Shangri La Strategic Management

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Strategic Analysis of Shangri-la

I. Introduction

The hospitality industry constitutes an economic sector with the fastest growth worldwide. At present, the industry continues to receive recognition as a profitable and progressive industry. The hospitality industry offers diverse opportunities for employees and varied services and features to customers. This means that overall industry actual and potential provisions are unlimited, which accounts for continuous shifts or adjustments contributing to industry viability. Diversity in employment and service offerings of the international hospitality industry has resulted to the higher number of people employed in the hospitality industry more than in manufacturing firms. (1998) Due to the profitability and viability of the industry, it has also evolved into one of the most competitive economic sectors ( 2000). Heightened competitiveness in the industry could draw out the untapped capabilities of hospitality firms. On a firm level, hotel managers face the challenges of shifts in its target consumer segments coinciding with changes in consumer demands, issues of liquidity, and intense failure percentage within the industry (1999). To survive, hospitality firms need to deal with all these multifaceted issues by understanding these problems and implementing appropriate strategies. To understand how well firms in the hospitality industry ensure the competitiveness of the firm, a strategic analysis of Shangri-la hotel in Hong Kong is the case in point. Shangri-la constitutes one of the top and long-standing international hotels and brands.

II. Analytical Discussion

A. Introduction to Shangri-la

Shangri-la constitutes an investment holding company focusing on the establishment and operation of hotels together with associated real estate properties as well as providing hotel management or related services. The company primarily engage in operating hotels and leasing spaces for commercial, residential and other purposes. Shangri-la was incorporated in Bermuda but its main headquarters is located in Hong Kong. At present, Shangri-la has been in operating in the industry for 36 years, which makes the company a stable and strong industry player. In Hong Kong, there are two Shangri-la hotels, Island Shangri-la and Kowloon Shangri-la. 1. Physical Resources

Shangri-la carries a long-term perspective by acquiring or holding majority control over the land upon which it constructs its hotels. Kowloon Shangri-la is 100 percent owned while Island Shangri-la is 80 percent owned. Although, purchasing land is more costly relative to leasing in the short-term, the one-time acquisition cost becomes nil when spread in the long-term and when weighed against the profit derived by the company. In line with its long-term perspective, the lands acquired by Shangri-la in Hong Kong are strategically located to bring its hotels as close as possible to the target market. Island Shangri-la is located in the central business district to cater to clients engaged in business or tourists interested in scouring through the shopping district. Kowloon Shangri-la is located in the eastern district to cater to clients interested in shopping and entertainment. This hotel is also contiguous to the various forms of transportation such as the airport, trains and buses to provide greater mobility to clients. Although the hotel buildings were built decades ago, the structures were upgraded. In fact, Island Shangri-la fits with the modern buildings in the central business district while Kowloon Shangri-la is also modern but with a creative twist to fit its market environment. Both hotels are strategically located to provide a view of the Victoria Harbour to clients. The view adds value to the hotel services. Capacity is adjusted for peak and lean seasons. Island Shangri-la has a maximum capacity of 565 rooms while Kowloon Shangri-la offers 700 rooms. Based on the operations statistics...
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