Shangri-La Hotels Expanding to Non-Asian Markets

D. S. Mutum et al. (eds.), Marketing Cases from Emerging Markets

Hsiao-Pei (Sophie) Yang

Introduction

In the past two decades, brands from emerging markets have made significant inroads into developed markets, including those in the tourism industry [1]. Brands from emerging countries increasingly market their brands with the ambition of positioning them as global brands [2]. This case study illustrates the expansion of the Shangri-La hotel group as a good example of emerging markets' brands expanding to the Western markets. The Shangri-La group was a Hong-Kong based hotel group, focusing on luxury hotels. This case study pointed out the market entry challenges the Shangri-La group faced when it entered its first non-Asian market in Australia. As the case study illustrated, one of the biggest challenges faced by the Shangri-La group was preserving its Asian brand identify while adapting to the cultural differences in a new market. This case study also showed some possible challenges an emerging market brand might face before reaching cultural integration in a new market. Company Background The Shangri-La group established its first deluxe hotel in Singapore in 1971. Today, this Hong Kong-based hotel group is one of the Asia Pacific's leading luxury hotel groups that own 75 hotels and resorts throughout Asia Pacific, North American, the Middle East and Europe, with a room inventory of over 30,000 [3]. New hotels under development of the Shangri-La group are in mainland China, India, Malaysia, Mongolia, Philippines, Qatar, Sri Lanka, Turkey and United Kingdom. The Shangri-La group has four hotel brands including the Shangri-La hotels, Shangri-La resorts, Traders Hotels and Kerry Hotels. In 2003, the Shangri-La group entered its first non-Asian market in Sydney, Australia. Following that, other non-Asian markets the group had expanded into included Dubai, New Delhi, Vancouver and Paris. The Shangri-La group believes in the unique characteristics encapsulated by Asian hospitality, which shapes its philosophy ''Shangri-La Hospitality from a caring family'', which differentiates this Chinese hotel group from other Western competitors.

Market Entry Challenges

The biggest challenge faced by the Shangri-La group in its expansion into nonAsian markets was preserving its Asian brand identify while adapting to the cultural differences in new non-Asian markets. This case study uses the example of the Shangri-La group expanding into its first non-Asian market in Sydney, Australia, to point out some possible challenges a Chinese company might face before reaching cultural integration in entering a new market. The three key challenges identified by the management of the Shangri-La group in entering the Australian market included [4]: Restrictive Workplace Legislation

The management of the Shangri-La group found the Australian workplace legislation being quite restrictive compared to Asia, as it focuses more on centralised and formalised-based legal adversary relationship. Therefore, it is a challenge to get Australian staff to be flexible at work, such as getting a maid to change a light bulb or do something like that, which is different from Asia.

Different Workforce Composition

The composition of the workforce in the Australia hotel industry is different to Asia, as nearly two-thirds of staff are either part-time or casual, whereas the staff in Asian locations are mainly full-time. Such staffing composition has implications on training outcomes and motivation.

Different Cultural Values

Asian countries like China, Taiwan and Singapore are more collectivistic in cultural values, whereas non-Asian cultures such as Australia are more individualistic. Moreover, Western cultures, such as Australia, United Kingdom and United States, have smaller power distance than in Asian countries [5]. The management of the Shangri-La group noted that their Asian employees think their guests have higher social status than them and will treat guests very respectfully while Australian staff would think that they are doing a job to serve the guests but they are equal in status. Although the Shangri-La group had training contents that were widely used in Asia, the management of the Shangri-La group was willing to adapt the training contents as well as after-work social activities to suit the needs of their Australian employees. The management of the Shangri-La group also found the strengths of Australian employees differ from their Asian counterparts in areas like empowerment and anticipation of customer needs. Moreover, it was noted that Australian employees learn quicker in the training session and require less repetition of concepts when compared to Asian staff [6]. The above observations led to the redesign of training contents and adaptation of company communications, including accepting exceptions to organisational routines, such as reducing the training sessions as well the repetition in the training in Australia. Those adoptions all contributed to the preservation of the Shangri-La group's Asian brand identity and the success of this Chinese parent company when expanding into a non-Asian market like Australia.

Conclusion

The Shangri-La group repositioned its brand label from ''Asian hospitality'' to ''Shangri-La hospitality'' after entering the Australian market. Chinese companies, like the multinationals that have come to China over the past two decades, are reaching for opportunities in new markets abroad. Similarly, they will have to acclimate to new surroundings, just as the foreign companies that entered China did. In terms of adaptation, two key adaptations Chinese companies often need are adapting organisational culture and balancing cultural norms [7]. Firstly, many Chinese companies need to redesign organisational culture in their expansion beyond China, as many of them are still organising from the top-down, and the headquarters is the nominal centre where decisions are made. Secondly, Chinese companies often need to find a balance of cultures as they globalise, because similar to the case study of the Shangri-La group discussed above, they will face the challenge of combining Chinese and Western forms of communication and cultural norms. For many, this will be one of the greatest obstacles to global integration and to performance in global settings.

Questions

1. Discuss the market entry challenges faced by the Shangri-La group in its expansion into the Australian market.

2. Explain the common adaptations Chinese companies might need in entering the Western markets.

3. Discuss the possible challenges facing by emerging markets' brands when expanding into a Western market.