Strategic Management at Shangri La-Hotel - Case Study Example

Strategic Management: Shangri La-Hotels Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name Insert Date Here (Day, Month, Year) Analysis This is a case study of Shangri La Hotel, one of the biggest chain resort hotels of Asia started by Malaysian-Chinese tycoon Robert Kuok in 1971. He adopted the name Shangri-La from the Hilton’s legendry novel Lost Horizon. Meaning of Shangri La means “eternal youth, peace and tranquility”. (Campbell & Kazan, 2008: 1) He started its first hotel, Shangri La Hotel in Singapore with a mission, “delight customers each and every time”. (Campbell & Kazan, 2008: 3) . From there Shangri spread its wings into almost whole of Asian Pacific region. 1.1 Summary of Macro- environment 1.11 Political. . Political will of the Chinese government to increase the influx of foreign tourists into its lands increases the enthusiastic hotel entrepreneurs from all over the world to establish their brands into the soil of China with Shangri La as no exception. In 1999 the Central Government in China promoted travel as a method to give its economy a push giving three weeklong national holidays ultimately increasing the demand for hotel rooms. (Shen, 2008:online). Its open door policy with improvement in the legal system, bringing reforms and liberalizing restrictions in foreign investments and increase in the rights and privileges of foreign investors China saw influx of 31-million tourists who spent US 16.2 billion. (Pine, Ray, 2002: online). Along with China, other nations too relaxed their restrictions after the economic slow down in Asia to increase tourism industry.    1.12 Economic Shangri La’s strategy of opening its hotels in China saved them from severe economic crises that had engulfed Asia during 1997-98. Though economic crises severely hit many of the Asian nations but saved China due to their robust economic strategies. By 2005, company greatly profited from great travel demands in Hong Kong and China to earn revenues of 842 million dollars. (Campbell & Kazan, 2008: 3) By 2006, China became most favourite spot for the tourists, accounting for more than half of the new projects in the region. Among all the 386 hotels, all over Asia in 2006, 188 were already established in China, and among these 134 were rated four or five star hotels. (Campbell & Kazan, 2008: 8) 1.13 Social / cultural Social and culture factors of a nation or state is a contributing factor to bring in the unforgettable experience of local culture, art and beautiful serene surroundings. Shangri hotels have now become one of the world’s best hotel management companies while providing best quality room services with luxurious rooms adopting and developing local culture and adhering to the standards of customer-employee relationship. For e.g. in Thailand, it is very important for a service employee to provide tea or coffee on one knee, but in Philippines and in other Asian nations approach is straightforward, employees would simply enter the room, serve the refreshments and would turn their backs and Japanese would serve and walk out of the rooms facing guests. (Campbell & Kazan, 2008: 3). Shanghri-La’s chain of hotels adopted the social and culture of the place where they have established to give feeling at home to the local tourists and also give an essence of local culture to the foreign tourists. 1.14 Technology With t he globalization and high technological development in every social, economic and political sphere, hospitality industry is also not far behind. Shangri La adopted latest and scientific technological developments imparting highest standard of excellence in hospitality and customer servicing. It used networking and started online services for bookings. In fact scientific technology is also used in their cooking processes and several other services. 1.15 Environmental Shangri La is also contributing towards the protection of environment. The group’s main concern is in the areas of water management, waste disposal, ozone depletion, and indoor air quality. They have adopted various environmental friendly measures like fitting water saving devices in taps and showers in almost all its guestrooms and besides making use of the energy saving lamps in more than half of the group’s guestrooms. Besides it is also taking steps to reduce carbon di oxide emissions in every room in the night by 6.7 kg as compared to 2006. It is also using latest technological devices to save energy and resources like by rain water harvesting, making use of the solar panels using hot water production or heat pumps, and in bringing in improvement in building designs to reduce loss of heat or heat gain. (Hotel online: Online). 1.2 Summary of Industry – environment Management of the Environment has become a most important issue in the hospitable industry with many hotels adopting environmental management practices to give a serene, clean, quality and safe environment to tourists. Regulations in the form of restrictions, mandatory Environment impact Assessments and laws related to the business have forced hotels to regulate their day to day practices making them environment friendly. For e.g. many hotels have changed incandescent bulbs to energy saving compact fluorescent light bulbs and bringing in the improvement in the control mechanisms or recycling of waste water a day towards irrigation of landscaping and golf courses etc. 2 Industry analysis summary The hospitality industry is now considered to be 61 million dollar industry. Owing to the major international brand hotels targeting Asian markets especially China; Shangri La had to face tremendous competition. For e.g. After Beijing became host to the 2008 Olympic games, many hotels like Regent, Ritz-Carlton, Hyatt, Sheraton and others invested billion of dollars in Asia especially in China. By 2001, Intercontinental Hotel Group (IHG) also operated Crowne Plaza and Holiday Inn chains in the market of China. Besides, US based Marriott Chain intend to expand its hotels to 100 by 2010 and Wyndham hotel group that had also owned the Ramada and Wingate Inn brands increased the portfolio of 60 hotels in China in 2006 and had planned for further expansion. (Campbell & Kazan, 2008: 8) Lower cost of the labour too gave boost to the expansion of the hotels. In 2001, the average cost of labour in China was less than $1 per hour while in US it was on an average 16 $ per hour. This was also one of the reasons for the hotel industry to attain most remarkable image in Asia and become the most profitable venture with gross profit margin ranging 35% to 45% as compared to 20% to 25% in the West. (Campbell & Kazan, 2008: 8) 3. Internal analysis summary  3.1 Resources All the Shangri-La chain of hotels runs with main one motive “delight customers each and every time.” Their main resource is their staff who is given special training to meet high level of hospitality and gain excellence in all kinds of services ranging from their bookings, guiding them to providing them in room services. Its hospitality is built around main five principles, respect, humility, courtesy, helpfulness, and sincerity. The staff is trained to abide by these principles considering the local social and culture. They have five level organizational set up including divisional manager, departmental manager, sectional manager and front line employees with their own share of duties. 3.2 Capabilities With its 8,400 employees, 50 hotels, and $842 million Shangri La hotel has become a leading player in the luxury hotel industry and is growing to satisfy t he demands for deluxe hotels and resorts in Asia. Besides the rooms its chain of hotels provides several of the luxuries for tourists. It is also providing online reservation facilities to facilitate the tourists. Its hotels have five star deluxe ratings and more than 500 rooms on an average to t he luxury of the discerning clientele. Within the precinct of Shangri La brand there are many city hotels particularly adhering to the businessman and distinguished guests. They have Traders which is a four star brand catering to both service and business class. Other is Chi and Spa at Shangri La featuring luxurious private spa suits and villas. 3.3 Core Capabilities Shangri La has set up food and safety standards with the HACCP (Hazard Analysis and Critical Control Point System) certifications in the hotels.  Suppliers are expected to only serve high quality food. They have also implemented precautionary control and safety measures to control avail influenza. This involves training of the employees on the awareness about avian flue and taking most adequate measures for the prevention of the same. 4. Gap analysis and summary 4.1 Marco environment – business strategy gaps summary Despite of the vast expansion, the company kept its investments policy focused in the Asia Pacific region particularly in China. The main reason behind this approach was the relaxation for the foreign tourists, increase in the urban income and rise of the boom in Chinese domestic market and travels. Besides country had recently become a member of the World Trade Organization, its capital Beijing was also selected as the host nation to the 2008 Olympics and is looking forward to host World Expo 2010. In 2008, Shangri-La had planned to increase its hotels from 17 to more than 30 in China itself. (Campbell & Kazan, 2008: 2) Industry – business strategy gaps summary In the global economy, hospitality industry is a 3.5 trillion dollar service sector but the diverse nature of the hospitality industry, unpredictable seasons and market positions are few among the various problems posing challenge before the hotels. Besides stiff competition between them is yet another biggest hurdle in the growth of the hotels. Almost all t he hotels operate for complete 24 hours, 7 days a week, and complete 365 days in a year without giving space to “breathing and rest”. Along with this there are high fixed costs, fixed rate of supply, but often- fluctuating season, and unpredictable demand. Services are also related towards the care of tourists and maintaining congenial relations with them. So the entrepreneurs in the hotel business always develop strategy to attract the new costumers and explore new markets. During late 2000 saw many leading hotels expanding their horizons in Asia. 4.3 key competitor – business strategy gaps summary The hotels key competitor was the new players in hotels who had captured the Chinese Market. 5. Strategies    5.1 current strategy’ The hotels current strategy is giving the decision making power t o front line employees as they have direct contact with guests and could easily deliver best services to them. 5.2 business strategy The business strategy of the Hotel remains maintaining of the quality standards in services to customers 5.3 corporate strategy Its corporate strategy includes the increase of the current work force from 10,000 to approximately 19,000 employees all of whom had to meet customer service standards and they are qualified to meet the changing global needs. Their strategy lies in investing in the training of t he staff.    5.4 International Strategy Expansion is the main motive in its international strategy move launching several hotels in Europe, Australia, and North America. 6 Recommendations As Shangri La is facing competition from the Western chain of hotels at home and also wages and cultural issues it is highly recommended that they increase the wages of their workers. These workers are now being trained under the special training lessons from Shangri-La training programs and are attainting skills in several aspects of servicing. Moreover, hotel could also lure tourists by providing additional privileges as compared to their counterparts with schemes of offering them tourist packages at discounted rates and publicizing the brand within the cultural paradigm of the area. Reference List Campbell, D. & Kazan, D. 2008. Shangri-La Hotels. Harvard Business Review, 1-22. *****************888888 Batcha, M.R.K. 2007. Shangri-La Hotels Marketing Analysis. [Online] Available: http://www.scribd.com/doc/3903459/Shangri-La-Hotel [31 January 2009] Cris. 2007. Shangri-La Brand Development Strategies for North America. [Online] Available: http://www.vacantready.com/blog/item/vancouver_shangri_la_development_discussion/ [31 January 2009] Handlechner, M. 2008. Risk Management. Norderstedt, Germany: GRIN Verlag. Hsu, C.H.C., Powers, T.F. & Powers, T. 2002. Marketing Hospitality. New York: John Wiley and Sons. Hotel Online. 2007. Shangri-La Hotels and Resorts Developing Strategy to Enhance Corporate Social Responsibility Activities in Five Key Areas: the Environment; Employees and the Community; Health and Safety; Supply Chain Management; and Stakeholder Relations. [Online] Available: http://www.hotel-online.com/News/PR2007_3rd/Sept07_ShangriLaStrategy.html [31 January 2009] Ray Pine, 2002 China's hotel industry: serving a massive market; as China ramps up to a world-class hotel...[Online] Available http://www.allbusiness.com/accommodation-food-services/241715-1.html Shen Samuel, 2008, China's budget hotel industry is booming as tourism grows [Online] Available http://www.iht.com/articles/2008/01/16/business/hotel.php Read More