Shangri-La Expansion in China
Introduction
Shangri-La Company is a hotel group of Asian origin. It is the fastest growing hotel in the region. It is still spreading its wings across different regions. It has exploited the European and North America markets. In the recent past, it also opened new hotels in the Middle East, Dubai, and Maldives to be precise. The mainland of China is the heart- throb of this company with over twenty hotels and fifteen more expected to be set up by the enterprise.
Shangri-La is a public company that was incorporated in 1971 and by 2004; its sales had reached $726 million (Frison, 2013). It specializes in four divisions; spas, property development, hotel management, and hotel ownership. It is owned by the Kuok business empire, with the chain of hotels all over the world being just but a slice of their whole business empire. Shangri-La was founded by Robert Kuok of the Kuok family when he made an early real estate investment in Singapore, and this became the starting point to this huge dream. The company operates under five primary core values, which include humility sincerity, courtesy, helpfulness, and respect (Frison, 2013).
Decision-making is a fundamental element in management and is often applied in Shangri-La. Normally many decisions are made without the presence of full information; there are still some uncertainties possible since the outcome of the decision is not known. Risk is also a known factor during decision-making. It is important to note that being a risk taker is important in business, but it is also vital to remember that the decision with more risks and uncertainties is bound to fail. Tradeoffs involve measuring the value of an outcome of a particular decision (Llamas & Belk, 2011). These entities help the decision maker to choose from a number of existing choices. Hence, it enables the use of rationale and principles in strategic decision-making. Therefore, risks uncertainties and tradeoffs play a vital role in this process. In strategic decision-making, it is crucial to decide on various strategies for a company (Llamas & Belk, 2011). Strategies are necessary since they steer the objectives of the company and provide it with a sense of direction. Hence, decision-making is a necessary part of setting goals.
Background
Shangri-La has its heartthrob on the mainland of China. It was the first to indulge in a Chinese hotel market on a global scope regarding foreign investment but later built its headquarters in Hong Kong. The company has undergone aggressive expansion especially in the Asia Pacific area; this has occurred over the span of 1982 to 2002 with its main attraction being the Chinese market. At first, the company aimed to exploit the Chinese market initially (Frison, 2013) but the rapid economic growth in Asia led to them expanding their business coverage as they had a competitive advantage. There was also a high demand for luxurious hotels for foreign investors, business people from other countries and tourists who wanted to know more about the mainland in the same region. This gave it a better platform to get even more funds for future expansion. Over the years, the company had a continual increase trend globally, creating a solid foundation in Asia and encompassing a good reputation globally.
This report has the primary aim of understanding various aspects of Shangri-La, regarding strengths and weaknesses; also threats and opportunities. The company has been formed in a competitive age where it also faces competition from some business entities in the same field. Without competition, the company would not feel the need to provide high-quality services to their customers. Their main competitors include; Mandarin Oriental Hotel group, Hong Kong& Shanghai Hotel Limited, Mriott Hotel Chain among others (Frison, 2013). These companies are competing neck to neck for a fair share of the market. Shangri-La is like the cockroach that never dies, and has continued to fight so hard to stay at the top despite the competitive environment.
For a company to succeed, it needs to apply a business strategy. Firstly, a company must have an objective, and a business strategy comes in as the how the goals will be achieved (Chan and Ho, 2006). Essentially, it is the actions partaken by a business entity in steering its objectives to ultimate success. Shangri-La has applied the various strategies that have driven it to success in the hospitality industry. At the corporate level, it encompasses the use of expatriates, an increase of their global presence, and expansion. Also regarding business level, the company has done well in applying a differentiation strategy whereby they are unique in Asian hospitality (Fesalboni, 2014). Even if they start a business in London, it still has the Asian touch. In such a case, this strategy makes it unique.
Also, it has also applied the strategy of embracing social responsibility by giving back to the society and promoting individualized projects in specific hotels. There are several strategies applied by the company, but the main one involves expanding the business in several regions around the world. Shangri-La does not feel shy to explore different markets and consequently, this has contributed to its rapid growth and gain of an economic status in the hospitality industry (Fesalboni, 2014).
For every business to thrive there must be good communication in and out of the company. Good communication promotes good decision-making. Much concern has been drawn to social media, reputation management, crisis management, and more especially corporate communication. Many successful companies have alluded their success to their strategic communication plan, and that is why Shangri-La has directed much attention to it (Mynewsdesk, 2016). Social media has been applied to ensure dialogue with the customers on their experiences at both a local and a global scope. It has also looked into digital communication like telepresence and teleconferencing. This has facilitated various operations of the company since managers in different parts of the world can freely interact without necessitating physical interaction. It also assists in crisis handling (Mynewsdesk, 2016).
Main Ideas
Shangri-La has applied a strategy of expansion to make sure that their global presence is felt. It is understood that its expansion trend has put the company on a competitive page in the world market. So far, their global presence is being felt, and it even threatens the US competitors in the hospitality industry. The company has gained ground in Asia and also a feared opponent in regions like North America, Europe; London to be precise, Paris, Vienna, Ghana, Sydney, United Kingdom, Sri Lanka, Qatar, Oman, and Dubai. The concept of the expansion strategy would, therefore, be justified since this company has ensured that its ripples are felt in most regions of the world and in the coming future, the company will have a business in almost every country (Miller et al., 2013).
One interesting fact about Shangri-La is that it is aggressive in its market diversification. They are ready to explore different markets but always putting into consideration the Asian touch (Miller et al., 2013). Also, it targets the leisure destinations that are most sought after tourism destination and convert them to even better destinations through their quality service.
Opportunities and Threats
Various external factors affect business operations in any business. Shangri-La is an excellent example of a company that is looking out for different opportunities and makes use of them effectively. First, when it was starting there was an economic growth in Asia, and many people were immigrating into the region hence, it expanded to accommodate the increasing number of customers. The stability of the host countries has also contributed to the success of the business (Yee, 2016). The hospitality sector is an all-time business, and therefore, Shangri-La manages to remain relevant. As it has carefully followed its expansion strategy, the company has taken up some share of the European and North American markets; this is indeed an excellent opportunity to continue infiltrating its effectiveness throughout other global super powers, (Yee, 2016).
Shangri-La also faces a good number of external threats including new entrants into the market who happen to have up-to-current strategies on how to succeed in the service industry. The hospitality industry in itself faces its fair share of instability as it happens to boom during various times and seasons (Yee, 2016). This poses a threat to such a company since if it faces weak demand in a good number of its regions, then this could result in a high rate of losses. Also, there is the great global recession, which threatens all industries, tourism being among the most profoundly affected. This company was formed in 1971, a time when the level of inflation was low. Today however, inflations rate is unusually high leading to increased expenditure in the company (Yee, 2016). Lastly, there is increased threat of terrorist attacks and natural calamities. The two are significant threat since it reduces the available market for the tourism industry.
Strengths and Weaknesses
Regarding internal operations, the company has different strengths and weaknesses since nothing can be perfect. It has the following strengths; it provides a unique Asian touch as its way of operations. Its employees are highly trained to produce the best services possible. The company also offers very high quality services regarding the levels of luxury. The company has set ground especially in China and many of the markets, which it has indulged in hence; it has an excellent market support. In essence, they have loyal customers (MBA Skool-Study.Learn.Share, 2016). Also, it has stable revenues, and this serves as a great plus especially in the budgeting of the company. It is indeed an aspirational brand with more than 80 hotels under four brands; many companies strive to achieve this hence it is seen as a role model in the hospitality industry. Also, it has a lower employee turnover compared to the rate that is there in the industry. At Shangri-La, the employee is the most valuable as he/ she determines the level of business depending on how they treat the customer (Fandianto and Sutanto, 2015).
Every business including Shangri-La has its share of challenges. Weaknesses are quite critical as they enable the company to continue to strive for be the best. Firstly, it is quite a challenge for them to understand other cultures as they continue to expand to various parts of the world. As aforementioned, it has a good base in Asia. The only problem is that in other regions other than Asia, the Asian touch is not so much welcomed. In essence, their fame beyond Asian boundaries is quite small. It also faces very stiff competition from other companies. There is also the lack of a sufficient bonus system, which demotivates the workers. It is indeed true that services offered by the employees are of high quality especially in China since the Asian culture is well understood and the core values of the company are highly upheld (Fandianto and Sutanto, 2015). The only challenge is maintaining the same standards across all the other regions of the world. It is quite evident that the Asian culture is not very well incorporated in areas like London. Therefore maintaining the same Asian touch would be quite a challenge. The management is working tirelessly to ensure these problems are sorted out.
Critical Evaluation
As aforementioned, Shangri-La has engaged some strategies over the years to ensure that they remain relevant. Despite the primary policy of expansion, there is the social responsibility of giving back to society, environmental sustainability, health, and safety among others (Miller et al., 2013). It has employed various procedures to implement the same. On the matter of expansion, it has merely established a plan to identify new probable areas of developing their company brands.
Interestingly Shangri-La has a tendency of identifying the most eyed places and purchasing them as soon as possible. It has started a Shangri-La talent Academy as a way of giving back to society. The company is interested in training the young generation and helps them realize their talents (Normand, 2007). It has also established food production benchmarks and programs to assist needy children in the society. Regarding environmental sustainability, the company has taken up energy saving initiatives to aid in the conservation of the environment. Also, they believe in care as a company. Hence, you will find that in most of their businesses premises the environment has been given so much voice by being well taken care of not only to appeal to the prospective customers but as a mere call. (Normand, 2007). Also, they employed a strategy of reducing the emission of carbon dioxide per room by building more efficient buildings to lessen the emission of greenhouse gasses to the atmosphere (Miller et al., 2013). On health and safety, the company has installed safety measures in all of its buildings and trained its employees on areas of first aid. The company has also trained its employees on how to deal with issues like avian flu and how to protect themselves and their customers.
As we all know, change is inevitable. Various changes are bound to happen in an organization, and it is, therefore, paramount to find ways of managing it so that its effects do not affect the day-to-day operations of the business. Leaders are the main point of focus when it comes to change management (Chan &Ho, 2006). The leaders should first understand the change and the effects of that particular change. Also, they should seek employees opinion on the change expected, and in such a case, they should not threaten or manipulate the employees. They should, therefore, build trust and enable them to understand the importance of compromise especially if the change was an urgent one (Chan and Ho, 2006). In such a way if these concepts are carefully applied then the change will hardly be felt since it is likely to face minimal resistance. The change management process will therefore be a success.
Shangri-La has made it a personal mission to provide new experiences to their customers. They expect their customers to be delighted with the services and experiences they get. Firstly, the use of distinct Asian touch in their hotels especially is a unique way to attract customers and give them an experience of what it feels like to be Asia (Normand, 2007). It upholds culture hence has made its presence felt through expansion, such that a larger number of people are reached it. In essence, their mission’s statement puts it out plain and straightforward that they want to draw more focus on making the comfort and luxury of their customers a priority so they could gain delightfulness in the experience (Chan and Ho, 2006). It is, therefore, true that the missions and goals have played a significant role in aligning the strategies of the company.
It is quite expected for an organization to lay strategies that are in line with its business model. The Shangri-La business model consists of four main brands: Shangri- La Hotels management, hotel ownership, spas and property management. They believe in five main core values of respect, humility, sincerity, helpfulness, and courtesy, (Hotel-online.com, 2016). Most of all, they go by the Asian slogan, “There's no greater act of hospitality than to embrace a stranger as one's own” (Hotel-online.com, 2016). The factors have significantly helped in steering the strategies that have contributed to the ultimate success as they have guided the provision of high quality services. It is understood that the business model and the existing strategies have worked hand in hand in placing the company at its current competitive page.
As an internal change agent, I identified the increasing labor cost as the economy continues to grow and as the expansion strategy continues to be fulfilled. I played a significant role in trying to resolve this problem because as the company continues to expand, it is evident that there will be an incurrence of hiring costs and paying of new employees. I, therefore, proposed the partnership of Shangri-La with local universities to hire interns. With the current education system, it is plausible that interns will be available almost throughout the year. This is an advantageous move since it will help fulfill the company’s social responsibility while at the same time reduce hiring costs of the company. This will undoubtedly contribute to the business effectiveness.
Conclusion
Shangri-Li Company is indeed a corporation of its mettle. It is a company that depicts what a typical organization should focus on. Despite its success, various weaknesses exist. In my opinion, I have identified numerous recommendations that could prove useful to the company, and if applied appropriately, they would ultimately lead the company to the top. It is evident that Shangri-La has gained its popularity through its Asian identity in all of its hotels and other businesses, but as earlier mentioned it only has its grounds in Asia and less popularity out of Asia.
In my opinion, I would recommend that the company diversify its scope regarding culture, as this would increase its popularity and market, since their customers would want to get a feel of the various cultures across its entities in different regions. This would eliminate the boring state where the customer knows what to expect since it would just be an Asian from one place to the next. Another recommendation would be to create a standard system to reward employees according to their performance and not that of the department or head of that department. In such a case despite the fact that the employees are given intense training, they will have further job satisfaction since they will feel appreciated.
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