Marketing Analysis for Shangri-La

 

This report mainly focus on the current market situation of Shangri-la Hotel Company, providing evaluations and recommendations for marketers of the company to get more involved in the hotels in the Chinese market - Marketing Analysis for Shangri-La introduction. A brief introduction of the background of Shangri-la is included, as well as the market and product category which Shangri-la exists. The report demonstrates the macro and micro environment and introduces the major competitors. In addition, analysis of target segment and how current products can meet different needs and wants are also included.

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Some recommendation regarding to several aspects are provided at the end of this report. The sources of information were collected from academic journals and text book as secondary data. 1. 0 Introduction 1. 1 Purpose The goal of this report is to demonstrate the market environment and examine whether the product of Shangri-la has satisfied its target segments based on the information from the comparison with competitors, primary research and database of the club. 1. 2 Background information 1. 2. 1 Industry background

The hotel market is still in a growing phase, star-rated hotels and economy hotels are both in an increased trend. With multiple, and complementary components in one development, the hotel element has been seen very much as big the heart of the mixed-use, there has been a great interest in hotel development, which has contributed to the rapid expansion of the hotel industry in China (CBRE RESEARCH ASIA, 2009). In recent years, hotel industry keep an increase developed trend, especially in China, China now has the second largest hotel development pipeline since 2009 in the world, second only to the United States.

Hotel operators, particularly international hotel chains, have been active in taking up these hotel chains while new domestic players have been aggressively building up their hotel network in the economy sector (CBRE RESEARCH ASIA, 2009). 1. 2. 2 Organization background Shangri-la is a famous international 5-star rating hotel, which is a key player in Asia’s luxury hotel market and is based in Hong Kong China. The Shangri-la legend began in 1971; today, there are 72 hotels and resorts throughout Asia Pacific, North America, the Middle East, and Europe (Shangri-la website, 2011).

1. 3 Scope In this report, it is about Shangri-la company, which covers some marketing theories form the marketing text book, including the micro and macro environment, levels of product, STP and branding. Meanwhile, it will mention some terms on hotels, resorts and spa. All of the information is from the official website of Shangri-la company and some online research. 1. 4 Methodology The resources of this report are almost from the relative academic journals, online databases, and others from Shangri-la official website. 1. 5 Assumptions and limitations

During the research, some journal articles about the operation of Shangri-la in Monash library could not be accessible, however, the information can be found from other available ones and the official websites, which are apparently impartial. 1. 6 Plan The plan for this report will focus on subheading listed below. Under each of these subheadings, detail information and examples will be provided for further illustration for particular area. 3. 0 Macro environment 4. 0 Micro environment 5. 0 Product analysis 6. 0 Target market analysis 7.

0 Analysis of current product 8. 0 Conclusion 9. 0 Recommendation 3. 0 Macro Environment The macro force which consists of 6 factors can affect consumer buying power and spending patterns. These forces represent ‘uncontrollables’, which the company must monitor and respond to (Vieceli, J. & Valos, M. , 1998). 3. 1 Economic The Gross Domestic Product (GDP) in China expanded 9. 70 percent in the first quarter of 2011 over the same quarter, previous year. Historically, from 1989 until 2011, China’s average annual GDP Growth was 9. 32 percent reaching an historical high of 14.

20 percent in December of 1992 and a record low of 3. 80 percent in December of 1990 (Trading Economics, 2011). Figure 1 China disposable income (Google image) The relative stable GDP increasing rate and the increase of disposable income changed the ability and the spending patterns of Chinese people; as a result, people are willing to spend more money on enjoying good hotel services. 3. 2 Cultural In China, people’s traditional lifestyle is more scrupulously than western people, people are more likely to spend their money on other things they really need, but not on enjoyment in a luxury hotel for one night.

Considering the traditional frugal lifestyle in China, sales may drop as a result. Moreover, nowadays Chinese people also gradually value the freedom of lives; they are more willing to have good time with their family and friend, instead of keeping their money in the pocket. That provides opportunity for Shangri-la Company. 3. 3 Political Chinese citizens remain under tight visa and group tour restrictions when traveling abroad and therefore most are compelled to take their holidays within China.

Tourism is consequently driven by heavy local demand with domestic tourists accounting for about 90% of visitor arrivals and 70% of receipts. In 2007, the number of domestic travelers reached 1. 6 billion, up 15. 5%from a year earlier. Domestic tourism receipts jumped 24. 7% to RMB 777. 1 billion during the same period (CBRE RESEARCH ASIA, 2009). Due to the tight visa and group tour restrictions when traveling abroad, the political force caused this rapid grow trend of China’s domestic tourism, hotel industry gets more opportunities than before. Figure 2 Growth in the number of domestic and overseas visitors (Google image)

4. 0 Micro Environment Micro environment consists of the actors in the company’s immediate environment that affects its ability to serve its markets: the company, market intermediaries, customers, suppliers, competitors and publics (Vieceli, J. & Valos, M. , 1998). 4. 1 Customer The customers include consumer markets and business markets. The consumer markets are made up of individuals whose purchases are for personal uses. For Shangri-la most of consumers are business men or leisure travelers, who have a business meeting in foreign places or in a nice traveling repectively.

For business markets, many large companies may use Shangri-la’s meeting or celebration services to hold meetings or have parties. 4. 2 Competitors As a famous international luxury hotel, there are many international hotel companies competing with Shangri-la, for example, for global market Hilton and Marriott are its key competitors. Moreover, for Chinese domestic market, 7 Days is a key competitor of Shangri-la. 4. 2. 1 Hilton Figure 3 Hilton logo (Google image) For Hilton, its strength is in resorts, suits, all season’s packages, spas, golf courses, advertising to small and large companies.

Today Hilton Hotels & Resorts have guests in more countries than any other luxury full service hotel brand, with more than 540 hotels and resorts in 76 countries across six continents. (Hilton website, 2011). 4. 2. 2 Marriott Figure 4 Marriott logo (Google image) Marriott which has a huge market share and high differentiations with long history, it provides a wide variety of low quality to high quality hotels over a large geographical area. It has 521 hotels in 66 countries and regions (Marriott website, 2011). 4. 2. 3 7 Days Figure 5 7 Days logo (Google image) 7 Days is the one of leading brands in China economy hotel industry.

It has already set up over 1000 hotels in China, covering more than 111 cities. 7 Days hotel chains have more than 22. 9 million members currently, which is the largest member system in China’s economy hotel industry (7 Days website, 2011). From the information above, it can be given a perceptual map: Figure 6 Conceptual map of Shang-la 5. 0 Product Analysis 5. 1 Product category The right combination of product and promotion can be more effective in enhancing sale; promotion type should be determined by the product category, its features and target market (Banerjee, 2009).

Due to Shangri-la’s five-star hotel status, its luxury service is very expensive to common consumers; so it should belong to specialty products classification. However, many successful businessmen or rich travelers who enjoy Shangri-la hotel service may go to this hotel frequently. For them, Shangri-la’s service should be in the shopping products classification. 5. 2 Type of product Consumer products are those products which bought by final consumers for personal consumption (Kotler, P. , et al, 2010). Shangri-la’s hotels, resorts and spa service all belong to consumer product.

5. 3 Three levels of product Figure 7 Three Levels of a Product (Google image) Product can be divided into three levels, which are core product, actual product and augmented product. 5. 3. 1 Core product For core product, it consists of the problem-solving services or core benefits that consumers obtain when they buy a product (Kotler, P. , et al, 2010). Applying to Shangri-la’s customers, the core product is the services of hotel & resort, which can provides luxury enjoyment for their trips. 5. 3. 2 Actual product

For actual product, this level suggests the formal product that could offer the core benefit desired by a customer (Phadtare, M. T. , 2008). It has as many as five characteristics: a quality level, features, styling, a brand name and packaging. So, for Shangri-la, the Shangri-la brand name, crew uniform styling, booking system, and features such as wake-up service, ‘chi’ spa, food and beverage service and their 5-star rating quality levels. 5. 3. 3 Augmented product The augmented product suggests a sum total of benefits a buyer will receive in obtaining an actual product (Phadtare, M.

T. , 2008). Shangri-la offers more than a room for its customer, even a product that customers value before and after living in the hotel room. For example, some consumers may expect to get the Shangri-la membership, priority hotel check-in, airport shuttle, or receiving bonus points from living to join the Shangri-la’s frequent-user scheme. To Shangri-la’s consumer, these augmentations may become a key part of the total product. So, Shangri-la must satisfy these customers’ wants to create a competitive advantage. Figure 8 Three levels of Shangri-la’s product

Wake-up service Food & beverage Crew uniform styling Scenic spot delivery Frequent-user scheme Priority check-in Shangri-la brand Booking system Luxury hotel Enjoyment Spring Festive Package Shangri-la membership Airport shuttle Shopping Butler Package ‘Chi’ spa 5. 4Branding and strategies “Brand-building effort has to be aligned with organisational processes that help deliver the promise to customers through all company departments, intermediaries, suppliers, etc. , as all these play an important role in the experience customers have with the brand. ” (Ghodeswar, B. M.

, 2008) The branding strategy decisions consist of the following four steps: Figure 9 Major brand strategy decisions (Monash College PPT) 5. 4. 1 Brand positioning Shangri-la is positioned on strong beliefs and values. It highly praises that “To treat a stranger as one of our own”, in order to make guests feel at home. 5. 4. 2 Brand name selection Inspired by the legendary land featured in James Hilton’s novel “Lost Horizon” published in 1933, the name Shangri-La encapsulates the serenity and service for which Shangri-La is renowned worldwide (Shangri-la website). 5. 4. 3 Brand sponsorship

Shangri-la brand is a manufacturer brand, because the Shangri-la company provides all the products and services directly and does the promotion by itself. 5. 4. 4 Brand development For Shangri-la, it selected multibranding, the company has already founded two new sub-hotel brands, which named Kerry hotel and Traders hotel. They mainly focus on business visitors segment with lower price and standard. Figure 10 Kerry Hotel logo and Traders Hotel logo (Shangri-la website) 5. 5 Packaging Packaging includes all activities of designing and producing the container or wrapper for a product (Kotler, P. , et al, 2010).

For Shangri-la’s hotels or resorts, the packaging of its products is the decorations of hotels or resorts. From the gate and outer wall to interior trim of the build, and to the decoration of rooms, all parts are packaged in luxury style. 5. 6 Labelling Labels range from simple tags attached to products to complex graphics which are a part of the package (Kotler, P. , et al, 2010). For Shangri-la, it should be labeled as luxury hotel or 5-star rating hotel. 6. 0 Target Market Analysis Primarily, the target market should have large sales with growth characteristic and high profitability (Kotler, P.

, et al, 2010). Marketers can develop the right product for each target and adjust their prices, distribution channels and marketing communications to reach the target market more efficiently and effectively (Bednall, et al, 2008). 6. 1 Market segmentations 6. 1. 1 Psychographic segmentation Under psychographic segmentation, consumers are divided into particular group based on psychological traits, personality, lifestyles or values. The determinant of psychological trait is socioeconomic status which has a strong effect on preferences in cars, clothing, leisure activities and store choice.

Different customers own different needs and wants. Therefore, they are motivated by one of the factors known as need for uniqueness to satisfy self-actualization need as given in the Maslow’s hierarchy of needs (Schiffman et al. , 2008). As the figure shows below, there are 5 levels in Maslow’s hierarchy of needs. Figure 11 Maslow’s hierarchy of needs (Monash College PPT) For Shangri-la, the consumers should be at least in middle-class or higher, for this kind of customer, they don’t worry about low level need, they live in Shangri-la hotel in order to meet their self esteem needs.

6. 1. 2Demographic segmentation Demographic segmentation means dividing the market into groups according to variables like age, gender, income, occupation, race and nationality. To consider the age change, younger people are more willing to spend their money on other more exciting activities other than a luxury and relaxed trip. So people who older than 40 years old may are the major customers for Shangri-la. For income and occupation aspects, frequent consumers of Shangri-la may be businessmen, leisure travelers and MICE of other companies who are all in the high income level.

Those rich people are more likely to live in a luxury hotel than ordinary beings. 6. 1. 3 Geographic segmentation For geographic segmentation, Shangri-la would like to build up their hotels in big cities or near to scenic spots but not in the small towns to attract their consumers. 6. 2 Characteristics | Leisure Travelers| Business men| Wedding Couples| MICE| Celebrity| Behavioral| LuxuryEnjoyment | Full serviceand comfort level| Professional top-level wedding design| Large reception capacity| Luxury service and high safety| Benefits sought | | | | | |

Usage rate| Medium user| Heavy user| Light user| Medium user| Heavy user| Loyalty status| PotentialUser| RegularUser| PotentialUser| RegularUser| RegularUser| Product Choice| All-round service plans| Trade suites| Marriage hall;Restaurant | Conference room| Deluxeroom| Demographic| All groups| Managers or administration| All groups| Administration & operative| Professional| Occupation| | | | | |

Family life cycle| Older;With children| Older;| Young| | Allgroups| Psychographic | Socially Aware & Visible achievement| Visible achievement| Young optimism| Visible achievement| Visible achievement| ValuesAttitudes and lifestyle| | | | | | The markets can be segment based on different people’s characteristics. Shangri-la’s consumers’ main characteristics are their income and lifestyle. The people who have high-level income are more likely to check in a 5-star hotel, comparing to other people.

In addition, lifestyle patterns provide broader views of consumers so that marketers can think about them more intelligently (Kucukemiroglu, 1999). Shangri-la is appropriate for people who are willing to enjoy lives and spend money on travelling and living in a luxury hotel; while some people may be frugal, they prefer to live in an economic hotel, even though they are also in the travelling or in the business trip. The table below shows the different types of Shangri-la’s target segments: Table 1 Shangri-la’s target segments 6. 3 Specific target segment

For one of these target segments, celebrity may be the most special and important segment for Shangri-la. Due to the celebrity charm, whatever they are famous statesmen or sports superstars, if they become the loyal customers, that will be a kind of intangible promotion for Shangri-la. 6. 3. 1Motivation For celebrity, they are in the top income level, the main motivation for they to live in Shangri-la is the luxury service, for their busy work, they would like to get a good rest in the hotel. And the other motivation is the reliable safety protection.

As a 5 star rating hotel, Shangri-la can provide top level safety precautions to protect them from outside harassment. 6. 3. 2 Needs & wants To apply the Maslow theory, celebrities’ goal to live in Shangri-la is to satisfy self-esteem needs and even security needs. 6. 3. 3 Relationship level For Shangri-la hotels, the relationship between the celebrity group and the company is in the proactive level. Shangri-la may phone or e-mail celebrities from time to time with suggestion to improve their service for this special group. To build up a stronger relationship, Shangri-la should focus on adding social benefits to celebrities.

Because they have enough money to pay their room charge, they prefer to get more social benefits, such as preference records or special check-in channel. 7. 0 Analysis of current product For Shangri-la company, the main current products of it are types of hotel rooms. For example: Honor single room, Deluxe Twin Room and Executive Standard Twin, From a famous international booking website (http://www. booking. com), there is some information about the current customers’ satisfaction and some valuation about Pudong Shangri-la hotel in Shanghai. Figure 12 Satisfaction Score

Breakdown (Booking website) Most customers are almost totally satisfied, in the message board, they said that: “Service is outstanding and makes the difference with other hotels”; “The rooms and the view are excellent, and so are all hotel facilities”; “Very well run hotel service food and room were all excellent”. It can be seen that consumers are totally satisfied with the service and hotel facilities, which are helpful to build up high consumer loyalty. However, some problems also exist; some consumer said that “Check-in was extremely slow”; “The business center is far from the rooms and lobby.

Business Centre should be free for the enterprise”. It shows the speed of checking in and hotel design is still defective (Booking website, 2011). In general, most consumers are nearly totally satisfied with Shangri-la hotels’ current main products and service, there are only some little details need to be imporved. 8. 0 Conclusion To sum up the information discussed above, this report introduced the background of the hotel industry, Shangri-la Company, its competitors, product category and micro & macro environments.

To analyze the market, the report focused on the products, branding and market segmentation of Shangri-la. Finally, it will also give the brief recommendation for future market of Shangri-la. Due to current stable globalization trend in many fields, the tourism will keep the rapid increase. Also since the recovery from economic crisis, people’s situation will be better off. These are new opportunities for Shangri-la to get more market share in the future. Overall, Shangri-la hotel has got great success in past 40 years; it will also barely pause for breath in the future. 9. 0 Recommendation

9. 1 Quantity improvement & Type adjustment Shangri-la’s new hotels are under development in Canada, China, India, Philippines, Qatar, Turkey and UK now. Shangri-la focuses on five-star hotel service for many years, the gap of numbers of hotels are a main weakness of its company, comparing to Hilton or Marriott. Increase the number of luxury hotels may be an important target for Shangri-la. Furthermore, it should build more hotels with lower standard and price as Kerry Hotel and Traders Hotel, which focus on medium or lower level market in appropriate countries or religions.

Through this ambidextrous approach, Shangri-la may get more market share both in Chinese market and global market. 9. 2 Promotion Strategies Development The popularity and power of influence of Shangri-la are not strong as Hilton or Marriott, due to its shorter history and weaker financial resources. To get more market share in luxury hotel market, Shangri-la should build up more powerful promotion strategies and pay more money for adverting budget. Through promoting the great services and increase the popularity of Shangri-la, delivering the core business value to its customers, the company will get more market share in next decade.

9. 3 Service development Shangri-la should increase the speed of checking-in, build up consumers’ preference records system and provide more all-sided full service. Reference list 1. Banerijee, S. (2009). Effect of product category on promotional choice: coparative study of discounts and freebies. Management Research News. 32(2), 120-131 2. Bednall,D. Schiffman, L. O’cass,A. Paladino,A. Waro, S. & Kanuk, L. ( 2008). Consumer Behaviour. (4th). French Forest NSW: Pearson Education Australia. 3. Booking website, (2011), Guest reviews for Pudong Shangri-La Hotel Shanghai, view date: 26/8/2011, from: http://www.

booking. com/hotel/cn/pudong-shangri-la. html? selected_currency=hotel_currency&aid=315194&label=hotel-181422&sid=90e750cbd728b35eecf752d859fe2fb9&checkin_monthday=27&checkin_year_month=2011-8&checkout_monthday=29&checkout_year_month=2011-8&do_availability_check=1&dva=0&lang=en-gb 4. CBRE RESEARCH ASIA, (2009), Hotel Operators in China: “New opportunities in a more sophisticated marketplace”, CB RICHARD ELLIS, Viewed date: 25th/7/2011 http://www. cbrehotels. com/NR/rdonlyres/0405A01F-02C4-442E-927A-91FB9CAA203A/0/FinalHoteloperatorsinChina_Eng. pdf

5. Ghodeswar, B. M. (2008). Building brand identity in competitive markets: a conceptual model. Journal of Product & Brand Management. 17(1), 4-12 6. Hilton website, (2011), Our brands-Hilton Hotels & Resorts, viewed date: 22th/8/2011, from: http://www. hiltonworldwide. com/ourbrands/hilton. htm 7. Kotler, P. , Brown, L. , Burton, S. & Armstrong, G. , (2010). Marketing. (8th ed) Frenchs Forest NSW: Person Australia. 8. Kucukemiroglu, O. (1999). Market segmentation by using consumer lifestyle dimensions and ethnocentrism. European Journal of Marketing, 33(5/6), 470-487 9.

Marriott website, (2011), Our brands-Marriott Hotels & Resorts, viewed date: 22th/8/2011, from: http://www. marriott. com/corporateinfo/glance. mi#brand0 10. Phadtare, M. T. , (2008), page 54-57, Managing Product Mix, Industrial Marketing, Eastern Economy Edition, Prentice-Hall of India Private Limited. 11. Shangri-la website, (2011), About us, viewed date: 26th/7/2011, from: http://www. shangri-la. com/en/corporate/aboutus/overview 12. Schiffman, L. et al. , 2008. Consumer Behaviour. 4th ed. Frenchs Forest NSW: Pearson Education Australia. 13. 7 Days website, (2011), About us, viewed date: 22th/8/2011, from:

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