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The Ritz-Carlton Hotel is one of the most luxury hotels in the world, and it has kept its luxury and elegance for decades. The Ritz has become a name to connote glamour, elegance and luxury. The brand Ritz-Carlton Hotel has been the signal for the luxury and elegance of life. Currently, the firm has hotels and resorts with 74 properties located in major cities and resorts in 23 countries worldwide. The Ritz-Carlton hotel offers unmatched and unexpected experiences for every traveler from all over the world.
For the expansion of the Ritz-Carlton all over the world, the firm chooses big cities and golden location for the entry of business hotels, while famous resorts for holiday accommodations. In this essay, the expansion of the Ritz-Carlton Hotel has been analyzed by giving an example of its entry in China, the largest developing country in the world.
Marketing Environment of China
As for the markets entered, while China is a developing country not as rich as America and the most European countries, but the Ritz-Carlton Hotel did not lower its standard in China. It chose to locate its new hotel in the big five cities: Beijing, Shanghai and Guangzhou, Shenzhen, a city near Hong Kong, and also a special economic area, and Sanya, who earned its reputation of the golf, beach, sun, attracting visitors all over the world. There are enough customers who are able to experience the luxury of The Ritz-Carlton, and also looking forward to it.
PEST framework is used to analyze the micro-environment of the luxury hotel industry in China. It stands for political, economic, social and technological environments that might affect the companies. For the political part, joining WTO offered China a great opportunity of globalization, the government offer tremendous opportunities for business travel by holding 2008 Beijing Olympic Games, 2010 Shanghai World Expo and 2011 Guangzhou Asian Games, which will boost tourism and thus lead to great demands of hotel rooms. For the economic part, with the booming of China's economy and increase of people's living standardizations, the luxury brand like The Ritz-Carlton become affordable for some people, it is easy for the firm to find its customers both domestic and abroad. For the social part, the increase of economic increasing usually reflects on people's social activities, people tend to travel to different places to experience different culture; lastly, for the technological part, the development of technology speed up the transportation to and also spread the information like hotel advertisement faster. Though more people will get to know this traditional western brand and have the opportunity to enjoy it.
Thus, for the past ten years, The Ritz-Carlton has chosen a best time to enter Chinese market. According to the website of The Ritz-Carlton, the firm is planning to open new hotels in Macro and Hong Kong in the near future, which also demonstrate that the operation in China is successful.
Entry Chinese Market and Strategies Adopted
Ritz's entry to Chinese market followed the method of launching management contracts. Such method, as Ekeledo and Sivakumar (1998) and Hill, Hwang, and Kim (1990) put, can help the company keep its strengths in the new environment as well as its own structural and strategic characteristics, these advantages could be defined as especially helpful for Ritz's expansion in Chinese market, because a firm with strong competitive advantages in intangible aspects, such as services, will be unlikely to affiliate with an outside brand or chain, so the chain owned, unaffiliated strategy suit the company who has the intangible advantage the most, because it helps the firm to control more of the hotel's marketing and operations functions, pointed by Dev, Brown and Zhou (2007).
However, as what being put forward by Osmond Vitez, such method can also bring some disadvantages for multinationals. These disadvantages could be summarized as following: 1. Ambiguity may be aroused since the contracts cannot address all the issues, 2. since the business contract has already made some decision for the business, it may be not that flexible to follow the change of business world, 3. By launching management contract, it may be hard to correct errors for customer, thus furthering the negative goodwill between customers and the company.
What's more, when viewing such entry method followed by Ritz from some other angles, such as operation, marketing and the forth, Dev, Erramilli and Agarwal (2010) pointed out that the method of management contract can bring irreproducible advantages for the efficiency improvement of corporations' operations, because the core advantage of this hotel is the outstanding service served by ladies and gentlemen, just like the motto of this firm: we are ladies and gentlemen serving ladies and gentlemen. This core advantage is hard to copy by the other organizations or firms, it is irreproducible. While the firm also owns the other advantages like the luxury design and decoration, good location, and so on, these aspects are easy to copy and conducted. In this respect, owning the highest level of control is very important for the company to keep the outstanding performance. Thus when the Ritz-Carlton Hotel entered Chinese market, it used management contract, which largely maintain its excellence.
The Ritz-Carlton culture is why the firm keeps excellent service. While entering into Chinese market, where the culture is very different from western culture, the Ritz-Carlton also does a great strategy in keeping its own culture while adapt to the environment of China.
Kent (1990), by experience the Ritz-Carlton Hotel in Pentagon City seven days prior to its opening, made a conclusion that the Ritz-Carlton opens a new hotel with the emphasis on instilling its culture in the staff. It includes using substantial amounts of time teaching new employees about the Ritz-Carlton mysterious and credo. In China, we have a very different workplace culture than hotels in the United States or Europe, but through encouragement, the Ritz-Carlton keeps its culture (Cooper, 2000). The hotel encourage the right behaviors through recognition, and the hotel reinforce the actions it is looking for through the kind of stories it tells and the kind of actions it writes thank-you cards. If an employee does something for a guest that is very personal - for example, she leaves work for a while to take a guest's lovely toy to someone she knows can fix it, then brings it back in time for the guest's flight - the firm recognize that. Even in the environment of China, a country with five thousand years of brilliant but solid history, the Ritz-Carlton keeps its own cultural and tradition of empowerment. By sharing good and moving stories from employees from branches all over the world and the flexible regulation of empowerment, the firm constantly reminds people of the kind of actions that it wants to see.
The core of the company's service philosophy: we are ladies and gentlemen serving ladies and gentlemen. It is easy said than done, especially in China, a country influenced by five-thousand-year of strict class classification. The firm keeps its tradition that the motto is printed in a card carried by every employee at all times. And the employees could review the steps of services as they want: 1, a warm and sincere greeting; 2, anticipation of and compliance with guests needs, and 3, a fond farewell. Both the motto and three steps of services encourage employees to build good relationship with customers, and exceed the standards which are written in the regulation.
The Ritz-Carlton also takes a strict line on recruiting the right people. They want to recruit the people who fit in with the strong service culture, not only those who has lots of related experience. "We select talent and teach staff the technical part of their job, we seek people who care for and respect our guests and each other. Those who have a high work ethic are detail oriented and relationships driven are the types of characteristics we seek in people," says Grippo.
Based on the above, though trying hard to fit the Chinese culture, the Ritz-Carlton maintain its excellent by keeping its core culture and management style.
The Standardization and Adaptation of Ritz's Marketing Strategies
In order to outline the standardization and adaptation of Ritz's marketing strategies, this section will firstly introduce the strategies being followed by Ritz in Chinese market. Then, the standardization and adaptation of such strategies will be analyzed critically.
The strategies taken by the firm in Chinese market are customer oriented, rather than competitor oriented. It keeps its standard of services but also adapt to Chinese environment, especially in detail aspects. A deep analysis will be done by using Marketing Mix.
The elements of Marketing Mix are price, place, product, and promotion, also known as the Four P's. It is probably the most famous marketing term. They are the variables which can help the managers to control in order to best satisfy customers in the target market.
The Ritz-Carlton Hotel offers accommodation, meeting, airport pick up and many other services all over the world. As rooms are the core product of the company, both standardization and adaptation are applied in the Chinese market. Firstly, the design is a combination of Chinese and western culture. The rooms are decorated by Chinese traditional pictures, the carpet, the tea equipment, or the painting handing on the wall are showing that the hotel is in China, while the standard bed, the arrangement of pillows, the facilities in the washroom, and adaptors offered, etc. these show that it is an international hotel. For the restaurant, the hotel offers both Chinese traditional dishes (local food sometimes) and western food to meet the need of various services.
There is also a small detail. In China, we think the number four, fourteen represent death, since the pronunciation is similar to "death"in Chinese. Thus the numbers listed in the elevator, there is no four and fourteen, when it comes to that floor, number four is represented by number five, while actually it is number four. From this case, we can easily find that The Ritz-Carlton Hotel do adapt and respect Chinese culture.
The Ritz-Carlton Hotel did not lower its standard in China. The price is higher than the state-owned five-star hotels in China, and as high as other luxury hotels such as Shangri-La. There is always some discounts for dinners, but relatively rare for the rooms.
There is also adaptation of setting price. In western countries, the price offered by the hotel for group customers are always being fix, or with little space for bargaining. But in China, the environment is different. We prefer bargaining and the rules are negotiable, the group can always get lower price aftering negotiating with sales representative. Thus in the Ritz-Carlton, its sales representatives also conduct this way.
The promotion of The Ritz-Carlton Hotel in China is focusing on the combination of east and western culture. Since six out of seven branches now in China are business hotels, the advertisements are always about business enters Chinese market which encounters in The Ritz-Carlton Hotel.
As a western hotel entered Chinese market, it is very important to build good relationship with Chinese government. Since China is now in the process from planned economy to market economy, the state-owned hotel still enjoys the great advantages of getting more deals from the government. Maybe in western culture, firms can get profit from the good quality of products, but in the environment of Chinese market, the government plays an important role in the development of the company. Facing this situation, the firm is trying hard in public relations aiming to earn more support from the government.
Beside an environment protection program settled by the firm for its branches all over the world, another program was set for Guangzhou.
In 2008, the Ritz-Carlton Hotel set a service training program for taxi drivers in Guangzhou, for supporting Asian Olympic. This public promotion is brilliant for three reasons. Firstly, the firm successfully send the message to the public that the service of this hotel is outstanding and excellent; secondly, the taxi drivers are important for they can influence the decisions of some customers arriving at Guangzhou, the training program could help them to better understand this hotel and its core value; lastly, by conducting this method, it is much more easy to earn support and recognition from the government. The general manager, Francois J. Cnockaert also receives awards from the government.
As discussed before, the firm chooses big cities and golden location to express its luxury and elegance. The location is near to the subway and bus station as well. By biding to get the station named of The Ritz-Carlton, it is also Chinese way to recognise some place, rather than using the name of the road.
Based on the discussion above, the Chinese market is a good market for the entering of The Ritz-Carlton Hotel. The firm is now successfully expanding in Chinese market by keeping the highest control of the firm to keep its outstanding services, while adapting to the east culture in some extent.