Global Expansion of Grace Hotel: A Case Study Analysis (MIHM302)

This case study examines the global expansion strategy of Grace Hotel, a hospitality business based in Australia, focusing on its potential entry into the Chinese market. The report begins with an introduction to the concept of global expansion and provides an overview of Grace Hotel's business operations, including its services and industry context. The rationale for expanding into China is then discussed, highlighting factors such as increasing tourism, opportunities for diversification, and cost reduction. The core of the analysis involves applying Porter's Five Forces framework to evaluate the competitive landscape of the Chinese hospitality industry. The analysis assesses the threat of new entrants, bargaining power of suppliers and consumers, threat of substitutes, and the intensity of competitive rivalry. Based on the findings, the report recommends the implementation of generic strategies, including cost leadership, diversification, and a focus strategy to gain a competitive advantage. The case study concludes by summarizing the opportunities and challenges for Grace Hotel's expansion and emphasizing the importance of strategic planning and adaptation to succeed in the Chinese market. The study uses credible sources to support its findings.

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Contents
Introduction......................................................................................................................................2
Overview of the Business................................................................................................................2
Overview of Industry.......................................................................................................................3
Global Expansion.............................................................................................................................3
Porter’s Five Forces.........................................................................................................................5
Recommendation.............................................................................................................................7
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

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Introduction
Global Expansion is the strategy of expanding the business at the global level. The companies
implement this strategy at the workplace to grow their business in the market (Kim, Vogt, and
Knutson2015, pp.170-197). Expansion means to expand the business in the existing market or to
enter into the new market. It is required the more capital to expand the business at the
international level (Kennedy, et. al2018, p.2018-2181) It is essential for the company to analyze
the market environment or industry while enter into the new market. There are numerous
strategic tool have been used by the organization to analyze the environment such as PESTLE
Analysis, SWOT Analysis, Porter’s Five Forces Framework and the others (Tech Target, 2018).
In this report, the discussion is made on the topic expansion of the company. In this report, Grace
Building has been taken into consideration to evaluate the industry environment. Grace Building
operates in Hospitality industry in Australia. The hotel is operating with the high rate due to
which it has the opportunity to expand the business at the international level. The hotel decides
to expand the business in China.
Overview of the Business
Grace Building is a heritage-listed building that delivers the services of bar, hotel, café and
restaurants. It was designed for the purpose of two departmental stores but after that it was
intended to provide rental office accommodation for soft goods trade and for importers. Grace
Building provides the various services. In the year 1997, the building was established with the
382 rooms in hotel. It remains a hotel from that day. Hotel service of the building will be
expanded into the China. The hotel provides the various services in hotel such as bar, café and
restaurants (Grace Hotels, 2018).

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Overview of Industry
The Australian hospitality industry is growing in the continuous manner. The revenue in the
hotels segment amount is $2026 m in the year 2019. The restaurant sector achieved 20.2 billion
Australian dollars and hotels and resorts that achieved 79 billion AUD (Statista, 2018). It is
expected that the revenue of the industry is 4.8%; the market volume is $2444 m in the year
2023.
(Source: Statista, 2017)
Global Expansion
Grace Hotel provides the various services of hotel to the consumers. It has big opportunity to
expand the business at the global level. Although, the hotel provides the various services to
consumers due to which it earns the large amount of revenue (Schuckert, Liu, and Law2015,
pp.608-62) It has various opportunities that it can grasp such as high market share while
expanding the business into the new market. There are various reasons which state that the hotel
has to expand the network in China as well. Some of the reasons have been discussed below:
Tourism

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The rate of tourism has greatly expanded from the last years in China. The increasing tourism in
the country is directly affects the revenue of hospitality industry as the increasing tourism
increasing the demand of hospitality industry. It has been evaluated that the total inbound
tourism is 141.2 million trips which is increasing with the rate of 1.2% (Travel china guide,
2018). The total revenue gain by tourism industry is 5.97 trillion that reflects the demand of
hospitality industry is high just because of increasing demand of guest in China. It is a reason
that the Grace hotel has to enter the hospitality industry of China so that it can also earn the high
revenue (Kandampully, Zhang, and Bilgihan2015, pp.379-414).
(Source: Travel china guide, 2018)
Diversification
China is the country where the hotels provide the many services to consumers in order to attract
towards them. The hotels of China are popular in terms of their diversification services in the
world. Another reason to expand the business of hotel in China is that it diversifies their services
to attract the more or more consumers towards its services (The Business Journal, 2018).
Although, the hotel is already diversified in different ways or services such as hotel, café, bar
and restaurants but as compare to China it has to work on it and diversify the services. The hotel

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can enter the market with more diversification services such as spa or theater services to
consumers as per the market trend of China.
Reducing Cost
It is observed that the people of China believe in machine work as compare to labor work. The
advance technology is used by the hotel in China due to which the cost of services is reduces. It
is beneficial for the hotels to enter the hospitality industry of China as cost is reduce and also
they earns the high profit due to high demand of guest towards the hospitality industry. It states
that China is the best place to grasp the new opportunities in the market (Jaipragas, 2016).
Porter’s Five Forces
Porter’s Five Forces Framework is a strategic tool which is used to evaluate the environment of
industry. It also helps the organization to evaluate the competition in the market. It is required for
the company to evaluate the current situation of the industry of host country in order to beat the
competitors or the challenges that arise in the coming future (Jurevicius, 2013). As the hotel
expands the hotel business in China that is why; it is required to analyze the current situation of
hotel industry of China. The current situation of hospitality industry of China has been evaluated
in order to expand the business.
The threat of new entrants
It has been seen that the threat of new entrants is low or moderate as the high capital is required
to establish the business. It is observed that the hotel industry has high risk of losing customers
or also it has to take care of the customers all time that is why; the hotel has to ensure the high
capital cost is worth it or not. The existing hotels have advantage as they have high brand image

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in the industry of China that is why; the guest attracts towards their services as compare to the
new hotels (Della Corte2016, pp. 83-94). It is difficult for the new entrants to beat the existing
hotels of China in terms of competition. It becomes a challenge for Grace Hotel while enter the
hotel industry of China.
Bargaining power of suppliers
It is observed that bargaining power of suppliers is high in the hotel industry of China. It has
been seen that the resources used in the hotels are easily available in the market. There are large
number of suppliers that provides the resources such as cleaning products, paper products,
beverages, food services equipment’s, uniforms, furniture’s and the others (Foshansourcing,
2018). As there is large number of suppliers in the market that provides the services to hotels due
to which the risk is increases for Grace Hotel.
Bargaining power of consumer
It has been found that the bargaining power of buyers is low as they provide the services. There
are small or big hotels in the market of China that provides the similar services to guest as per
the prices. It is observed that the service of hotel is similar but in this industry prices depend on
the quality. Facilities and qualities are the factors on which the hotel set their prices to deliver the
services (Singal201, pp.116-119). The consumers have many choices to select the services as per
their situation or affordability but they do not negotiate with the hotels in terms of prices on their
services or high quality. The bargaining power of consumers is low as they do not have options
to enjoy the services with the high quality in low prices (Gursoy, and Sandstrom, 2016, pp.3-18).
.

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The threat of substitute
The threat of substitute is high as there are many small or big hotels that provide the similar
services with the high quality (Köseoglu, Putra, Yi, Okumus, and Zhao 2019, pp.15-3).
Although, the services provided by the hotels have low substitute because there is no other
services that can replace the services of the hotel. While the visitors come to visit the China that
time they have to take the services of advantage. But the guest has many options to switch their
demand with other hotels as there are the other many companies that provide the similar services
to guest with the different price rate.
The threat of competitors
It has been seen that threat of competitors is high in the hotel industry of China. There is lot of
hotels in China that beat each other’s in terms of revenue. The high competition among industry
becomes the challenges for Grace Hotel while it enters the market of China. Banyan tree,
Anantara resort, the peninsula and the other hotels of China are popular which increases the high
competition in the market (The luxury travel expert, 2014). These hotels give the high
competition to new entrants and also become the challenge for Grace Hotel during the entrance
of new market (Kharub, and Sharma2017, pp.132-160).
Recommendation
From the above analysis, it is recommended that Grace Hotel has to implement the generic
strategies. Generic strategies help the organization to grow in the market or to beat the
competitors. Generic strategies include the cost leadership strategy, diversification and focus
strategy that helps to gain the competitive advantage in new market (Mind Tools, 2018). Cost
leadership strategy has to implement at the workplace in which the company has to provide the

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services at low price with high quality so that more or more guest attracts towards the services of
hotel (García-Lillo, Úbeda-García, and Marco-Lajara2016, pp.121-130).
It has been seen that there are various hotels in the hospitality industry of China that have high
brand image in the market. It is observed that the hotels are widely diversify in terms of services
such as spa, bar, café and restaurant due to which the chances of losing the consumers is high for
Grace Hotel (Schuckert, Liu, and Law2015, pp. 608--621). It is recommending that the hotel has
to diversify its services as compare to its competitors so that the huge number of guest comes to
visit or stay its place. It helps to earn the high revenue or also gain the high market share in the
market.
Focus strategy defines that the company has to focus on its own services in order to improve its
quality. As per the analysis, it has been seen that the hotel has to expand the business in China
with the high quality. It is suggesting that the hotel has to provide the services with the high
quality so that it can gain the high market share in the market in terms of high quality of services
(Xiang, Du, Ma, and Fan, 2017, pp.51-65).
. The hotel has to invest in employees and also on the interior so that the quality of services will
improve and the consumers attracted towards it.
Conclusion
From the above analysis, it is concluded that Grace Hotel has moderate opportunity to enter the
hospitality industry of China. It is observed that Grace Hotel delivers the quality of services to
consumers with the high brand image in the market due to which it has high opportunity to
expand the business in China. But as per the above analysis, it has been seen that it has to face
the challenges while enter the market of China such as competition and high capital required to

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beat the competitors. The bargaining power of buyers is also low due to which the risk of losing
the guest is high that also becomes the challenge for the company. It is recommending that Grace
Hotel has to implement the generic strategies in order to beat the competitors or to attain the high
market share in the market while enter the market of China.

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References
Della Corte, V. (2016) The strategic environment of hotel chains. In The Routledge Handbook of
Hotel Chain Management (pp. 83-94). Routledge.
Foshansourcing. (2018) How to Buy Hotel Supplies from China?. [online] Available from:
https://www.foshansourcing.com/how-to-buy-hotel-supplies-from-china-2/ [Accessed 13/08/19].
García-Lillo, F., Úbeda-García, M. and Marco-Lajara, B. (2016) The intellectual structure of
research in hospitality management: A literature review using bibliometric methods of the
journal International Journal of Hospitality Management. International Journal of Hospitality
Management, 52, pp.121-130.
Grace Hotels. (2018) Grace Hotels. [online] Available from:
https://aubergeresorts.com/gracehotel/ [Accessed 13/08/19].
Gursoy, D. and Sandstrom, J.K. (2016) An updated ranking of hospitality and tourism journals.
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Kandampully, J., Zhang, T. and Bilgihan, A. (2015) Customer loyalty: a review and future
directions with a special focus on the hospitality industry. International Journal of
Contemporary Hospitality Management, 27(3), pp.379-414.
Kennedy, J.D., Borregaard, M.K., Marki, P.Z., Machac, A., Fjeldså, J. and Rahbek, C., (2018)
Expansion in geographical and morphological space drives continued lineage diversification in a
global passerine radiation. Proceedings of the Royal Society B, 285(1893), p.2018-2181.
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119.

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