Essays on Franchising as Entry Option in International Hospitality Industry Case Study

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The paper “ Franchising as Entry Option in International Hospitality Industry” is a convincing example of the case study on marketing. The global hospitality industry is undergoing a transformation. Over the past, international hotel chains typically grew in the west, that is, in the United States, Canada, Europe, and Australia. However, slow growth in these areas over the past decade, fast growth in emerging economies in Asia and Latin America, and forecasts of even stronger growth in the latter group of countries have together shifted the trend. In particular, China and India have seen the highest activity in the international hospitality industry.

For example, InterContinental Hotels plan to have 125 additional hotels in China by 2008, in preparation for the Beijing Olympics of 2010 (Price Waterhouse Coopers, 2006). Growing business opportunities in these new markets and low labor costs have lured many investors, particularly in the hospitality industry. Yet, it must be recognized that new markets have essentially different characteristics in terms of competition, regulatory framework, and cultural parameters, the last being particularly important for a service industry like hospitality.

In order to gain competitive advantage, a hospitality player needs to weigh the returns in terms of profitability and low costs against the risks in terms of bureaucracy, cultural differences, unfamiliar or uncertain legal and political systems, and inadequate infrastructure (Price Waterhouse Coopers, 2006). A firm’ s entry strategy into a new market depends on its ability to transfer its market and technical knowledge, whether codified or tacit, into a competitive advantage on the basis of its organizational structure and culture. There may be a number of ownership types for the hotel industry that in turn affect the organizational culture.

The hotel may be independently owned and operated either by itself or through franchise/ brand from a third party; independently owned, franchise/ brand from a hotel chain and operated by a third party; independently owned, branded and operated by a hotel management company or a hotel chain; or independently owned and leased to an operator or a brand owner.

Works Cited

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Arthur Anderson, Hospitality Adjusts to Globalization, http://www.hotel-online.com/Trends/Andersen/global.html

Bennett, Julie (2004). Chinese Market Offers Franchise Challenge, Wall Street Journal, March 31. Retrieved from http://startup.wsj.com/franchising/franchising/20040331-bennett.html

Cornell Hotel and Restaurant Administration Quarterly (2007). Global Brand Expansion: How to Select Market Entry Strategy. January 2. Retrieved from http://www.encyclopedia.com/doc/1Y1-103192751.html

Deloitte Touche Tohmatsu, Hospitality 2010, www.scps.nyu.edu/docs/general/marketing/Hospitality2010.pdf

Erramilli, M. K., S. Agarwal, and C. S. Dev (2002). Choice between non-equity entry modes: An organizational capability perspective. Journal of International Business Studies 33:223-42.

Hofstede, Geert (1980). Culture’s Consequence: International Differences in Work Related Values, Beverly Hills, CA: Sage Publications

4Hoteliers (2006). Things to Consider Before Obtaining a Hotel Franchise by Stephen Rushmore, 15 June http://www.4hoteliers.com/4hots_fshw.php?mwi=1413

Hotelsmag (2001). What do Hotel Franchises Actually Cost? By Stephen Rushmore, June. Retrieved from http://www.hotelsmag.com/archives/2001/06/rushmore-cost-franchise-hotel.asp

HVS International (2006). The Great Indian Hospitality Boom: Is it for real? By Siddharth Thaker, 17 February, http://www.hospitalitynet.org/news/4026384.html

Sommers, Amy L (2005). Hospitality Franchising in China: Is There Room at the Inn? Franchiseek International, http://www.ssd.com/files/tbl_s29Publications%5CFileUpload5689%5C9605%5CFranchiseek.pdf

Toncar, Mark, et al. (1999). Cultural Determinants of International Franchising: An Empirical Examination of Hofstede’s Cultural Dimensions. Retrieved from http://marketing.byu.edu/htmlpages/ccrs/proceedings99/toncar.htm

UK Franchise Directory, The International Franchise Market, http://www.theukfranchisedirectory.net/article/The-International-Franchise-Market/25

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