The Expansion Strategy of Jumeirah Group of the Hotel - Literature review Example

? Management Essay Introduction Most companies are embracing expanding into international market to grow their revenue and reduce the impact of competition within their home country since international diversifying strategy can enhance company’s’ growth and performance (Hwee 2007, P.17). A company may grow internationally through setting up new enterprises to a new area that has not been tapped, through buying off a company or integrating with an existing company (Marcelo at el 2008, P.1). Travelling for leisure of business mostly involves crossing national and state boundaries (Prokkola 2010, P.223) and tourism and hotel services provider must tap into providing competitive services and products to the visitor travelling to their company. Jumeirah Group is multinational company that operates luxurious hotels and serviced apartments in Dubai, Rome, and Shanghai, Germany among other places in the world and its headquarters is Dubai (Newswire, 2012). The company was found in 1997 and is affiliated to Dubai Holding (Hornett, G 2013). The company is planning to grow their operation by establishing five star luxury hotels in various countries in Africa one of them being Seychelles. Seychelles is a group of about 115 granite and coral tropical island in Indian Ocean (Background Note: Seychelles 2007). Its temperatures vary all round the year though they are humid due to their size. Mostly people occupy Major Island while small islands are sparsely occupied, with most of residents being Africans, Indians, Chinese and French settlers while others are expatriates (Political Conditions 2012, P. 10). Their culture is a mixture of French and Africa though most used language is English and French. This paper will critically analyze expansion strategy of Jumeirah group of hotel in this island nation. Feasibility analysis Indian Ocean islands depends on tourism as a main economic activities with Seychelles and Maldives being the most preferred than the rest in terms of gross domestic product, employment, tourism income and tourism ventures investments (Prayag 2011, P.221). For example in 2010 tourism contributed to the Gross domestic product of this islands as follows Mauritius 26.5 %, Reunion 4 % in Madagascan 12.7 % % Maldives 63.4 % and Seychelles 46.4 % while it also contributed to the national employment about 14.2 % of the total new appointment in Mauritius, 1.9 % in Reunion,3% in Madagascan, 28.1% in Maldives and 31.5 %Seychelles (Prayag 2011, P.223). In recent times Indian Ocean islands have recorded increase in tourism activities due to their favorable climate, geographical isolation, relatively long coastlines, diversity of ecosystems, cultural diversity and political stability (Prayag 2011, P.223). However there have been challenges in this industry such as poor working conditions for the employees, high staff turnover, environmental degradation, poor staff training and insufficient rules and regulations (Prayag 2011, P.223). Major islands in Indian Ocean that include Mauritius, Reunion, Madagascar and Seychelles have teamed up to Form Vanilla islands to market their countries as tourist destination with the aim of increasing visitors (Ramchurn 2011, P. 49). The combined strategy is to increase their competitive advantages over other island tourist destination like Caribbean and Maldives islands due to their diverse cultural experiences. Their plan is to win the confidence of the services providers such as hotels, Airlines, tour operators and the media to connect the islands. The major advantages of Vanilla islands over the Caribbean island are their cultural diversity and they are not far from each other thus reducing jet lag (Ramchurn 2011, P. 50).Tour operators have introduced itineraries that cover all the regions and Airlines have also introduced connection flights to islands. This combined strategy is likely to increase tourism flow as the tourist will be able to get diverse experience in one trip as compared to planning several trips to each of the island. In 2008 the tourism board of Seychelles joined up to market Seychelles as a tourist site destination due to their food, fine art, and customs (Precision Marketing 2008, P.2). CNN being an international media both on internet and TV would reach thousands of people who might be interested in visiting the island country. Seychelles being an island s also major research area therefore it’s also a destination for scientist from major environmental and research organization, who require accommodation facilities. Another attraction to these islands is their cuisine. According to (Fatimah and Milne 2011, P. 134), traditional foods tourist enhances experiences and play an important role as a tourist attraction. Seychelles is a unique country ever growing numbers of tourist and research associate visiting the islands per year and Jumeirah hotels and resorts grow their business in Africa through the islands. Market Analysis The economy of Seychelles depends on Tourism as well as fishing (Background Note: Seychelles 2007) and tourism is directly related to hotel business. Tourism and hotel industries contribute to the economic growth of the country though direct and indirect employment, infrastructure development, natural resources and cultural conservation, growth of new industries and revenue to the government (Douglas 2013). Findings from world economic forum show that Seychelles was ranked as number one tourist destination in Africa and number thirty eight in the whole world in 2013. Its tourism infrastructure are ranked as number six in the world and therefore hotel companies need to perfect their products and services to increase their competitiveness (Douglas 2013). It’s for this reason that the Dubai based hotel chain want to grow in this country. The company operates luxury five star hotels and wants to maintain its standard across of the continent with the aim of offering standard services for all its customers and ensure customer loyalty for their customers who travel to different continent. The company usually develops hotels with unique design which offer world class services and some of them have been elevated as tourist attractions due to their design. Seychelles has realized tourism growth in the last six years as well as direct airlines operating between UAE and Seychelles thus easy to do business (Douglas 2013). Nevertheless present are rival companies in the market for example four seasons and Raffle hotels that over personalized services to their customer with their main package being the honeymoon package for couples due to its stunning ocean view (Cruising News 2012) Seychelles have also enjoyed stable political and economic activities thus encouraging investors. Financial analysis International diversification is when a company starts to operate in new country (Marcelo at el 2008, P.1) with the aim of increasing profits. This is a good strategy for growth due to reduction in political and economic risks as well as increase in customer base. However this requires a lot of resources and is costly to establish a new company, acquire or merge with another company. The cost is in form of staff recruitment, transport of the staff from parent country, communication cost, expert consultation cost, marketing cost, exchange rates, inflation and other related cost (Marcelo at el 2008, P.1). The company can grow international through acquisition, merging or starting a new venture (Allen and Gorgeon 2007 P.10). Jumeirah hotels and resorts intend to start a new venture which is less costly compared to acquisition but takes time due to development (Allen and Gorgeon 2007 P.10). The company focuses on high end customer and would want to develop an ultra modern facilities hat is in line with their other hotels in Middle East. This method allow the company which has strategy of offering standardize services to their customers all over the world control over daily running of the hotel, organizational structure of the hotel, booking and reservation and operations (Leon-Darder at el 2011,P. 109 ). Potential high growth rate of tourism and travel industries is the major consideration of the hotel group to invest massively in Seychelles. The hotel intends to build an ultra modern facility in Seychelles. The company will get a loan from international lending banks to cover the constructions cost which include cost of land, contractors cost, surveyor cost, designer cost, cost of building materials, Architectural Fees among others. Other costs on the building may include cost of furniture and unexpected costs For proper administration and operation of the hotel the company will require recruiting a General manager, marketing manger, human resource manager, operations manager and finance manager from both local host country and the parent country. With he help of recruitment firm or human resources department the company will also recruit the other hotel staff that may include sales executives, chefs, waiters, accountants, customer services representatives among others, and this under taking can be costly if not carefully done. The company will also allocate budget for marketing and advertising he new hotel locally and international to its target customers, tour operators and Airlines. Marketing In Seychelles, the hotel major target is the high end customer who visits the islands for leisure as well as the expatriates. The company will be focusing on marketing to who have visited their other hotel to use their facilities when in Seychelles. To tap to the other customers, the hotel will establish an interactive website that reflects the cultural diversity of Seychelles and other island countries since website that communicates indigenous values attracts the attention of the visitors (Moura, at el 2012, P 43). Most international travelers rely on word of mouth and internet when choosing their destination and tourism services providers. The company will provide excellent services to their customer to ensure loyalty and referrals for business growth. Management analysis Expansion to Africa dictates that the company employ more managers to head various departments like marketing, finance, logistics, human resources among other departments though the company will still have a centralize managements for the core operation activities. The company will also seek consultation services from local experts to avoid making wrong decisions (vessels 2012). Jumeirah hotels and resorts are owned by Dubai holdings and in Seychelles the company will be integrate local employees with international employees. Strategic position of the islands and introduction of flights from Middle East helps to ease flow of labor force since most of the top managers in tourism industry can be able to work across national borders (Prokkola 2010, P.223). Bringing together employees from different cultural backgrounds helps to build a strong and competitive team since each employee have different talents, experiences and skills. Employees from the parent company understand their services, products, organizational culture and hospitality industry while the local experts understand he new market trends, rules and regulation of local trade, cultural background of the host country as well as political and economic risks. Top level manager who will be from the parent company must be willing to learn from their employees since understanding new market takes several stages including excitement phase, distress phase, understanding phase and finally affective phase (Dewald and Self 2008, P. 353). The ideal situation is to have a general manager from Seychelles while other top managers are sourced from the parent company (Vessels 2012).Effective management and marketing strategy must in line with institutional culture as well as national culture to promote harmony among employees and between employees and clients since hotel industry is relationship industry. Jumeirah hotels and resorts penetration in African market is a long term goal to increase its profitability, excellent customer services and customer satisfaction as well as proper management, staff retention and proper business ethics will help achieve this goal and that is why establishment and sustainability of good management team is important. Risk analysis Venturing into new market is a risk every multinational company takes that can be ether profitable to the host company or lead to loss of revenue. The cost of establishing the new company may be higher than the actual revenue generated by its operation therefore the company should pay attention to both new and parent company. Some companies may neglect the parent company which is the source of revenue for expansion. The company should conduct a formidable research to minimize cases where the parent company buys new non profitable multinational (Mitchell at el 1992, P.420). Seychelles is relatively stable politically and economically with large population enjoying good living standards (Seychelles Country 2012, P.12). Being an island country, it has been affected by piracy though the problem has been minimized with the help of France government, European Union and United States (Seychelles Country 2012, P.12). With political, economic and security stability and the recent classification as the most visited tourism destination in Africa (Douglas 2013), there is possibility of potential growth in hospitality industry and Jumeirah hotels and resorts can tap into this market. Jumeirah hotels and resorts are luxurious five star hotel located in prime areas offering personalized service to high income earner. The greatest risk of the company investing in Africa is harmonizing the cost of the services with the service offered. There is need for more research to determine if the African Market it willing to pay the prices or the company will have to offer the standardized services at lower rates. The other challenge is competition from other hotels offering luxurious services such as Raffles Praslin Seychelles (Cruising News 2012). The competition can be reduced by adopting strategic management style, Good customer services, offering valuable services and good staff relation. Cultural analysis Seychelles is a multicultural country with people from different ethnic groups that include descendants of French settlers, African slaves, Indians, Chinese and expatiates. Their dominant culture is French and African (Background Note: Seychelles 2007, P.2). The diverse culture fro different region has led to the vibrant colorful culture of the islands that is seen trough their songs, house design, artistic designs, food and dances. This vibrant culture is a major tourist’s attraction. The local African language is Creole through English and French is mostly used but its national language is English. Most people who visit the islands are travelers for leisure to enjoy their cultural practice, beaches and ocean environment. Cultural diversity is one of the motivational factors that determine the choice of a tourist destination though the decision is also based on social needs, personal preference and psychological satisfaction. Personal satisfaction plays a major role in choosing a tourist destination. Seychelles have cultural diversity that enhances tourist satisfaction in terms of accommodation, leisure activities, food, transport and sight seeing. (Manrai and Manrai 2011, P. 33).Its major Economic activities is tourism as well as fishing and therefore any company providing tourism services should focus to grow its business in this country(Background Note: Seychelles 2007) Jumeirah hotels and resorts has a history of developing hotels and serviced apartments with unique service as well as physical design that is also regarded as an attraction site. The hotel will incorporate both the Seychelles culture and modern culture to give the hotel the indigenous feel. The management team will also include both the local expert and expatriates from their parent country thus integration of both cultures. Conclusion Currently Seychelles is facing rapid growth in tourism and hospitality industry due to its strategic Geographical location, Tropical temperatures, natural beaches, long coastal lines, diverse cultural practices and traditional dances and music. The tourism board of Seychelles plus the other surrounding islands have also embarked on marketing the region as a tourist destination to the tourist and investors such as airlines, hotels, tour operators and other service providers to develop tourist supporting infrastructures. Seychelles has also been ranked as number one tourist destination in year 2012 in Africa. Due to this recognitions most company are willing to invest in the tourism sector and such company is Jumeirah hotels and resorts which is owned by Dubai based company. The hotel and resort group offer high class service to leisure and business travelers with presence in Middle East, Europe, and now targeting African Market. Seychelles present a potential opportunity for any hospitality company planning to venture into African market. However the company must conduct a comprehensive market study to determine its long term sustainability due to high competition among the industry players, its economic and political stability, and environmental degradation due to its small size, cultural degradation and criminal activities such as piracy. Jumeirah group of hotels needs to conduct research on market trends and involve local experts to avoid making investment mistakes. Inappropriate investment decisions can turn a profitable business venture to non profitable business idea that might pull down their other hotels that are currently performing well in their respective markets. References Allen, D and Gorgeon, A 2007 Diversity Strategy, IE Business School. Mardid. Spain. Business Source Complete, EBSCOhost, viewed 14 April 2013. Background Note: Seychelles. 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