadership position in
sustainable business practices. In 2009, as in previous years, ITC was the only enterprise of its size
and scope LQWKHZRUOGWREH³FDUERQSRVLWLYH´³ZDWHUSRVLWLYH,´DQG³VROLGZDVWHUHFFOLQJSRVLWLYH´
Sitting down with his team of senior executives at ,7&+RWHOV¶DQQXDOILYH-year planning session,
Anand challenged them to push sustainability further in the Hotels division while simultaneously
raising its luxury aesthetic. Their newest property, ITC Gardenia, a super-premium luxury hotel that
was set to open in Bengaluru, would be a LEED (Leadership in Energy and Environmental Design)
Platinum property. The senior executive team pointed out that if they truly wanted to position
themselves as a sustainable luxury hotel chain, they would have to retrofit their other eight luxury
properties to convert them to platinum status. This would be a huge undertaking in terms of cost and
operations. Retrofitting the eight properties would increase capital expenditures by approximately 15
per cent over the next two years. The team acknowledged that most of these hotels were already
eligible for LEED Silver. Thus, the main question that Anand and his team had to answer was whether
they should retrofit or not. He reminisced:
1
2
&KDLUPDQ¶VDGGUHVVDWWKHth Annual General Meeting of ITC Limited in 2009.
Nakul Anand is responsible for the Hospitality, Travel and Tourism businesses of ITC
Professor Tonya Boone, Nalin Kant Srivastava and Arohini Narain prepared this case solely as a basis for class discussion.
This case is not intended to serve as an endorsement, a source of primary data, or an illustration of effective or ineffective
management. This case was developed under the aegis of the Centre for Teaching, Learning, and Case Development, ISB.
Copyright @ 2013 Indian School of Business. The publication may not be digitised, photocopied, or otherwise reproduced,
posted or transmitted, without the permission of the Indian School of Business.
This document is authorized for use only by Bushra Khan in Hospitality Management taught by Helene Okabe, Montclair State University from March 2018 to May 2018.
For the exclusive use of B. Khan, 2018.
ISB016
We were expanding our footprint more rapidly than we had since our inception but were
unsure about our positioning in light of our growth plans. Traditionally, hotels were
positioned either as luxury or green hotels. We had an edge on both, and leveraging one
over the other would do us no justice. It was then that we decided to carve out a third
niche path, amalgamating the two incongruent concepts of sustainability and luxury to
HPHUJHZLWKWKHHWKRVRIµ5HVSRQVLEOH/X[XU¶
HISTORY
ITC Hotels was one of the many businesses in the corporate portfolio of ITC, which had started as
the Imperial Tobacco Company of India Limited in 1910. Its name was changed to India Tobacco
Company Limited in 1970 and it was eventually renamed ITC Limited in 1974 to reflect the wide range
of company businesses. In addition to tobacco products and hotels, by 2009, the corporate
businesses included information technology, packaging, paperboards, agri-business, foods and
personal care. ITC ranked third among Indian-listed private sector companies in terms of market
capitalization. (See Exhibit 1 for key financials.)
The triple bottom line objectives of environmental, social and financial performance, with an
emphasis on nation building, had become aQHVVHQWLDOSDUWRI,7&¶VFRUSRUDWHYLVLRQ see Exhibit 2)
The corporation issued its first independently audited sustainability report in 2004. Generating
economic value for India and EXLOGLQJWKHQDWLRQ¶VHQYLURQPHQWDODQGVRFLDOFDSLWDOZHUHDPRQJ,7&¶V
core values. An IMRB-%XVLQHVV :RUOG 6XUYH KDG UDWHG ,7& DV RQH RI ,QGLD¶V PRVW UHVSHFWHG
3
companies.
,7&¶VKRWHOGLYLVLRQRSHQHGLWVILUVWKRWHO&KROD6KHUDWRQ later renamed My Fortune), in Chennai,
Tamil Nadu in October 1975. With its distinctive logo of hands folded in the traditional Indian greeting
of namaste, the chain of ITC hotels soon became synonymous with Indian hospitality and was
UHFRJQL]HG DV RQH RI ,QGLD¶V ILQHVW %  Whe four brands of ITC Hotels had approximately 100
hotels in more than 90 destinations among them (see Exhibit 3).
INDUSTRY BACKGROUND
The Indian hotel market was highly fragmented, with strong domestic brands such as the Taj
Group of Hotels, the Oberoi Group and ITC competing against international companies. The market
had a strong unorganized segment comprising small hotels, low-priced motels and guesthouses. The
4
organized sector accounted for about 30 per cent of the INR 956 billion hotel industry. Five-star
hotels accounted for 55 per cent of that sector. The average room occupancy rate was estimated at
62 per cent, although it varied across the country. Driven by increasing foreign and domestic tourism,
the demand for hotel rooms was expected to grow at about five per cent. (See exhibit 4 for market
information.)
In the wake of a balance of payments crisis in 1991, the Indian government introduced
breakthrough reforms including the liberalization of the economy, which resulted in astronomical
5
economic growth. ,QGLD¶VGDP shot up from US$293 billion in 1989 to US$1,377 billion in 2009. The
6
middle class in India (annual household income: INR 200,000 to INR 10,000,000 ) grew at 13 per cent
from 2001-02 to 2008-09 (as a percentage of the total population, it rose from six to 13 per cent). In
2011, India had 55 dollar billionaires (total wealth of INR 11,090 billion), up from eight (total wealth of
7
INR 1,157 billion) in 2004 and three (total wealth of INR 212 billion) in 1996. It was estimated that the
QHWZRUWKRI,QGLD¶VXOWUD-rich households would increase by five times over the next five years, from
3
Annual corporate presentation, www.itcportal.com.
On April 27, 2012, US$1 = 52.44 INR
5
World Bank Country Data Profile. http://devdata.worldbank.org/AAG/ind_aag.pdf, accessed on June 3, 2012.
6
As per income band estimates from the National Council of Applied Economic Research (NCAER).
7
³7KH:RUOG¶V%LOOLRQDLUHV,´Survey. Forbes; http://www.forbes.com/wealth/billionaires, accessed on June 15, 2011.
4
2 | ITC Hotels: Designing Responsible Luxury
This document is authorized for use only by Bushra Khan in Hospitality Management taught by Helene Okabe, Montclair State University from March 2018 to May 2018.
For the exclusive use of B. Khan, 2018.
ISB016
INR 45 trillion in 2010-11E (estimated 62,000 households in number) to INR 235 trillion in 2015-16P
8
(projected 219,000 households in number). Traditionally, they resided in the exclusive areas of Tier I
9
& II Indian cities such as Mumbai, Delhi, Bengaluru, Ahmedabad, Hyderabad, Pune and Jaipur. For
Indians, luxury and wealth denoted money, power and indulgence. The Indian luxury industry grew at
a CAGR of 13 per cent from 2007-2009, aggregating US$4.76 billion. It was estimated that India had
a latent demand of almost US$1.5-2 billion (120-150 per cent of the size of the luxury market) for
10
luxury products. According to these estimations, the Indian market potential of the 15-35 age bracket
11
was pegged at US$14 billion by 2015 and at a whopping US$30 billion by 2025.
RESOURCE ISSUES
Energy and water management were critical to hotels in the luxury categories, especially those
that served significant numbers of foreign travellers. Fuelled by rapid population growth and continued
high levels of economic growth, India’s electricity sector was insufficient to cope with the rapidly
increasing demand. Inadequate power supply, compounded by frequent outages, was a thorn in the
country’s business environment and a major obstacle to economic development. The annual loss of
power through the existing transmission system was over 30 per cent. The overall length of India’s
power grid was 6.5 million kilometres. Seventy-five per cent of Indian villages (around 70 per cent of
,QGLD¶VSHRSOHOLYHGLQUXUDODUHDV UHFHLYHGHOHFWULFLWVXSSOEXWRQO 43 per cent had a permanent
supply of power. As many as 600 million people were not even connected to the power grid. The
Indian power supply deficit was 11.1 per cent in Q1 2008-09. Hotels, therefore, had to develop their
own reliable electricity supply.
ITC businesses used environmentally friendly sources of energy and devised innovative means to
minimize energy consumption. The hotels division also ran several initiatives to reduce the
consumption of energy, but there was lot of scope in terms of managing the generation and sourcing
of energy. Arun Pathak, Executive Vice President, Finance, ITC Hotels recalled:
National policy for most states enabled the use of non-conventional energies. Luckily for
us, the wind patterns, which are strongest between April and September, matched our
financial year. In a wind farm, we maximize generation and government policies allow us
to bank it for at least one financial year. Thus, we have a good read into the units
generated and total usable units. We put all those units into the grid and can draw them
up to March 31 for that particular year. It allows a degree of financial planning, capacity
creation and capacity utilization. This coincides with the way we look at our financial
results.
The power sector in India had a three-tier pricing strategy. Consumers in each state were divided
into five broad categories: agriculture, domestic (residential), commercial, industry and railways.
Based on their consumption levels, each of these categories was further divided into sub-categories.
The categories and sub-categories varied across states. Even within these sub-categories, some
states had different tariff rates for consumers in urban and rural areas. There were large crosssubsidies between customer categories in India: tariffs for households and agriculture were generally
well below actual supply costs; while tariffs for other customer categories were usually above the
XWLOLWLHV¶UHSRUWHGDYHUDJHFRVWRIVXSSO
8
Ibid.
Indian cities are organized into three tiers based on the real estate market. Tier I cities are characterized by fairly wellestablished real estate markets, where the demand drivers are quite pronounced. Tier II cities are characterized by
growing real estate markets, experiencing heightened demand and investments. Tier III cities are characterized by the
perception that they have substantial potential demand, but their real-estate markets are yet to be established. Source:
http://www.india-reports.com/Products/try/IR-tier-2-3-011208-Try.pdf, accessed on June 1, 2012.
10
³Luxury in India: Charming the Snakes and Scaling the Ladders´Confederation of Indian Industry (CII) and A.T.
Kearney Report, October 2010.
11
³7KH0LQW/X[XU&RQIHUHQFH([SORUH*URZWK3RWHQWLDORI,QGLD¶V/X[XU0DUNHWV´Elite Choice, March 27, 2011.
http://elitechoice.org/2011/03/27/the-mint-luxury-conference-explores-growth-potential-of-indias-luxury-markets/,
accessed on March 21, 2012
9
ITC Hotels: Designing Responsible Luxury | 3
This document is authorized for use only by Bushra Khan in Hospitality Management taught by Helene Okabe, Montclair State University from March 2018 to May 2018.
For the exclusive use of B. Khan, 2018.
ISB016
Though hotels were colloquially referred to as an industry, they were classified under the Shops
and Establishment Act. Hence, they ended up paying the highest rates for power, even though they
paid taxes like an industry. Nakul Anand said:
There has been a definite mind VKLIW WRZDUGV WRXULVP IURP DQ µHOLWLVW DFWLYLW¶ WR DQ
µHFRQRPLFactivity,¶ touching the lives of the aam aadmi (common man). The Travel and
Tourism sector alone has created 11 million jobs in the last six years. The various
initiatives of the center need to be dovetailed with the states, ensuring a positive
transition for the industry.
To enhance its positive environmental footprint and manage its spiralling energy costs, ITC chose
wind energy as a renewable energy source. Under its Clean Energy Initiative, ITC invested in a 12.6
megawatt wind energy generation plant in Tamil Nadu. Wind mills were installed in the states of
Maharashtra and Andhra Pradesh and connected to the regional power grid. By 2011, 30.9 per cent
RI,7&¶VHQHUJFRQVXPSWLRQZDVIURPUHQHZDEOHVRXUFHV.
India had  SHU FHQW RI WKH ZRUOG¶V SRSXODWLRQ DQG four per cent of its fresh water resources. It
was estimated that surface and groundwater availability in India was around 1,869 billion cubic meters
(BCM). Of this, only 60 per cent was available; the rest was unavailable for use due to geological and
12
topographical reasons. Over 90 per cent of surface and extracted groundwater was used in the
13
agricultural sector, and the remaining was used by the industrial and domestic sectors. The average
availability of water in India was expected to remain fixed according to the natural hydrological cycle,
but the per capita availability was expected to shrink due to the increase in population. It was
estimated that by around 2020, India would be a ³water stressed´ state with per capita availability
14
declining to 1,600 cubic metres per person per year.
ITC focused on achieving the lowest specific water consumption (water used per unit of
production) through conservation, audit and benchmarking. For example, in order to recycle
wastewater, water from wash basins and bathtubs was captured and filtered. This filtered water was
UHXVHGIRUPDNHXSWDQNVODQGVFDSLQJDQGKRUWLFXOWXUDOSURMHFWVDURXQGHDFKKRWHO¶VFRPPXQLW
By treating and recycling all of their wastewater, the hotels were able to eliminate any effluent
discharge and reduce fresh water intake. ITC also engaged in rainwater harvesting. Such
development projects consolidated ITC’s water positive status for nine consecutive years.
In India, solid waste was often disposed of at landfills and through dumping, making waste
management a serious concern. Most landfills and dumping sites posed serious health threats for
people living in their vicinity and also contaminated soil and water. ITC Hotels aimed to achieve ³zero
waste generation´ status. For example, ITC Maurya installed an organic waste convertor (OWC)
inside its premises in 2008. The OWC processed separated biodegradable food waste from the
KRWHO¶VNLWFKHQVZLWKIULHQGOEDFWHULDconverting the waste into high-quality manure. The entire waste
conversion process took about 15 minutes, following which the raw compost was converted into
manure over two weeks. ITC Maurya¶V OWC had a capacity of 800 kgs per day. The hotel produced
an average of 1,100 kgs of degradable waste per day, which meant that it reduced and reused almost
80 per cent of the waste it produced. Similarly, in 2008, ITC Grand Central, Mumbai installed an
odour-free organic waste converter with a bone shredder which converted all bone waste into usable
manure. The process took approximately 10 days. The converter helped in cutting down on various
costs. Not only did it generate dry, recyclable waste, it reduced the transportation cost of wet waste
and the usage of plastic and garbage bags as well. The hotel planned to do away with the wet waste
room, thereby also eliminating the resultant spillage and odour (see Exhibit 5).
12
Gupta Akhilesh, Mall R.K., Singh, Ranjeet, Rathore L.S.,and Singh R.S., ³Water Resources and Climate Change: An
Indian Perspective´ Current Science, June 2006, 90(12).
13
.KXUDQD,QGLUDDQG6HQ5RPLW³’ULQNLQJ:DWHU4XDOLWLQ5XUDO,QGLD,VVXHVDQG$SSURDFKHV´:DWHU$LG
background paper, http://www.wateraid.org/documents/plugin_documents/drinking_water.pdf, accessed on June 20,
2012
14
A country is said to be water stressed when the per capita availability of water drops below 1700 cu.m/person/year.
http://www.sustainable-design.ie/fire/India_Whose-Sustainability_PLEA2006-Paper939.pdf, accessed on July 20, 2012.
4 | ITC Hotels: Designing Responsible Luxury
This document is authorized for use only by Bushra Khan in Hospitality Management taught by Helene Okabe, Montclair State University from March 2018 to May 2018.
For the exclusive use of B. Khan, 2018.
ISB016
Human Resource Management
Most ITC managers were hired from the ITC Hospitality Management Institute. The admission
process was very competitive and the Institute particularly looked for caring and service-oriented
applicants (see Exhibit 8). The Institute provided specialized programs focused on the different hotel
areas.
Employee behaviour was guided by ITC¶V Core Principles (see Exhibit 2) and Platinum Standards
(see Exhibits 6 and 7). These comprised the values underlying all hotel processes. For example, upon
checking into the Gardenia, guests was greeted at the entrance by a front desk clerk and presented
with a stole. Employees were expected to deliver personalized service at each guest encounter.
Staff at Gardenia were educated about the features of the property, the meaning of LEED
certification and the effort required to maintain LEED certification. Careful resource management
EHFDPHDQHVVHQWLDOSDUWRIWKHKRWHO¶VFXOWXUH$QLO6KDUPD9LFH3UHVLGHQW+XPDQ5HVRXUFHV,7&
Hotels, said:
People are integral to any intervention we undertake in the organization, thus ensuring
that they become the catalysts for change. Being part of ITC, an eco-responsible ethos is
LQKHUHQW LQ RXU ‘1$ ‘XULQJ RXU WUDQVLWLRQ WR µ5HVSRQVLEOH /X[XU,¶ RXU HFR-sensitized
associates ensured that the shared vision was effectively translated across all levels.
Hence, ZHGLGQ¶WKDYHWRJRWKURXJKWKHSURFHVVRIµPDUNHWLQJ¶WKDWFKDQJH
In addition, all employees were evaluated on metrics in three basic categories: revenue
enhancement, retention of customers and returns on profits. These categories incorporated concepts
of social and environmental responsibility. Reducing energy consumption contributed to return on
profits, providing exceptional service increased customer retention, and developing new products and
services enhanced revenue. Employees with outstanding performance in these categories were
honoured as WelcomAchievers. The reward associated with this honour varied according to position,
but always included division-wide recognition.
WelcomEnviron
7KH +RWHOV JURXS¶V FRPPLWPHQW WR Hnvironmental responsibility began in 1988. At that time,
Niranjan Khatri, who steered the Hotels division in that direction, was general manager of a hotel in
the Andaman Islands. The hotel aimed to deliver a resort experience, but it had severe resource
constraints. Flights delivered supplies and guests twice a week, and Khatri and his staff had to make
supplies last until the next delivery. Rainfall was irregular, interspersed with long dry spells. Khatri
began to explore ways to reduce the use of water and …
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