Introduction

The objective of this research assignment is to spread light on the relationship of the two countries China and Sri-Lanka. In order words, the Sino-Sri-Lanka relationship has been intact for the past five decades since the independence in 1948. However, the initial steps of this successful bond shared between these two nations can be dated back by twenty centuries during which the initial exchange of goods and services and sharing of resources took place.

The purpose of this research assignment is to highlight the contemporary issues present in the Sri-Lankan market and how this impacts the hotel and leisure industry. This will be looked at in detail in relation to the magnitude of the impact on other organisations and the economy. it It is of vital importance to the Kingsbury hotel to analyse the product portfolio of the company in relation to its product life cycle and formulate an effective global strategy to address the contemporary issues.

Environmental analysis will be conducted to better identify the strengths and potential market threats to Kingsbury and PESTEL analysis will be looked at to identify the likelihood of the impact of the external factors to the company. (Holy Family University , 2018)

Background

Hotel Kingsbury has been chosen for the purpose of this research assignment to facilitate in-depth understanding and acknowledgement of the critical issues for the organisation due to strategic decision of china which has a drastic impact on the Sri-Lankan hotel and leisure industry. The Kingsbury hotel is one of the reputed and finest five star hotels located in the heart of Colombo between Galle face green and the world trade centre providing convenient access to entertainment and business needs.

The Kingsbury offers twenty-four hours’ business services such as corporate meeting and conference rooms as per the convenience of the guests with aid of contemporary audio and visual aids. The Kingsbury specialises in the service sector industry with high end unmatchable fine hospitality service to their guests with access to the international harbour restaurant with famous Chinese, Indian, continental, middle eastern and Bangladeshi cuisines. The service also includes a magnificent ball room that could accommodate 300 guests and a twenty-four seven open bar with finest brand varieties to cater different guests. (The Kingsbury , 2018)

Contemporary Issue

The contemporary issue is defined as the strategic issue that is relevant to the present day that could negatively impact the operations of a business and hence it is of critical importance to most businesses today.

Restrictions in Outbound Investments by China

The relationship shared with China by Sri-Lanka is of great value added proposition that helps bring in vast amounts of investments to the economy of Sri-Lanka which has helped the hotel and leisure industry. China is one of the largest economies with a GDP per capita of $8500 and hence the end of the civil war witnessed high levels of outbound investments from China to Sri-Lanka but however recently china has implemented new laws and regulations in relation to the outbound investments such as acquisition of properties and assets. The Chinese government has informed that all the outbound investments of properties, hotels, entertainment and sports will be under enquiry in context of outbound investments. (Kelegama, 2014)

According to the Forbes magazine, the Chinese investment in Sri-Lanka has dropped by 46% in the first two quarters of 2017 and this has been confirmed by the Chinese Ministry of Commerce. This can adversely affect the Sri-Lanka’s growth sufficed through the foreign investments. The Chinese FDI investment in the United States had dropped by 35% to $29 Billion in 2017 and the drop of Chinese acquisitions in the US was even sharper with a downfall by 90% compared to the previous year. The underlaying factors behind this downfall was attributable to the beijing’s regulatory clampdown on outbound capital flows. The table below depicts the FDI investment of China in United States and the areas of concentration has been segmented.

(Hanemann, 2018)

The annual foreign direct investments inflows from China to Sri-Lanka stands at less than $1 million in the year 2005 but however this escalated to the rise by $400 Million and this was largely during the rajapaksha’s regime. These massive FDI investments were largely targeted at the port city project which was forecasted to be the financial hub. Sri-Lanka has largely relied on the outbound investments from China where in the last decade alone $1.1 Billion FDI was received from China whereas only $400 Million FDI received from the United States.

The restriction in the outbound investments by China has drastically impacted the GDP growth of the nation and this was evident in the trend analysis that was done to identify the growth of the GDP in the last decade which outlines that the reduction in the Chinese investments have led to downfall in the GDP growth of Sri-Lanka. (Moramudali, 2017)

(Trading Economics, 2018)

Analysis of the Issue

Sri-Lanka’s relationship with China dates five decades back since the independence and the positive relationship shared between China and Sri-Lanka has enabled Sri-Lanka to benefit from high levels of investments and imports of essential resources that helps to contribute towards the Lankan economy.

The above table was obtained from Sri-Lanka Customs data which reflects the balance of payments transactions between Sri-Lanka and China. The imports and the exports between the two countries have been constantly increase however the proportion of increase of imports from China to Sri-Lanka is twenty-five times in 2012 highlight the negative balance of payments however the restriction of the outbound investments is likely to cut down the exports of Chinese products to the Sri-Lankan market. (Sri-Lanka Customs, 2013)


The Sri-Lanka’s major imports from china includes electrical machinery and equipment, boilers and cotton. These imports generally fall within the manufacturing and production sector which are secondary goods but however most of the goods exported by Sri-Lanka to China fall within the primary goods category which are of comparatively lower monetary value.

The cut down in foreign investment by China into Sri-Lanka is likely to affect the growth of many industries that is reliant in the Chinese monetary funding such as the infrastructure sector. The Chinese investment funded the development of a poor rural town Hambantota into an international destination with an investment of $2 Billion to develop the Hambantota Port and the nearby Airport. This helped the country reap benefits through well-established high way roads to attract tourists and multinational corporations to set up business in Sri-Lanka.

The new policy of china is likely to reduce the future potential outbound investments from china is likely to affect the sustenance of these industries and development of Sri-Lanka.

Repercussions on the Hotel and leisure sector of Sri-Lanka

The Sri-Lankan economy has recovered with growth of tourism sector and establishment of prominent star class hotels and resorts establishing their presence in the Sri-Lankan market that had helped the Lankan economy to recover from the three long decade of civil war. However, the cut down of outbound investments by the Chinese government is likely to

Employment

The foreign investment into the Sri-Lankan hotel and leisure sector is likely to infuse the demand for employment and skilled workers which reduces the level of unemployment within the Sri-Lankan economy and enhances the demand for unskilled and skilled workers. The establishment of businesses and hotels by multinational firms such as Shangri-La enhanced the demand for employees specialised in the hospitality sector and better job prospects for the locals. This Is likely to get negatively affected if china decides to cut down on its future investments which is likely to worsen the unemployment within the Sri-Lankan hospitality industry.

Economic Growth and GDP

The economic growth is of great importance to most developing countries to raise the standard of living of the people and alleviate poverty. Economic growth shares a positive relationship between tourism development and economic growth as per the cross country study conducted by IMF. The study shows that a change in one standard deviation of tourism exports leads to 0.5% growth in the economy annually. This enables the developing economies to enrich the standard of living of the people with through long term growth stimulation. The reduction of Chinese outbound investments in the Sri-Lankan Hotel and Leisure sector is likely reduce the GDP per capita and the export of services which otherwise would bring considerable revenue to the Sri-Lankan economy.

(The World Bank , Oct, 2011)

Analysis of the product portfolio of the company in relation to the product life cycle model

The product portfolio of an organisation is the collection of products and services catered by the organisation to the market. The Kingsbury hotel’s product portfolio includes restaurant with diverse cuisines, five-star luxury rooms for the guests, ball room, bar and business meeting conference halls. The largest segment of the revenue generating model of Kingsbury is through the luxury rooms that provides magnificent view of the ocean with 269 rooms in total. Kingsbury consists forty apartments, twenty suites and two hundred and seven rooms in total as a segmentation breakdown.

As far as the analysis of the product portfolio is concerned, the high profit generating rooms are the Kingsbury Suite and the Premier Room which is mainly targeted at the foreign guests and tourists with the view of the ocean to provide an exclusive hospitality experience. The product portfolio of Kingsbury needs to be critically assessed in relation to growth prospects, profit margin drivers, market leadership and operational risk.

Growth Prospects

The end of the civil war in Sri-Lanka led to the attraction of the Sri-Lankan market to foreign companies to establish their business and it was safe for tourists to visit Sri-Lanka which is considered the pearl of the Indian ocean to experience finest hospitality experience. The Kingsbury hotel serves the guests with 269 rooms with diverse cuisines and chefs specialised in continental, Indian and middle east styles but however there is considerable competition from existing hotels such as cinnamon grand and Taj. Further to this, Shangri-La one of the Asian giants in the hotel industry as stepped into the Sri-Lankan hotel and leisure industry thereby the growth prospects of the Kingsbury hotel has reduced in terms of the captured market share.

The hotel needs to invest in marketing promotion campaigns and add more value to the services offered to retain guests and customers to suffice its long term survival.

Market Leadership

The current market leader in the hotel and leisure industry is dominated by the cinnamon hotels with 33% of the market share followed by Aitken Spence with 17%. Kingsbury holds 8% of the market share of the hotel and leisure industry but however in order to enhance its business growth and expand its operation to achieve the market leader position the hotel needs to diversify the range of products offered such as opening hotels in the down south region and central province to have tourists visiting the hotel during different times of the year such as Christmas holidays and summer vacations. (NIBusinessInfo.co.uk, 2018)

Operational Risk

Operational risk in general terms is defined as the risk arising from failed processes and inefficient implement of systems and processes. Kingsbury is five-star hotel with a large employee base with multiple operations of business functions such as restaurant, bar facilities, management of the ball room, guest relation services etc. Hence it is important to have defined systems and processes in place in order to ensure a smooth functioning of the overall business system.

Analysis of the Product Life Cycle Model

Product Life Cycle outlines the stages involved in the life cycle of a product starting from the introductory stage to the decline phase of the product during which the organisation has considerable authority to implement strategies to delay the decline phase of a product. Therefore, product life cycle management is of high importance to Kingsbury to understand the current position of its products and recommended marketing strategies to maximise its sales.

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The product life cycle includes four key stages during which the product of an organisation travels through different phase and experiences fluctuations in sales and demand and thereby impacts profitability of a firm. (Study.com, 2003-2018)

The key flagship products that falls within the kingsbury group includes Kingsbury hotel, and Global Cuisine Restaurant. These are the key revenue centres that generates sales for the business and hence the sustainability.

Kingsbury Hotel

The kingsbury hotel is a five star hospitality service provider with a premium pricing strategy which high end quality star class services to the propspective guests visiting the hotel for a stay. The hotel includes Restaurants, swimming pool, Jacuzzi, ocean view from the bedroom and exceptional guest relation services that ensures a pleasant stay for the guests. According to the Sunday Times, the kingsbury hotel recorded an impressive financial performance for the FY 2014/15 with a reported profit of Rs.300 Million but however this has dropped to Rs. 215 Million in 2017. The Kingsbury hotel is experiencing the end of the growth phase in the product life cycle with healthy profitability but at the same time rising costs for the business due to inflation. (Sunday Times, 2016)

Global Cuisine Restaurants

The Global Cuisine Restaurants of Kingsbury group offers exotic dishes from around the world with customised menus to meet the needs of the guests. The restuarants include Beach Honey, Grill, Ocean Seafood and Harbour Court. The cuisines specialise in Continental, Indian, Bangladesh and middle east in order to serve the best prepared delicacies to take the guest on a culinary adventure. The Global Cuisine Restaurant of Kingsbury was named the Restaurant of the Year 2015 by the Luxury Travel Guide UK 2015. The Global Cuisine Restaurant is at its Maturity phase with leading services provided to the guests and customers. The 2017 interim financial statement of Kingsbury outlined that the revenue generated from the Global Cuisine Restaurants are twenty five percent of the total revenue of the hotel which is one forth of the propotion of total revenue. (The Kingsbury , 2017)

Formulate a global strategy for the company

The strategic decision of the Chinese government to increase the scrutiny level on the out bound investments in Sri-Lanka is likely to reduce new investments in the hotel and leisure industry and this is less likely to give rise to new potential entrants. This can be utilized by the Kingsbury hotel through measures of expansion by opening up two more hotels in the regions that are developing and upcoming tourism attraction locations. Through this strategic decision of Kingsbury, the hotel will be able to capitalise on expanding its product portfolio and enhancing the market share thereby eliminating the sole dependency on one single hotel operation and profitability.

A formulation of a global strategy is required for the purpose of this research assignment to assist a better marketing strategy to enhance the business performance and operation.

Environmental Analysis

Environmental analysis is a marketing concept that analysis the factors that is important to an organisation and has an impact on the operation of the business. Environmental analysis is of two types are they are internal and external. External factors are beyond the control of the organisation and has drastic impacts on the overall performance of the business and this needs to be identified and necessary measures to be taken to reduce the negative influence on the business efficiency. The internal factors Is generally within the control of the firm to an extent thereby the firm can influence these factors through effectively formulated strategies.

SWOT Analysis

Swot Analysis is a popular marketing concept that helps Kingsbury hotel identify its four key dimensions such as Strengths, weakness, opportunities and threats. These four factors are crucial for the Kingsbury hotel to identify where it possess competitive advantage and the areas of concern.

Strengths

  • Established Brand Name
  • Large Enterprise
  • High Quality Service
  • Diverse Product Portfolio

Weakness

  • Competition from Close Rivals
  • Lack of Industry Experience

Opportunities

  • Training and Development to the Employees
  • Expansion to southern region

Threats

  • Government Regulations
  • International Competition
  • Increase in cost of operation

The Swot analysis highlights on the well-established brand of Kingsbury and its diverse product portfolio that it offers its guests and customers which is the strength of the organisation. But however the hotel is comparatively new to the industry compared to Cinnamon Grand, Taj Samudra and Mount Lavinia hotel. Thereby, the Kingsbury hotel lacks industry experience and this can be gradually increases to sustainable business operation and long term survival. In addition, an appropriate marketing campaign needs to be formulated by the Kingsbury hotel to capture the customers and guests of cinnamon grand and Taj Samudra to generate high business revenue. The external factors such as threat and opportunities spread light on training and skill development that needs to be made priority by the Kingsbury management to train the employees to enhance their language skills and interpersonal skills since the hospitality industry is a service sector and guests and customers liaise with the staff on a daily basis and rate the service based on the approachability and the experience of their stay.

In the long term however there are likely to be potential threats from the government changes that could bring about new change in policy and laws that could tighten the rules and regulations that can redefine the way hotels function in the hospitality industry. In addition, the end of war has witnessed multinational corporations setting up business in the Sri-Lankan market thereby there is likely threat of potential international competition. But however this is less likely due to Chinese cut down of foreign investments which is a vital opportunity for Kingsbury hotel to expand its operations and capitalise on market share.

PESTLE Analysis

Pestle analysis is a marketing concept that helps a business analyse the external factors through effective breakdown of the impact of each external factors and using these the firm can suggest suitable strategies to use those external factors to the critical advantage of the firm.

Political Factor

Political factor is a key government instrument which can be used by the Sri-Lankan government to impose regulations and compliance that the hotel needs to adhere to in order to effectively operate its business. Kingsbury hotel can implement corporate social responsibility initiatives to obtain the positive impression of the government by serving the community that they operate in and this is likely to build a positive mutually benefitting relationship between the Sri-Lankan government and the Kingsbury hotel.

Economic Factor

The economic factor includes the costs of operation and as discussed, there can increase in costs of operation in future due to inflation and these need to be effectively incorporated into the budget of Kingsbury to identify areas of enhancing the revenue to maintain a healthy profit margin thereby providing reasonable return to the shareholders of the hotel.

Social Factor

Social factor spreads light on the importance of the business ethics and corporate practices of the organisation and this has been considered important by most businesses of today era’s due to the millennial age of employees. The social factor initiatives are an excellent strategy of Kingsbury to invest in ethical values of employees and best practices and great place to work culture can be created for better employer branding appeal and number one employer of choice. These are likely to enrich the brand value of Kingsbury and enhance market price in the stock market.

Technological Factor

Digital technology revolution is a widely discussed concept and the benefits of automation and digitalized processes has been acknowledged by most firms today and how this contributes towards achieving competitive advantage. Kingsbury hotel could make use of digital automated processes implementation to automation the tedious tasks that strengthens the reservation system and helps business efficiency of better management of the hotel to enhance business performance.

Legal Factor

One of the most important external factors that need to be taken into account by the Kingsbury hotel is the legal factor that outlines the laws and legal compliance that needs to be adhered to by the Kingsbury hotel. This is important to ensure the hotel conducts its operations within the framework defined by the government and the authoritative bodies to avoid fine and bans.

Environmental Factor

The operations of hotel and resorts has raised significant concerns on the matter of pollution and disposal of wastage that destroys the environment of the surrounding and suburbs and this has negative image on the company by the public. The Kingsbury hotel needs to take responsibility of the environment it is surrounded with in terms of protective measures and development of the neighbouring surroundings to create a good public and social image to be named as socially responsible hotel operation. (Oxford College of Marketing, 2018)

Conclusion

As per conclusion, the relationship shared between Sri-Lanka and China can be dated back to the 1950s with constant exchange of trade practices and good and services with foreign investments coming through but however the strategic decision of the Chinese government to halt its outbound investments is likely to negatively impact the economy of Sri-Lanka. The purpose of this research assignment is to highlight the impact on the repercussions on the hotel and the leisure sector of Sri-Lanka and a detailed analysis of the product portfolio and the company background of the Kingsbury hotel as part of this research. The Kingsbury hotel product portfolio includes diverse range of products and the product portfolio was analysed in relevance to the product life cycle model which illustrates the phases the product and service of Kingsbury goes through before it enters declining stage. A global strategy was formulated with the aid of the product portfolio and the strategic decision of the Chinese government. This was facilitated through popular marketing models such as the Swot analysis and the Pestle analysis that provides in-depth insights on contemporary issue at hand and how Kingsbury hotel could transform the external factors of Pestle to its advantage by better understanding its market position.

References

 

Bibliography

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