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Another strategy companies often rely on are franchising their operations to attain economies of scale and global growth at the same time (Altinay, 2007). Franchising however has significant risk as it requires a high degree of branding consistency and brand enforcement over time (Altinay, 2007).
Any expansion strategy has a direct implication on a company's value chain. A merger, acquisition, alliance or joint venture can completely re-define the value chain of an organization (Porter, 1986). The value chain for Marriott's expansion into China is shown in Figure 1, Marriot Value Chain for China Expansion.
Figure 1: Marriott Value Chain for China Expansion
Based on the value chain model from Porter (1986)
The competitive dynamics throughout China are unique as the majority of hotels and revenue are state-controlled. As of 2010, 58% of hotels are state-owned and 37% are private. This makes the ownership of a private hotel in China exceptionally valuable, and places great emphasis on how well a hospitality chain can lobby the Chinese government for concessions and support for new venture creation. Global competitors in the Chinese market include Accor, Starwood, Shangri-La, Hyatt and Hilton. It is the most competitive region of the world for gaining new hotel rooms that are privatized, HENCE Marriott's prioritization of this market as their most important. Figure 2, Analysis of Hotel Ownership in China provides a graphical analysis of state-owned vs. privatized hotels in the country. Figure 3 provides an analysis of the total number of hotel rooms each global chain controls as of 2010. As can be seen this is quite literally a gold rush for hotel rooms that are not state-owned. Of all competitors, IHG continues to be the most adept at gaining the Chinese government's approval for new building and also for managing to grow their brand through joint ventures and alliances.
Figure 2: Analysis of Hotel Ownership in China
Source: (World Travel and Tourism Council, 2010)
Figure 3: 2010 Competitive Comparison Analysis
Based on analysis of the Marriott Annual Reports and 10Ks
(Marriott Investor Relations, 2010)
Attaining a high level of reliability and validity is critical for any research project to make a lasting contribution to the body of knowledge of which it is a part. The intent of this research methodology is to accomplish the three objectives of determining the impact on the Marriott brand of pursuing specific expansion strategies, evaluate how the Chinese market dynamics will affect the Marriott global value chain, and evaluate the expansion of Marriott into China from a competitive analysis standpoint. Each of these objectives are accomplishable through secondary research methodologies that are defined in this analysis. Additionally, the longitudinal effects of these decisions can be seen in financial analysis of Marriott's revenue and RevPAR figures published annually in the 10Qs on file with the Securities and Exchange Commission (Marriott Investor Relations, 2010). Taken together, the secondary research and data analysis based on financial performance will attain each of the three objectives of this study.
The research method will include the following data collection and data analysis strategies and processes to ensure the data is valid, reliable and contributes to the body of knowledge for this field of study.
Secondary data collection will be completed using the online databases available from the Glion Institute of Higher Education, specifically starting with EBSCO Host, ProQuest (ABI Inform), Business Source Complete and Lexis/Nexis. Morningstar and Standard and Poor's will be accessed from the library for financial analysis, in addition to using the downloads Marriott makes available from their investor relations page.
In any data collection effort, it is critically important to have a sampling frame and defining of the sampling universe. For purposes of this study, the sampling frame will be defined as the expansion strategies of those companies shown in Figure 3. Profiles of each of these competitors' value chains, timeline of strategies, market development and Chinese partnership strategies, and pricing strategies will be assessed. The value chain model (Porter, 1986) will also be completed for each competitor and assessed as part of the data analysis phase. In short, the replication of timelines, decisions made, value chain implications and the financial impact of these decisions on each competitor will be possible given the data collection phase of this methodology.
The data analysis will be completed in three stages. The first phase will be secondary research of each hotel chains' operations and timeline of activity leading up to their entrance into the Chinese market and growth progression. This analysis will conclude with a comparative analysis of strategies and an assessment of the financial implications of each set of decisions over time. The second phase of the analysis will concentrate on defining the value chains of each of the companies in the sample. This assessment would contribute significantly to the current body of knowledge in the area of successful market entrance strategies in China. Comparing these value chains and their variations in how supporting strategies support core areas of each company would provide insights into how each business model had to potentially shift in order to enter emerging markets. It is anticipated that the insights gained from this second phase of analysis will provide insights into how firms can modify their value chains to increase the likelihood of success in China. This phase of the analysis will also define the progression of value chain maturity over time. It is anticipated that a value chain maturity model will eventually emerge from this analysis. The third phase of the analysis is the statistical interpretation and analysis of the financial results Marriott provides in the annual reports and filings with the Securities and Exchange Commission (Marriott Investor Relations, 2010). The goal of this phase of the analysis is to evaluate any causality on the data that Marriott provides on RevPARS by geographic region and the relative levels of investment the company makes in each region of China. It is anticipated that there will be a statistically significant correlation of investment and the RevPAR figures by region, with a lag function of at least 18 months for build-out of property value to be generated. These three phases of the study will provide a comprehensive analysis of the got-to-market strategies and frameworks within China for Marriott and its series of competitors.
Result, Findings and Discussion
The findings will be reported in the context of comparative value chain analysis (Porter, 1986) to illustrate how strategic decisions influence the potential for a company to enter China successfully with a hospitality venture. The analysis will also include key success factors by strata or segment of the market to differentiate how each type of business has chosen to address the market potential in China given their unique strengths. The statistical analysis of financial data using ANOVA techniques will determine if gaps in performance attributable to global expansion vs. domestic market performance can be defined from the data sets gained from the methodology. In conclusion, this three-phase methodology will provide a strategic blueprint of which decisions have led to the greatest success in addressing growth opportunities in China.
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