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Marriott's corporation: the cost of capital
What is the weighted average cost of capital for Marriott Corporation?
Are the four components of Marriott's financial strategy consistent with its growth objective?
Marriott Corporation is an international company who's the growth over the year has been more than satisfactory.
In 1987, Marriott's sales grew up by 24% and its return on equity stood at 22%.
Moreover the sales and earnings pr share has doubled over the previous year.
The company operates in three divisions: lodging, contract services and restaurants which represents 41%, 46% and 13% of sales in 1987 respectively.
Marriott is determined to develop and to enhance its position in each division.
This main goal contains 3 others more detailed components:
- To become the most profitable company.
- To be the preferred employer.
- To be the preferred provider.
In order to achieve its goal, the managers of Marriott have developed a financial strategy with 4 main decisions.
Manage rather than own hotel assets.
The first measure is simply to be more involved in the management of theirs hotel.
It means for the company to have more control on how the money is used but also to have more responsibilities concerning the employees and especially the customers. The company is able to monitor and control its resources and expenses. By having more control, Marriott can try to improve its efficiency and its profitability, for example, by searching the best suppliers with long term contracts for what the company really needs and it could decrease useless expenses.
There is another benefit if Marriott performs well on increasing its profit; Mar ...