Case Study – The golden rule and a global strategy
By Andrew Paris
Florida Atlantic University
Middle east expansion: A risky concern?
Since the attacks of September 11th occurred in the United States, there has been a level of social, environmental, and political unrest. This unrest is not only among individuals, but also among businesses worldwide and Four Seasons is not excluded from that list. Most of the scrutiny that is felt is directed at countries and more specifically groups of the Middle East that seemed to be involved with, or to be blamed for the disturbances of September 11th. The case study clearly points out that political unrest between the Middle East and the United States could play a huge role in determining the expansion and over all success of that area (or lack there of).
Unfavorable economic and political conditions in international markets, including civil unrest and governmental changes, could undermine consumer confidence and reduce the consumers' purchasing power, thereby reducing demand for leisure products like luxury hotels. In addition, boycotts resulting from political activism could reduce demand, while restrictions on the ability to transfer earnings or capital across borders which may be imposed or expanded as a result of political and economic instability could impact profitability for four seasons. Without limiting the generality of the preceding sentences, the unfavorable business environment, the current unstable economic and political conditions and civil unrest and political activism in the Middle East, and the unstable situation in Iraq or the continuation or escalation of terrorist activities could adversely impact international business.
Even with these economic and political factors to consider, socio-cultural factors also play a huge role in assessing risk for the development of a Four Seasons hotel in the Middle East. The four Seasons practices business in a European way (being headquartered in Canada), with their primary focus being customer service, customer loyalty, and values that correspond to American and European culture. Middle eastern Social values are vastly different, and may result in conflicts of service. For one, Woman are considered to be in a lower separate classes, as compared to American and European beliefs. This would go against the hotels core competencies and beliefs for how their customer should be treated. Small things such as having pets, or understanding poverty, all play a huge role in understanding the culture. The bottom line of this issue is tolerance. Tolerance between our socio-cultural beliefs are vastly different, therefore could be risky if you try to mix them for business reasons.
The case talks about how the industry is under the process of consolidation. Strategic alliances, mergers and acquisitions are a huge reason why international investments in the Middle East may be less concerning. In the case of Four Seasons, the article discusses how many acquisitions and mergers have taken place with Four Seasons since the 1970s and 1990s. An important one was the acquisition of Regent international hotels. Not only did that expand them into Eastern markets, but it also lured an alliance with The Saudi Arabian Prince when he bought 25% of the company for 167 million dollars. His understanding the culture and his deep pockets allowed them into a market that was otherwise a very risky proposition. As per the case study, this reason is the reason for economic expansion and growth in the Middle East.
The pro’s and Con’s of the luxury hotel segment
There are many benefits to being in the luxury hotel segment. The case study strongly suggests that individuality is a key competitive advantage for this segment. What positively distinguishes a brand is the unique level of service offered, known as “the golden rule”. The golden rule is to treat others as you would like to be treated (which in the Ritz...
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