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CASE 3: INTERCONTINENTAL HOTEL GROUP’S ENTRY INTO CHINA

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Meg Mica

on 31 May 2016

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Transcript of CASE 3: INTERCONTINENTAL HOTEL GROUP’S ENTRY INTO CHINA

CASE 3: IHG’S ENTRY INTO CHINA
CONTENTS
Introduction
External (Environmental) Analysis
Internal (Organizational Resources) Analysis
Summary of Situational Analysis – SWOT
Recommendation
InterContinental Hotel Group is one of the world’s biggest hotel chains.


The company operate their hotels in three different ways : Franchising, Managing and Owned.
Enter China market in 1984 makes IHG was among the earliest international hotel chains to enter the China Market
The group shows rapid growth each year; 2007:manages 76 hotels and was names as the top 10 International hotel chains in China
Introduction
External (Environmental) Analysis
Summary of Situational Analysis – SWOT
By:
1601287915 ISMI ADILLA AYUMI
1601262761 KEVIN IBRAHIM
1901567615 LEE JEONGBIN (BEN)
1601249614 MEGAWATI HENDRA
1601263461 MEYLIZA THORINA
1901567325 SARA BELLOUTI
PEST Analysis
Political:
Foreign lodging group entering China: Chinese shareholders trust in international companies
China investments in IT and transportation infrastructures
Economical:
Economic growth of China
Personal income in China also increases  higher buying power
Socio-cultural:
Harmony and balance value: competence leads to confrontation
Personal relation importance (“Guanxi”)
Brand confusion: Holiday Inn
Technological:
Advance IT infrastructure development
Porter’s Five Forces Analysis
Threat of New Entrants
Barriers to entry: low - moderate, as capital requirement is relatively low - medium, and many big companies are still capable to afford it.
Strong brand portfolio
Advance IT infrastructure, but still not protected and relatively easy to imitate, thus other companies still be able to copy it.
Economies of scale
Customers can easily switch between the different products offered by the lodging industries
Overall: Low to moderate
Threat of Substitutes
Many substitute products available
Customers can easily find the product/services that the company offering at the same or even less price
Quality of the competitor's product might be better
The competitors offering substitute products are earning high profits thus they can reduce their prices to a low level, making it more attractive for customers
Overall: High threat of substitutes
Bargaining Power of Buyers
China is the world's most populous nation  huge number of potential customers
Product is not differentiated in the eye of the customers: switching cost to competitor's product is low
Buyers are price sensitive
Overall: Moderate to High – Buyers are no more interested from whom they are going to buy as they will tend to compare costs in order to find the best option
Bargaining Power of Suppliers
Suppliers are concentrated and well organized
The product offered has competitive advantages: economies of scale on global level, a strong brand portfolio, and global IT infrastructure
Moderate cost of switching suppliers
Overall: Moderate
Industry Rivalry
There are a number of equal competitors (Starwood, Accor, Marriott, and Wyndham)
Customers have low switching cost among product choices
Hotel industry in China is growing
Exit barriers are high, hence rivals stay and compete
Fixed costs are high resulting huge production and price reductions
Overall: High
Internal (Organizational Resources) Analysis
Recommendation
Joint ventures with state-owned properties
Blend in with the local value of "GuanXi“
Data base marketing and personalized customer service: record the client database, and utilize the data to be analyzed further for the company to improve the customer service.
Enhance the IT infrastructures: Apps, POS system, online billing/ reservations
Outsourcing/ utilization of trainee or daily worker
Strength:
A well recognized brand name & one of the largest international hotel chains in China.
Leader in hotel chain group with 7 popular hotel brands in China.
The 1st international hotel chain that launch a Chinese language website and the first who offer online reservation options to customers who do not use credit cards
Alliance with big company such as Air China.
Famous with business travellers
The number-one loyalty program in the industry and owns the industry’s most visited website
The acquisition in 2001 strengthen the upscale market position in China
Central reservation was launch to handle greater China reservation
Obtained many Awards in China
Economic of Scale strategy
Good relations with the Stakeholders

Opportunities:
China’s economy will continue its strong growth.
China’s tourist market maintains its rapid growth.
The United Nations World Tourism Organization (UNWTO) forecasted that China would become the world’s leading tourism destination by the year 2020
The nationwide increase of business and leisure tourists will create the need for hotels in coastal areas. IHG has recognized this great opportunity and included many developing projects.
China is investing heavily in transportation infrastructures.
The open door policies created a rapid growth on the tourism industry
China walks away from planned economy and moves toward the market economy, resulting easier expansion in China
Weakness:
Target segmentation scales are limited to upper scale and midscale
There is a different perception of Holiday-Inn brand hotel. In China, it is counted as an upper scale hotel while in Western countries are not.
The upgrade in China of HolidayInn to be an upscale class could come as a shock for International tourists.Target segmentation scales and limited to upper scale and mid scale
Product are standardize which could be less attractive for traveler who wants to have the cultural experience
The big scale strategy makes IHG could not focus on one brand or specific area.
Threats:
Fierce competition in the Hospitality and tourism industry in China
IHG does not have luxury brand in China market hence luxury tourist would gone to Marriot and St. Regis
Other International hotel are speeding their expansion IHG should create a luxury brand hotel to accommodate the luxury target market.
Domestic hotel offers more rooms and more cultural experience
Internal analysis is the process of identifying and evaluating an organization’s specific characteristics, including its:
Resources
Capabilities
Core competencies

Competitive advantage is what sets an organization apart. Without a sustainable competitive advantage, the organization’s long-run success and survival are uncertain.

Economy of scale
Sales time around the globe that counts for 77% of the world’s market

Weaknesses:

IHG offer could be more diversified

IHG is not covering all the different market segments (luxury brand as well as economy/budget), it doesn’t have any luxury brand in its mix

Different perception of Holiday-Inn brand in China (upper scale hotel) while in Western countries is not

Too much standardized product could be less attractive for travelers who want to feel Asiatic or Chinese experience
Full transcript