Introduction
Cursory inspection of the accommodation sector might suggest that a few large chains dominate the market, giving the impression of an oligopolistic structure. However, the service hospitality sector within holiday tourism is mostly fragmented in many small units where location and the spatial distribution of accommodation are important factors determining the degree of competition. Furthermore, the wide range and quality of accommodation, its multi-product nature and seasonal variations in demand, introduce an additional dimension into the operation of the market. These aspects of the accommodation sector are considered at some length in tourism texts, of which those are good examples (Sinclair & Stabler 1997).Accordingly, different forms of structure perfect competition, monopolistic competition, oligopoly and even monopoly might, as argued below, reflect the conditions of different elements of the sector, ranging from the serviced to the un-serviced self-catering segments. Notwithstanding its complicated structure, some fundamental economic factors characterize the accommodation sector. It is subject to fixed capacity with all its attendant problems in the face of periodicity; perish ability and seasonality (Hall & Tucker 2004).
Allied to this, particularly in larger units offering a wide range of services, high fixed costs drive operators to attain high occupancy rates through such devices as product differentiation and market segmentation (Hall & Tucker 2004).These characteristics tend to involve elements of both natural monopoly and oligopoly (Tolentino 2000).The hospitality/ accommodation industry is one of the most successful industries in the global economy. This industry includes business that includes hotels, casinos, tourism and food services. Companies in the hospitality sector that face a tough competition has to make sure that its strategy can overcome the threats by the competitors. In any industry, changing a strategy is a must especially if the company has difficulty in surviving in the environment. Companies should have the appropriate tools and procedures that will help them determine whether their strategies are appropriate. The strategies formulated by businesses will always be under certain issues. These issues helps a company determine which strategy is the best one for them to consider. Strategies should not only be based on changes in the local environment. The strategy of any company is affected by the different changes in the international environment. Strategies need to be globally competitive and well adjusted to the demands of the environment for it to be a success. Countries rely on the hospitality industry and the business within it to assist in the countries goal to have a good economy. One state that acquires benefits from the hotel industry is Hong Kong. In Hong Kong the Hotel business has faced different kinds of change. This is due to the regions economic situation wherein after some downturn the economy of Hong Kong is slowly improving again. One Hotel in Hong Kong is The Excelsior Hotel. This paper intends to discuss about The Excelsior Hotel in Hong Kong, the general environment of Hotels in Hong Kong, the macro environment of The Excelsior Hotel and the internal environment of The Excelsior Hotel.
The Excelsior Hotel
Hotel chains have a long history of operating beyond national borders. Some of them started international operations more than a hundred years ago. Certain hotel chains are extremely global. Others are not. The globalization of service industries, notably some professional service industries, brings about new forms of organization of international business activity, which do not exist in manufacturing. In the production of goods, Multinational enterprises (MNEs) are a cluster of firms incorporated under the laws of different countries, all of which are wholly or partially owned subsidiaries of a parent firm (Aharoni & Nachum 2000). In contrast, the expansion of professional service MNEs to new markets is often achieved by a network of several autonomous partnerships. Each partnership gives up some of its autonomy to achieve minimum common standards, and to gain more reputation and thus work. These organization forms are unique characteristics of these firms, and they have important implications for the ways advantages are generated in international competition and diffused within the multinational enterprise (Aharoni & Nachum 2000).
In several service industries, competitive pressures forcing larger Transnational corporations (TNCs) to adopt strategies of following other companies to establish a presence abroad have also contributed to increased foreign direct investments (FDI) by TNCs in important markets aimed at strengthening their respective international market positions in relation to major competitors. The industries mainly affected by this kind of strategies include banking and other financial services and, in some locations, other services such as management consultancy, advertising, air transportation and hotels. International franchising is frequently associated with service firms, such as hotels, retail outlets, and quick service restaurants. These firms often have strongly identifiable trademarks and try to guarantee the customer a uniform and consistent level of service and product quality across different locations and over time. However, the high degree of standardized operations makes the replication of the format across diverse markets difficult (Aharoni & Nachum 2000). Global economic restructuring and development are the most pertinent factors in the study of globalization. Economic globalization is reflected in footloose capital and the growth of less nationally regulated industrial, banking and commercial sectors, a process that is also clearly represented in the global tourism industry’s principal economic sectors with mergers and buyouts between international airlines and hotels (Mowforth & Munt 2003). Hotels help Hong Kong to improve its image to the tourists that visit the state. Hotels like The Excelsior need to show to tourists that they should come to the country not only because of the various destination spots but because of the uniqueness of hotels in the country. The Excelsior Hotel of Hong Kong is one of the most famous hotels in the region due to its nearness to Causeway Bay which is a shopping haven for tourists. This hotel is a five minute drive to Hong Kong’s business district and requires short travel time for one to reach Hong Kong International Airport. The excelsior Hotel has 886 rooms and suites. It has a fully functional business center, tennis courts, fitness centers and various meeting and banquet areas (Hong Kong Hotels 2009).This hotel is now owned and operated by Mandarin Oriental.
General Environment
Hotels in Hong Kong
Owning hotels was never a ball game for Chinese business firms in Hong Kong before 1980. In fact, only two major hotel operators existed in Hong Kong prior to the 1970s: Hong Kong & Shanghai Hotels and Mandarin Oriental International. Both hotel groups are well connected with Jewish and British capital in Hong Kong. Hong Kong & Shanghai Hotels is owned by the Kadoorie family, which has extensive business links with Swire Pacific and other leading Hong Kong companies. Mandarin Oriental International is owned by Jardine Matheson and belongs to part of Jardine’s business empire in Hong Kong. It was not until the property boom in Hong Kong during the 1970s that many leading Chinese property developers had made their fortunes (Chung Yeung1998). The 1970s witnessed the transfer of corporate control of Hong Kong’s economy from dominant British hongs to giant Chinese property companies. The late 1970s also saw the takeover of some former British hongs by cash-rich Hong Kong Chinese businessmen. The leading hotel groups in Hong Kong include Hong Kong and Shanghai Hotels, Mandarin Oriental International, New World Development Co., Wharf Holdings, Hopewell Holdings, Regal Hotels International, Shangri-La International (Chung Yeung1998).
In the hotel business it appears that financial muscle, secured through networks of informal credit, is the critical determinant of the success of any hotel groups in riding out turbulence in the global hotel business during the past decade (Chung Yeung1998). The hotels in Hong Kong have gone from a very rough start to a successful present. The hotels in Hong Kong have increased over the years due to the improving economy and the influx of tourists coming from China and other countries. The hotels in Hong Kong are shrinking and it can affect the nation’s economy and tourism since the loss of hotel space turns off some clients and tourists. The next part will show some hotel statistics.
Year End
Number of rooms
Number of guesthouses
Number of hotels
2002
38949
397
98
2003
38133
414
96
2004
39128
440
101
2005
43866
467
118
2006
47128
486
126
2007
51581
511
140
*Figures obtained from office of the licensing authority, home affairs department and hotel information survey.
There were changes that happened in Hong Kong hotels from 2002 to 2007. From 2002 to 2007 the number of rooms increased, as well as the number of guesthouses. This shows that the shrinking hotel phenomenon has not created a big impact in Hong Kong. From 2002 to 2007 the number of hotels increased but there were some years that had no movement for the industry. The hotel industry in Hong Kong is continuously growing due to the influx of tourists and business people who want to visit Hong Kong. As the tourists and other visitor’s increase the rooms increased but due to the shrinking hotel phenomenon the rooms only has a specific measurement that must be strictly followed. This caused complains from the clients with regards to lack of space for them to rest and put their belongings
Macro environment analysis
PESTLE
Political
The Excelsior Hotel made sure that they were aware of the political situation of every country they have operated in and the company has made sure that it has a reasonable position with regards to political issues. The Excelsior Hotel is continuously prepared for any problems concerning the political sector. Any political noise is irrelevant to the company. Unless the political environment will change rules that relate to their operations, The Excelsior Hotel prefers to stay away from such subject. The political environment has allowed the liberation of the market, liberation of the market paved the way for improvement of services. The laws of Hong Kong will not be a hindrance to the growth of The Excelsior Hotel. It will provide the much needed help in making sure that the company will achieve its goals. The laws of Hong Kong will give guidance to The Excelsior Hotel so that the company can achieve its goals without major issues from the government.
Economic
The Excelsior Hotel can be said to be economically stable for the past years. Its economic stature is doing well that’s why they try to improve their products to give the best to their clients. It is not only the internal economic situation of the company should be taken note of but also the economy of the country. The Excelsior Hotel checks first the economic status of the country they are operating in before making decisions if they will have a branch in that area and since Hong Kong has been doing well economically then there is no reason for The Excelsior Hotel to abort expanding in that market. The economic forces can dictate the actions of The Excelsior Hotel, if the economy is doing well then The Excelsior Hotel can offer new services but if the economy is in a worse state then The Excelsior Hotel have to reduce unnecessary expenditures and un important actions. The economy Hong Kong and the Asian Region as a whole has given opportunities to hotel businesses. The status of the economy has paved the way for various hospitality and hotel businesses to prosper in the region and help in proving that Hong Kong and Asian Region is one the premier region that houses the industry.
Social
The socio cultural force serves as the conscience to The Excelsior Hotel. This force ensures that The Excelsior Hotel will not do things they know can ruin The Excelsior Hotel’s reputation with the society. This force ensures that the company will consider first its environment before making any decisions. The Excelsior Hotel makes sure that the services they offer will be accepted by the general public. Since it is already owned by Mandarin Oriental, it has to follow the social strategies used by the company. The Excelsior Hotel does not authorize the delivery of some services they know will cause outbursts or complains from different groups in the society The Excelsior Hotel also engages in social activities that tend to develop a better relationship between them, the clients and the society they are operating in.
Technological
The Excelsior Hotel offered new innovations in its technological aspect and introduced new concepts with regards to its industry. The Excelsior Hotel makes use of highly advanced register systems. It also makes use of better security systems to rooms, hallways and other vital places. Since technology rapidly changes. The Excelsior Hotel makes sure they are updated to what is happening and they can adjust to these changes. If other companies use new technologies to provide services, The Excelsior Hotel has the technology capable of competing with such technologies. The technological forces dictate the trends in the hospitality industry, these forces is the one that determine what should be used to provide a service. The Excelsior Hotel relies on its kind of service and the products created by the technological forces; the products of these forces are the ones that can give The Excelsior Hotel advantage over their rivals and success in the hospitality industry.
Legal
The Excelsior Hotel makes sure that it follows the different laws of a country they engage transaction in. The company doesn’t want to risk their client’s welfare and company image by breaking local and international laws. The Excelsior Hotel makes sure that the transactions they engage in will have a legal basis and will be sanctioned by local or international legal organizations. The Excelsior Hotel makes sure that they know the laws of a country before opening any branch there.
Environmental
The Excelsior Hotel makes sure that the products they use are proven to cause minimal problems to the environment. The Excelsior Hotel puts up certain regulations on what type of product they will use in providing service to the clients. As much as possible the materials used by The Excelsior Hotel have passed environmental restrictions. The Excelsior Hotel has also introduced better waste management strategies that aim to reduce pollutants and create a cleaner environment for the future. The Excelsior Hotel makes sure that its waste system is organized to prevent any mistakes from the personnel. The Excelsior Hotel has well tested waste management systems that ensure that they do not contribute to environmental pollution.
Porter’s five forces
Potential Entrants
The Excelsior Hotel has been around for a quite some time and the company is not greatly affected by the new entrants. The influence of potential entrants to the company is weak. Any new entrant will have difficulty in gaining clients not unless they can provide innovative strategies that can thwart The Excelsior Hotel from its position and get the company’s clients. The services offered The Excelsior Hotel is unique in terms of appearance if any new entrant wants to compete with The Excelsior Hotel’s standard of service they need to have a huge investment to create services that have the same caliber as the services of The Excelsior Hotel. They also need to make use of better strategies that will give them an instant brand identity.
Competitive rivalry
Competitive rivalry has a low influence on The Excelsior Hotel. The company has lower concerns on its competitors since there are limited competitors in their industry. The competitors cannot give much problem to the company since it already acquired a good percentage of the buying public. But due to the plan to enter a new market, competitive rivalry is becoming a concern to the company. The Excelsior Hotel needs to make sure that it makes cautious decisions in Hong Kong’s market.
Substitutes
Substitutes give high influence to The Excelsior Hotel and its different branches since substitutes can make a company lose the clients it has. The substitutes can be in the form of online or actual stores. This kind of business is continuously growing and continuously changing strategies. Substitutes come in the form of motels and hostels. The Excelsior Hotel makes sure that the substitutes won’t give them much problem. They do this by proving that the service they offer and the technologies they use to provide the service are the best quality and are better than substitutes or any other company.
Bargaining power of buyers
. The bargaining power of buyers highly influences the hospitality industry and The Excelsior Hotel. It shows how the industry tries to create good relationships with clients. As much as possible the company maintains reasonable prices for their services. They also have promos that intend to make the clients have second thoughts on purchasing products from other companies. When the clients try to dictate lower prices The Excelsior Hotel tries to know whether it is reasonable. The Excelsior Hotel sees to it that a big part of decisions on prices will be based on suggestions of the clients. For The Excelsior Hotel the bargaining power of its buyer is gradually increasing as they are more similar types of services available in the Hong Kong market.
Bargaining power of sellers
The bargaining power of sellers highly influences The Excelsior Hotel. The company makes sure that their suppliers have high bargaining power through helping them show their importance in the industry. The Excelsior Hotel makes sure that the price being asked for a material has the same value as the same materials’ quality. This will ensure that budgets will not be wasted. The Excelsior Hotel has to be aware of its partnership with its services partners and suppliers. The Excelsior Hotel has to make sure that every part of the agreement with the partners will be followed.
Conclusion for the five forces
Among the five forces The Excelsior Hotel has high levels of influence on the bargaining power of buyers and seller and substitutes. These three forces can change the policies or strategies that The Excelsior Hotel use. It can also affect the standing of The Excelsior Hotel.
Competitor Analysis
Taking the time to look critically at and understand competitive advertising and positioning strategies has been among the most effective ways to leverage means-end research into an effective communications strategy that builds on strength, stresses defensible points of distinction, and reframes the consumer decision-making process in a way that creates competitive advantage. Segmentation divides a heterogeneous marketplace into smaller and more manageable homogenous components. These smaller market segments can be targeted with more personally relevant positioning strategies that have greater appeal to individuals within the group (Reynolds & Olson, 2001). Today’s winning companies have been among the first to accentuate their distinctiveness by adopting customer-based marketing and positioning strategies. Such strategies help managers deal with their growing uncertainty regarding how to position a product and develop an action plan that will retain and cultivate established customers, and in some cases, attract whole new market segments (Paley, 2006).There are many probable competitors for The Excelsior Hotel in the Hong Kong market, they include the Nathan Hotel; Metro park Hotel Wanchai; Prudential Hotel; Hotel Nikko; Renaissance Kowlon Hotel; Hotel LKF; Panda Hotel and many others. To achieve the goals of maintaining a good standing in the Hong Kong market, The Excelsior Hotel should strengthen its competitive advantage of being able to offer affordable prices for their services and room rates. The company should see if their prices can compete with the prices by competitors in the Hong Kong market.
SWOT analysis
Strength
Strength of The Excelsior Hotel is the strong brand name they have. The strong brand name is what makes the company, its products and services popular. Furthermore a strength of the company is its ability to make strategic adjustments whenever there is a need for it. The company makes sure that whenever changes in the industry happen they have alternative plans towards it. Another strength of the company is its personnel who provide an excellent kind of service. The personnel of the company are well trained and makes sure that the clients are given total satisfaction. Lastly strength of The Excelsior Hotel is its website that is easy to use, attractive, and informative. Such website encourages the clients to visit the hotel and avail the company’s services.
Weakness
The Excelsior Hotel’s main weakness is mismanagement that caused its purchase by Mandarin Oriental. The company was not able to balance itself well to prevent any takeover by another company. The company was not able to make sure that Excelsior Hotel would be stable enough to maintain total control of the hotel.
Opportunities
An opportunity for The Excelsior Hotel is to find out more ways to give a distinctive look and features to the hotel. By doing this the company will have competitive advantage over other firms. It will attract clients who have various tastes. This will help the company have unique identity in the Hong Kong market amidst their competitors. An opportunity for the company is to improve the features of the website they currently have. By doing this it can attract more markets and it will help them attract tourists that will come to Hong Kong.
Threats
The main threat to the Excelsior Hotel is the competitors. The competitors like The Nathan Hotel; Metro Park Hotel Wanchai and Prudential Hotel try various tactics to make it difficult for Excelsior Hotel to maintain its standing in the Hong Kong market. The threat to the company includes the laws in the country they operate in. For the different countries they operate in, there are different kinds of laws. This forces the Excelsior Hotel to change some of their strategies. Another threat to the company is the tariffs and taxes that the company has in the Hong Kong market, each countries has its own rate of taxes and tariff that creates additional expenses for the company. Lastly a threat to the company is the culture of some clients in the Hong Kong market. Some people may not be used to the culture that was brought by the Excelsior Hotel.
Internal Analysis
Resources, Capabilities
Resources
The Excelsior Hotel’s resources come from reliable suppliers and manufacturers. The materials used in the hotel are made of the best kind of raw materials and come from reliable suppliers. Another resource for the company is its personnel that provide the best kind of service to guests and clients. The personnel make sure that clients receive the satisfaction they need.
Financial
The company funds come from either Mandarin Oriental or from other sources like investors. The funds are used to pay for the different expenses of the firm. The funds of The Excelsior Hotel are used to pay for important expenses, the payment for all the employees, the cost of amenities, the cost of electricity, the cost of office materials and other costs or expenses.
Human
In providing excellent service to the clients, a company needs to have a dedicated staff that performs well and knows that the service they give to the client can help The Excelsior Hotel have a positive or negative image. The staff of the company is well trained to ensure that the best service can be given to the clients. The company makes sure that it hires promising individuals that can assist in the company’s task of reaching their goals. It makes sure that the personnel have a distinct skill that matches the company’s goal.
Skill
The Excelsior Hotel’s capabilities include its use of sophisticated technologies to provide the best kind of services. The Excelsior Hotel has a unique set of production regulations that makes sure that every stage in the company’s operations will minimize any waste on time and effort. The Excelsior Hotel has made use of advanced technologies to provide services to the personnel and give them complete security.
Capabilities
The main capabilities of the company are on the well trained personnel. The personnel serves as the arm of the firm and they show how the company meant by total customer satisfaction. The personnel of The Excelsior Hotel are well skilled in assisting the clients and giving them excellent service. The company makes sure that they hire individuals who are skilled in management, human relations, fine dining and other qualities that a member of a hotel business needs. The Excelsior Hotel also looks for various activities, seminars, and symposium that will help the personnel improve their skill. A rare capability for the firm is to maintain its image amidst the takeover by Mandarin Oriental. The company was able to keep its position in the market amidst the change in management and ownership.
Competencies
Core Competencies
The core competencies of The Excelsior Hotel include its personnel and corporate competency wherein the focus is on the company’s relationship with its internal and external environment. These two competencies assist the company in its daily operations. It also provides the company the capability to create new trends in the market. The two competencies are given extra attention by the company since these two competencies can do various things for the company. In the instance of one of the competencies experiences some problem the company has to create solutions or it will experience more problems that may hamper the operations of the company.
Distinct Competencies
The Excelsior Hotel’s distinct competencies include its ability to provide services with a high value but with minimal costs. The company makes sure that the employees are paid accordingly but the personnel are expected to provide a good kind of service. The company’s distinct competency is embedded on its efficiency of service. The company also makes sure that the best lodging and assistance will be given to the clients.
Conclusion
The Excelsior Hotel has achieved success through strategic management. This hotel had achieved success in its internal and external environment through the proper use of strategic management. Its strategies were seen on knowing how it operated under the Political, Economic, Social, Technological, Legal and Environmental forces. Its strategies were visible through how they developed their internal environment. The strategies used by The Excelsior Hotel helped the company attain its goals. The Excelsior Hotel had contributed to the success of the economy of Hong Kong through creating an interest for tourists to return to the country. Excelsior Hotel did not steer away from the strategies that gave it success before it was acquired by Mandarin Oriental.
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Credit:ivythesis.typepad.com
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