Global Marketing: Marriott Hotel - Report Example

Global Marketing: Marriott Hotel Table of Contents 1 Introduction 3 2 Brief Overview of Key Issues 4 1.3 Emerging Markets: Issues and Debates 5 1.4 Occur Group: Company Profile 6 1.5 Country Situation Analysis 7 1.6 Political and Economic Challenges 8 1.7 Suggested Strategies 10 1.7.1 Debt Funding by Banks 11 1.7.2 VISA Issues 12 1.7.3 Technology Related Issues 13 1.8 Political and Economical Opportunities 13 1.8.1 Political Opportunities 13 1.8.2 Economic Opportunities 15 1.9 Conclusion 17 1.10 Recommendations 17 List of References 18 Global Marketing: Marriott Hotel 1.1 Introduction Marriot Hotel is a leading American multinational hotel chain that manages and operating number of hotel portfolio across the globe. The expansion of the business on a global scale requires global marketing managers to seek potential opportunities and challenge before entering the market. Globalization has promoted the internationalization of business in emerging markets. The present paper analyses the expansion of Marriot Hotel in India (Mansoor & Jalal, 2011). For the expansion of the business in the global market, the Marriot Hotel is constantly engaged to establish and expand its business in India (that is recognized as one of the emerging markets). The rate of tourism in India has significantly grown with the economic stability and growth that makes it’s a favourable market for expansion of business. Marriot hotel is engaged expand its business in the market like India that has showed improvement in the rate of tourism (Werhane, 2012). The main purpose of this report is to critically analyse political and economic challenges and opportunities in India that Marriot Hotel has to adequately address in designing its marketing strategies. Therefore, key trends, challenges and potential opportunities in emerging market are analysed with a perspective of the global marketing manager. It highlights the changes prevailing in a marketing environment that has influenced overall global marketing. Outline of the report 1. Introduction 2. Overview of Key Issues 3. Emerging markets, issues and debates 4. Company Profile 5. Country Profile 6. Conclusion 7. Recommendations 8. Appendixes 1.2 Brief Overview of Key Issues Expanding business in emerging markets encounters several issues that are subjected to complexity in the global market. The following are the key issues faced by the Marriot hotel to expand its business in India - Market Needs: It is essential for the company to identify diverse needs of the target markets that is based on the preferences of the consumers. Therefore, it is important for the company to design its product design, portfolio, pricing strategies, and products according to the customer demand. - Technology: The constant change and advancement in technology has put persistent pressure business to adopt advanced technology in its operations. The adoption of the technology in accordance with the cultural and national trends is prevailing in the respective country. - Cost: Cost management remains to be a dominant factor that has influenced designing and managing products and investment. The uncertainty in the industry is predicted on the basis of the research, engineering, design, and production costs of the business functions. Firms operating in the Hospitality industry are labouring extensive. The establishment or expansion of business in India provides a great opportunity for the business to control its costs because of availability of low-cost labour. In addition, flexible taxation policies can interest rate provides potential benefit for the company to make investments and reduce it costs. However, the increasing inflation rate can be one of the issues in India that is essential for the company to address. - Quality: Maintaining quality of product determines the functioning and performance of the product in the particular market. It is important to maintain the quality of the product and the prices it offers to its customers. It is also important for the company to ensure global quality standards to sustain its competitive edge in the industry. 1.3 Emerging Markets: Issues and Debates The emerging market possesses potential advantages for the companies to invest in the respective market. However, these markets are exposed to certain issues and challenges that are required to be effectively addressed. The key issues faced by the business to enter in emerging market are the socio-economic conditions, cultural factors, and trade and commerce policies. The investment in emerging markets is required to emphasize on the BRICS Trade and Investment Corporation Framework. The business communities are required to implement BRICS Framework to enhance the trade and investment and bring economic developing in the country (BRICS Trade and Investment Facilitation Plan, 2014). Therefore, the following are the principles that are required for the company to ensure to make investment in India: 1. Improve transparency and awareness 2. Promotion of simplified operations and practices and efficiency in its business practices 3. Meeting consistency and predictability 4. Enhance communication and consultation 5. Encourage cooperation and harmonization. The implementation of the BRICS Framework in India is essential, as it will allow the company to establish sustainable relation and success growth rate in the market. The effective implementation of the framework can significantly contribute to the development of the business as well as economic development of the particular country. India is the second most populated country and the third largest foreign exchange generator with a huge potential to grow and further expand in the realm of world tourism. In fact, tourism contributes to around 3% to the gross domestic product in India. The state of Goa in India is one of the most visited places by foreigners with about 2.8 million foreign visitors each year. India is investing even more by planting trees and keeping the environment clean so that it could earn more foreign exchange in the future. Since Goa was built as a tourist state in 1987, it has seen an average growth in tourism of about 10% each year (Tourism & Hospitality Industry in India, 2014). The report aims to investigate the type of political and economical challenges and opportunities global marketing managers are faced with while operating in India. The company selected for the marketing report is Marriott International that has twenty-five 5 star hotel located all over India. The global marketing managers of Marriott International are concerned how the target market, foreigners who visit India for vacationing and the locals that visit the hotels perceive their brand name and services. The global marketing managers analyse the political and economic conditions of India and try to work on the challenges and opportunities by cleverly marketing the services of Marriott International to the targeted audience all over the country. 1.4 Occur Group: Company Profile Marriot International Inc. Marriot International is an American hotel chain that operates and manages more than 4,000 properties in more than 78 countries across the globe (Annual Report: Marriott International Inc., 2014). Marriot Hotel is tremendously expanded its business in emerging markets that have significantly contributed to the increase in the revenues. The company operates number of franchise hotels under eighteen brands including "Marriott Hotels, The Ritz-Carlton, JW Marriott, Bulgari, EDITION, Renaissance, Gaylord Hotels, Autograph Collection, AC Hotels by Marriott, Moxy (expected opening in 2014), Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, TownePlace Suites, Protea Hotels, Marriott Executive Apartments and Marriott Vacation Club" (Annual Report: Marriott International Inc., 2014). Marriot hotels are constantly engaged to explore potential opportunities in the market. The financials of the company reveal that the company has showed positive growth in its performance and positioning in the market through establishing and maintain its quality and relation with its customers. Table 1: Key Performance Indicators 2012 2013 2014          Asset Turnover 1.93 1.95 2.02 Gross Profit ($ million)  1,585 1,714 1,966 Net Profit ($ million)  571 626 753 Total Borrowings       1.5 Country Situation Analysis       Table 2: Country Situation Analysis  2012 2013  2014   Land Mass (Area sq. km)  2,973,190.0  2,973,190.0  2,973,190.0 Population (millions)  1,227.19 1,243.34 1,259.7 GDP (%)  4.75 5.02  5.63 Unemployment (%)  9.4 6.3  5.2 Inflation (%)  10.21  9.49 7.82 Interest Rates (%)  8 7.2 8 Exchange Rates (comparing USD)  54 61 62 Development Index  0.583  0.584  0. .586 Urbanisation Rates (%)  32 32 32 Corruption Perception Index  94  94 67               Source: (Tourism & Hospitality Industry in India, 2014) 1.6 Political and Economic Challenges Terrorism in India One of the recent challenges that global marketers face in the hospitality industry in India is to guarantee a secure environment for its customers. The 2008 terrorist attack at Mumbai left hundreds of people dead at the 5 star Taj Mahal Hotel. People in India questioned the security of the hotel and how the terrorist managed to get inside with heavy guns. There were many protests carried out in India for the lack of security measures the government and hotels took to prevent the problem. Marriott International was also one of the hotels that were directly affected as a result. The locals of India who used Marriott International for business seminars, dining and vacationing hesitated to acquire the services of the hotel as it was of the same calibre as the attacked Taj Mahal hotel. People felt scared to acquire services of a hotel that could be the victim of the next attack. Marriott International and other 5 star hotels in Mumbai and New Delhi and Goa saw a decline after the Mumbai 2008 attacks. Many people also vacated their rooms after the attack because of the strong rumour that others hotels would be targeted in India. Terrorism is something that gives a very tough challenge for the global marketers to tackle while operating in India (Williams & Green, 1997). Mixed Culture Marriott International is not much of a success especially in the city areas neither with the locals nor with the foreigners. One of the reasons for not being too successful is the lack of ability to adapt to a culture. Marriott International seems to be trapped between the Indian and American culture that is miles apart from each other. It is important for the restaurants to focus on a single type of culture when operating in a country. Marriott International serves more of Indian foods but focuses to provide an environment for its interior and decoration that is more American and European in nature. In short, it manages to invite the foreigners through its interior but serves more of the Indian cuisines. On the other way round, it does serve Indian cuisines for the satisfaction of the locals but charges extra for the fully air-conditioned and well-decorated environment it provides to them. It is stuck in the middle where it wants to cater both the market but is not doing it efficiently (Bensoussan & Fleisher, 2012). Economic Challenges Taxation Policies The economic challenges that the hospital industry in India is facing are the issues of high taxation. The taxation rate imposed in other Asian countries is around 8 to 10 % but in India the tax rate varies between 20 to 25 % depending on the state in which the hotel is operating. The different tax structure in different states of India makes it difficult for the tourists to understand these rates. The high taxation rate has dropped the occupancy rate to as low as 58.3 % that has caused the hotels to reduce their average room rates. The Federation of Hotels and Restaurant Associations of India (FHRAI) claims that the hospitality industry in very volatile in a bad phase of the economy. The government should offer tax reliefs to the hospitality industry so that the industry can survive at the time of depression. Marriott Hotel also faces these problems and the taxation policy has had a negative impact on the profitability of the hotel. The occupancy rate of the Marriott Hotel is also affected by the because of the different taxation policy in different states of India (Kashyap, 2014). 1.7 Suggested Strategies The hospitality industry in India is sensitive, and the government needs to support the industry in surviving the challenges it faces. Though the hospitality industry in India has revived after the terrorist attack and the government has helped the industry in making a quick recovery but still there are certain obstacles that hold the hotels back from doing more business. The taxation policies are the biggest barriers and to overcome this issue the entire hospitality industry must negotiate with the government to reduce the tax rate rates. Marriot Hotel, an international hotel brand along with other international and local hotels must raise the issue of an international platform about the unjust taxation rate that in the end the customer has to face. The burden of taxation is on the customer and to increase tourism that will improve tourism in the country, the tax rates must be reduced and must be according to the rates of tax prevailing in other Asian countries (Singh, 2009). 1.7.1 Debt Funding by Banks Debt funding is required by the hospitality industry to improve their working activities. The banks in India do not provide proper loans to the hotels so that the hotels that are another reason for the slow growth of the hospitality industry. Cities like New York and London receive loans for a period of 20 to 30 years at an interest rate of 5 to 7 %. In India, the loans given for such facilities are for a shorter period. The term of the loans given by Indian banks is around ten years at an interest rate of 12 to 14 % (Tourism & Hospitality Industry in India, 2014). The hospitality industry cannot grow at a faster pace as these are the barriers for new hotels. Marriott Hotel also faces similar problems when they have to start their course of business in different states of India. These obstacles have a big impact on the business of Marriot Hotel as growth is limited because of lack of funds (Naik, 2012; Bensoussan & Fleisher, 2012). Suggested Strategies Debt funding is another activity that acts as a barrier to the hospitality industry in India. Marriot Hotels in India also faces the problem of debt funding. The structure of repayment of debt is almost impossible and the period of the loan is very less. The interest rate is very high which demotivates the hotel owners to start a new project in different states of India. In order to overcome this issue, Marriot Hotels can ask for funding from another country or use its resources to increase the course of the business in India. Marriot hotel has recognized the increase of tourism activities in India and to gain the advantage over it they must open more hotels in different states. The best option available for Marriott Hotel is to fund themselves rather than asking the banks for the funds. It is a large investment, but they will not have to pay heavy amount of interest (Getz, Carlsen, & Morrison, 2004). 1.7.2 VISA Issues The tourists face the visa issue while traveling to India, which is another pillar that stands in the way of the growth of hospitality industry in India. According to the stats of 2013, the foreign tourists that were attracted towards India were around 7 million. As compared to the competitors, it is an insignificant amount because its competing destinations like Singapore had 15.5 million, Thailand had 26.7 million and Turkey had 35.6 million tourists. The reason of lacking behind in gaining the attraction of the tourist is the strict visa policy adopted by the Indian Government. The impact of Visa Issue is on Marriot and all other hotels in India. The less issuance of visa will attract less number of tourists that will reduce the occupancy of the hotels. The problem of the issuance of visa has an adverse effect on the hospitality business (Kashyap, 2014). Suggested Strategies Due to Visa issuance problem that the tourist face not only the hospitality industry suffers but also the economy of India suffers a great loss. Marriot Hotel greatly suffers from this loss but cannot take any step as it is a totally governmental issue. The owners of several hotels have discussed these issues on various platforms and brought this issue to the notice of the Indian government. The government of India has decided to take action against their policy of visa issuance. The government has allowed liberalizing the visa norms and will offer tourist visa on travel. The government of India plans to issue Electronic Travel Authorization to citizens of around 180 countries, which will increase the number of tourists and eventually help the hospitality industry in India (Yu, 2012). 1.7.3 Technology Related Issues The world is moving ahead with advanced technology, and everyone must keep pace with the technology to survive in the market. Hotels in other countries have started facilitating the customers by providing them with the easy usage of smart gadgets like iPads, iRemotes, etc. Providing better Internet facility is considered to be a blessing for the customers. The hotels have efficiently developed software for online reservation. The technology advancement has not taken place in India to a greater extent (Kashyap, 2014). Marriott hotel is affected be less developed technological advancements in their system. If the government does not play its role in technological development, then not only the hospitality industry but also other industries will also be affected (Kashyap, 2014). Suggested Strategies The management has to focus on technological advancement because it is the only tool to enhance the business and retrieve position in the competitive market. The company has to introduce devices in the hotel to satisfy the needs of their guests. They have to import different technological devices that provide help for improvement in the operations of the business (Hayes & Ninemeier, 2008) 1.8 Political and Economical Opportunities 1.8.1 Political Opportunities Democratic Government India being a democratic country gives a lot of benefit to the foreign business entities like Marriott International. The Indian government is ruled under the 1949 constitution that allows the head of the state to consider the opinion of the public while making rules and regulations. The democratic government in India encourages foreign hotels to promote their culture better. Alcohol, for example, has been a subject of much debate in the country in the past when hotels were forbidden to serve hard drinks to the customers. The democratic government does not impose any such restrictions of the hotels. It gives foreign hotels the opportunity to invite foreigners and dine just like they do in their homeland. Similarly, the democratic government in India does not also prohibit the use of the hotel for private parties. Marriott International has the advantage to organizing and executes private dance parties just like foreigners would like to see in America or other European countries (Bensoussan & Fleisher, 2012). India-US Bilateral Relations India’s relationship with the USA has developed very well in the recent past, and the two countries have formed a strategic partnership based on the ideology of their democratic government. The first summit between Prime Minister Narendra Modi and President Barrack Obama in late 2014 has helped to lift many trade barriers to import and export in the past plus has also managed to form an agreement to trade commodities at low custom duty and import taxes (Kashyap, 2014). The type of trade will greatly help the global business in India. Marriott will get the benefit to directly import many commodities for which it is known in India. For example, soaps, shampoos, and other cosmetic products are something that are an essential part of their culture. Previously because of the high cost of import, Marriott International could not import these commodities from the USA. Even the towels were manufactured in India. The new trade agreement could give Marriott International to serve their customers in India in the same fashion they serve their customers in the USA (Kashyap, 2014). 1.8.2 Economic Opportunities Low and Falling Inflation Rates In the past decade, India witnessed the lowest inflation rate in the year 2014. The inflation rate in 2014 was 7.8%, and it is expected that the rate will fall further in 2015. It is expected that the inflation rate for 2015 will be 7.4%. It is also expected that the inflation rate till 2020 will continue to drop and by 2018 it will be around 6%. The low inflation rate will only provide more opportunities for the investment and profitability from the hospitality point of view. If the inflation rate is low, then people living in India will be able to afford food and paying rents for the halls and rooms. It is unlikely that the demand for hotels will fall because of economic reasons. There are no indications that the prices in food or the cost of renting a room would go up as the prices of other commodities in India will remain steady or even reduce. Marriott International will also benefit as they will be able to buy resources required to cook food at a lower cost than before. Falling prices of commodities would generate more revenues for the hotel considering the prices of other things remain constant including the prices of food products that Marriott International offers to its customers. In these hard economic times when customers have become very price conscious, India might stand out to be a favourable choice of vacationing. Foreigners might find the Indian currency very reasonable after exchanging with the US Dollar (Kashyap, 2014; Naik, 2012). Suggested Strategies The company has an opportunity to gain inflationary advantage in future. The company will receive food products at low cost, and they will be able to top provide low rate products and services to their customers that will result in attracting foreign customers to their hotel. Low prices of the products offered by the company will attract more customers to enjoy rooms and food facilities at a low price (Wearne & Morrison, 2013). Growth Rate India is an emerging economy and the hospitality industry in India is growing at a very fast pace. After the terrorist attack in 2008, the annual growth rate dropped severely. From 13.1 % to – 3.1 % in a year, the hospitality industry suffered badly in India. The government helped in reviving the hospitality industry in India by providing high security to the hotels and to the foreigners. After taking the strict actions for security, the government helped the hospitality industry as in a year’s time the annual growth rate of the hospitality industry was 2.2 (2009). Now the economy of India is growing and the government of India is also promoting tourism that is attracting tourist from all over the world and because of these steps and growth in the economy, the annual growth rate in 2013 was 19.9 %. It is an economic opportunity for Marriott Hotel to attract more and more tourist towards them, which will increase the profitability of their business. As the annual growth rate is increasing, Marriot Hotels must further invest in the improving their course of work. Suggested Strategies The company has an opportunity to attract foreign customers to its hotel as the country has a high growth rate that indicates that foreigners had a strong relationship with the country. The company might encourage customers from the global market. The high growth of the country is favourable to the company as the industry is growing rapidly in the country. The company should apply marketing techniques to advertising its product on Internet and provide facilities to encourage the large amount of customers to the hotel (Kapila, 2009). 1.9 Conclusion The study revealed all economic and political factors of the country that Marriot has to identify for the success of their business in India. Marriot has spread in many countries including Pakistan to expand its business in international market. The company needs to focus on opportunities that could be availed by applying strategy suitable for the situation. The company has to identify all the challenges mentioned in the paper to tackle the situation that may arise in future. The country has many beneficial factors including high growth rate that encourage foreign companies to do business in India. It could conclude that the challenges and opportunities for tourism are valuable for Marriot to capture the wide market of India. Marketing and promotion will result in increasing sales of the products and services of the country. The company has to set the environment of hotel according to the culture of the country. 1.10 Recommendations The company has to focus on marketing and promotion of products and services because the size of the market is big. The company has to introduce its new business in different cities of the country. There are large numbers of social website users in India. Marriot has to promote their business on these websites. The company has to increase its security systems to avoid any difficulties in future. The customers of the company will be from foreign countries as well so the food products must be available at their hotels. The environment of the hotel must be in accordance with the culture of the country. 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