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Strategic Management


Posted on Aug 2017



Abstract

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.

 

 

 

 

 

 

 

 

 

Hotel Okura Macau Strategic Management

1.0          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. 

 

2.0 Business Environmental Analysis

            According 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).

2.1.1 Strengths

 The major strengths associated with the hotel include having high-quality services, strong management team and a variety of products.

 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.

2.1.2 Weaknesses

            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' cultures.

 

2.1.3 Opportunities

            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 customers.

            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 market. 

2.1.4 Threats

            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).

3. Proposed Strategies

 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.

3.1 Three Dimension of Strategic Change

            According 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.

3.1.2 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).

             Offering 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).

4. Conclusion

 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.

            As 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).