Question 1
The managers of Shangri-La believe that superior service is key to their differentiation strategy and they work to build a strong, service-based culture to ensure that each employee delivers service the “Shangri-La Way.” This culture encourages employees to go the extra mile and emphasizes the importance of acknowledging and fixing mistakes when made. The culture also encourages employees to take responsibility for customers’ satisfaction.

Shangri-La Philosophy was to develop local talent to world class expectation. The company launched its culture training program.

* Care Module 1: Shangri-La Hospitality from caring people. * Care Module 2: Delighting Customer * Care Module 3: Recover to Gain Loyalty * Care Module 4: Take Ownership

The three-tier compensation structure was designed to support organizational goals at various levels. At the first level, compensation included a salary and a bonus. The bonus was tied to financial results to help hotels reach goals. Compensation for the second tier, level two and three employees, was linked to financial results and, more specifically, to customer satisfaction and customer loyalty scores, which were key indicators of how well Shangri-La executed its strategy. In the third tier, level four and five employees, there was a common bonus pool that linked compensation not to individual performance, but to an overall company performance.

Shangri-La’s five-level organizational structure was also supportive of its strategy execution as it allowed them, within limits, to directly address guests concerns. At each level in the organization employees had a specific dollar amount that could be used to address customer requests that might fall outside of normal operations. The front-line managers and employees were introduced with the delegation of authority. Management allowed employees to use initiative to answer customer queries for a speedier response.

Question 2
Shangri-La’s business culture is based on providing customers with an unforgettable experience through Asian standards of hospitality and service. Their attention to detail in relation to culture is one of the company’s key success factors. It offers differentiation from any other competitor by focusing on providing this distinctive experience through their hospitality. Shangri-Las’s culture is built on a number of principles which are respect, humility, courtesy, helpfulness and sincerity.
Their goal is to give their customers a full Asian experience while also respecting the cultures of the regions their hotels are located in. Shangri La mission statement is to “delight customers each and every time”. It is evident through this statement that the company aims to focus its hospitality service to impact their customers in a positive light every time. The company’s objective therefore is to create high standards constantly, with their customer’s thoughts at the core of what they do. The customers feel appreciated and special as a result of Shangri La’s culture and trained staff. All staff members and colleagues of Shangri La Hotels undergo a programme which teaches them how to make guests feel special by bringing the company’s core values to life, they learn how to win guests loyalty by delighting them every time, they learn to take initiative in everything they do and also they are thought to turn unfortunate incidents into valuable experiences. Again this programme is another major part to their global success. Their distinctive service offers customers ‘an unforgettable experience by blending local cultures, exotic art, and lively ambience.’

Question 3

Competition
The economic boom in China was not only seen by Shangri-La but also other dominant players in the market such as the Regent, Ritz-Carlton, Hyatt, Sheraton and others; all of whom poured mass capital into expanding into the Asian market. , France’s Accor at the time has 30 hotels in development across China, all scheduled to be complete by 2008. This makes rivalry amongst competitors a very strong force in the hotel industry in China making it difficult for Shangri-La to establish a dominant foothold on the East-China market.

Local Hotels
The influx of foreign capital and brands could force local hotels to improve their services and rely on the “shop local” approach to marketing, which in a country dripping in tradition could have an impact on the Shangri-La business as it could be seen as a multi-national brand instead of a local home grown business.

Wages Issues
Newcomers in China’s market tend to poach Shangri-La’s trained staff and offer higher wages to attract their employees to work for them. Reservation managers of Shangri-La were offered 35% higher salary by the competitors. Security managers are being offered 50% higher salary. Retaining the skilled workers in the company is challenging.
Shangri-La’s train their staff at such a high standard which makes them an attractive asset to competitors which is why they offer higher competitive wages than Shangri-La. Retaining the skilled workers in the company is challenging in a market which is seeing foreign companies with higher wage rates entering the market.
Recommendations
We believe for Shangri-La’s to retain it’s staff they must offer them incentives such as retirement schemes and health benefits. To counteract competition they should portray a local image, employing local staff and using local products.