Shangri-Las Competence and Differentiation Strategy - Case Study Example

?Shangri-La Hotel and Resorts Shangri-La is a chain of deluxe Asian hotels that have experienced an outstanding growth strategy in present years. Thefirst one of Shangri-La chain of hotels and resorts was founded in 1971 in Singapore. Its founder is Robert Kuok who was a Malaysian- Chinese business tycoon. The organization is extended over Asia, the Middle East, North America and Europe. (Campbel and Kazan, n.d., pp. 432) Over time as has been observed by Campbel and Kazan (pp. 423- 433), Shangri-La has successfully acquired a distinctive place for its standards and quality of Asian hospitality. Capital investments of Shangri-La is chiefly in Asia- Pacific regions. Apart from extensive hospitality and marketing strategies, some part of growth and expansion of Shangri-La is also due to increase in travelling tendencies of people. The fact that international traveling has become more hazardless has also contributed to this fact. Shangri-La is known for its business focus and capital investments. Like most other hotel chains in Asia, Shangri-La hotels do not engage in multiple business provisions. Shangri-La hotels and resorts are situated in 29 locations and have over 23,000 rooms. In order to compete in global market, Shangri-La has ventured beyond its business activities in Asian markets, and has entered other nations especially into China. Expansion was made in luxury segment as well as in business relationship between owner and operators. This was achieved by extension and well management of contracts. As per their extension programs, Shangri-La has established as many as thirty- five hotels in different and popular tourist destinations of Asia. Some of these destinations include Singapore, India, Malaysia, Japan, etc. Shangri-La has its branches in almost all prominent cities in these continents, like Chicago, Miami, London, Vancouver, Paris, Las Vegas, etc. These achievements have made Shangri-La one of the largest chains of deluxe hotels that are based in Asia. Business activities of Shangri-La, in fact, have not been constrained to Asia only. Over time Shangri-La branches has been established in Dubai in the United Arab Emirates first, and then to Muscat, Oman. Later on it was expanded to other Middle East, Europe, and North America as well. Shangri-La has also expanded in Australia. In 2006, the organization had approximately 40 future projects. (Campbel and Kazan, n.d., pp. 432- 438) However, as far as its expansion to China is concerned, Shangri-La has experienced huge benefits from China’s growing economy. Since 2006, Chinese economy has turned towards a new growth. This has made China one of the most important concerns of Shangri-La. this concern is evident from the fact that since 2006, most of the projects regarding establishment of new hotel branches were set in China. The figure is estimated to be somewhere around 188 hotels. Another reason why Shangri-La has invested a major part in China is because, in recent times, China has introduced much relation in travel, and has withdrawn some travel restrictions also. It has resulted in significant growth in domestic and outbound travel in China. Also, international events like Olympics in 2008, held in Beijing have not only given China more exposure internationally but have also boosted the country’s economy. All these factors, combined, have prompted Shangri-La to invest more in China. (Campbel and Kazan, n.d., pp. 433) Shangri-La has been following a differentiation strategy as far as international competence is concerned. This chain of hotels had differentiated itself by establishing itself as a cultural brand. That is to say, overall brand strategy of Shangri-La is based on Asian hospitality and cultures. The chief aim is to please and delight the customers. Other objectives include consistent top- notch service that would keep up the brand image. Shangri-La Care is the best example of this. This unit has been set up by Shangri-La Hotels as a measure to ensure customer service. This program also included training and developmental programs for staffs as well as the managers of all branches of Shangri-La. Such programs in both divisions of Shangri-La aim at improving quality of service. Not only the corporate values are stressed, but customized services are also provided to the customers. Contented customers tend to remain loyal. Thus, this strategy is helpful for retaining loyalty of customers. This has enabled Shangri-La to achieve organizational objectives by turning local talents according to international standards of hospitality. Successful execution of this managerial strategy is further backed up by a three-tier compensation system as well as a secured career path for its staffs (Roll 2005, p. 203). In order to delight its customers with best service and comfort, a five tier model is followed. The model indicates specific responsibilities, designations and nature of work. The system has proved effective to be for managing such a large workforce all around the globe. This business strategy of Shangri-La reflects that more concern is being put on generation of values through unique ways. Like its competitors, management and contentment of a wide range of customers is a big challenge for Shangri-La. this challenge is faced through practice of differentiated hospitability. That is to say, Shangri-La adopts different approaches by heightening levels of hospitality and providing the customers best services and super luxurious atmospheres. In spite of operating over such diverse geographical locations Shangri-La has never failed to focus on business investments, especially in Asia- Pacific region. (Campbel and Kazan, n.d., pp. 461- 462) All these have contributed largely in building of Shangri-La’s brand image and have also won it recognition all around the world. In past few years, Shangri-La Hotels and Resorts have won numerous awards and recognitions in the form of “Best Business Hotel Chain in Asia Pacific” by Business Traveller (U.K. and Germany) and “Best Hotel Chain” by Chinese Hurun Report (China). Thus, Shangri-La gains competitive advantage on an international level by offering outstanding customer service. Some of the core organizational policies aim at providing respect, courtesy, warmth, cordiality, sincerity, geniality and friendliness. These are indispensible in hospitality industry and each and every hotel and resort of Shangri-La makes sure that it is met. The staffs and management of Shangri-La exhibit cultures and traditions of respective nations or regions. Guests, too, are treated accordingly, as expectations and behavioral patterns of people widely vary across the globe. Extensive training and developmental programs has been a part of Shangri-La for long time. This is divided into three sections. Other than Shangri-La Care, there is Delighting Customers and Recover (Roll 2005, p. 203). As this is immensely important for hotel industry, Shangri-La allocates separate funds within its budget for training and developmental programs. Trained employees and management makes sure that brand promises of the organization are rightly delivered to the customers. The employees are also trained about utilizing decision-making, for Shangri-La has often been unable to provide best services to their customers due to hesitation and flawed decision making process of their front- line employees. This was an attempt to maintain a common standard of performance in all its hotels and resorts. All these have contributed in consistent success of Shangri-La in present global competitive market and have also its heighted value to stakeholders. In hospitality industry, one cannot boast of a perfect success strategy. Organizational policies and strategies keep on changing according to market and customer requirements. The same holds for Shangri-La as well. Again, interpretation and implementation of strategies varies widely. This has been the reason why Shangri-La’s competence and differentiation strategy is often considered as a niche strategy. Through niche marketing Shangri-La was able to reach those sections of customers who wish to enjoy hospitality of Asian countries. This is applicable for both business branches of Shangri-La- the Shangri-La Hotels and the Traders. While the former is a five star enterprise, the latter is four starred. (Campbel and Kazan, n.d., pp. 440- 442) Expansion programs of Shangri-La have been possible for the funds received through incorporation in various subsidiaries as well as by listing with local stock exchanges under Shangri-La Asia. However, a large section of Shangri-La’s profit revenue comes from their chain of hotels in China. Also, with betterment of facilities and service, Shangri-La has increased their charges. It was estimated that in 2005, the charges were increased to a whopping 75% as compared to 71% of 2004. Operating costs of Shangri-La chain of hotels and resorts accounted for 32% of gross operating revenue per hotel. Labor costs and utilities account for another one fourth of total cost. (Campbel and Kazan, n.d., pp. 442- 446) From point of view of Ghoshal and Bartlett, the expansion of Shangri-La hotels and resorts could be regarded as ‘Global strategy approach’. This business approach was first popularized by a French organization, Accor. In spite of basic difference in business objectives, details, managerial strategies and execution, this business approach is successfully adopted in both branches of Shangri-La chain. Thus, in all outlets of Shangri-La hotels and Traders global strategic approach is followed. However, in present times, Shangri-La has been facing certain managerial problems. It has been found out that decisions made by front- line employees are failing quite often to bring the desired results, especially in Shangri-La hotels and resorts in China. (Campbel and Kazan, n.d., pp. 445- 446) Thus, it could be inferred that Shangri-La is opting for large scale expansion and exposition at a global level with the sole objective of expansion of geographic base of operations. In future Shangri-La has expansion programs in mainland China, Italy, Ghana, Myanmar, Philippines, UK, Qatar, Indonesia, Singapore, etc. It has to be noted that a large of future expansions will be in Chinese lands. References Campbel, D and Kazan, B. Harvard Business School Roll, M 2005, Asian Brand Strategy: How Asia Builds Strong Brands, Palgrave Macmillan, UK Read More