NAME: Roxas, Angela Mae C.

and Quimio, Harvey COURSE & SECTION: BSIE-4A Case Analysis #18 - Shangri-La Hotels Overview Shangri-La Hotel is a facility of services which provide places to stay for customers around the world. It is known as a hotel or a resort for consumers to relax or even have a vacation at the hotel. Shangri-La Hotel is a much known hotel in Singapore because it was founded there itself. Shangri-La Hotel has provided a hotel for business traveler. Therefore, it has made another target of business in its management. With these targets, the company has proven to be the world’s best finest hotel in management, and services. This hotel has also been situated in Malaysia itself, which have also become a finest hotel for business travelers and also travelers around the world and locally. Therefore, with these achievements, we have decided to make a research about the company itself and prove of its facility that satisfies us as a customer. Company Highlights  In 1971, Shangri-La Hotel, Singapore opens  In 1981, Kowloon Shangri – La opens  In 1983, Shangri-La International Hotel Management Limited (management takeover of Shangri-La Hotel, Singapore)  In 1984 November, Shangri-La Hotel, Hangzhou (management takeover of Hangzhou Hotel)  In April 1985, Shangri-La Hotel, Kuala Lumpur opens  In March 1986, Shangri-La Hotel Bangkok opens  April, Shangri-La Hotel Penang opens  October, Shangri-La Hotel Beijing opens  In December 1988, Shangri-La’s Tanjung Aru Resort, Kota Kinabalu (management takeover)  December 1989, Traders hotel, Beijing opens  July 1990, China World, Beijing opens  In March 1991, Island Shangri-La Hong Kong opens

Hong Kong (Shangri-La assumes management)  In March 1994. We will be environmentally conscientious and provide safety and security for our customers and our colleagues. care and integrity in all our relationships We will ensure our policies and processes are customer and employee friendly. Shangri-La had a total of 35 hotels and resorts in Asia  In 1997. We will demonstrate honesty. Shangri-La Hotel. We will enable decision making at customer contact point. Shangri-La Hotel. April Kowloon Shangri-La. Shangri-La Hotel. . Jakarta opens and Shangri-La Hotel. Australia. Wuhan opens and Shangri-La Hotel. We will make customer loyalty a key driver of our business. Shangri-La Hotel.“Delighting customers each and every time” Vision .“Shangri-La hospitality from caring people” Guiding Principles (Core Values)         We will ensure leadership drives for results. We will create an environment where our colleagues may achieve their personal and career goals.  July 2003. Cairms re-branding  February 2006. Sydney. ANA harbor Grand Hotel rebrands as Shangri-La Hotel. Harbin opens  In 2003. Guangzhou opens  Best Business Hotel Chain in Asia Pacific by Business Travelers (U. Dubai opens  August 2004 Shangri-La Hotel. and Germany)  Best Hotel Chain by Chinese Hurum report (China) Company Mission. We will be committed to the financial success of our own unit and of our company. Qingdao opens  In April 1999. Vision. Shangri-La Hotel. employees.“The first choice for customers. Shangri-La Barr Al JIssah Resort and Spa. Core Values and Philosophy Mission . The Marina. Muscat opens  In 2007. shareholder and business partners” Philosophy . Surabaya opens  In 1995. Putrajaya Shangri-La Hotel opens  July 2003.K.

Service Model of Shangri-La Shangri-La’s service model of “Shangri-La Hospitality” was built in five core principles:      Respect Humility Courtesy Helpfulness Sincerity . The company launched its culture training program. THE 7 P’S OF SHANGRI-LA HOTEL  People  Place  Process  Product (Services)  Price  Promotion Shangri-La Care Shangri-La Philosophy was to develop local talent to world class expectation.  Care Module 1: Shangri-La Hospitality from caring people .The core of the Shangri-La brand was steeped in offering customer an unforgettable experience by blending local culture.  Care Module 2: Delighting Customer  Care Module 3: Recover to Gain Loyalty  Care Module 4: Take Ownership . exotic art and lively ambience.

performance still varied considerably from hotel to hotel. Computer Lab 3. Training lounge 6. The training facility had six training rooms: 1.Shangri-La’s Organization Structure Shangri-La used Five-level organization design:      Level 1 – Divisional Manager Level 2 – Departmental Managers Level 3 – Sectional Managers Level 4 – Front-line Supervisor Level 5 – Front-line Employees Training and the Shangri-La Academy The Shangri-La’s commitment to highly personalized guest service. Internal / External Analysis Strength World’s Best Management Hotel Shangri-La represent the Asian Culture Luxury facilities which make the customer comfortable Shangri-La owns strong capital and service that help it earn good reputation Customer loyalty . Housekeeping practice suit The goal was to develop a new breed of hospitality professional with enhanced skills and a strong service orientation equipped to adopt innovative approaches in tackling challenges at work. Training restaurant 5. Library 2. The training program focused on heavily on preparing employees to more effectively utilize decision making authority through the use of progressive and interactive instructional methodologies. Training and demonstration kitchen 4. such as a role playing to create the circumstance employees would face.

. Strategic Implication To retain its workforce. Recommendation    Shangri-La is to ensure that signature quality and service standard are translated to a new hotel’s in new market. Opportunities Expansions on other countries especially in western countries.- Good relation with the staff Giving the employees training program in every culture (i. Western and Asian Culture) Weaknesses Shangri-La is not famous in the other continent. Australia and North America. China was not Shangri-La’s only focus. Threats The competitors are strong There are lots kinds of hotel. Hotel facilities will attract them. The company was about to launch multiple hotels in Europe. Tourism develops faster and faster. Maintained a high staff-to-guest relation. including non-pay recognition to motivate employees. The company also tried alternative methods. So it hard to attract those customer. so Shangri-La does not have tremendous competitiveness. well defined career paths. the company focused on creating on creating transparent.e. During the expansion the main concern is to maintain worldwide service quality standard and deliver excellent service to customers. the hotel consumption of the people will continue to increase. They need to maintain control and translate Asian Model into tighter labor markets in the western world.

  Shangri-La pursue creative methods to mobilize its workforce around the globe for the short and long terms Opportunities were provided to move up within properties and to move across to other properties. An important component is to offer a compensation package that is sufficient to retain employees but not so high as to eliminate operating profits. That package might include a higher salary or greater incentive-based pay to better align the goals and efforts of employees with that of the company.  Hotel management services to group-owned and third-party hotels.A. QUESTIONS/ANSWERS: 1. and management approaches underlie Shangri-La’s efforts to execute its strategy are: Training .  Property development including commercial buildings and serviced apartments. and 2. What are the key elements of Shangri-La Hotel’s strategy? Which of the five generic competitive strategies described in Chapter 5 is the company employing? What is Shangri-La’s strategy for competing internationally? Operating in four main business segments including:  Hotel ownership and operations.) New York: McGraw-Hill/Irwin. support systems. What policies. . support systems. Shangri-La offers a more competitive compensation package to help retain its trained employees. and management approaches underlie Shangri-La’s efforts to execute its strategy? The policies. (2009). Reference Thompson. practices. A. practices. Crafting & Executing Strategy (7th ed.

which included level two and three employees. there was a common bonus pool that linked compensation not to individual performance. Compensation System The three-tier compensation structure was designed to support organizational goals at various levels.” This culture encouraged employees to go the extra mile and emphasized the importance of acknowledging and fixing mistakes when made. was linked to financial results and. Organizational Structure Shangri-La’s five-level organizational structure was also supportive of its strategy execution as it empowered them. which included hotel general managers and division heads. 3. Career Path The company’s career path was designed to retain Shangri-La’s well-trained workforce by offering well defined career paths. How important are the company’s training and Shangri-La Care program to its success? What is your assessment of Shangri-La’s compensation policies and career growth effort? What pluses and minuses do you see? A well-designed reward structure based upon monetary and nonmonetary rewards is the most powerful tool to build commitment and to sustain employees’ commitment to organizational . which were key indicators of how well Shangri-La executed its strategy. to customer satisfaction and customer loyalty scores. The culture also encouraged employees to take responsibility for customers’ satisfaction. gross operating profit and gross operating revenue attainment) to help hotels reach goals. which included level four and five employees.e. The company’s policy of promoting from within helped enhance the value of the career paths. to directly address guests concerns.. within limits. but to overall property performance.Culture Training The managers of Shangri-La believed that superior service was a key to their differentiation strategy and they worked to build a strong. more specifically. compensation included a salary and a bonus. At each level in the organization employees had a specific dollar amount that could be used to address customer requests that might fall outside of normal operations. At the first level. These career paths offered upward mobility driven by rapid international expansion as well as lateral mobility by moving from hotel to hotel. In the third tier. service-based culture to ensure that each employee delivered service the “Shangri-La Way. Compensation for the second tier. The bonus was tied to financial results (i.

thereby encouraging standard delivery of worldwide excellence. Students should recognize that these programs were the cornerstones of Shangri-La’s successful strategy implementation. humility. corporate culture affects how organizations conduct business. if not impossible. In this case the corporate culture is critical to the company’s success. Subsequent modules of the Care program were launched to improve retention and guest loyalty and to emphasize the importance of recovery when a mistake was made. Its training program ensured that employees had the confidence to make decisions to improve each customer’s experience. If the employees do not share the corporate culture it would be difficult.goals. the training program highlighted common mistakes to avoid while emphasizing best practices to pursue. as was the case in China. 5. beliefs. More specifically. business principles. courtesy. What are the key features of the culture at Shangri-La Hotels? How important is the culture in the company’s success? Explain. To help instill employees’ confidence to take this initiative. Equally important. Shangri-La’s Care program sought to develop local talent to world-class expectations. ingrained behaviors. 4. helpfulness and sincerity. work practices and styles of operating. The training program also sought to overcome cultural challenges that might inhibit employees taking initiative. What impact do the company’s mission statement and the Shangri-La Care program have on the company’s culture? This culture is shaped by its core values. Shangri-La’s training and Care program were critical to its success as the successful execution of its strategy to offer a unique Asian luxury hotel experience depended on maintaining a capable workforce. especially since the company differentiates itself based on service. As such. Key elements of this strong culture include the company’s guiding philosophy and its mission statement. Shangri-La developed a competitive advantage based upon personalized guest service that required a capable workforce. The company’s structure and culture was based on empowering employees through the delegation of authority. as shown in case Exhibit 6 and the five core values of the Shangri-La brand of hospitality (respect. What core/distinctive competencies has management at Shangri-La tried to build and nurture? What challenges does the company face as it attempts to transfer its core and distinctive competencies to other cultures? How has the company attempted to resolve these challenges? Has it been successful in doing so? . traditions. for the company to live up to its Shangri-La Care standards.

To accomplish these goals Shangri-La developed core and distinctive competencies in human resources management. humility. employees were expected to adapt to the local requirements and expectations of each country and were given personal decision-making authority to accommodate guest requests. What does the company’s financial and operational performance reveal about how successful its strategy and strategy implementation efforts have been? Should shareholders be pleased with the company’s financial performance? Why or why not? What financial and operating performance pluses and minuses do you see? Shangri-La’s strategy in terms of planning and implementation appears to have yielded solid performance. courtesy. Shangri-La has recorded impressive growth. Hence. exotic art and lively ambience. 6. What challenges does Shangri-La face in expanding into Eastern China? Do you believe the company’s current policies and operating procedures will be sufficient in addressing these challenges? If so. A high standard of service excellence stemmed from its mission to “delight customers each and every time. Students should recognize that the company’s total expenses grew at a slower rate of 53% during the same 4-year timeframe. The cornerstone to offering an experience with which few other hotels could compete depended largely on Shangri-La’s competitive advantage of offering personalized guest service. 7.They wanted to create a distinctively unique hotel experience based upon Asian standards of hospitability and service. with total revenues increasing by 67% between 2002 and 2006.” Both its hospitality and service relied on Shangri-La’s ability to blend local cultures. why? If not. Each hotel was expected to serve its clients in the way their society deemed acceptable. what else may need to be done? . especially in employee training. Shangri-La’s brand of hospitality was built around five core principals – respect. This competitive advantage relied on a well-trained and well-compensated workforce that could consistently deliver high levels of service across a variety of cultural norms and preferences. Students should also notice that operating income grew by 123% and net income grew by219% between 2002 and 2006. helpfulness and sincerity.

In low wage and developing markets such as China. competition from local hotels. How do the challenges associated with Shangri-La’s expansion into Europe. Additionally. Australia and North America are different than those encountered in China.-based Marriott chain. Profits are likely to be further eroded as demand for trained employees drives up wages.0 staff per guest. it must focus .S. the quality of training that Shangri-La offers to its employees makes it attractive for poaching. Shangri-La could maintain a ratio of staff-to-customer ratio of 2. By 2006.Shangri-La faces several challenges in its efforts to expand to Eastern China including competition from international hotel chains. which can be minimized by increasing fringe benefits. How big a threat does the expansion of other hotel chains into China pose for ShangriLa Hotels? What specific challenges are likely to arise as a result of this expansion? How should Shangri-La address these challenges? This type of expansion is likely to lead to increasing rivalry for both customers and suppliers. or salaries. As Shangri-La enters hypercompetitive markets. nonmonetary recognition. and French-based Accor targeted China for new growth. what else may need to be done? The challenges that Shangri-La faces in its effort to expand to Europe. Australia. a hypercompetitive market is likely to result in the erosion of profits as hotels utilize competitive weapons to out compete their rivals and build market share.K-based InterContinental Hotel Group (IHG). Students should note that the most critical challenge confronting Shangri-La in expanding into these areas has to do with maintaining an adequate ratio of staffto-guests in light of relatively more expensive labor markets where trained hotel staff was in short supply. China had become the world’s fourth largest economy and a very attractive destination for tourists. Hence. 8. Although the Chinese market represents a lucrative and growing market. and wage pressures. resource-rich international hotel chains such as the U. why? If not. the U. 9. and North America compare with the company’s expansion in China? Do you believe the company’s current policies and operating procedures will be sufficient in addressing these challenges? If so.5 to 3.

The company should design the compensation structure in a manner that is sensitive to the diverse cultures in which they operate 10. Expansion of operations without retention of the organization’s culture is likely to produce inconsistent service across countries. but they must work hard to retain that workforce through both financial and non-financial forms of compensation.Shangri-La will have to engage in more aggressive training to ensure that their way of doing things is perpetuated as they expand internationally.Attentive students will tend to pick this up and make recommendations focusing on this issue. While we have no reason to believe that the company is not making hires that are supportive if its culture. What recommendations would you make to Symon Bridle to improve Shangri-La’s prospects for continued success? .on not only training its workforce to implement a strategy that emphasizes a unique experience. . That package might include a higher salary or greater incentive-based pay to better align the goals and efforts of employees with that of the company. . it would be worthwhile for them to explore developing a selection process that focuses on identifying key characteristics in their applicants. ShangriLa should expand their operational training and cultural training efforts to maintain a high quality of service and decision-making. .Shangri-La offers a more competitive compensation package to help retain its trained employees. An important component is to offer a compensation package that is sufficient to retain employees but not so high as to eliminate operating profits.

First Asia Institute of Technology and Humanities School of Technology Industrial Engineering Case Analysis # 18 Shangri-La Hotels Submitted by: Angela Mae C. Gevaña February 21. Darwin R. 2011 . Roxas Harvey Quimio Submitted to: Engr.

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