International Business Strategy
International Business Strategy
The Shangri-La hotels and resorts initiated in 1971 with a flagship hotel in Singapore. The Hong Kong based hotel chain now has around fifty five deluxe hotels and resorts across the world. The Shangri-La currently has hotels and resorts in Asia, Middle East, Europe, and North America. Shangri-La hotels and resorts shall soon be opening hotels in the regions of the Maldives, the Philippines and in Bangalore, Mumbai, Thailand and India.
We can concur from this rapid international growth of the Shangri-La that the hotel is expanding its operations to various countries and increasing its international presence. The hotel not only needs to devise strategies for entry but for overall operation as well with respect to human resource, marketing, services and general management. This paper shall discuss the intricacies of the entry strategy employed by Shangri-La Hotels & Resorts, the corporate strategy that it observes, the competitive strategy and the competitive business strategy that it exercises.
The paper shall also perform a functional analysis of the Shangri-La Hotels and Resorts in terms of the Human Resource Management strategy that it exercises. The paper shall conclude by identifying key organizational dimensions that have been established through the study performed in the paper. Introduction to the Subject MNE The launching of Shangri-La Hotels and Resorts began in the 1971 with a flagship hotel, in Singapore. Till the year 2008 it has been recorded to have 55 deluxe hotels located in major cities of Asia, Europe, Australia, United States and the Middle East.
Along with these the Shangri-La Resorts and Hotels bear alliance with their Sister Company the Trader’s Hotel that fulfills the catering requirements of business travelers. This chain of hotels was set up by Mr. Robert Kuok and now his nephew Mr. Edward Kuok Khoon Loong holds the position of chairman of the board for Shangri-La Asia Limited. Despite its ranking as a 5 star deluxe hotel, it has had quite a few unfavorable reviews. But it appears that the positive reviews far supersede the negative ones.
For instance one guest reviewed the hotel as part spectacular and part unimpressive. According to this guest, The Horizon Club Premier room was far from the exemplary 5 star deal originally promised. However this guest goes on to suggest that while the Horizon Premier wing was unimpressive, when asked for a transfer to another wing, known as the Valley wing this guest was highly pleased, it was everything the hotel had promised and more.
The luxuriant 5 star deluxe tagline was apparent in the spectacular yet cozy furnishing and the service was described to be incredible. Another guest however described the service of the hotel to be despicable. First not only were the details of their payments messed up, they were forced to pay more or if they could not, they had to move to the lowest paid room, which was a far cry from the luxurious settings of the Valley Wing, there they were submitted to zero rated service, as it appeared that only affluent guests were applicable to affluent treatment.
However their being ushered into a lower class room meant that they were not worth the special brand treatment reserved for the high paying guests. Contrary to the above negative reviews, a couple who stayed at the Shangri-La Hotel described the treatment, services, luxurious settings and furnishings as unbelievably fantastic, they too stayed at the Horizon club and in contrast with above reviews, they described it as a highly pleasurable experience. Many such guests describe their stay at the Shangri-La hotel as a memorable and nostalgic experience.
Every hotel despite its efforts at flourishing, obtains bad reviews, this most probably is dependent on the fact that environments are subject to every individual’s personal thoughts and interpretation, what was unpleasant for some, in contradiction was fantastically better for others. Motivations for Internationalization Internationalization is one of the major elements of growth for any enterprise or organization where companies take advantage of the global business environment involving various countries in the world.
There are various factors that motivate companies to invest internationally and expand business from local to international levels. These factors include exploring new markets and taking advantage of growth patterns of certain industries in various countries. The Shangri-La hotel also focuses on new markets where there is good potential for hotels and resorts. Take the examples of India, U. A. E, Australia, Thailand and Maldives. These markets are becoming tourist destinations for individuals from all around the world.
These countries are not only tourist destinations but also offer attractive environment for businesses like hotels and resorts. Another motivation for the hotel to internationalize is the lower cost of doing businesses in various countries and high level of revenues the hotel can generate from those areas. The foreign exchange a company earns by doing business abroad is also one of the causes of internationalization. Various countries also offer lower tax rates in various specific industries such as hotels, education and other industries. Shangri-La has gained from opening hotels in new locations both financially and in terms of goodwill.
As the company opens new hotels and resorts in various locations, it draws closer to becoming a member of the highly reputed hotel chains of the world. The hotel has to keep up with the challenges being faced in the new locations both regarding the culture of the local populace and catering to the tourists flocking to these locations. The hotel has not only opened in various locations but the plans for extending to newer location and increasing the number of hotels in the present international locations identifies the hotel management’s ideology regarding internationalization.
As the company benefits in terms of revenue and status from the international locations, its local popularity grows as well as Shangri-La now signifies a multinational hotel resort chain with five star hotels and resorts at various international locations catering to the needs of a diverse clientele base. The intention of opening hotels in U. A. E and Maldives implies how far the management is willing to go to introduce the hotel chain to newer markets and benefit from the hotel and resort friendly atmosphere in these locations despite of major cultural differences.
The hotel chain invests in culturally viable human resource to tackle with the cultural differences and relies on a local and expatriate workforce as well. The hotel like other multinational companies depends heavily on these foreign locations for a constant and sustainable growth which is the most significant cause of internationalization of Shangri-La hotel and resorts chain. Functional Analysis – HRM Modern day Hong Kong based multinational organizations are choosing to establish a work force they can rely on to provide them with a working infrastructure that can adapt to various cultures.
This is because of the fact that for multinational hotels, the aspect of human resource adaptability has become just as important as the professional abilities that the candidates posses. This becomes all the more significant in scenarios where hotels and hospitality establishments such as Shangri-La Hotels & Resorts are concerned. In the last few decades, the trend of hiring culture adaptable human resource has undergone a significant degree of growth.
This is because of the fact that in order to cater to a global clientele and to serve them, it is essential that the elements performing the services are well versed in the language of the clientele. In order for the working elements of hospitality to function on a global scale, they have to be capable of thinking on a global scale. Albeit, one cannot ignore the fact that their functioning will be within a perimeter where foreign clientele will visit, therefore, it is essential to note that the human resource has to be proficient in the areas involved in the functioning of the immediate locale as well.
Because of the same reason, hotels & resorts such as the Shangri-La Hotels & Resorts now choose to hire personnel who can entertain clients from all over the world with the same degree of hospitality. The candidates that Shangri-La Hotels & Resorts now seek out are ones who can be cordial, sociable and have former experience in the area of adapting to clients from across the world with a consistent degree of hospitality. For Honk Kong based Shangri-La Hotels & Resorts, knowledge of the language of an immediate region is just as essential as the knowledge of the language used by their clientele from across the world.
As Hong Kong based multinationals prepare to expand, the need for personnel who can not only function but also manage the infrastructure at the same time increases. The room for errors is decreasing exponentially over time. The Hong Kong based multinationals are also searching for a workforce which includes people who are affordable. Due to a substantial rise in the operating costs, doing business in Hong Kong has become more expensive in the last ten years. The firms based in Hong Kong are not enthusiastic about giving the incentives and bonuses to foreign workers as they did earlier.
The same goes for Shangri-La Hotels and Resorts, the cost of doing business has affected the human resource policies in hotel management as well. The companies based in Hong Kong including hotels such as the Shangri-La now offer a salary package that includes housing and living costs on into the basic salary. The companies are also starting to offer performance based salary arrangement which are more attractive to new employees (Meijob. com 2008).
Entry Strategy There are three factors which determine the entry strategy for any hotel into international markets which are control of the hotel, commitments of resources and level of risk diversification. The entry strategies available to hotels include complete ownership, franchises, management contracts, joint ventures, strategic alliance and forming a consortium. The entry strategies adapted by Shangri-La hotels for various international locations include sole-ownership, management contracts and equity participation in the form of joint ventures or strategic alliances.
These strategies vary from location to location depending on the specific environment of the host countries. The company operates sole-ownership hotels in countries where the gain on real estate is higher and the hotel operations are profitable and have a good potential for growth. In countries where a significant level of risk is involved the company opts for other options such as management contracts where direct ownership of real estate is either not possible or not viable for the company.
The hotel chain uses joint ventures in areas where the cost of doing business and the cost of capital is quite high or in locations where there are certain property ownership constraints. The hotels established by the company in various areas were the first luxury hotels of the area and in some areas the company provided luxury hotel services solely. The company had signaled a long term planning structure for the time to come as in 1989 the company started a second hotel chain called Traders.
This was a four star mid-ranged hotel brand with lower level of standards than the company’s main hotel chain. The company amended the newly acquired chain and upgraded services to meet the current luxury levels of Shangri-La. The main ideology behind this amendment was to introduce the concept of luxury hotels to newer markets and eventually establishing five star luxury hotels in these regions. Again this market entry strategy reflected the company’s long term goal to take luxury hotels and resorts to newer locations.
Though the hotel chain saw difficult times the company gained substantially from its investments in China as the economy of the country flourished. In the starting of the new century the company amended its entry strategy slightly to adapt to global conditions. The company had now acquired hotels in Dubai and Canada. The growth of the company enabled it to open various hotels in different locations during 2000-2005 and there is a long list of hotels which are being planned for newer locations.
The entry strategy for global locations has now changed slightly as these markets are already familiar to luxury hotels. The company now aims to gain from its reputation as one of the largest hotel chains of Asia. The company invests heavily in areas with high tourism capacity and targets areas which have a high potential for luxury resorts such as Dubai, Maldives, Thailand and Malaysia which have now become tourist hubs for individuals from around the world with diverse cultural backgrounds.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 26 September 2016
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