Hotel Okura Macau is part of the Oku...
Hotel Okura Macau is part of the Okura
Hotels and Resorts. Okura Hotels and Resorts is a chain of international hotels
and resorts who operates in the hospitality as well as the tourism industry.
The initial Okura hotel started operations in 1962 in Japan. Despite the hotel
making huge investments in the Chinese market, it is experiencing challenges
adapting its business to the Chinese culture. This report looks at the best
strategies that can be used by the hotel in dealing with its cultural
challenges impacting on its ability to remain competitive and generate high
returns in the Chinese market, especially in the Macau region. The report
first, outlines the hotel's business environments, both external and internal
ones using Porter's fives forces model and SWOT analysis. Then, the report
provides recommendations on the strategies that can be used to address the
strategic challenges facing the hotel.
Okura Macau Strategic Management
Introduction and Background
Hotel Okura Macau is part of the Okura Hotels
and Resorts. Okura Hotels and Resorts is a chain of international hotels and
resorts who operates in the hospitality as well as the tourism industry. The
initial Okura hotel started operations in 1962 in Japan. Over the years it has
grown to become a chain of hotel, mainly operating in Japan and other major
cities in the Asian region, such as Shanghais and Hong Kong. However, the Hotel
Okura Macau started was officially opened in 2011 as part of the Okura Hotels
and Resort chain. Hotel Okura Macau is a five-star hospitality institution,
which offers customers with high-quality services and products to their
satisfaction. The hotel is renown within the Asian region for offering the best
products and services to the target customers. Its operations are mainly based
on the Japanese culture.
Hotel Okura Macau mission is to providing a
moment of kindness to target customers. This mission helps it to provide
high-quality service to customers that are in line with their needs and
preferences. Despite the hotel making
huge investments in the Chinese market, it is experiencing challenges adapting
its business to the Chinese culture. Currently, it makes use of standardized
strategy making it hard to attract Chinese customers due to their cultural
needs not being fully addressed. Consequently, its sales have not been
appealing due to a low number of Chinese customers using its services and
products. To address this problem, the
report proposes strategies that can be used to address the current challenges
facing Hotel Okura Macau in its operations in the Chinese market. The three
dimension of change theory is used in localization strategy, and Ansoff's
matrix is used in the case of strategy related to product development.
Business Environmental Analysis
to Aaker (2008) analysis of business
environment of an organization aids in understanding the external and internal
factors that influence its performance and operations. For purposes of
understanding the business environment of Hotel Okura Macau, SWOT Analysis and
Porter’s Fives Forces Model have been applied.
2.1 SWOT Analysis
David (2011) points out that SWOT analysis
play a vital role in enhancing a competitive business advantage through
enhancing the understanding of its internal as well as external environments. SWOT
Analysis aids in understanding the organization's strengths, opportunities,
weaknesses, and threats to its internal and external business environment (Hill,
Jones and Schilling 2014; Freeman 2010).
The major strengths associated with the hotel
include having high-quality services, strong management team and a variety of
Hotel Okura Macau has high-quality services
that it offers to its customers. For instance, the customers are treated like a
king by employees of the hotel. According to Hitt, Ireland and Hoskisson (2012)
offering quality services to customers is critical in building loyalty which is
a major source of competitive edge for an organization.
Additionally, Hotel Okura Macau has a strong
management team. The management team is responsible for providing leadership to
the employees, especially ensuring that resources needed to undertake various
tasks aimed at providing customers with the best products and services are
available. The leadership in the company also provides the support needed
regarding moral support to employees, leading to the building of a motivated
workforce (Moutinho 2011). Also, the hotel offers a variety of products to
target customers. The hotel offers different foods and beverage products,
accommodation services and casino products that are in line with the
preferences as well as the needs of the target customers.
The Hotel Okura Macau has different
weaknesses. They include failure to localize its products and services, and
lack of brand history in the Chinese market.
One of the major weaknesses that are facing
the company in its operations within the Chinese market is a lack of brand
history in this country. The hotel does not have any history regarding its
operations in the Chinese market. According to Freeman (2010) in most cases, an
organization that does not have a brand history in a certain market has a hard
time penetrating the market. A large number of customers do not trust a brand
they have not used before, and they are always cautious about using its
products or services. Hence, lack of brand history in the Chinese market has
made it difficult for the Hotel Okura Macau to penetrate the target market,
especially winning the heart of customers.
Also, failure of the company to localize its
products and services is a major weakness as it is impacting negatively on its
ability to win Chinese customers. The company currently offers products that
are mainly related to the Japanese culture, and this makes them less attractive
to the Chinese customers who are the majority within the target market. This
has led to the firm losing many potential customers to competitors who offer
localized products and services that are in line with the target customers'
There are numerous opportunities that
Hotel Okura Macau has in its operations within the Chinese market. These
opportunities include localizing its products and services, use of the internet
to increase sales and expanding its products offering to reach out to new
One of the opportunities that the
company can take advantage of is localizing its services and products for
purposes of winning the heart of customers who affiliate themselves to the
Chinese culture. In this case, the company needs to offer services and products
that are in line with the Chinese culture so as to have a strong customer base
in the future.
Additionally, the company needs to implement
the internet as a tool for facilitating customers to make services book or
accessing their favorable sites while at its premises. The use of the internet
will help to increase its international presence, thereby, increasing possible
sales from the global market. Finally, the company should increase the variety
of products and services its offer to the target market with a goal of
attracting new customers in the future. The move will help to diversify its
product base, allowing it to expand its current market share within the Chinese
The major threats facing Hotel Okura
Macau in its operations in Chinese market include government policies,
competition, and economic growth slowdown.
Government policies that keep on
changing is a threat to the stability of the company as well as its
performance. For instance, the government taxation policies that keeps on
changing means that the company's revenues are not stable as there is no clear
tax rate that can be used as the basis for estimating future earnings from
operations of the hotel.
On the other hand, competition is a
major threat to the ability of the company to penetrate the Chinese hotel and
hospitality sector market. According to Moutinho (2011), stiff competition
increases the marketing costs, and this affects the company's overall net
profit. Hence, the stiff competition will force the hotel management to invest
a lot of resources in the area of advertising and promotion. The economic growth slowdown within the
Chinese market recently is going to affect the sales of the company. This is
the main threat to its abilities to generate high revenues in the future.
2.2 Porter’s Five Forces Model
The porter’s five forces model aid
in determining the competitive position of the hotel by critically analyzing
its external business environment (Wheelen and Hunger 2011).
2.2.1 The threat of new entrants
The threat presented by potential
new players entering in the Macau hotel, tourism, and hospitality sector is
low. The cost of starting a five-star hotel with modern facilities is huge, and
this makes it hard for new players to join this market.
2.2.2 Threat of Substitutes and Competitive Rivalry
There are many competitors as well as
substitute products and services for what is offered by Hotel Okura Macau. Some
of the major competitors include Hilton, Holiday Inns, and others. Due to a
high number of competitors available in the market, the degree of rivalry is
high (Evans, Stonehouse and Campbell 2012). There are many available
substitutes, such as four and three-star hotels available in the region. Hence,
the threat of substitutes in the market is high.
2.2.3 Bargaining power of Suppliers and Buyers
The bargaining power of the company's
suppliers is moderate, as there a large pool of suppliers that the company can
use to get vital products that are a key to its success in the Chinese market.
Moreover, the bargaining power of customers is moderate despite the switching
cost from one hotel to another being low. The hotel has managed to
differentiate its services and products regarding quality, hence, reducing the
bargaining power of the target clients (Ansoff 2007).
Hotel Okura Macau is facing a problem of being
unable to attract Chinese customers through the services and products its
offer, leading to poor performance in its sales since it ventured into these
market. The main cause of this strategic issue is the failure to localize its
products and services, hence, making the local Chinese people less attracted to
products/services that are not in line with their culture. Because the company
does not have any strategies to address the problem, two major strategies are
proposed. The hotel needs to localize its products and services and improve its
product development process to be in line with the local culture.
Three Dimension of Strategic Change
to David (2011), the three dimension of strategic change theory looks at change
from three different dimensions. The first dimension is related to the content
of change; it asks the questions what the need of change. In this case, the
purpose of changing the current strategic approach to hotel operations in the
Chinese market is to win the local customers who are the majority within the
target market. The second dimension looks at the process of strategic change
and is concerned with how the change is to be achieved. The question about the
company's strategic change is concerned with determining the way the goal will
be achieved by winning Chinese customers. The third dimension is related to the
issue of context and is concerned with answering the question where the
strategic change is expected to be implemented. When it comes to Hotel Okura
Macau the strategic change will be implemented in its internal operations with
the aim of responding to the needs of its target customers effectively. Based
on the analysis of the strategic change needs, it is recommendable for the company
to make use of localization strategy.
The localization strategy involves offering products/services that are
in line with the cultural needs and preferences of the clients in the target
market (Cheon, Cho and Sutherland 2007).
Hotel Okura Macau is supposed to make use of this strategy to win the Chinese
customers. The current standardization strategy fails to effectively respond to
the cultural needs of the target clients. Implementation of the localization
strategy will involve offering services and products, such as food,
accommodations that are in line with the needs, preferences and cultural values
of the Chinese customers (Verbeke 2013).
services and products that are tailored towards the target customer cultures
and preferences will help in boosting the sales of the company in the future,
especially by winning the Chinese customers who prefer food products and other
hotel services that are designed in line with their culture. Therefore, use of
localization strategy in running the hotel will be beneficial to the company as
it will help to boost its sales in the local Chinese market (Whitla,
Walters and Davies 2007).
3.2 Ansoff Matrix-Product Developments
According to Ansoff matrix, there are
different strategies that can be used by a firm in different situation to
enhance its performance, such as market strategy aims at aiding a company in
increasing its market growth (Ansoff 2007). Given that the goal of Hotel Okura
Macau is to expand its market in China, by winning more customers, it would be
appropriate for the company to make use of product development strategy. It is
appropriate for the hotel to design and develop products and services that are
in line with the needs of the target customers. Developing products that are
tailored toward meeting the needs of the target customers will help in boosting
the company's market share in the future (Claver-Cortés, Molina-Azorín and Pereira-Moliner 2007).
The strategic analysis of Hotel Okura Macau
shows that it does not have any strategy in place for dealing with the problem
of failing to attract Chinese customers to the services and products it offers,
resulting in decline in its sales. The major cause of the problem act as its
threat and weakness, and it arises due to failure of offering localized
products and services, resulting in customers preferring competitors offering
products that are in line with their culture. Nonetheless, the problem can be tackled
using its strengths, such as strong management team and opportunity of
localizing its services and products. In the case, SWOT analysis and Porter's
five forces model have been used in showing the hotel's current external and
internal business environment. The inability to address the current problems
facing the hotel may result in its closure in the long-term.
an external consultant hired to look at the strategic issues facing the
company, there are two solutions that can be proposed to address the current
problems facing the hotel. First, it would be appropriate to implement localization
strategy, which will help in offering products, such as food and beverages that
are in line with the Chinese culture. This would enable the hotel to win the
Chinese customer resulting in an increment in its overall sales volume in the
future (Wang, Chen and Chen 2012).
Additionally, it will be appropriate for the company to increase its
competitiveness through developing products that are in line with the needs as
well as preferences of the Chinese customers using product development
strategy. The implementation of the strategy will help in boosting the overall
performance of the company regarding enabling it to generate more sales and
attract the Chinese customers as it will be offering products/services that are
tailored towards meeting their needs (Lo 2012).