Reasons Making the Relocation of Practices Striking - Essay Example

International and Cross-Cultural Marketing Table of Contents Introduction 3 Reasons making the relocation of practices striking 4 Analysis (Findings)4 Factors that influenced the transfer of practices 4 PESTLE Analysis 6 SWOT Analysis 10 Target Market 11 Positioning Strategy 11 Marketing Mix (4Ps Framework) 12 Conclusion 13 Recommendations 14 References 16 Appendices 17 Introduction Global marketing can be defined as the process via which a company looks to target international customers by making the products available beyond the borders. On the other hand cross cultural marketing can be defined as the dissimilarities among different communication styles among the members belonging to different cultures and societies. In the modern competitive business environment companies are looking to enter the international market not only to cope up with the fluctuating economic conditions but also to gain competitive advantage. However, there is much argument about the differences and similarities between international and cross cultural marketing process. Cross cultural marketing says that marketers should understand that there is very little scope for ethnocentrism in international business. The marketers should also understand that no culture is better than the other. Today ‘cross-culturalization’ is inevitable just like globalization. Therefore the key to the success of the companies in case of international marketing lies in the degree to which the companies can differentiate and understand the cultures of the host nations. The present study has been done in order to analyze the cross cultural and international strategy of Al- Jumeirah. Al- Jumeirah is a UAE based luxury hotel chain. Here the targeted host country has been chosen as China. China has been chosen as it happens to be one of the fastest growing economies in the world since the entry to WTO. Over the course of the study the issues such as factors influencing the entry of Al- Jumeirah in to China; business environment of China; segments to be targeted; demographics ;cultural issues of China has been discussed from an international and cross cultural perspective has been discussed (Kotabe and Helsen, 2008, p. 301). Reasons making the relocation of practices striking Saturated Markets Before entering to China Jumeirah was present was present in economies that are mostly matured and statured in nature including U.K., Germany etc. Such economies usually provide very few opportunities for growth. Add to that the economic downturn provided additional threat to the hotel chain. Therefore in order to combat the fluctuating economic conditions the hotel chain decided to enter an emerging economy like China. Healthy capital from local market Al- Jumeirah is an established brand in UAE and the company had already made reasonably high amount of profit from the local market. This may have prompted the hotel chain to enter the Chinese market. Analysis (Findings) Factors that influenced the transfer of practices China’s entry to WTO In order to attract the foreign companies to invest in the country so that the country can achieve industrialization and economic growth the China entered WTO in the year 2001 after several years of negotiation. As a result the government was bound to follow the WTO trade regulations which meant that the trade barriers went down. This initiated the starting of the economic development of China (Appendix1). Educational Reforms As international firms started to come to China the demand for skilled labours in the country went up. Hence, in order to meet eh demand the country had to go through educational changes. The government decided to invest resources to develop the colleges and universities. Considerable amount of effort put in to improve the tertiary education system also. The focus of the government was not in quantity but on quality as the universities decided to meet the global standards. The initiatives by the government paid off as the number of undergraduates and graduates in China started to go up wards (Appendix 2). Lifestyle development and Rise in Personal wealth According to a report by research and consulting firm McKinsey there might be more than 3 millions wealthy households in China at the end of 2013. This has actually been a result of the educational growth in the country. Due to the development in the educational system the life style of the public has improved drastically. Most encouraging factor has been the fact that the gap in the style of rural and urban population has gone down (Appendix 3). Development in Tourism China has witnessed a steady growth in tourism. Due to the rise in economic conditions the Chinese cities; especially shanghai and Beijing. This has acted as the catalyst for the growth in the tourism and hotel industry. Since the last four plus years the hotel industry has seen a 13% CAGR (Appendix 4). AS on 2010, there were approximately 15,713 in the country. AS far as luxury hotels are concerned, many foreign hotels are trying to develop top most brands and develop luxury properties. This is mainly due to the likely high margins of gain expected from the luxury properties in the country. The tourism industry in the country also saw a huge boost during the 2008 Olympics and the World expo held in 2010. But the tourism industry in China has not only externally but also internally. The boost in the personal wealth has been well supplemented by the brand appreciation factor also. As a result various domestic and foreign hotels in China are doing quite well. Economies of Scale One of the most important factors that may have motivated Al- Jumeirah to invest outside the native country is to gain the economies of scale. Via invest in foreign countries like the production of the company would have increased as a result the per unit production cost would have come down and hence the company would have attained economies scale. Economies of scale not only provide competitive advantage but also act as a barrier to entry against new entrants. PESTLE Analysis PESTLE Analysis will resolve the impact of external environment factors on the Al Jumeirah in Shanghai. Political Factors Due to large population and huge size of the country, it is difficult for china to control and rule entire country from its capital Beijing. Al Jumeirah is situated in Shanghai. The communist party of china still has the dominance over the people of China after the economic reformation. It is feasible that, slowly and gradually the nation has introduced privatization. It was possible only after the death of Mao Tse-tung. The government of China has influenced the foreign firms to operate the business practices in their country. The government decentralization and economic reformation in the early 1980s has encouraged the foreign business players to enter in the Chinese market. Huge availability of resources, like labour, capital and land in low cist has motivated Al Jumeirah to operate in Chinese market. Presently, the political situation has become favourable. Therefore, it can be state that, the hotel may gain political advantages in the potential Chinese market. Economical Factors Currently China is one of the strongest economies around the world. Though the financial crisis and global recession has affected the economy of China, but gradually the Chinese economy is overcoming those negative effects. The disposable and per capita income of the Chinese people is significantly increasing. Moreover, the high GDP growth of China is addressing that the economy is recovering from the effect of recession. As the economy of China is strongly developing and disposable income of Chinese people is increasing, therefore, it is feasible that, Al Jumeirah can gain the advantage of economies of scale by effective business practices. Social Factors The external social factors can be characterized into two aspects, such as cultural and demographic. Cultural Shanghai is the most traditional cultural place in China. Major of the Chinese people belong to high income level. These Chinese people tend to attain the traditional functions and events. Moreover, they like to live traditional Chinese life style. Al Jumeirah has also executed their customer services basis on the traditional Chinese cultural factors (Jumeirah, 2013, p.1). Adoption of cultural aspects into their business strategy can increase their brand image. Demographic Shanghai is one of the developed education and business hubs within the country. Major of the people of shanghai are highly educated. Shanghai is one of the leading crowded cities in the nation. As China is the leading country in terms of number of inhabitants, therefore, it is feasible that, Al Jumeirah should target the highly qualified successful Chinese people. Moreover, large number of population can generate huge customer base around the country. Moreover, several international and local tourists can prefer Al Jumeirah as their staying destination. The traditional and old Chinese culture can imitate through the customer services of Al Jumeirah. Technological Factor China is technologically a developed country. Technology has contributed a significant part in Chinese GDP growth. Moreover, several international and domestic business firms are also implementing advanced information technology in business process. Al Jumeirah has effectively used advanced technology in their business operations. Self-service check-out and check-in kiosks with advanced technology has eased the customer service process. Moreover, Al Jumeirah has effectively adopted in-room technology services to satisfy their guests. The implementation of advanced technology has significantly eased the business process of Al Jumeirah. Legal Factor The Chinese employment structure is influenced and followed by the Northern European and Asian communalist replica. It is essential for all the foreign and domestic business players to obey implemented laws and regulation related to business ethics. Moreover, it is necessary to control and maintain effectual corporate governance practices. According to the employee regulations, each and every employee should be distributed their salary timely and appropriately. Moreover, in-job physical and mental violation is strictly prohibited in China. Therefore, it can be state that, Al Jumeirah needs to follow all the legal regulations in order to do their business practices smoothly. Environmental Factor According to the Chinese environmental regulations and laws, the business organizations should execute sustainability in their business process. The Chinese government is focusing on reducing the emission level of carbon. Therefore, the government has implemented several environmental laws. In order to operate smoothly in China, the business organizations need to follow these specific rules and regulations. Moreover, these leading organizations should focus on the environmental sustainability practices and programmes, such as, organizing CSR activities, concentrating on the reduction of carbon emission level, recycling of solid waste and water and supporting several CSR activities. These sustainability strategies will help Al Jumeirah to increase their brand image. SWOT Analysis Strengths Potential opportunities for growth in the tourism and hotel industry. Growth would most likely to become industrialized by 2020. Strong commitment o the government towards achieving overall growth. Availability of rich natural resources. China’s growth as a tourist destination. Weaknesses Low infrastructural condition than north American or European countries. Native employees would need a lot of customer service training. In spite of the accessibility of the resources, still coal is mainly used as resource to generate energy. In spite of the educational reforms there are still 100 million people who are illiterate in the country beyond the age of 15. Income in-equality is quite high. Opportunities There lie opportunity for direct investment and joint ventures Boost in external and internal tourism. The opening between the rural and urban life style has decreased. Threats Protection of intellectual property is low. Differences in human and work rights. Lack of transparency in government reporting structures. The strong hold of the government over the censorship issues and media. Increase in the educational level has led to a rise in the un-employment level. Target Market Primarily Al- Jumeirah is a luxury hotel that provides quality services at a premium price. Such strategy would stay consistent in Chin also. The hotel in China would mostly target wealthy people or people belonging to the high income group. From the marketing point view the company would be using focused marketing strategy by targeting one definite target market segment only. The income level of the target market segment is likely to be 17100 Yuan. Here it is to be mentioned that based on the recent economic development it is being believed that China may have more wealthy people than U.S. (Appendix 5). Positioning Strategy Al- Jumeirah would position itself as hotel that would provide luxurious services at a premium price. As far as the cultural perspective is concerned the company should position itself as a business entity that reflects the rich cultural heritage of China. Such positioning strategy would help the company to target both local and international customers. Marketing Mix (4Ps Framework) Marketing Mix is an important strategic marketing analysis tool that includes price, place, product and promotion. 4Ps of marketing mix structure has been implemented below for the purpose of the study. Product Superior quality in-room amenities and convoyed with the exceptional individual guest service is the key power of Al Jumeirah. Moreover, the self-service facility with the help of higher technology for the guests has eased the responsibility and job of the operation executives. The effectual differentiation strategy has helped the hotel to increase their core competency within the competitive luxurious Chinese hotel industry. The effectual brand and product strategy are the flourishing approach that has engendered high level of revenue and has helped them to maximize their business profit. Price The pricing strategy of this luxurious has been remained consistent throughout the years. They have set up differentiated business objectives in order to provide added value for a logical price range. Al Jumeirah has implemented quality and premium pricing strategy. They used to offer superior quality services to their guests. Rational conference hall Tariff can significantly attract the managers of MNC and other leading organizations to organize a conference in Al Jumeirah; Shanghai. Place Product and service information of Al Jumeirah used to reach to the target people through individual selling and promotion through internet. The delivery channels of this leading hotel chain include international travel agents and reservation system. Promotion Al Jumeirah has resolute the mass communication strategy through website marketing and print advertisement. Al Jumeirah has described the cultural aspects of Shanghai on their company web page. Moreover, the leading hotel chain has executed direct mailing strategy for the loyal existing clients. It will help the hotel to make them aware about the new tariffs and offers. Long-term effectual and strong relationship with the leading business houses has created a potential client base around China. The effective PR activities are one of the key elements of Al Jumeirah’s promotional activity. Taking part in the local cultural events and participating as the supportive community member has increased its brand image in Shanghai. Conclusion Al Jumeirah is one of the popular and leading luxurious hotel chains around the world. This lavish hotel chain has executed premium pricing strategy as they have appointed superior quality guest services in their business process around the globe. Al Jumeirah is successfully operating in Shanghai. Shanghai is one of the most developed cultural cities within the nation. Al Jumeirah has always targeted higher income group people. The hotel chain has positioned them as the high quality-price product. The encouraging external environmental factors have sustained the Al Jumeirah to grow within the potential Chinese market. They have executed usual promotional tactic for their target customers. Adoption of advanced technology has eased the business practices of Al Jumeirah. At the same point of time the luxurious hotel chain has able to satisfy their guests. Favourable economic condition, fondness of high income level Chinese people for the luxurious hotel chain has augmented the prospective opportunity for Al Jumeirah. Recommendations Several recommendation plans have been proposed to augment the core proficiency of Al Jumeirah. The luxurious hotel chain is established only in Shanghai. Therefore, it is suggested that, an effectual PR team should be appointed for other potential cities within the country. For an example, Beijing is one of the leading and important business hubs in China. If Al Jumeirah try to cap, map and tap other prospective cities for their hotel, then they can significantly generate huge customer base. People always favour the local services and products as habitually people are familiar and biased with the traditional local things. Therefore, it is suggested that, Al Jumeirah should fetch more Chinese traditional belongings into their services. It will help them to increase customer loyalty around the country. Effectual CRM tools necessitate to be executed in order to maintain the existing and old customer base. Moreover, CRM will help Al Jumeirah to acquire new potential clients. Al Jumeirah needs to endorse their offers, services and tariffs through emerging social and digital media. As the new generation people are getting more centric and biased to the popular social media network, therefore, advertising through social media networks like Facebook and twitter would be effective media source. This promotional strategy will help Al Jumeirah to set up vast range of international and domestic client base. The luxurious hotel chain should also need to target the domestic tourist people. This domestic market has not significantly tapped. Last but not the least; successful employee withholding strategy will be effective for Al Jumeirah. The hotel management need to organize training and guidance programmes in order to boost the efficiency and skills of the employees. Al Jumeirah needs to motivate them as the employees are key assets of organization who can show the path of success. References Kotabe, M., and Helsen, K., 2008. ‘Global Marketing Management’. (4th ed.). USA: John Wiley and Sons. Appendices Appendix 1: China’s Entry to WTO Appendix 2: Educational reformation Appendix 3: Lifestyle and Wealth Development Appendix 4: Development in Tourism Appendix 5: Target Market Read More