Introduction
Organizational leadership and strategic positioning are the two leading determinants of success in any industry in the contemporary globalized world where stiff competition characterizes the marketplace. John Maxwell, one of the leading thinkers and authors in the leadership space notes, “Everything rises or falls on leadership” (Maxwell 2007, p. 267). Therefore, the kind of leadership practiced in an organization affects virtually all other aspects of operations and management, thus ultimately determining market performance. Even the extent of success experienced from strategic positioning relies heavily on the leadership in place (Chathoth & Olsen 2002).
This paper discusses the significance of organizational leadership and strategic positioning for Shangri-La Hotels, specifically by analyzing how these two aspects are employed to address the impact of the extraordinary challenges of the external environment.
Shangri-La Hotels: An Overview
Founded in 1971, Shangri-La Hotels and Resorts is a Hong Kong-based multinational hospitality company with a diverse and integrated global portfolio comprising investment, real estate properties, lifestyle, and wellness facilities. Currently, the company operates over 100 hotels and resorts in 76 destinations around the world (Shangri-La Group 2021). Shangri-La Hotels is classified among the strongest and iconic leaders in the luxury hotel space in Asia and it has been successful in other places in Europe and around the world. Visionary organizational leadership in the company has created an enabling environment for the thriving of people-centered culture that keeps driving the company’s success.
Similarly, strategic positioning has allowed the organization to remain competitive in the market by addressing unique customer needs for the ultimate exemplary performance in various locations in Asia and around the world. Therefore, it is important to understand how challenges emanating from the external environment affect the successful management of hotel organizations, such as Shangri-La Hotels.
Challenges from External Environment
Organizations in the hospitality industry are subject to political, economic, socio-cultural, technological, and environmental (PESTE) forces, which are all external. Therefore, such companies have limited control over these influences, hence the need for strong leadership and strategic planning to ensure that changes in any of these factors do not lead to loss of business by taking advantage of the available and emerging opportunities, and reducing the impact of threats presented by these factors.
Political Forces
The political climate of any country plays a central role in determining how businesses perform in any given market. The underlying political philosophy held by the government of the day could stimulate or stifle economic development in various ways (Arif & Hossin 2016). For instance, the existing government policies could encourage tourism, which in turn creates the needed market for players in the hospitality industry. Additionally, licensing laws, tax regimes, and other regulatory measures could stifle or promote hotel industry operations in a given country. Political and governmental policies keep on changing and they affect the hospitality industry diversely; hence, the need for management to be aware of such factors for contingency planning to address the emerging issues successfully.
Economic Forces
The economic environment comprises all activities that influence the wealth and income of a given population. The major economic influences include the state of the economy, employment/unemployment rates, the rate of inflation, and other factors like the rate of exchange, which all work together to determine the customers’ purchasing power through the amount of disposable income (Gregoric 2014). Hospitality markets thrive in cases where consumers have high levels of disposable income to be spent on luxury services offered by entities, such as Shangri-La Hotels.
Socio-cultural Factors
The socio-cultural environment shapes the consumers’ purchase behavior in the hospitality industry. For instance, in some cultures, business ethics matter with people wanting to associate with ethical business. The underlying cultural habits tied to food preferences also determine how the hotel industry operates. Similarly, the demographic composition (age, gender, density, race, occupation) in a given population influences market demand in the hospitality sector in various ways. For instance, in Western countries, the number of aged people is growing significantly, which is changing the demand for holiday destinations. Similarly, a growing middle class would drive demand for luxury services in the industry.
Technological Forces
The technological revolution of the 21st century has revolutionized the way hospitality organizations operate. For example, e-commerce is rapidly taking over with customers seeking to engage hotels through online platforms. The sophisticated online booking and reservation of hotels allow customers to place their requests in advance and remotely. Big data and the Internet of Things (IoT) also play a central role in gathering consumer data to create targeted marketing campaigns for hotels. Therefore, organizations that lag in adopting technology in their operations are likely to lose significant market share to competitors.
Environmental Factors
The question of environmental degradation and preservation as associated with the hospitality industry is complex. Tourism, which is the mainstay of this industry, has been accused of environmental degradation through the widespread development of hotel and leisure facilities, which in turn encourage pollution, impingement on natural habitats, and usage of scarce resources. As such, some countries have come up with stringent measures to preserve the environment by requiring organizations in this space to operate sustainably.
Other External Threats
Apart from the PESTE factors, the hospitality industry is intensely competitive, which is a major threat to its constituent organizations. According to Nain (2018), “the resulting competition, which often involves price-cutting in efforts to provide greater value to guests, reduces the profits generated” (p. 567). Additionally, companies are forming strategic alliances, mergers, and acquisitions to improve competitiveness in the market. Finally, the outbreak of the Covid-19 pandemic has created another challenge in the management of hotels. With restricted traveling, the industry has suffered significantly (Davahli et al. 2020), and this new development presents yet another challenge for this sector. The management now has to become innovative to remain afloat at a time when economies are shrinking.
Organizational Leadership at Shangri-La Hotels
Shangri-La Hotels enjoys visionary leadership that is people-centered based on the catchphrase “treat your employees exactly as you want them to treat your best customers” (Martin Roll 2017, para. 6). This approach to leadership has created a culture where people work towards achieving contributive goals for the ultimate success of the organization. The management uses this principle to inspire, instruct, and guide behaviors across all its operational areas to create a culture that promotes excellence. According to Droulers and Heffernan (2007), the Shangri-La philosophy of caring for people has played a major role in creating teams that address the majority of challenges in the marketplace.
All employees undergo the Shangri-La Care training program where they learn various aspects involved in running the organization including its core values, mission and vision statements, culinary arts, service provision, front office management, and housekeeping operations among others. This approach has helped the company remain competitive and perform exemplary in the marketplace.
For instance, when the company launched its first non-Asian operations in Australia in July 2003, it faced a myriad of challenges associated with cultural adjustment and other related external aspects, such as political and economic influences. However, by the end of 2006, year-to-date figures showed that the company ranked number one in occupancy rankings, average revenue per day, and revenue share index when compared with its major competitors at the time – Intercontinental, Sheraton, Westin, and Four Seasons (Droulers & Heffernan 2007). The leadership in place has created a vision and laid down elaborate mechanisms for addressing external pressures in various markets to emerge as one of the leading luxury hotels in Asia and beyond.
Strategic Positioning
The management at Shangri-La Hotels understands the value of strategic positioning in a quickly evolving marketplace characterized by intense competition. Strategic positioning in this case means the ways through which a business differentiates itself from its competition to deliver value to its customers (Sainaghi 2008; Rendón et al. 2014; Tsai et al., 2009). As such, Shangri-La Hotels has distinguished itself as a luxury destination, thus creating a niche market targeting high-end clients. Additionally, the organization focuses on quality service provision through intense training of its workforce in ways that align with its core values, vision, and mission. In Sydney, Australia, one employee noted, “The view and room size gets them in; the service gets them coming back” (Droulers & Heffernan 2007, p. 6).
This assertion goes a long way to show how the organization values quality service provision as part of its strategic positioning to address the external challenge of intense competition. Additionally, in 2009, the company started leveraging big data technology to understand its customer needs and meet them through value creation (Martin Roll 2017). In the process, it uncovered unmet needs, which has led to the creation of guest-centric experiences as part of its brand identity today.
Conclusion
Leadership and strategic positioning are major factors contributing to the success or failure of an organization. The hospitality industry faces numerous external challenges, such as political, economic, socio-cultural, technological, and environmental factors that affect the successful management of hotels. Shangri-La Hotels’ visionary leadership has helped in creating a culture of excellence through strategic positioning to ensure that the organization is differentiated from its competitors as discussed in this paper.
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