What are the key elements of Shangri-La Hotel’s strategy? Homework Help

1. What are the key elements of Shangri-La Hotel’s strategy? Which of the five generic competitive strategies described in Chapter 5 is the company employing? What is Shangri-La’s strategy for competing internationally?

A. You should have relatively little trouble identifying the following elements of Shangri-La’s business-level strategy:
a) Operating in three main business segments including:
b) Hotel ownership and operations,
c) Property development including commercial buildings and serviced apartments,
d) Hotel management services to group-owned and third-party hotels, and Spas.
The company is a deluxe Asian hotel chain which has followed an aggressive growth strategy. It operates under two brands: the five-star Shangri-La and the four-star Traders. It owns or manages resorts in Asia, the MiIDle East, North America and Europe for a total of over 23,000 rooms in 29 locations. As of 2006, the company had over 40 aIDitional projects in development
B. Shangri-La based its competitive advantage on outstanding customer service. The service model was based on the core principles of respect, humility, courtesy, helpfulness and sincerity. The service model was supported by extensive training, an organizational structure that decentralized decision making, and a compensation structure that was designed to align individual goals with the company’s mission.
C. To meet the expectations of excellence, Shangri-La developed local talent to world class expectations through culture training. The importance of Shangri-La’s employees as central to its successful execution of its strategy was further reinforced by its three-tier compensation system and transparent and well-defined career path.
You should recognize that Shangri-La competed on the basis of a differentiation strategy which involves being unique in ways that are valuable to a wide range of customers. The differentiation is based on providing distinct standards of hospitality and service by offering a luxurious atmosphere and outstanding service for its clients. These efforts led to the establishment of a world-class reputation and prestigious awards and recognition to include the following: “Best Business Hotel Chain in Asia Pacific” by Business Traveller (U.K. and Germany) and “Best Hotel Chain” by Chinese Hurun Report (China) – along the way.

One of the difficult things to understand about strartegy is that there is rarely a single right or wrong answer to things. So, some of you may want to conclude that the company is employing a niche strategy, as we indicate in the accompanying slides, would be our perspective. However, we could understand and be sympathetic to a student who stated that they feel that a broader differentiation strategy is more appropriate as the company offers both five-star and four-star properties under its two brands – Shangri-La and Traders. AIDitionally, the company has been pursuing aggressive international growth to expand its geographic base of operations.

To compete internationally, Shangri-La expanded beyond its core Asian markets through management contracts and owner/operator developments in the luxury segment. The company launched its rapid expansion by building a foundation of 35 hotels in some of Asia’s most sought after locations. This was followed by Shangri-La’s becoming the largest Asian-based deluxe hotel in Southeast Asia. The deluxe hotel company had expanded to Dubai in the United Arab Emirates and then to Muscat, Oman. Its expansion efforts took it to Australia and included plans to expand to North America and Europe. Despite these diversifying interests, Shangri-La remained focused on investments in the Asia-Pacific area with plans to expand rapidly in China. Shangri-La funded its expansion by incorporating its various subsidiaries and listing with local stock exchanges under Shangri-La Asia.

In terms of the Bartlett and Ghoshal approaches, we might see this strategy as fitting the ‘Global’ strategy approach’ – the product offering in Shangri-La and Travellers, although different from each other in some details, was based on the same idea and the hotels in the Shangri-La chain were, to all intents and purposes, the same in each location.
This approach is common in the hotel chain business. It was pioneered about 40 years ago by Accor, the French company that owns the brands Novotel, Mercure, and other hotel chains.

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