Chapter 5 The Decision to Go Global

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Chapter 5The Decision to Go Global
International Hotels Development and
Management Second Edition (428TXT or 428CIN)
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Competencies for The Decision to Go Global

• Explain the phrase, think globally, act
  locally, as applied to international hotel
  operations, and discuss the glocalization" of
  international brands.
• Outline the business challenges, organizational
  responses, and training program responses
  associated with transnational, global, and
  multinational organizations.
• Identify three growth strategies for
  expansion-minded chains, list advantages of and
  motives for international expansion, and identify
  target regions for international expansion.
• Identify potential drawbacks of expansion, and
  outline important considerations in making the
  expansion decision.
• Summarize the distribution patterns of
  international hotel chains, and identify factors
  that explain the differing patterns.

(continued)
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Competencies for The Decision to Go Global
(continued)

• Explain why it is advantageous for foreign hotel
  chains to have properties in the United States,
  and describe the marketing approach these chains
  often use.
• Define the terms corporate hotel chains,
  voluntary associations, and conglomerates.
• Describe affiliation options available to hotel
  companies, and explain affiliation
  considerations, including the costs of choosing
  the wrong affiliation.
• Outline problems and concerns associated with
  multinational operations, and propose planning
  and control measures for such operations.

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Three Growth Strategies

• Expand existing markets at home
• Create new products to appeal to new markets
• Develop new markets abroad

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Reasons for International Expansion

• Strategic growth, profits
• Increase domestic business
• Build customer loyalty
• Increase real estate equity
• Diversification
• Improve company status, prestige
• Hedge against recession
• Investment incentives

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Potential Drawbacks ofInternational Expansion

• Profitability not immediate
• Potential for political instability, nationalism,
  lack of suppliers
• Cultural differences
• Problems with resource availability
• Potential for compromised quality and consistency
  standards
• Potential for runaway costs
• Political and legal hurdles
• Transaction and translation risk in foreign
  exchange

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Important Considerations in Making the Decision
to Expand

• Timing
• Domestic strength, strategies
• Managerial resources
• Suitable locations
• Cultural, linguistic, and political barriers
• Control issues

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Costs of Choosing the Wrong Affiliation

• Lost revenue
• Operating losses
• Cost of terminating the agreement
• Cost of acquiring a new affiliation agreement
• Cost of purchasing new "identity items" (signs,
  logos, etc.)
• Start-up operating losses under new company

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Problems/Concerns Associated with Multinational
Hotel Operations

• Geographic distance
• Time zone differences
• Communication system reliability
• Transportation issues
• Financial issues
• Owner oversight
• Local vs. expatriate employee issues
• Regulatory, legal, political, and cultural
  environment
• Differences in religion, mores, and work ethic
• Centralization vs. decentralization

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Planning and Control Measures for Multinational
Hotel Operations

• Identify risks
• Multidimensional performance evaluations for
  managers
• Flexible business goals for local properties
• Flexible planning system at corporate level
• Budgets based on a property's particular
  requirements
• Budgets designed to accommodate multiple and
  continually changing objectives
• Planning and control system should include both
  quantitative (financial) and qualitative
  variables