Shang-Rila Hotel Strategic Plan Analysis

Introduction: Prominence, Adversity, the Plan

Shangri-La Hotels and Resorts, as one of the most distinguished brands in the hotel industry worldwide, has earned its reputation with its dedication to high quality service. In spite of enjoying some appreciable profits and rapid development of the scale of the company in the early 1990s, there was no common core value among all the hotels. It was this concern that led to the introduction of the "Shangri-La 2000" strategic plan. In this essay, the changes in the company brought about by the plan will first be discussed, then the existence and cause of subcultures as well as the ideal way to manage these subcultures will be analyzed. The essay will end with suggestions on how the Kowloon Shangri-La hotel could succeed in becoming the dominant force in Hong Kong.

A Brief Picture of Shangri-La

Well known for its eccentric name and guaranteed quality whenever you pay for its service, Shangri-La Hotels and Resorts (SLA) is a deluxe hotel chain setting its sites in Asia founded by the Malaysian-Chinese tycoon Robert Kuok in 1971. It took 28 years for the company to expand from being started with just one hotel in Singapore to having 37 branches located in major cities and popular tourist destinations in Asia. During this period, the company saw the recognition of its excellence ever climbing and reaching its peak in 1997 when Island Shangri-La, located in Hong Kong, became the first hotel in Asia Pacific to obtain ISO14001 certification to go along with the numerous rewards the company received then and the year after.

The Environment in Asia: From Prosperity to the Asian Economic Crisis

When the first Shangri-La hotel was founded in 1971, the whole Asia was in a period of rapid economic growth and the tourism industries in the countries benefited hugely from it. The expansion of SLA was greatly facilitated by the blooming economies in the area to reach such a large scale, and the profit of the company increased proportionately. Nevertheless, the tale reached a dramatic climax in the 1990s, a decade that saw the economies in Asia undergoing a roller-coaster development. While the wealth of the countries had flourished to an arguably unprecedented level within the first six years, the Asian economic crisis in 1997 put a traumatic end to all the optimism of the people and SLA was invariably affected by this. The devaluation of currencies, the lack of demand and the translation of revenues at unfavorable exchange rates led to a substantial reduction in the profitability of the hotel industry in Asia and the profit of SLA attributable to shareholders dropped sharply from HK$1,090,357,000 in 1996 to HK$743,132,000 in 1997. The impact of this depression has not ceased since then.

The Changes brought about by the Plan

If many people liken business to a game, then one rule a competitor must bear in mind in order to win is that no strategy can ensure forever victory. The Managing Directors of Shangri-La Hotels and Resorts (SLA) understood this and boldly took radical actions to resolve the problems he saw in the company. This invariably brought huge changes in the company, and they will be pointed out and their effectiveness weighed in the following.

Despite the significant decline in the profit of the company during the economic recession after 1997, Shangri-La Hotels and Resorts was chiefly a highly successful company as recognized worldwide. However, complacency would only hinder the long-term development of a business. In 1993, a Managing Director, having newly joined SLA, observed a major problem in the management of the hotels. His concern was that while each hotel was able to maintain a high-level quality in its service, the inter-hotel relationship was weak. The hotels were under different styles of management as if each was independent and thus they all had their own cultures, management processes and standards for their service. They did not have a common marketing strategy or a centralized budgeting process that all hotels would follow. The Managing Director felt that this should only occur in a small company with a few hotels but not in one with the scale of SLA. It was this concern of his that initiated the "Shangri-La 2000" strategic plan to be launched. Under the plan, the organization was changed in three ways: the clarification of values of the organization, decentralization and an increased emphasis on measuring the performance of the company in different areas.

Clarification of Core Values and Principles

This was the most important change in the organization brought about by the plan. First, the vision of the company was clearly stated, that is, to be the dominant hotel company in Asia by the year 2000. This showed the ambition of the company to the employees and made them more motivated in actively contributing to the company. Moreover, to avoid seeing different interpretation of the core values in different hotels, the plan introduced five words to summarize them, namely Respect, Humility, Courtesy, Sincerity and Helpfulness, which were under the philosophy of the Asian hospitality from caring people. In addition, eight guiding principles were introduced to the employees explaining the direction of their job, and the principles were largely about how to satisfy the customers. The main purpose of these was to enhance unity and consistency in the organization besides educating the employees about the essential concepts behind their job.

Decentralization and De-bureaucratization

This means the distribution of more power to the junior employees. Contrary to the old way where employees had to strictly follow the operating guidelines when performing their duties or refer to their supervisors for resolution, the frontline employees were given the power to make decisions on their own at the customer contact point when the amount of money involved was below a certain limit. This increased the efficiency of the service-rendering process by reducing the rigidity of the job of such employees, while the loss arising from inappropriate decisions made by such employees was also limited. The aim of all these was simply to make customers feel more comfortable since their requests could be promptly dealt with and thus they would be more loyal to the hotels of the company in the long run.

Increased Emphasis on Measuring Performance in Different Areas

Partly to assess the effectiveness of the plan and partly to assess the efficiency of the company in reaching its goal, a series of evaluation schemes were established to measure the performance