Entry Modes In Hospitality Industry Tourism Essay
Research carried by the author has pointed out the differences in the choice of entry mode of Accor in Thailand and China. According to interviews carried before the analysis, managers in Thailand assumed the foreign direct investment as the major choice for local market, which can intensify the network of hotel chains and avoiding financial constrains.
According to Sass (2003), FDI is an entry mode which bounds the international business with the domestic ones. Thus, this choice is appreciated by the local government in Thailand, which may be too busy in political reconstruction to get into the rebooting of tourism and hospitality industry.
Meanwhile, acquisition is applied by Accor Thailand in order to get acceleration in network expansion. This is mostly realized by management contract, which according to Esperanca (1992), can separating the ownership from the management. However, the long-term contract is related to the motivation systems for the owners, which also admitted by Thailand managers that credibility, trust mechanism are still needed to be constructed for the local owners.
Different from this, the strategy in China, especially in the brand Ibis owns the unique characteristic. Although franchising is assumed to be the ideal choice for franchisor and franchisee by the assistance in operation system and the quicker mode to establish network (Pine &. Zhang, 2000). It is the fact that many countries are lack of the stable environment which facilitates the process of franchising. As a consequence of this, the overall and diversify market in China is become the ideal choice for this attempt. After all, franchising is putting the reputation of the brand into danger. Once the operation in one point is facing crisis, the whole brand reputation will be called into question.
2.0 Reasons contributed to the different strategy
2.1 Relationship with local strength in host countries
This element is viewed as an influential factor in the extension strategy for international hotel chains. While in consideration of the circumstances in those two countries, it is easy to find out the differences into this factor.
The first fact is the leading position of Accor in Thailand, which make it more convenient to expand within that country without real competition. Meanwhile, Accor in Thailand is trying to develop better relationship with travel agencies, which can help the process of promotion in current downturns. Even though this efforts is turning unsatisfying results, which can be reflected by the merely 3% guests who claimed to be introduced into the hotel by travel agencies, this efforts in this area are still worthy. Since from long-term perspective, the markets in host countries, especially in new booming ones like Thailand, are more essential for the development of international hotel chains (Gammeltoft& Pradhan, 2010). Cooperation with local strength may change the disappointing situation on the overall brand promotion for Accor in Thailand.
However, in Chinese marketing, the most worthy way to cultivate is not the one of travel agency. Since many travel agencies in China are limited in moderate scales and not be trusted by travelers, especially native people. Due to the situation in China, that reflects as the relatively close relationship shared by Chinese among friends and family. The results of 23% interviewees who claimed their recognization of the brand is from friends and relatives have provided evidence to this aspect. As a consequence of this, it is understandable why Accor promotes Ibis, which is a economy hotel, widely in Chinese market. Since more local tourists will be attracted by the recommendation from friends. Besides the target group, the local brands and government can also be viewed as important strengths in China for Accor Group.
Most MNCs, especially those indulged in service industry like Accor are attracted by China for the low cost of labor, since most of these industries are known as labor-consuming. However, the Chinese government is claiming the efforts they will put in the transformation in this area. Policies will be put more highlights on high-tech area. Thus, for Accor Group in China, it is not advisable to perceive the low cost of labor as an advantage. This is just be self-evident by the efforts Accor have put into the promotion of brands belongs to high class like Novotel as a sign of quality-provided chain.
2.2 Culture aspects
Lake of cross-cultural awareness is the major reason which contributes to the frustration of MNCs in host countries. For Accor Group, which pursuit for the position in service industry, this awareness seems to be more essential.
The analysis of visiting purpose of the guests can give the most obvious distance from Chinese and Thailand culture. Compared with 27% of guests who claimed to visit hotels on the purpose of relaxing in Thailand, the correspondence rate in China is revealed as merely 9 in 93 persons. This difference, if finding explanation from the culture side, can be understood as Chinese always value family concept more important than other cultures. That is, they will be less likely to choose relaxing places besides home. That’s can also be viewed as reason that contribute to the over 50% satisfaction with the facilities of the hotel in China, since most of them are travel on purpose of business or sightseeing, there needs in additional facilities are relatively lower than others.
That’s the reason why Accor promotes brands like Novotel in China. As the business image of the Group, Novotel is just attractive for those international business people who pursue excellent quality service. And the expansion of lower brand Ibis is just suitable for the economical pursuit for sightseeing guests
Different from this, Accor is trying to establish more brands in Thailand market. This strategy is also related with the recovery of the political situation. However, it is designed to satisfy the needs of multiple cultures in Thailand.
2.3 Geographical difference
This element influence the control relationship between headquarter and subsidiaries abroad. Rodrigues (1995) has lighted the two choices for the headquarters-foreign subsidiary control relationship, included centralization or decentralization.
However, the geographical circumstances in China have put a challenge on the centralization process. That’s also the major reason that Accor apply franchising mode in this country. Due to the large area and diversity in many elements, the centralization process will cause too much efforts of the headquarter company.
Different from this, Accor Thailand is trying to introduce more brands designed for different groups of people. The higher class hotel like Novotel can not be promoted in methods expect from direct investment, that’s partly due to the danger of quality maintain in mode like franchising. Meanwhile, in area like Thailand, whose economical centers are concentrated in the certain region of the country, decentralization will more easy to be realized
3.0 Recommendations in strategy improvement in Thailand and China
A. Focusing on the promotion of overall brand.
Even though the overall satisfying situation in the subject hotels of research carried by the author is highly evaluated over 50% countries, the recognization of the Accor Group is disappointing. As Punjaisri and Wilson (2007) defined the recognization of the brand for existing guests can give influence to other costumers. As a consequence of this, the disappointing current results will cause barriers when Accor introduce new brands into these two markets.
B. Trying to attract different guest groups
Business guests and sightseeing ones are two unique highlight in Thailand and China, which covered the largest part of the interviewees in those two markets separately. However, as a hot destination, Thailand owns the distinctive potential in tourism. Even though the Accor Thailand is witnessing 25% guests who claim to settle for sightseeing. It still has a great distance when compared with the booming of tourism industry in this country. Thus, it is advisable for Accor in Thailand to promote image as tourists’ choice.
Different from Thailand, China has been long recognized as sightseeing attraction. As a consequence of this, most international hotel chains would be more likely to position themselves as types for tourists in this market, which also in turn make competition in this area. The 43% sightseeing group also verify this strategy of Accor in China. However, as a developing country who is in the acceleration development, the business guests in China will be increasing gradually in near future. Meanwhile, the location of China also makes it taking the role of economical hinterland for countries in Asia or the world. Thus, the business potential will worthy the efforts to promoting business hotels in Chinese market.
C. Combination of entry modes
Franchising owns the fastest expansion speed while direct invest witnesses highly control relationship. However, both of these methods own their cons and pros.
Current situation is the separation of both modes in China and Thailand as major strategy for those markets. However, franchising can also be applied in Thailand, while franchising may facilitate the development of certain brands in China,
Taking the All Seasons in Thailand as example, they are operated by the method of FDI, and only establish a network from Bangkok to Pattaya. The relatively slower speed just testifies the disadvantages of direct investment. Thus, in order to operate economy hotel more successfully in Thailand and set up the wildly net which can attract more tourism. Franchising, which is unique in Chinese market can also be used in All Seasons in Thailand. Higher class brand like Novotel can maintain in the way of direct investment which can ensure the quality of service.
While in China, Accor is trying to expend as fast as possible in order to get more share of this booming market. Franchising as the most effective way in this aim is widely applied to expand the economy brand. However, when Accor moving forward in China, there must be attention paid on the choice of the city. The subjects which are chose in the research of author reflect the subtle difference Accor in brand operation among different cities in China. Dalian, as a city bordering on the sea, is always perceived as sightseeing destination in China, thus, Ibis here will position itself as economical choice for tourists. Different from this, Beijing, the capital of China, which is also the centre of economy, is the ideal choice for Novotel to settle. However, due to the larger area in China, the serves radius of a city here is limited. When putting into strategy consideration, it will be necessary to value how many cities exactly Novotel Beijing can provide service to. As a consequence of this, one city in China may shoulder two responsibilities, which can serve as tourism destination and economy centre in center region. That’s where the combination of entry modes should be applied. Meanwhile, the direct investment may be not suitable due to these characteristics, management service contracts can be applied as a replacement, since it’s a method which can be more decentralize than direct investment, meanwhile, owns more control than franchising.
D. More emphasis on the Internet and media promotion
This suggestion is merely based on the disappointing situation of Internet channel in both countries. According to the research, this is only 9% and 13% in Thailand and China of the guests who claim acknowledges of information of the hotels is from the Internet. Since Accor is trying to establish the network in both of these two markets, no channel can be more effective than Internet promotion. While at the same time, according to the development situation in both countries, the Internet has already become the major source of information for people It is advisable for Accor to fulfill the existing blanket area in this category.
Besides the Internet, the media approach is also neglected in both countries. Even though the media can not be an effective way to promote service of the hotel or provide information details. It can be an efficient approach to the overall brand promotion, which is thought to be a failure for Accor in both markets. As a consequence of this, media can be used to promote the image of Accor and improve the recognization situation of this company among local people, while the Internet can convey the detail information to the target groups.
Conclusion
To sum up, despite the fact of expansion strategy in both markets, differences are also witnessed according to the various elements like culture, economy and relationship with strength in host countries. Meanwhile, in order to get more share in these two new booming markets, Accor has also to adjust details in its strategy in order to make it more appropriate to those two countries.
