International Market Analysis and Strategy: Red Carnation Hotels

This report provides an in-depth analysis of Red Carnation Hotels' potential for international expansion, examining the factors impacting the global hotel industry, including economic conditions, political unrest, terrorism, pandemics, technology, and legal changes. It presents an overview of Red C...Read More

Running Head: INTERNATIONAL MARKETING 1
INTERNATIONAL MARKETING

INTERNATIONAL MARKETING 2
Introduction
Red Carnation is an luxury Hotel chain which offers quality services like accommodation, tours,
food and dine, spa and beauty, cruises across the UK and the Channel Islands, Ireland, South
Africa, Switzerland and the USA, and a country gastro-pub in Dorset. The Hotels came into
existence in the year 1950 in South Africa and later the company expanded to other locations.
The company core values are to consistently provide their customers with the best quality of
products and services. Through its strong core values and qualified employees the hotel has
become one of the luxury brands of hotel. The company in order to expand its customer base is
thinking to explore the opportunities for international expansion. This work carries out analysis
of the hotel market and recommends an international market for the hotel group to enter in the
year 2019. This work also develops an appropriate international marketing strategy for the hotel.
Factors that impact global hotels industry
The major factors that impact the global hotel industry are as follows:
a. Economic factor: the total expenditure by consumer on hotel accommodation is directly
related with GDP performance, thus economic downfalls naturally have the most
common and expanded effect on the hotel industry. In the period of recession a consistent
pattern is reflected by the Old trends across numerous regions (see Figure 1) (Alegre et al
2012).

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If the price sensitivity starts high then it means low in demand, tenancy ranks also
becomes low and hoteliers reduction prices to attempt to secure bookings. Recessions can
create many problems to hotel industry, it leave the industry at a risk and vulnerable
conditions to further disturbance from secondary shocks, as established by effect of the
Arab Spring.
b. Political Unrest & Terrorism: Trouble to hotel industry performance mainly concentrates
on locations directly facing political chaos and demonstrations. Terrorist attacks can
affect the hotel industry globally because the foreign travelers are afraid of these terrorist
attacks and threats by the terrorist groups. On the other hand mainly the local and
regional travelers can not discouraged by these types of threats and incidents. But due to
the security reasons and safety of people of their country the government can’t allow their
people to travel in such conditions.
c. Pandemics: The international hotel industry is also affected by diseases such as swine flu,
Ebola and SARS because of these diseases the government of many countries cannot
allow peoples of that country in which the viruses of these diseases is spread. For
Example in 2009 due to swine flu Mexico City verified a 50% decline in tenancy of the
visitors (McGuire 2015).

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d. Technology: many new and effective technologies are introduced in the hotel industry
and it affects much organization in hospitality. If new software related to the hotel
industry is not being used by the companies then competitors will take benefit and they
create problem in sustain. These new technologies and software’s are very useful in hotel
booking facilities and tour management. They are very useful in the rapid growth of the
company (McGuire 2015).
e. Changes in law and Tax rates: international hotel industry is also affected by tax rates and
changes in law. There is no control of hospitality industry on the government rules and
regulation regarding their workings and tourism department (McGuire 2015).
Internal business environment of Red Carnation hotel
Value chain
The Red Carnation hotel has 17 luxury boutique hotels and spas in South Africa, United
Kingdome, Ireland, Channel Islands, Switzerland and USA. The company emphasizes on the
values of giving warm and consistently excellent services to the customers, Value, respect and
support their staff and shareholders, and to be equally responsible for the development of
sustainable environment (The Red Carnation Hotel 2017).
The Porter value chain analysis for the company is as follows:
In bound logistics: The company has sound partnership with their suppliers and take proper care
in providing excellent quality of food and beverages, laundry services, cleaning and other
services. Inventory control, stock requisitions, back of the house storage and distribution,
transport facilities are all maintained to ensure that customers are feeling respected and satisfied.

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Operations: the hotel hires talented employees and trains them so that they are able to prove the
best kind of services to their customers. The operations of the company include the process from
support at the customer desk, hotel services support, management control, online support,
marketing people, and the actors are the highly trained employees.
Outbound logistics: These are the services and the final products like room services, spa
services, and pub services offered and distributed to the different guests at the different outlets of
the company.
Marketing activities: These includes the fair marketing practices through print and digital
media, internet, with discount offers and detailed list of services to get customers for hotel
services, for spa, for pubs, for conferences etc. (Jha 2010). The Hotel stands by its offer and
always charges as quoted in the advertisements.
Services: The hotel offers quality services with memorable experiences. The operational
philosophy is that no request too large and no detail too small. The colors of the room, the fabric
used for décor, bed covers, and furniture all are designed in order to make the customer stay a
memorable one. Regular information on the travel sites, best places to visit is provided to the
customers by company blogs (Guillet 2011). The company makes use of IT based technology to
deliver quality services with accuracy in less time to their customers. Company also displays its
strong corporate social responsibility by participating in socio environment events and programs.
The employees of the hotel are trained such that they offers attentive, personalized services, fine
food, the ready smiles, and attention to detail of each customer needs of diverse international
customers.
SWOT analysis

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Strengths:
The Company has a brand image of luxury services. It offers numerous types of services like
hotel accommodation, services, Spa services, cruise services, spa services, journey tour services,
weeding management and venues, conferences and meeting venues etc. The company brand
image is reflected from the hotel design and décor (The Red Carnation Hotel 2017).
The company has highly skilled and qualified employees. The company considers its employees
as the main drivers of success and thus gives them respect and positive working environment.
Due to this the company has been in the top 10 list of 100 best companies to work for the past
three years (The Red Carnation Hotel 2017).
The company relies on IT infrastructure and makes use of latest technology to ensure that the
operations of the company are accurate, faster and more effective for the customer point of view.
The company makes use of internet and social marketing for attracting customers (Geetanjali.
2010)
Weakness:
The company is becoming weak due to the management system imbalances caused by extension
of the business.
The company has its presence in very limited company where the competition in the
international market is high. There are other dominant players like Hilton, Marriott etc. in the
international market.
The company still has lesser customer awareness related to the organization and the services.
Opportunities:

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The company has sound experience and a business image. Thus, with the support of employees
the company can slowly expand its presence in other international markets.
The company should increase its presence even in already operational countries like USA and
Switzerland.
The company should make use of its sound IT infrastructure to enhance the quality of services
and customer awareness.
Threats:
The Hotel faces threats from the decline in the customers due to high rate of substitution of
customers.
The recent attacks of terrorism and diseases like swine flu have decreased international tourism
in some countries. This shall have huge impact on the company revenue. Moreover there are
many top luxury hotels that have decreased prices to attract more customers in such tough times.
This has increased the competition and this may result in decreased revenue.
Evaluation of Target Market
12 C China France Nigeria Thailand
Country The GDP growth
rate is 6.7%.
Inflation rate is
2.0% (Trading
The GDP growth
rate is 1.2%.
Inflation rate is
0.18%
The GDP growth
rate is -1.5%.
Inflation rate is
16%
The GDP growth
rate is 3.3%
Inflation rate is
4.2%

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economics 2017)
Fastest growing
middle class
(Tradingeconomi
cs 2017)
Top consumer of
luxury market.
(Tradingeconomi
cs 2017)
Low consumer of
luxury market
(Tradingeconomi
cs 2017)
Has growing
consumers of
luxury market.
Culture Power distance
score is 80.
Individualism
score is 20.
Masculinity 66
Long term
orientation 87.
Power distance
score is 68
Individualism
score is 71
Masculinity 43
Long term
orientation 63
Power distance
score is 80.
Individualism
score is 30.
Masculinity 60
Long term
orientation 13.
Power distance
score is 64.
Individualism
score is 20.
Masculinity 34
Long term
orientation 32.
Concentration 56% of the
population lives
in urban.
The average age
of people of
china is 36.2
years.
The population of
China is 1.39
billion
comprising to
80% of the
population lives
in urban.
The average age
of people of
France is 40.1
years.
Population of
France is 66.9
billion
(Tradingeconomi
48% of the
population lives
in urban.
The average age
of people of
Nigeria is 18
years.
Population of
Nigeria is 186
million
(Tradingeconomi
50.3%of the
population lives
in urban.
The average age
of people of
Thailand is 24
years
Population of
Thailand is 69
million
(Tradingeconomi

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18.47% of world
total population
(Tradingeconomi
cs 2017)
cs 2017) cs 2017) cs 2017)
Choices The luxury
market is seeing a
tremendous
growth with more
liking to Western
products.
Product quality
and branding are
the main strength
(Wassener 2010).
The luxury
market is huge in
France and
people pay here
for quality
services
(Wassener 2010).
The luxury
market is limited.
Due to high
inflation rates
people find daily
used prices to be
high (Wassener
2010).
The luxury
market is
expanding due to
huge number of
international
tourist (Wassener
2010).
Consumption The Hotel
industry is
promising with a
growth resulting
$45 billion
revenue (Zhang
et al 2012).
Due to terrorist
attacks the
tourism market
has decreased a
bit to $18.18
billion (Zhang et
al 2012).
The international
hotel industry
growth is
projected to
increase. The
current market
revenue is $39
million (Zhang et
The Hotel
industry is
promising with a
growth resulting
with $2.8 trillion
revenue (Zhang
et al 2012).

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al 2012).
Communicatio
n
52.2% of the
population is
connected via
internet
(Crampton 2011).
It has 2000
newspaper type
and 3000
television stations
86.4% of the
population uses
internet. It has 86
newspaper type
and 584
television stations
46 % of the
population uses
internet. Country
has over 100
newspapers and 2
Television
stations.
43% of the
population uses
internet. country
has 34 newspaper
and 5 Television
stations
Capacity to
Pay
In the long-term,
the China
Disposable
Income per
Capita is
projected to trend
around 6253USD
(Tradingeconomi
cs 2017)
Disposable
Income per
Capita is
projected to trend
around 425836
USD
(Tradingeconomi
cs 2017)
Disposable
Income per
Capita is
projected to trend
around 60427
USD
(Tradingeconomi
cs 2017)
Disposable
Income per
Capita is
projected to trend
around 260299
USD
(Tradingeconomi
cs 2017)
Currency Country uses Country uses Exchange control Access to

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exchange control
mechanisms for
the currency
European
Exchange Rate
Mechanism
system is still not
appropriate
Exchange control
mechanism.
Commitment Country has
strong subsidy
system and
blocks many
foreign products.
Country is more
famous for its
tour and luxury
products.
Country is seeing
a positive growth
in luxury market
but the trends are
slow.
Country is seeing
a positive growth
in luxury market.
Channels Country has 500
airports and 7 sea
ports. Strong
emphasis on
infrastructure
development
(PressReference
2017)
Country has 475
airports. Country
has strong Rail
route, Sea route
and world class
infrastructure
(PressReference
2017)
Country has 30
airports and the
infrastructure for
road and
transportation
still needs huge
investment and
development
(PressReference
2017)
Country has 38
airports and the
infrastructure still
needs to be
developed
(PressReference
2017)
Caveats For international
market presence
Joint venture or
foreign invested
enterprise (FIE)
For international
market it is best
to go for multi-
franchise or joint
ventures (Zhou et
Companies and
Allied Matters
Act looks over
the investment in
international
The country
imposes a
Foreign Business
Act which
monitors foreign

INTERNATIONAL MARKETING 12
such as a wholly
foreign owned
enterprise is
permitted (Zhou
et al 2015).
al 2015). market (Zhou et
al 2015).
investment (Zhou
et al 2015).
Contractual
Obligations
The business
laws are to be
followed.
Tax issues, trade
mark registration,
protection etc.
Tax, information
technology,
trademarked rules
The challenges
are related to tax
issues, human
right issues and
land office
guidelines
From the analysis it is clear that the promising market due to huge population, growing customer
in average income to luxury class is China and Thailand. The disposable income of the people of
these two countries is promising. But China has strongest GDP projection for the future and thus
the consumer purchasing power is increasing (Pira 2014).Apart from it there is a huge growth in
the luxury market in china. China also has strong communication and distribution channels
which shall help the company to promote and ensure supply chain management properly (China
ready news. 2014). In Thailand the main source of GDP is tourism and thus there are many big
players which shall pose huge competition to the Hotel. In such scenario the best choice thus is
China.
Recommendation of Entry Mode
The entry mode for the hotel in the China would be a wholly foreign owned enterprise. This
entry mode is selected from the fact that in China the current legislation for foreign franchising

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for international market can be either as a joint venture or through a domestic subsidiary made
through foreign invested enterprise like wholly foreign owned enterprise. Going with joint
venture eliminates the need of a domestic enterprise but imposes the risks like the absence of a
good local partner which may lead to the lack of proper control of the franchise. Thus, going
through a wholly foreign owned enterprise is the best option as it shall give the firm to hire and
have local employees which shall help the hotel to supervise the business structure in accordance
to the socio-cultural factors of the country. It shall help in managing business resources
efficiently and can lead to brand awareness (Andreu et al 2017). It is also beneficial in terms of
tax perspectives.
Marketing mix for Red Carnation Hotels
Following Marketing mix’s recommended for the Red Carnation hotel in the china market.
a. Place: The Company should select a suitable place for expanding in to the china market
such that the company gets good number of customers. Since the hotel offers luxury
services of Cruises, wedding venues, spa and life style, the choice of the place should be
near sea side. Dalian is a Chinese city bordering the sea and is a famous sight-seeing
destination. This shall be an economical choice for the hotel. The hotel should come up
with Chinese version of the official website (Changing minds. 2015).
b. Products: the company along with its services of accommodation, spa and health well-
being, cruises, wedding venues, etc. should include facilities for yoga, and martial arts.
Chinese people are known for giving priority to their health and thus love space for
training yoga or martial arts. Moreover the hotel should also have the facility for cycling
keeping in the socio-cultural factors of china in mind (Dudovskiy 2013).

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c. Pricing: the pricing strategy should be a decoy strategy where the hotel shall offer
multiple products and services with similar prices. Chinese people love to examine the
services and their quality. Through this strategy they shall be able to compare the options
with similar prices and select the best suitable to them which shall result in the increase
of the sales of the attractive item.
d. Promotion: The number of internet users in china is increasing day by day and the Red
Carnation hotel has strong IT support and uses blog and social media for attracting
customers especially the Chinese social networks like Wechat & Weibo. Thus, the best
strategy for promotion shall be using internet based social media and blogs along with
advertisements in local newspaper and at local shops.
Conclusion
Red Carnation hotel is a luxury hotel offering services of accommodation, food and dine, spa and
health well-being etc. To expand its market and to gain more global present the company thus
can plan to go ahead to the emerging market of China. In recent years the per capital income of
the people of China has been increasing and the country people are giving importance to western
products and services to show their luxury. With huge population, growing middle to luxury
class people and strong economic growth the Hotel can make a best expansion of its chain into
the China market through wholly foreign owned enterprise.
References