Shangri-La Hotel and Resort

pic Prepargond By Yee Shan (Sarah) CHUNG, Yan Sin (Jessy) LI, Kim Sang (Anson) HO, Kit Yat (Donald) Thai Table of Contents 1. Introduction3 2. synopsis of Macro Environment4 3. synopsis of perseverance Analysis8 4. Summary of Internal Analysis12 5. Gap Analysis14 6. Recommendations22 7. Appendices26 8. references52 1. Introduction Since the p arnt company, the Kuok Group, is established in 1949 and until 1979 the home- experiencen paradise Hotel, Singapore, was opened its doors in 1971 and it was opened under the management of Western external Hotels.However, paradise foreign Hotel Management Ltd was founded in 1982 and from that time until now, Shangri- La endeavoured d unmatched count little challenged from the Asian financial crisis to the outbreak of SARS in 2003 and a lot of another(prenominal) challenges, Shangri- La Hotels and Resorts (SLHR) recently was announced and located its properties autopsy city addresses and whatsoever of the earths most exotic destina tions across Asia, Middle East, north America and Europe. As of 2006, SLHR was the bouffantst Asian free radicald deluxe hotel congregationing in Southeast Asia.The company managed a amount of 50 hotels under terce shits the v-star enlightenment, the intravenous feeding whatsoever-star Traders and Kerry with total inventory of over 23000 rooms across 39 locations. Further much, SLHR a ex channeliseable join the stock securities application of Hong Kong, Malaysia and Thailand. As of SLHR mission statement To de atonic our guests every time by creating engaging experiences straight from our heart, SLHR in any case produce invigo calculated proceeds antitheticiation much(prenominal)(prenominal)(prenominal)(prenominal) as Chinese theory spas which named the Chi in most of its disposal.The success of SLHR does non debar at that place expanding its merchandise or join on their inventory, but the management ever much than than concern its competitors who n ates subscribe to the better(p) crop and service base on SLHRs ones. SLHR management as well requires having st outrankgies for long term belongway the organization. The aim of this st footstepgic analysis report is to realize vision for organization in coming(prenominal) by identifying and analysing the major macro- environsal trends which believe the major issues proceed to the future growth of SLHR.The report also quickly examines the five forces inside the patience analysis to rough idea the current effectiveness of the effort and also based on evidences to expect the future profitability of SLHR. Besides, to pass water the advantage competitive of SLHR, all of internal outgrowths in term of resources and capabilities could inspect. Moreover, to piddle an overall the difference between the desired situation and the real(a) situation of SLHR, a gap analysis forget be chief out for bringing all analysis together and base on this analysis gap, organization impar ting bear an overall difference.Lastly, it is definitely not absent in this report pass oning be a constitute of recommendations which overhaul formulating for SLHR in relation to achieve to great its position in all foodstuffs in the future. 2. Summary of Macro Environment Macro purlieu or PESTE analysis is the first step in creating the Environmental Analysis. The macro environment examines the general avocation climate as it relates to the giving medication, but the governance has nothing to do with it. It has an impact to incline paradise Hotels by four different factors, such(prenominal) as Political or Legal, scotch, Socio-cultural, Technology and Environmental.These four factors had been analysed in the Appendix 1, which is based on the Shangri-La over the world. The worldwide economic has more negative factors that impact the Hotels, Global pecuniary Crisis straight off is one of the big issues for most of the industries around the world, as it leads rece ssion which leave view the finance of the countries or industries. Beca recitation of the Global Financial Crisis, the unemployment rate of roughly countries is tranquil growth in the beginning of 2012, such as Euro commonwealth increased to 11%, Italy increased to 10. 0%, Spain and Greece has increased over 20%, but some of the countries atomic number 18 fall such as Japan, Thailand, joker and Hong Kong(Trade Economic, 2012). The unemployment rate is increasing beca physical exercise of the constitute of labour is increasing as puff up which the current financial situation is not veracious enough to support. slew atomic number 18 more concern on price or father price sensitive now because of global financial crisis, as they leave alone call back the convergence is worth with the listed price or not.Some of the countries had announced nose corporationdy Tax scheme which al mild affect the hotels, as every organisations enquire to pay a certain amount for the ca rbon that they produced. These negative factors whitethorn leads the guests rarely go cash in ones chips and stay in hotels because they fork up less income, as the net income of Shangri-La Hotels Group had decreased to $253. 0 one thousand thousand (Bloomberg Business Week, 2012). However, the Gross Domestic Product around the world is increasing while the inflation is decreasing in most of the countries. Same as the Economic factors, the Political also has more negative factors impact the hotels.Over 90% of the countries had established a legislation of minimum wages, the legislation is to prevent the employers when at that place is the intense market competition and they in order to guide be, at the same time the wages of the employees are unavailing to equal their atomic number 50onic enquirefully. On the recent years, there are some conflict occurs between nations, for example, there was two attackers rammed a border post with a scum truck and threw two grenades, a nd then attacked policemen with knives in Kashgar, Beijing and a roadside bomb explosion in Diwaniyah.The most recent hotel bombing is the Marriott capital of Indonesia bombing in 2009 because of terrorism which leads at least 9 battalion killed and 50 raft injured. For a hotel chain as Shangri-La, the properties are all over in the world, they need to prevent and consider slightly the locations political issues before or after they take over or establish a refreshed Shangri-La. On the other hand, some nations baffle a legislation to authority the people own arms or guns. But when the estimates of arms retentivity increase, the country and properties need to increase the insecurity as well (Shah, 2011).By having legislation of arms controlling is acceptable for Shangri-La. As in 21st Century, everything is being graduate(prenominal) engineering science which core there are lots of immature technology overlaps invested and announced into the market such as 3D televisi ons and surrounding audio systems. When those products had announced to public, the guests whitethorn expect the hotels leave alone wealthy person one of these products in house. Most of the technology factors are neither positive nor negative impact for Shangri-La, as the number of the net income users is increasing rapidly every year, nearly everyone pass on shit at least one computer and smartphone.When most people eat up at least one technology product, some of the companies will start produce some up-to-date communication softwares and some peeled applications will announce to the sociality. By the time when the number of internet users is increasing rapidly, Shangri-La fag take advantages from that, as they can do marketing via internet, peculiarly the social networks (e. g. Facebook, Twitter, Myspace). The guests can book a room via their official website or some work agents website, and Shangri-La can announce the latest tidings on their official website and socia l networks for the guests to read.For the sedulousness, the socio-cultural has average impact. As the population in the world is increasing which is chargeworthy for all the industries, there are more consumers to consume their products. But at the same time, the fluctuating death rate is increasing which is the age population is increasing as well, because the medical technology has been improving year by year, the people will adjudge extended life than the past. Most of the people will expect a better quality of life, such as for living and for travelling, they would homogeneous to contribute in effect(p) experience on everything, especially on travelling and accommodation.Multi-cultural is a good for the handicraft as well, because Shangri-La can adopt the culture and develops a different experience for the guests, for example, in India, Shangri-La can excogitate an Indian style hotel to cater and adopt the environment to curl up the guests to stay in. However, because of different culture and the religion of the culture, they need to generalize and get known about these before they establish the hotel in a country or city. In addendum, there are several environmental issues that affect the effort, for example, natural disasters will occur in some countries such as Earthquakes, Floods, Tsunamis and Hurricanes.Nowadays, natural disasters had experience more serious and more often, because of the climate change within a decade and global warming, ozone depletion are caused primarily by increases in babys room gases as Carbon Dioxide. delinquent to the natural disasters and the global warming, the lands will be destroyed and lead land shortage. Land shortage will influence Shangri-La as there is no enough land for it to manufacture new hotels, it can contrive them could not expand their business.While they embodimenting new hotels or running existed hotels, pollutions will be produced, for example, building new hotels will produce lots of dust and the lighting of running existed hotels as the light will open 24hours 7days. On the other hand, 3Rs policy has been announced as Reduce, Reuse and Recycle, the government encourages people to reuse and recycle the products that they used. According to capital of Nebraska (2007) Shangri-La have a wide of environmentally friendly measures such as fitting all guestrooms with water saving device in taps and showers as well as apply push button-saving lamps in more than half of the pigeonholings guestrooms.For saving energy and resources, Shangri-La has intermixture of methods, as by rainwater harvesting, hot water production using solar panels or heat pumps and improvements in building envelope design to cut off heat loss or heat invite as well as air filtration. Shangri-La also has several methods to crucify the kibibytehouse gases, such as through active systems and processes, the use of new technologies and substitute(a) energy sources and by building more efficie nt buildings. In summary, the luxury hotel industry has opportunities and panics associated with the macro environment. There is variety of positive, balanced and negative trends.There are still opportunities for reasonable growth in this industry disdain the threats. 3. Summary of manufacturing Analysis Industry environment has a more direct effect on the firms strategic combat and ability to earn above-average return as canvass to the general environment (Misangyl et. al, 2006). Hitt et. al (2011, p. 51) mention Industry analysis will be using the five forces model of competition such as the threats posed by new entrants, the motive of suppliers, the originfulness of buyers, product substitutes, and the intensity of arguing among competitors to understand the profitability dominance within the industry.The strength and interaction of the five competitive forces are what influence profit effectiveness. This section will debate about the industry analysis of hotel indus try and a more precise analysis can be seen in Appendix2. The threat of entrants in the hotel industry is not significant which leads to high industry profitability. New entrants need to have sufficient amount of budget in order to build and run the hotel such as require certain upfront investment in building, specialized equipment, infrastructure and staffs.Products and go are well to replicate in hotel industry, therefore, brand identity is the differentiator in the hotels. It is difficult for new entrants to gain access to the capital requirements necessitate to develop and build hotel. The industrys incumbents have established relationships and experience, which enables them to achieve significant cost savings. In addition to brand inscription and be the new entrants must also get by with the probability of retaliation from the established hotels. The xisting businesses in the industry have a high item of absolute cost advantages as they have create good relationship a nd trust between the suppliers and customers. The number of suppliers to the hotel industry is extremely high. The types of suppliers for hotels include structure suppliers, monopoly suppliers such as electricity, gas and water, furniture suppliers, linen and bedding suppliers, food suppliers, decor suppliers, appliance suppliers, uniform suppliers and most importantly then staffs. The suppliers have medium talk terms condition which will affect the attractiveness and profitability of the industry.There is high submerging of suppliers. However, the majority of hotels have regional weightlifts with suppliers. This locks the hotel companies into using certain suppliers and creates duty perioding be. The hoi polloi being sold to the industry is important to the in the buff materials sources suppliers and equipment manufacturers because hotels will purchase in bulk to assure the business. Contracted suppliers be and employees costs are high because they are needed to work for the operation of the business. These suppliers have high bargain power.However, they are unable(p) to bargain and will make close to their best offer at the first chance in order to gain profit for their business. speciality of outputs from suppliers is necessary to deliver surgical operation in order to be more profitable in the industry. Hotels and resorts are part of the accommodation in the dwell industry. Rooms are highly perishable products. There are other options to stay when the customers are international from home such as apartments, condos, cabins and town houses. emptors have high talk terms power in choosing the accommodation that they would kindred to stay.Hotels can create distinction strategy to add rank to attract customers such as dealing with the pricing strategy, good customer operate and nominate up-to-date technology in the hotels. However, there is high denseness of buyers telling to the industry. There is very little threat of backward desegregation from the consumer due to the high costs of start up in the hotel industry. Hence, when the buyers have medium to high bargaining power, then the industry profitability will be suffering. Substitutes to the hotel industry have a high aim of power which leads to low industry profitability.There are a lot of substitutes in the industry. leisure time customers have more alternatives when they travel overseas as well as business customers, they can plan whether to fly to a city in order to have meetings. Nowadays due to the advance technology invented, lucre helps the business people a lot. Business man can do video-conferencing in their own country without flying to other country. This helps the business to save a lot of silver. In regards to leisure customers, they have more choices to consider such as staying in boutique hotels, motels, apartments, camping, cruise ships and even caravan.Substitutes gave greater power. The substitutes can provide similar services a nd products and providing better value for money which make economic sense for buyers to append. The intensity of rivalry in the industry is medium to high which leads to low industry profitability. Hotel industry is in progress stage, there is no industry growth. With the increase of competitors such as the elaboration of luxury Asian brand Mandarin Oriental, it makes it difficult for the hotels in the industry to maximize its profit by strengthening its occupancy rates.The high cost of building, furnishing and servicing the hotels in the industry create high fixed costs and high exit barriers. This increases rivalry as they need to maximise winnings to have significant returns on investment. It makes it difficult to withd unprocessed from the industry and has to compete with other existing rivals. The aim of variety among the companies is medium because the majority of the hotels provide similar types of high quality service. Due to this reason, it is easy for buyers to swi tch from one competitors product to another.While there is great rivalry in this industry, there are opportunities for expansion into national and international markets. Moreover, there are many stakeholders involved and bombastic dollar investments, thus, it involves high commitment from every members in the organisation. general, analysis of the five forces in hotel industry found out that hotel industrys attractiveness is rated as medium-low in terms of the potential to earn adequate or pukka returns.It is considered as a partly unattractive industry because it has low entry barriers, medium to muscular bargaining position of suppliers and buyers, fond competitive threats from product substitutes and intense rivalry among competitors. 4. Summary of Internal Analysis Internal analysis is an analysis about the organisation itself, it finds out organisation resources and capabilities to create value to customers and identify area of weaknesses to be addressed by future strateg ic and evaluate core competencies (Evans, Campbell and Stonehouse, 2003).Acknowledging those resources and capabilities can understand company position and competitive advantage to achieve superior performance and profitability by strategic (Hill and Jones, 2012). Resources Tangible nirvana group comp rising slopes 110 hotels and resorts throughout Asia Pacific, North America, the Middle East and Europe. In future development more than 20 hotels and resorts will be create in variety countries. Revenue has maturation up nearly a keister from 2009 to 2010, US $1,729 million to US 2,145 million.But, Share of profit of associates of hotel operation total is 15. 0, and property rentals total is 47. 7. Intangible Shangri-la group has great disposition in public, goodwill value is US $84,504,000 in 2010, because create green chain of mountains to public, Sustainability is umbrella brand which has several action to rationalize energy phthisis, waste water and carbon dioxide emission. It shows the low turnover rate, this is because company pays respects, cares and certified their employee and provide work-life balance program to motivate staffs to work productively and efficiently.Capabilities It has strong human resource capabilities which is compare to others hotel property, the staff turnover rate is low, Shangri-la provide a series training to staff ensure rag service consistency that ensure meet the expectation of service quality, so this is the competitive advantage. The dissemination channels are strongly developed, it has several internet distribution channels, e-commerce is the best way to deliver and see information nowadays.However, the product differentiation, marketing and management are not strong enough to be core competencies. 5. Gap Analysis Macro-environment Business Strategy Gaps Trend see to it of concussion Business Strategy match or Mismatch Economic Growth in Asia 1-5 years hold Currently Shangri-La group is focusing on developing the (especially in China) market in China. Euro economic crisis 1-5 years Match Europe is not an essential market instalment for the Shangri-La group and does not have big influence on the hotel financial performance Increasing value of Chinese Now and current Mismatch As the exchange rate of RMB is getting high, tourists RMBs favour going to other Asian countries while China is the of import market for Shangri-La Green Awareness Now and ongoing Match Shangri-La really makes an effort on sustainability, creating a green organisation image to the public and gaining goodwill from that. Use of Technology Now and ongoing Match Shangri-La deceases significant resources on network promoting, for example customer can book a room through Shangri-Las Facebook change magnitude Target Demographic 3-5 years Mismatch Even Shangri-La group has other brands like Traders and Segment Kerry, but the target market is also focusing on up-scale market. Industry Environment Business Strategy Gaps Industry Environment Element luck of Threat Effect on Industry Profitability Business Strategy physical structure or Inconsistency suppliers inborn Average Consistent purchasers Threat juicy Consistent Threats of New Entrants Opportunity elevated Limited Consistency Substitutes Threat gamy Limited Consistency Rivalry Threat High Consistent Government Opportunity and threat Various by Location Some Consistency Complementors Opportunity scummy Limited Consistency Key competitor Business Strategy Gaps Competitor Physical Brands Decision Making Values ECONOMIC FACTOR time out proscribe Global Finance Crisis, spend money discreetly (Shah, 2010). neat & Service Tax, spend more money in good (Kalia, 2010). Negative Some of the countries had announced Carbon Tax which increase expense ( piece tidings Australia, 2012). Negative Gross Domestic Product is increasing which stimulate people spend in hospitality (The Economist Online, 2011). overbearing People are more concern on price due to Global Financial Crisis Negative High Labour cost, especially in China grow up rapidly fast. The inflation in most of the countries are decreasing , China still growing so fast (Global-Rates. com, 2012) Negative The unemployment rate in most of the countries are decreasing (Trading Economics, 2012) ordained Negative (China) Positive Overall Negative POLITICAL/LEGAL FACTOR Around 90% of countries had established a legislation of minimum Negative wages that increase labour cost extremely (Herr and Kazandziska, 2011). Conflict between nations, it is not condom for travelling that Negative influence hospitality industry (Global Conflict Map. com, 2011)( The World Bank, 2011). Arms control in some nations, limit import and exporting goods (Shah Positive 2012).For instance, North Korea has strict control r ules in hospitality industry. Overall Negative TECHNOLOGICAL FACTOR Growth of profit with fast wideband can assists consumers to Positive search for rooms available via websites. They can make reservations advantageously which help the costs of industrys marketing activities. talk software or technology improved every year such as Positive Facebook and Twitter are Social Medias for marketing. Many new technology products announced into the market, energy Positive saving light reduce pollution. For example, the installation of solar energy system in hotels which can help saving the budget of the company. Overall Positive SOCIO-CULTURAL FACTOR Fluctuating close Rate which mean age Population is increasing Negative (Population Reference Bureau, 2011). Expectations of service quality. Consumers now expect to get intangible experience and require to be recognized by the employees. Negative As long as the industry keep up the s tandards with what the customers are expecting then it will bring positive effect to the industry. The number of population is increasing over the world it increases the workforce and potential customer (Rosenberg, 2011). Positive Multi-culture around the world, allow familiarity and technique exchange. Positive Overall Balance ENVIRONMENTAL FACTOR great awareness in global warming issues is a concern.Energy Negative consumption needs to be considered to reduce greenhouse gas. The most cost-effective greenhouse gas reductions can be made by using existing low technology in building insulation, lighting, air-conditioning and water heating systems and electricity standby (Enkvist et. al, 2007), (Fenger and Tjell, 2009). Climate change (Shah, 2012) & Global Warming (National Geographic, 2012). For example, mountainous areas reduce snow cover and winter tourism southern areas decrease pass tourism period. Negative Water use management, reduce water use is a long-term strategic. (Queensland Government, 2012) Waste disposal management, Use filters in abstruse fryers to extend the life of cooking oil or sale to driver(Lincoln, 2007) indoor(prenominal) air quality, more countries forbid smoking in indoor than Positive last decade(Lincoln, 2007) 3Rs (Reduce, Reuse, Recycle) reduce waste cost in daily operation. For instance, use mugs to or else of disposable cups (USA Positive Recycling Facility Service, 2012) Some countries whitethorn need to face the natural disasters, e. g. Earthquake, Tsunami, and Hurricane (Shah, 2011). Negative Land Shortage in nations, less land available, so the cost of land is become expensive. For example, rise around 9% of the total Positive property price, since 2001 in Australia (Hopkins, 2012),(Asia for Educators, 2009), (Your investing billet, 2012). Negative Negative Overall Negative 2. Industry Analysis Forces Issues Impact Threats of new Economies of scale forte entrants New entrants need to have a certain large-scale production and huge finance because hotel industry requires substantial upfront investment in building, specialized equipment, infrastructure and staffs. Small lodges will find it difficult to enter to the industry and compete with Shangri-La Hotels and Resorts because it requires large investment, however, the other well-known brands hotels such as Marriot International, Hyatt and Hilton cleverness find it easier to build new hotels. Proprietary product differences sensitive Product differentiation in hotel industry is low. It is relatively easy to replicate differentiation such as the products and services. Every hotels and resort can provide rooms that meet the demands of the customers and also train their staffs well to provide personalized service. However, Shangri-La Hotels and Resort have built good b rand and reputation thus, it is the differentiator to compete with other new competitors. Brand identity moo Shangri-La Hotels and Resorts have built a good brand image in the mind of customers. Shangri-La Hotels and Resorts is already the leader in Asia (Dogan, 2010). They have established high product differentiation and brand loyalty.Other new brand hotels that want to come into the industry, they have to spend lots of costs to attract the customers to be competitive advantage. Buyer/customer substitution costs Medium It is simple and easy for customers to switch costs. Customers can be easily attracted to different hotels that offer more value for money, or affordable prices. Due to the presence of Internet, customers will search and compare the hotels price via websites. Loyalty program can prevent the guests from electric switch costs. Capital requirements Low High capital requirement is required for new entrants even though the compet itors plan to do franchise, merger and acquisition, there is still high investment costs involved such as costs of inventories, high risk and law return situation and marketing activities. Hubbard & twinkly (2011, p. 76) state New entrants with good ideas but without finance are unable to break into the industry. Access to distribution Low New entrants may have limited sources to access such as altogether materials and distribution channels, as existing hotels have regular customers and partners. Absolute cost advantages Low The existing businesses in the industry have a high degree of absolute cost advantages.They have built good relationship and trust between each others already establish hotels experience, favourable raw materials, advertisement expenses and favourable location. Thus, it is hard for new entrants to enter into the industry because there is low level of trust and familiarity with the suppliers. Government policy High Depends on the countrys regulations, government has the opportunity to set many restraints in the industry or encourage and facilitate the development of hotels. Expected retaliation High Retaliation is expected as existing hotels will low down price and promotes some packages to attract customers. Unique and differentiated products by diversifying it can therefore persist the retaliation. boilersuit RATING LOW strong suit Bargaining power of Differentiation of inputs Medium supplier Suppliers input is crucial to the final product. Good quality of the products and services provided by the suppliers will create a good outcome.Hence, it will have to progress the economy of the business. Hotels in the industry are the buyers and the producers of inputs that are the suppliers (Buffett & Munger, n. d). There are many suppliers involve in hotel industry such as The construction companies tend to have a particular strong position when it comes to the hotel possessor who would like to build a hotel. Thus, it strengthens the power of being a supplier. Monopoly suppliers who control electricity, gas and water supplies have high bargaining power. Hotels need to spend lots of money in the operational costs. Hotels need to buy Property Management System and Point of Sales to help the effectiveness of business operation. Hotels also need to buy amenities products, chemical products and raw materials for catering. Moreover, it needs to spend money on maintenance and servicing the equipments.If the hotels are locked into a contract, then the power of suppliers will be lower, they cannot increase the prices when they want to. Hotels are in the service industry. Hence, it needs people to provide exceptional services to the customers. High education and good experience employees will have higher bargaining power. They may negotiate the wages that they would like to receive and they think is reasonable before w orking with the hotels. Hotel customers are fragmented. Hence, as a supplier to the customers, the argaining power is low because there are substitutes that the customers can accept such as Marriott International Hotels and Hilton Hotels. Switching costs of suppliers and firms in the industry Medium Suppliers have power if there are few firms supplying the product or if there is no reasonable substitute for it (VBulletin Solutions, 2012). However in large hotel chains, many things are done by signing contract legally. Legal costs may increase if one party is not working as per contract listed. Thus, the switching cost is low. Supplier concentration relative to industry concentration Medium There are high concentration of suppliers to choose from for Shangri-La Hotels and Resorts. Therefore, the suppliers have lesser power. Importance of volume to suppliers Low The volume being sold to the industry is important to the raw materials sources supp liers and equipment manufacturers because Shangri-La Hotels and Resorts will purchase in bulk to operate the business.Shangri-La Hotels and Resorts have a great deal of power over the suppliers when purchasing raw materials sources and equipments. Cost relative to total purchases in the industry High Supplier cost is a huge part of the total cost. Contracted suppliers costs and employees costs are high because they are needed to work for the operation of the business. Suppliers retain the power. Information about suppliers product Medium Hotels are highly aware of the quality of the products they purchase such as raw materials, equipments and even labour sources. Hotels will not take the risks to change the suppliers before they did research and compare the market price among the suppliers industries. Supplier profitability Low Hotel industry has higher profitability as compare to the supplier industry.Suppliers will be unable to bargain and they will make close to their best offer at the first opportunity in order to gain profit for their business. Decision makers incentives Medium Hotels need to motivate their employees by giving incentives in order for them to provide good service to the customers. Hotels will do promotional packages when it is in low mollify to attract more customers to stay in the hotel. Threat of forward integration High Suppliers can sell their products via Internet and even to the supermarkets. They have the power to enter the industry (Hubbard & Beamish, 2011). overall RATING MEDIUM Bargaining power of Differentiation of outputs High buyers Customers determine the profitability of the hotels business by choosing which one they would like to stay with, they have high bargaining power to choose.Hotels create differentiation strategy to add value to attract customers such as Customers place products and pricing strategy at first. For instance, the hotels should plan for low price strategy during low season or include gratuitous goods for customers. Staffs provide good quality of service. Good geographic location which appliance the guests. Good atmosphere of the rooms and restaurants. Give service for disable such as have disabled rooms in the hotels which located in the first floor to convenient the handicapped people. Switching costs of buyers High Shangri-La Hotel and Resorts have created a loyalty program named Golden cycle to attract existing customers by earning points and then the customers can redeemed for hotel stays, dine or spa experiences at anyShangri-La hotel, resort, Traders hotel or Kerry hotel (Shangri-La International Hotel Management, 2012).Thus, this group of customers will most likely be repeat customers and choose to experience services from Shangri-La Hotels and Resorts. There are low switching costs for customers. Presence of substitute outputs High There is an importan t level of the industrys output has to the buyer. Hotels and resorts are part of the accommodation in the lodging industry. There are other options to stay when the customers are away from home such as apartments, condos, cabins and town houses (CarrHallCastle, 2012). Industry concentration relative to buyer concentration Medium Low Tourism industry is growing rapidly and the demand of hotels for customers increased. Travellers are highly concentrated relative to the industry, thus, the buyers do not have lots of bargaining power. Importance of volume to buyers High Large volumes of customers are expected to stay in the hotels because they are the main source of income for hotels to generate profit.For example, tour operators, who book thousands of customers into hotels, have a strong bargaining position and can demand lower prices from hotels. Rooms are perishable, thus, hotels must try to meet the occupancy level. Buyers have more bargaining po wer. Cost relative to total buyer purchases Medium Corporate customers efficacy invest large amount of money into the hotels when there is conference happens. They will reserve lots of rooms and meeting rooms. Therefore, they have more bargaining power. Buyer information about the industry output High Customers can survey on the best firms that offer great services. They can have assistance from the travel agents, corporate travel consultants, internet and haggling of let loose to determine where they can get the services that they would like to experience. Positive words of mouth will build good reputation and image to the hotel whereas magnanimous words of mouth will badly impact the business of the hotel. Buyer Profitability High Customers have the freedom to choose which property they would like to stay in and dine for. They will gain profit when they receive more services as compare to what they expected. They are still holding high bargai ning power. Decision makers incentives Low When there is a large group coming to stay in the hotel, hotel will provide a discount price. Threat of backward integration Low It is impossible for item-by-item customer to enter the hotel industry due to large investment required. OVERALL RATING MEDIUM HIGH Power of substitutes Relative price/performance of substitutes High Hotelmule (2008) states Continual developments in technology keep changing the potential threat from substitute products.Technological advancements in the internet make the overall market to be more efficient and at the same time expanding the sizing of the potential market and create new substitution threats. For example, video-conferencing has been used instead of holding a conference in hotel. Business customers tend to travel lesser. The substitutes for lodging such as camping, hostels and motels, the invention of cruise ships and trains causes travellers to have alternat ive choice when travelling to another country. Switching costs High It is easy for buyers to switch costs, thus, the substitutes have greater power. Buyer propensity to substitute High Substitute products or services will be a threat. Capon (2008, p. 63) states This can be achieved by the substitute being equally good and cheaper, or by it being equal on price, but offering a better product or more added value.When other lodges such as apartments, condos, cabins and town houses providing similar or equally good hold out and providing better value for money, it may make economic sense for the buyers to switch. OVERALL RATING HIGH Intensity of industry Industry growth rate High rivalry There is no industry growth. The hotel industry is in mature stage. Severe industry rivalry occurs. High fixed costs High The high cost of building, furnishing and servicing the hotels in the industry create high fixed costs. This increases rivalry as they n eed to maximise mesh to have significant returns on investment. Shangri-La Hotels and Resorts must sell more rooms to cover those costs and increase hotel market competition. Hence, it makes it difficult to immerse from the industry and has to compete with other existing rivals. Intermittent overcapacity Medium Due to there are a lot of competitors in the market, there might be a lot of rooms that are available and cannot be sold out. Product differences High There are no product differences because majority of hotels provide similar types of high quality service. Products and services in hotels are easy to imitate.It is difficult to reduce the rivalry through the differentiation of the products and services. Brand identity Medium-High Brand is important because through branding, a business can stand out of the crowd. People remember the organization and will choose to go to the well-known hotels as it can heighten the level of self esteem and be part of the social group. Shangri-La Hotels and Resorts have developed their brand name and are well known in worldwide. However, other hotel groups such as Marriott International and Starwood have great brand identity as well. Switching costs High It is easy for buyers to switch from one competitors product to another industry rivalry will be increased (Hubbard & Beamish, 2011). Thus, Shangri-La Hotels and Resorts create a loyalty program named Golden Circle to retain their customers. Informational complexity Medium-High Consumers can olfactory modality at rooms available in different hotels and compare prices online. Internet will have information about the price and service differences. Furthermore, some hotel websites provide virtual tours which introduce the guests about the real experience expending time in the hotels. There are also lots of travel websites such as trip advisor which provide guests review about the hotels. Informatio n is readily available on the Internet. Thus, industry rivalry is enhanced. Concentration and balance High Cline (n. d) mentions Hospitality customers increasingly set about predictable services that support their ability to move quickly and easily around the world. International hotel chains are expanding their business to meet the demand of the customers and to determine the way to be happy with their position in the industry. Hence, rivalry will be significant. Diversity of competitors Medium The level of diversity among hotels is medium because majority of the hotels provide similar types of high quality service. However, some hotels like Marriott International it diversifies its business into planning and organizing wedding events for the couple who would like to marry. Marriott provides free assistance from certified wedding planners and help with everything from selecting centrepieces to