Sheraton Hotel's Strategic Expansion in Russia: A Business Report

This report provides a detailed analysis of the Sheraton Hotel's potential for international expansion, specifically focusing on the Russian market. It begins with an introduction to the hospitality industry and Sheraton's background, including its strategic positioning and a SWOT analysis to assess its internal strengths and weaknesses. The report then delves into the global hospitality market and the specific context of the emerging Russian market, including a PEST analysis to evaluate the political, economic, social, and technological factors influencing business operations. Furthermore, Porter's Five Forces framework is used to analyze the competitive landscape in Russia. The report concludes by discussing various market entry strategies and justifying the most suitable approach for Sheraton's expansion, offering valuable insights into the challenges and opportunities within the international hospitality sector.

Running head: INTERNATIONAL HOSPITALITY MANAGEMENT
International Hospitality Management
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction......................................................................................................................................2
Background of Sheraton Hotel........................................................................................................2
Strategic Position of Sheraton.........................................................................................................3
SWOT Analysis of Sheraton...........................................................................................................3
Global Hospitality Market...............................................................................................................6
Background to Emerging Market....................................................................................................6
PEST Analysis of Russia.................................................................................................................7
Porter’s Five Forces.......................................................................................................................11
Threat of new entrants...............................................................................................................11
Threat of substitute products.....................................................................................................12
Bargaining power of suppliers...................................................................................................13
Bargaining power of buyers.......................................................................................................13
Threat of competitors.................................................................................................................14
Ansoff’s Matrix.............................................................................................................................14
Market entry strategy.....................................................................................................................16
Justification of the adopted strategy..............................................................................................16
Conclusion.....................................................................................................................................17
References......................................................................................................................................18

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Appendices....................................................................................................................................23
Appendix 1.................................................................................................................................23
Appendix 2.................................................................................................................................24
Appendix 3.................................................................................................................................25

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Introduction
The hospitality industry is a continuously growing sector due to increased demand for
luxury travel, leisure, and business. In order to sustain the competitive business market, it is
essential for the business organization to increase their business and customer base. In order to
strive for continuous growth, the business organizations need to emphasize on the international
establishment. This will allow the companies to explore new markets and customers thereby,
increasing the business. Tough competition is seen among the hospitality industry, as the
business organizations have to implement strategies for attracting customers and business
expansion.
This report introduces the background of Sheraton Hotel, is a chain of luxury hotels
owned by Marriott International along with evaluating the strategic positioning of the hotel
chain. The internal environments of the Sheraton Hotel chains are analyzed in order to judge of
the suitability of the hotel chain for international business expansion in Russia. Therefore, the
external environment of Russia, both micro, and macro are studied to judge the suitability for
international expansion. Additionally, the report also discusses the various market entry
strategies along with justifying the most suitable market entry strategy for The Sheraton Hotel
Chains in Russia.
Background of Sheraton Hotel
The Sheraton Chain of Hotels is a subsidiary of the Marriott International. The chain of
hotels is a Starwood brand and is considered one of the world’s largest and oldest brands. The
chain of hotels has more than 800 chains around the world. The hotel believes in offering luxury

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and comfort to the customers’ throughout the world. The main aim of the chain of hotels is to
provide the best and superior quality of service to the customers thereby, providing them a
lifetime experience. Until now, the hotel has been successful in providing high-quality service
for the customers. Due to excellent work and customer service over the years, the Sheraton
Hotels have received awards such as Trip Advisor Certificate of Excellence in 2016 along with
Global Business Travel Association (GBTA) in 2017 (Starwoodhotels.com, 2017).
Strategic Position of Sheraton
In order to sustain in the competitive market and establish a successful business in the host
country, The Sheraton emphasizes on creating lifetime experience and value for the customers
(Skift, 2017). The company has introduced different types of signature elements that highlight
superior customer service. According to the chain of hotels, the customers not only stay in the
hotels but the customers belong to the hotels. Therefore, the new strategic positioning of the
hotel emphasizes on comforting and warm service for the customers. The system of four points
by the Sheraton chain of hotels provides honest and good value to the customers (West, Ford and
Ibrahim 2015).

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High quality
High priceLow price
Low quality
The Sheraton Chain of Hotels
Figure 1: Strategic Position of the Sheraton Chain of Hotels
(Source: Author)
Based on the type of service provided by The Sheraton Chain of Hotels, it is strategically
positioned in the category of high quality and high price.
SWOT Analysis of Sheraton
A SWOT analysis is conducted in order to evaluate the internal environment of the
Sheraton Hotels.
Strength
 Above 800 hotels worldwide
 Strong brand presence
Weakness
 Innovations are easily duplicated by the
hospitality competitors

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 Effective marketing campaigns
 Strong strategic positioning of the chain
of hotels
 Tough competition of in the market
 Dilution of brand
 Due to high price the hotel encounters
challenges during economic downfall
resulting in fall of stock price
Opportunities
 Scope of luxurious expansion
 High growth in hospitality sector
 Has potential opportunity for business
with diverse market
 Rise in expectations has added value to
the hospitality sector
Threats
 Income of the customers
 Industry development highly dependent
on economic conditions
 Constantly changing political
environments
 Presence of black market
The major of the hotel is the brand name and presence over the years among the
customers of various countries (Starwoodhotels.com, 2017). The Sheraton Chain of Hotels is one
of the oldest organizations in the hospitality industry that has been able to mark their presence in
the market successfully. The Sheraton has been operating over 800 countries over the years.
Incorporation of latest technologies allowed the company to provide a better experience to the
customers thereby, promoting continuous up gradation for the business (Houtari and Hamari
2012). Moreover, strategic positioning has helped the chain of hotels to create a unique image in
the eye of the customers over the years.
The major weakness of the company is that the company is under the threat of another
chain of well-established hotels. Hotels such as Marriott International and Hilton Group possess

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tough competition for The Sheraton Group of Hotels. The faster rate of global expansion for the
chain of hotels can result in dilution of the brand (Starwoodhotels.com, 2017). The innovative
strategies undertaken by the group of hotels are vulnerable to other hospitality organization
making the survival of the company tougher. The business of the company is highly dependent
on the economy of the country. Therefore, the economic fluctuation is a potential weakness for
the company, as economic downfall will fail in continuing the business (Mahamid 2012).
The potential opportunities for The Sheraton Chain of Hotels include high growth in the
hospitality sector along with the luxurious expansion of the chain of hotels. The company can
achieve this by catering the preferences and needs of the customers (Starwoodhotels.com, 2017).
Due to aforementioned strengths such as strong brand presence along with unique strategic
positioning, has huge opportunities for the chain of hotels in the international platform. The
increasing demand of the hospitality sector will provide an opportunity for the chain of hotels for
luxurious and global expansion. The ability to fulfill the demand and expectations of the
customers will ensure success for the company (Ward 2016).
One of the major threats for The Sheraton Chain of hotels is the presence of black market
in the hospitality sector. Due to this, the recruitment of the skilled labor has become a
competitive factor (Starwoodhotels.com, 2017). Lack of skilled and experienced labor in the
industry has compromised with the quality of service provided in the hospitality sector. Another
major threat for the industry is terrorism and imbalanced political scenario that has led to the
downfall of the economy of the country (Raza and Jawaid 2013). Economic declination will also
hamper the income of the customers thereby, reducing opportunities of availing luxurious hotel
services.

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Global Hospitality Market
The hospitality industry has entered a new era of transformation and growth. In 2015, the
hospitality sector has recorded almost $1.2 trillion, that is, five percent higher from the previous
years (Bharwani and Butt 2012). It can be seen that the demand of service industry has increased
drastically over the years, as the customers prefer boding comfortable and luxurious hotel
services. For holidays or business purpose, the customers prefer availing standard hotels for
high-quality service. For this, the customers also prefer paying a considerable amount of money
without hesitation (Hawkins and Bohdanowics 2012). Moreover, another recent trend identified
in the hospitality industry is the use of technology in the service industry. The use of technology
will help the customers to personalize their tour by evaluating and analyzing all the options
present. For example, the customers will be able to select hotels accordingly, book transport for
sight-seeing along with booking accommodations and ordering food and beverages.
Additionally, the customers will also be able to modify the changes in case of emergencies.
These are the present global scenario of hospitality industry (Refer to Appendix 1).
Background to Emerging Market
The optimistic nature of the Russian hospitality industry resulted in high domestic trips
along with facilitating the increase of employment rates and foreign investors for establishing the
business. Post-2014 Olympics, the hotels in Russia has recorded an increase in inbound tourism
in 2016 Olympics (2016.export.gov, 2017). Moreover, in 2015, the hospitality market of Russia
has seen positives in terms of 80% occupancy rates in summer in St. Petersburg. Such high
numbers were previously recorded only during the peak season. High rate was also seen in Sochi
and Moscow where the occupancy rates reached nearly 100% (Export.gov, 2017). According to
the Federal Agency for Tourism of the Russian Federation also stated that as challenging

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economic situation resulted in decline in travel to Egypt and Turkey, hospitality industry rose by
almost 30% in Russia between 2014 and 2015. Moreover, the strong economic growth of Russia
over the recent years also facilitates the country in attracting international business venture and
expansion.
PEST Analysis of Russia
PEST analysis has been conducted in order to evaluate the external environment of
Russia thereby, judging the suitability of international business expansion for The Sheraton
Chain of Hotels.
P- Political  Open foreign relationship strategy
 Good opportunity for the trade and
economic of the country
 The political side undertakes the
principle responsibility of running
business for the whole country
 It is a federation but there is
relationship between regional and local
government
E- Economical  GDP rank 10th
 4th largest country in terms of
agriculture
 Mainly dependent of natural resources
 Extremely dependent on crude oil price

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S- Social  Adversely affected by alcohol
poisoning and HIV
 Well reputed in terms of literature,
music, arts and culture
 Aristocratic structure of the society
 Increase in the death rate whereas
decrease in the birth rate
T- Technological  One of the first country to send people
in space
 The government emphasizes more on
modernization and technological
advancement
 Rich in science tradition
 Use of technology for building military
materials and weapons
Political: Until 2009, the country had official relationship with more than 199 countries and 144
embassies. This signifies that the country has been maintaining an open relationship with the
foreign countries. The strategy of maintaining an open relationship with the foreign countries
facilitates good opportunity for international trade and commerce (Zhao 2012). Moreover, the
country has been playing a significant role in maintaining safety and peace in the world. Russia
has the largest store of nuclear weapon including navy, air force and military. It is one of the
countries with established domestic arms industry. The government of the country also

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emphasizes on growing their military base by investing more on it. Therefore, the country ranks
on top in manufacturing and exporting of weapons. It has been seen that the country not only
manufactures weapons but also export weapons in more than 80 countries in the world (Sutela
2013). This contributes largely o the economic growth of the country.
There is a close relationship between the local and the national government. The national
government is actively involved with the regional governments thereby, facilitating the growth
of trade and commerce. As a result, it is easier for the governments to monitor international
investors and business organizations thereby, helping them to conduct business in the country.
Moreover, as the governments are actively involved in running business, it is easier for them to
develop strategies facilitating and promoting appropriate business environment (Clapp and
Helleiner 2012).
Economical: The country ranks 10th in terms of the economic growth and is expected to reach
$3.18 trillion by 2018 (Kudrin and Gurvich 2015). As a result, the country is expected to gain
huge economic strength in the upcoming years. However, corruption in the Russia adversely
affects the economy of the country. Due to the prevailing corruption, the foreign business
organizations and investors are highly concerned. The increasing number of crimes such as
murder and robbery affects the economy of the country largely as it highlights the risk of internal
security of the country. However, the country has sufficient skilled workforce that are of great
use for the foreign investors in their relevant field. The available resources of the country largely
contribute in making the economy of the country strong and stable (Munda 2012).
Russia has one of the biggest resources of oil and gas and contributes largely for the
economy of the country by exporting them. Moreover, the country has the biggest area in terms