Final Project
Case analysis: Marriott Corporation
Introduction and background The Marriott Corporation, an American firm, was founded in 1927 by J.Willard Marriot.The company began as a small beer stand and soon began to sell food and provided lodging that expanded rapidly. With the help of his wife Alice, the family owned business had 45 restaurants in nine states by 1940 and grew into one of the leading service companies. The Company has three major lines of business: lodging, contract service and restaurants.
The four components of its financial strategy are steady with this growth objective. Its growth objective is to remain a leading growth company and developing appropriate investment opportunities in its different business sections. In 1987, Marriott’s sales grew more than 20% and its return on equity was at 22% that shows the sales and earnings per share have doubled over the previous year.
The company’s lodging divisions generated 41% of sales and 51% of profits, contract services generated 46% of sales and 33% of profits and restaurants division earned 13% of sales and 16% of profits in 1987 correspondingly.
. The four key elements of the reasons and motives are listed below;
• Manage, rather than own, hotel assets. The Marriott Corporation sold its hotel assets to limited partners to reduce assets and in this manner the return on assets it is increased which results in increased profitability.
Invest in projects that increase shareholders’ value. The discounted cash flow, net present value, and internal rate of return calculations to appraise potential investments permit the corporation to invest just in profitable projects. Investment projects at Marriott were selected by discounting the appropriate cash flows by the appropriate hurdle rate for each division.
Therefore, the profitable projects are desirable but projects with a negative returns are rejected and fundamental selection of its cash