Cultural Turnaround at Club Med

1. Analyse Club Med’s culture before 2000.
2. Explain the reasons for Club Med’s success between the 1950s and the 1990s. 3. How do you explain Club Med’s difficulties in the early 1990s? 4. Why did Bourguignon’s plan fail? Do you think that Giscard d’Estaing’s plan will be more successful?

This case example enables students to explore the impact of culture and history on an organisation’s strategy. 1.Club Med’s cultural web before 2000 should highlight the following points: Power structures. Very decentralised. Village General Managers are highly empowered and highly autonomous. Their personal relationship with the founders (Trigano and Blitz), based on trust, is a key. Organisational structure. Very informal, structurally paternalistic, progressively built. Village General Managers directly report to the Executive Committee. Control systems. Very loose control and few profit pressure. Career management is very informal. Accounting and sales management are done manually. Rituals and routines.

Numerous rituals in the villages signifying the abandonment of social norms and ‘hippy’ equality: pearl necklaces instead of money, songs and dances, shows, sports events with medals and so on. Stories. The origins (Blitz and Trigano), the first tent village in Alcúdia, former GOs who became artists or television hosts. The 1978 motion picture French Fried Vacation, even if it was not located in a Club Med village, typified the Club Med spirit. Its soundtrack, ‘Sea, Sex & Sun’, written and performed by Serge Gainsbourg, encapsulated most of Club Med’s beliefs. Symbols. The trident, ‘GO’, ‘GM’, the Mediterranean Sea. Paradigm. A bubble of conviviality, isolated from modern civilisation and violence, the ‘antidote to civilisation’. The cultural web depicts a paternalistic and informal organisation, based on affects, conviviality and a community life ideology.

2.The reasons of Club Med’s success between the 1950s and the 1990s. Club Med created a new standard offering in the tourist industry: the vacation village. Club Med dominated this market with virtually no competition until the 1990s. Club Med also developed a rich culture, which fuelled its strategic positioning. This culture generated a very strong sense of belonging among both employees and customers. Competitors did not manage to imitate this culture, which was one of the main sources of Club Med’s competitive advantage. 3.Club Med’s difficulties in the early 1990s? Though Club Med’s culture fuelled its success from the 1950s to the 1980s, in 1990s it hampered its development. The founding families were still in power, and most of the executives were former village General Managers.

All of them embodied Club Med’s historical culture, and it was very difficult for them to envisage another approach. The context had evolved; however, new aggressive competitors had appeared (Look, Marmara, Nouvelles Frontières etc.) and they deliberately imitated Club Med’s recipe, at lower prices. As a consequence, Club Med’s differentiation was no longer credible. Moreover, the community life culture and relaxed morals were no longer in line with social context. As a consequence, Club Med suffered from a strategic drift: its strengths became weaknesses and it lost control on the environment it had created. 4.Bourguignon’s plan failed for two main reasons:

Bourguignon focused on marketing and management control (external growth, marketing investment and cost cutting), but he neglected cultural aspects. As a consequence, Club Med’s employees never shared his vision and rejected his authoritarian management style, which was too distant from Club Med’s culture and history. The competitive environment suddenly worsened after the terrorist attacks of 9/11, which provoked a collapse of revenues, whereas Bourguignon’s strategy relied on steady growth. Arguably, Giscard d’Estaing’s plan might be more successful: Giscard d’Estaing seemed to take cultural aspects into consideration. He worked with Serge Trigano in order to understand Club Med’s culture.

He targeted an upscale repositioning (which is new), but with a convivial touch (which is consistent with the historical paradigm). He also involved the employees in the evolution of the culture through a major training plan. Even if the upscale repositioning is questionable with regard to Club Med’s culture and history, it is in line with today’s competitive and social context. Moreover, this repositioning could not have been possible without Bourguignon’s brutal reforms. Even if they failed, these reforms profoundly modified Club Med’s archaic management systems. The main question is the reaction from shareholders. Are they willing to wait before the strategic repositioning bears fruit?