Mr. Nijhawan

Eco-Friendly Practices

Essential Practices in International Expansion

By Sanjay Nijhawan, COO, Guoman Hotels (UK)

International expansion is fast becoming a priority for companies of every size. The decision to extend operations beyond domestic borders is not without challenges, but the potential payoffs are enormous.

What's driving the global push? First, there's the Internet, with its power to effortlessly cross borders and tap into previously hard-to-reach markets. Intense competition on the home front is another factor. All companies now face more pressure than ever from both domestic rivals and international players. Expanding internationally is one way to offset these competitive pressures. By broadening the potential universe of customers, companies also broaden their revenue sources. Globalization can also enhance a company's long-term survival as well. Companies that expand into international markets lessen their dependence on a single country's economy. This is especially relevant in these challenging times. And, specifically for the hospitality industry, there is a demand from international travellers for a guaranteed standard, and for the comfort factor of a recognised and understood brand, particularly in a new and alien environment for the guest. Whatever the motivation for international expansion, there are a number of key practices that all organisations should observe to successfully enter a market.

Understand the new market you are entering

It is important to recognise the social, cultural and economic differences between your domestic country and the market(s) you are planning to enter. These will range from subtle to dramatic, but fully understanding these issues is essential for effective market entry.

Key questions that need to be understood include:

1. The Macro economic condition of the country - is the economy growing, and if so at what rate? China's economic growth has made it a very attractive market to enter, despite the significant cultural differences to be overcome by Western companies entering the country.

2. The legal system of the country - what issues might you face in terms of company ownership, listing, regulation, legal demands?

3. The governmental policy and stability - is the Government likely to change, and will that impact on the economic environment? At its most serious, could there be political unrest and a threat to the organisation, its assets and its people?

4. The demand for your product in the country - will it be mainly positioned to international travellers, a domestic audience, or (most likely) a combination?

5. The level of competition - do you face strong competition from established brands, or are you a new entrant? In most cases you will be facing competition, so monitoring their distribution, networks, resources and activity will provide a useful insight into how strong a position they are in, and what you will be up against. Of specific interest for hospitality would be the range and scale of distribution channels in the new market, as access to these will be essential to establish booking volume.

Understand the cultural differences that exist in the market

I have deliberately featured this topic as a separate section, due to the vital importance of it in successful market entry. Although all the aspects above are very significant, understanding the new market's culture is essential to success - after all these are your customers. Advice should be sought from organisations already operating in and familiar with the market, and part of the market entry team should consist of local or established ex-pat individuals (more on this later).

Key elements that need to be understood include:

• Business conduct and attitude - how are negotiations and deals conducted, and how does this process impact on your own activity.

• Attitude of residents to the home country of the organisation - do you make a virtue of your heritage, or do you limit its profile? With Guoman Hotels entry into China we are focusing on our British background and pedigree, as British quality and innovation is well-respected in the market.

• Language barriers and expectations - how significant is the domestic language, and your employees command of it? Research shows that in France, individuals are very unlikely to book anything on-line that is not presented in the French language, even though fluency levels in English are high amongst the population. In Scandinavian countries no such barrier exists. Translation, and the nuances of local language, is another minefield; and translation into languages using different characters and symbols (such as Chinese or Arabic) requires significant local understanding.

• Religious and moral attitudes - how 'liberal' is the market you plan to enter, and are there any social attitudes you must consider. In muslim countries the population's attitude is much more conservative than that of Western countries, impacting on imagery - in particular the depiction of women and their dress, and relationships between men and women. So images presenting spa treatments, for example, would have to differ significantly in certain new markets.

• Colour - colour can present its own challenges, as different culture have different attitudes to certain colours. Red in (most!) Western countries signifies 'Attention' or 'Warning', but in China it is considered lucky.

This is far from an exhaustive list, but provides a flavour for the type of considerations that need to be reviewed. What is very clear is that expert local advice is essential if brands are to effectively engage with the different customers found in new markets, and to protect their current brand equity.

Establish the level of risk involved in market entry

Having assessed all of the factors above, you will be in a position to understand the challenge you facing in entering specific markets. You then have to identify your organisation's attitude to risk. Are you solely looking for 'safe bets', with possibly lower margins but with limited risk exposure? Or are you looking for maximum return opportunities, and are prepared to face greater risk in order to try and secure these? Or perhaps a combination of the two (size permitting)?

Establishing your attitude to risk is important not only in deciding which markets to enter, but also how to enter the market most effectively. Within the hospitality industry, property expansion options include building new hotels, buying existing hotels, securing management contracts, of franchising. Another possibility is a form of Joint Venture with an existing organisation in the market, in order to deliver scale and marketing muscle without the financial commitment required in property expansion.

Ensure you have an effective combination of brand champions and local talent

It is important for a brand entering a new market to convey their 'brand essence' to their new audience, so the audience understand what the organisation stands for and offers them. Bringing consistent operating practices, principles, and values to the new market is therefore important, and requires education and investment by existing 'brand champions' to the new work force. Classroom training, on-the-job mentoring, or knowledge-sharing mechanisms such as databases are all useful tools companies can use to instil a common mindset in their employees.

With extensive experience oin working for some of the biggest brands in the business, including Hilton, Holiday Inn, Marriott and Forte, Sanjay Nijhawan has been in the hospitality industry for over 17 years. Mr. Nijhawan joined Thistle Hotels in 2004 as general manager for The Tower in central London. Earlier this year Mr. Nijhawan was promoted to Chief Operating Officer of Guoman Hotels (UK) overseeing the development of a collection of six international deluxe properties in central London. Mr. Nijhawan graduated from Thames Valley University in 1992 with a degree in hotel management. Mr. Nijhawan can be contacted at 0870 333 9280 or Sanjay.nijhawan@guoman.co.uk Extended Bio...

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