Hotels are kings. They provide people comfort and luxury with over the border engineering. How do hotels map in this huge competitory market of travel and touristry? How do hotels run by instilling all the diverseness and varied factors of globalization? How do they develop themselves into a successful constitution by deriving an border over its rivals? Dubai and its Burj AL Arab hotel are surely successful instances. The purposes and aims of the undertaking is to analyze and separate assorted schemes. which Burj AL Arab hotel follows to aline with the hazard environment in Dubai it functions. in order to increase its net income and to be one of the finest universe acknowledgment.
Dubai is situated in United Arab Emirates. which is bordered in the North by Arabian Gulf. E and South by sultanate of Oman and Saudi and to the West by Qatar and Saudi Arabia. It is a prevailing Muslim state with Islam as its chief faith. The state has a big dependance on oil and natural gas exports where concern besides follows. This has encouraged the flourishing of a big figure of hotels in Dubai. which has created a batch of tourers sing the state over a long period of clip.
Burj AL Arab is referred to as the “Arabian tower” . Centrally located in Dubai and with a tallness of 321m. it is the tallest hotel in the universe. The hotel was built on a adult male made island 280m offshore. looking to look like a canvas or a “jib” to devout crewmans. It has a sum of 202 duplex suites and it is an all suite hotel.
From hazard analysis and reappraisal of the competitory environment facets. this article expounds the intuition of Dubai and its Burj AL Arab hotel that is pull offing to endeavor the highest quality in the hotel industry. The hazard analysis comprise cultural facets. economical facets. demographic facets. societal behavioral facets. and political and legal facets ; the reappraisal of competitory environment consists of analysis of the nature of competitory environment. capitalising Porter’s 5 forces. Porter’s competitory schemes and competitory tactics. and directional schemes based on the instance of Dubai and its Burj AL Arab hotel.
ENVIRONMENT RISK ANALYSIS
Significant Cultural Influence
A bold and advanced society. Dubai proudly treasures its civilization and traditions. It has a tolerant. widely distributed society that maintains its Islamic values and civilization.
Although comparatively tolerant and relaxed. Dubai’s civilization is steadfastly rooted in Islam. Most Emiratis are Sunni Muslims. and many belong to the rigorous Wahhabi religious order ( World Wide Web. zuji. com ) . Population make-up is quite diverse: merely about a one-fourth of Dubai’s people are Emirati ; Russian. Persian. and Filipino traditions contribute to the overall feeling of Dubai. Arabic is the official linguistic communication. but English is the linguistic communication of concern. Urdu. Farsi and Malayalam are besides utile.
The Arab national frock worn in Dubai is good adapted to the high temperatures of the part. Most work forces wear a traditional long white robe. while adult females are normally covered wholly by a black abaya and a thin face head covering.
Traditionally. the people in Dubai are gracious. sort and friendly and rather hospitable both in societal affairs and in concern. But as in any Islamic state. they are expected to esteem local imposts. particularly spiritual pattern ( World Wide Web. sevenseashotels. com ) . Dubai is besides place to the world’s richest Equus caballus race. the Dubai Cup. and championship golf classs.
The cultural environment holds profoundly influence on marketing behavior. Hotel industry needs to be sensitive to cultural fluctuation in the environment and appreciation chances for spread outing. For case. In Dubai there is 80 per centum aliens who have investings. concerns and employments. Over 1100 staff members from 50 different nationalities work in different countries of Burj AL Arab hotel. Therefore. they bring the diverse civilizations from all different place states such as faiths. values. and societal behaviors. etc. There will be little or even terrible varies between different invitee groups. merchandise providers. and hotel employees. It is important of import for the managerial degree to handle people with equal regard and revere different cultural norms.
The Relevant and Current Economic Climate
The relevant and current economic state of affairs and clime of Dubai evident influenced the development and menaces of Burj Al Arab-the Arabian Tower.
The metropolis of Dubai has an unfastened economic system with a high per capita income and a ample one-year trade excess. Its wealth is based on oil and gas end product ( about 33 % of GDP ) . and the lucks of the economic system fluctuate with the monetary values of those trade goods. At present degrees of production. oil and gas militias should last for more than 100 old ages. The authorities has increased disbursement on occupation creative activity and substructure enlargement and is opening up its public-service corporations to greater private sector engagement. ( World Wide Web. nbd. co. ae ) The factors that distinguish Dubai are its attractive commercial and investing clime that made Dubai an of import finish for international trade and touristry. investors. business communities and shippers from neighboring states and other parts of the universe coming to the Dubai therefore doing a positive impact on its economic and commercial activity.
Reflecting floaty economic activity in trade. services and touristry and fabrication sectors. the Gross Domestic Product ( GDP ) existent growing rate is 5. 6 % ( 2001 EST. ) . The GDP Purchasing power para is $ 51 billion and the GDP buying power parity-per capita is $ 21. 100 ( 2001 EST. ) .
The GDP composing by sector is: Agribusiness: 3 % ; Industry: 46 % ; Servicess:
51 % ( 2001 EST. ) . And the labour force is 1. 6 million include: Servicess 78 % ; industry 15 % ; agriculture 7 % ( 2000 EST. ) ( www. emiratesbank. com ) .
The continued increased GDP. the construction of GDP. the labour force construction show that the service is a really of import portion in the GDP. And financial policies will advance the development of the non-oil industry like touristry and cordial reception industry so that Burj AL Arab hotel will develop in this sort of economic environment.
This economic environment consists of factors that affect consumer buying power and disbursement forms. Markets require purchasing power every bit good as people ( Kotler et al. 1996 ) . So the purchasing power of clients decides that whether they will devour in the Burj AL Arab. and besides act upon the consume category of the clients in the hotel of Burj AL Arab.
Demographic Profile and Effects on Business
Dubai is the 2nd largest of seven Emirates that comprise the United Arab Emirates ( UAE ) . It is the costal metropolis of the United Arab Emirates. which located on the south eastern terminal of the Arabian Peninsula. Dubai’s country is 3. 900 sq. kilometer ( World Wide Web. tradepartners. gov. United Kingdom ) .
Dubai’s population is estimated at 700. 000. All of Dubai’s citizens are Muslims. with about 85 per centum followings of Sunni Islam and the staying 15 percent followings of Shi’a Islam ( World Wide Web. planetgypsy. com ) . Naturalization of new citizens is limited to Sunni Muslims. Approximately 80 per centum of the population are aliens. preponderantly from South and Southeast Asia. A significant figure of foreign professionals are citizens of states in the Middle East. Europe. and North America. The population denseness is 24 dwellers per sq kilometer. The estimated population growing rate is 3. 5 % per twelvemonth.
In the UAE. single emirates every bit good as the Federal Government modulate economic activity. In Dubai. the governments have intentionally sought to make an environment. which is good ordered without being unduly restrictive. As a consequence. Dubai offers business communities runing conditions that are among the most broad.
There are many options open to international companies seeking to set up a concern relationship with Dubai. Apart from organizing a trading relationship. many companies find that there are distinguishable advantages in holding an on-the-scene presence in order to research market chances. do contacts. liase with clients. and see through the inside informations of any minutess and orders secured.
From that state of affairs. Dubai have a strong demand on Burj AL Arab lodging industry from two largest market groups which are Business and Tourists travelers. Therefore. chief mark markets of Burj AL Arab will be both two types’ travelers. As other market sections. such as households. tourer etc. may every bit good supply big possible gross. therefore Burj AL Arab will besides include these sections as mark markets. Furthermore. since Burj AL Arab merely provide limited services charge with high monetary values. which hence will pull top-tier sections with center to higher income.
Dubai is a all right illustration of economic development triping fleet societal alterations. The metropolis is invariably constructing up its substructure of conveyance installations. schools. infirmaries. touristry developments and other comfortss of an advanced society ( World Wide Web. planetgypsy. com ) . It is a commercial metropolis with widely distributed characteristic. but has non forsaken its ancient ways.
Attractive characteristics offered have tempted international concerns in developing their market. The market has been increasing steady. although the UEA has a comparatively smaller population than other Middle East states.
Customer purchasing behavior is influence by societal factor. including the consumers’ mention groups. household. societal regulations and position ( Kotler et al. 1999 ) . Local communities accept the different civilization and behavior of tourers. In extra. Dubai is really safety and comfy for tourers and hotels in making their concern. The social/behavioural in Dubai brings positive impact non merely for Burj AL Arab Hotel. but besides for others. such as Le Meridien Mina Seyahi Resort. Hyatt Regency Dubai. and Sheraton Jumeira Beach Resort and Towers that can increase visitants going to Dubai. and besides makes the competition tighter between hotels.
Furthermore. Islamic jurisprudence applies as societal regulations that companies must follow. As the state with major population of Islam. Burj AL Arab Hotel must follow the ordinance on selling intoxicant and porc and praying preparation.
Political and Legal facets which support or restrain the concern
Dubai authorities is cagily puting Torahs and ordinances with respect to running concern. Regulations such as Tax Treatment of seaward operations might convey negative benefit to the domestic operations. All foreign investors have to use for a license from the ministry of economic system and commercialism before they start their concern ( World Wide Web. dibai. com ) . which will supply a more desirable environment. Foreign operators have to obtain needed blessings from certain ministries and other governments. This may diminish the virulent competition or entry of inappropriate companies or organisations.
In the instance of the hotel Burj AL Arab. competition seems ineluctable. The policies and ordinances is just to any investors. even foreign companies may hold more political benefit. it will promote hotels running by the domestic proprietors to better themselves to be more overriding by altering their policies so that to be steadfast. With the ordinance of authorities. if these ordinances and policies were implemented genuinely. the concern environment would be relatively more normal. easier for authorities to command and for investors to pull off.
Other ordinances such as: ‘No personal income revenue enhancement is deducted from rewards and wages paid to employees or on other income earned. ‘ ( Taxation of Foreign Employees of Offshore Operations. Offshore legal and revenue enhancement governments in Dubai ) may impact this hotel confronting the poetical jobs such as the addition of runing cost. Employees may job-hop to other hotels under the policy mentioned above. and so there will be an addition of the cost for enlisting and preparation. This might impact hotels in the host states to alter their policies or employee intervention. even the organisational civilization to accommodate to the policies. ordinances and alterations.
Recently. there was a unsmooth period for the cordial reception industry as it struggled to run in a tense political and economical ambiance. which was rocked by terrorist onslaughts. For the status of the turbulency in the Middle East. Dubai as a impersonal province since 1971 hasn’t been influenced negatively. However. the possible war against Iraq may do negative consequence over the development of Dubai touristry.
REVIEW OF THE COMPETITIVE ENVIROMNMENT
The Nature of the Competitive Environment
Dubai has experienced singular growing in the cordial reception industry in both sides of handiness and quality. Although recent political state of affairs in Middle East reduced development. cordial reception industry is predict to greatly spread out in the coming old ages harmonizing to the developing tendencies.
From 1993 to 2001. hotel industry in Dubai grew at an one-year norm of 6. 1 per cent. and hotels’ sum grosss increase an mean one-year of 9. 2 per centum ( www. hotelier-malta. com ) . By the terminal of 2001. Dubai possessed 69. 5 per centum of UAE Dh 2 billion entire gross from hotel and 72. 5 per centum of 364 entire hotel sum. For the hotels tenancy. the more luxury the hotel is. the more tenancy rate occurs. for case: 5 star hotels or up-71 % . 4 leading hotels-65 % . 3 leading hotels-53 % . and 2 star hotel or under-47 % .
Harmonizing to Fred ( 1995 ) . based on two evaluate dimensions: competitory place and market growing. appropriate schemes for any corporation are listed in each quarter-circle. which is called Grand Strategy Matrix. In the instance of Burj AL Arab hotel in Dubai. due to the great tenancy rate and high industry’s growing rate. it experienced the high market growing and strong competitory place ( More analysis of Burj AL Arab’s strong competitory advantage will be provided in Porter’s Competitive Strategy and Competitive Tactics ) . Therefore. the hotel is positioned in Quadrant 1. “which means continual concentration on current markets perforating and merchandises developing are appropriate strategies” ( Fred. 1995 ) .
Figure 2. Grand Strategy Matrix
Rapid Market Growth
Quadrant 2 Quadrant 1
Market development Market development
Market incursion Market incursion
Merchandise development Product development
Horizontal integrating Forward integrating
Divestitures Backward integrating
Liquidation Horizontal integrating
Weak Concentric variegation Strong
Quadrant 3 Quadrant 4
Retrenchment Concentric variegation
Concentric variegation Horizontal variegation
Horizontal variegation Conglomerate variegation
Slow Market Growth
Top-class leisure. athleticss event. and Dubai shopping festival have become the chief dynamism for sing Dubai. Leisure has surpassed concern as the primary ground for sing Dubai due to the gilded hotel services and installations. Dubai is besides widely known as an international sporting locale keeping many sport events such as Horse Races. International Power Boat Racing. Pedigree Camel Races. Dubai World Cup. Dubai Tennis Championships. etc. In add-on. the well-known Dubai shopping festival. which offers shopping. first amusement. day-to-day Raffless and humanistic disciplines. has been recognized as the world’s largest festival.
Porter’s 5 Forces
Michael Porter provided a model. which theoretical accounts an industry influenced by five forces: menace of new entrants. dickering power of provider. competition among bing rivals. dickering power of purchaser and menace of utility merchandise and service. This theoretical account can be utilized to derive in-depth apprehension of the industry context in which the house operates. and help the house in accomplishing higher net income borders and remain fight.
Rivalry Among Existing Firms
Harmonizing to Grant ( 1998 ) . there are several factors to analyze when sing the competition among existing houses:
* Low demand of the merchandises
* Low exchanging cost
* Exit barriers
* More equal size rivals
As a prima regional commercial hub with a state-of-the-art substructure and an first-class concern environment. Dubai provides investors with a alone and comprehensive value-added platform that make Dubai a strategic location for carry oning concern. As groundss to Dubai success in pulling foreign investings. many hotels were built in the yesteryear and some are under development to run into the high demand of foreign clients and to back up the economic growing of Dubai.
Burj AL Arab is one of the most obvious differentiations among them. It have a batch of rival like Le Meredien Mina Sayahi. Hyatt Regency Dubai. Sheraton Jumeira Beach Hotel and much more. which have strong trade name repute among local and international travelers. In order to leverage its trade name equity. Burj AL Arab Hotel must possess better quality of service and installations above its rivals.
Menace of New entrants
Harmonizing to Johnson et Al ( 1999 ) . there are several facets when sing the power of the new entrants:
* Existing trueness to major trade names
* High fixed costs
* High costs of exchanging companies
* Government limitations or statute law
For Burj AL Arab hotel. there besides exists menace from the new entrants. Even though it has loyal clients. little mishandling in clients outlooks may do the loyal clients to exchange penchants. Burj AL Arab has raised the client outlooks to a really high grade and failure to run into these outlooks can let down the clients. This hotel has a peculiar advantage which other hotels are hard to replace: the specialness of the merchandise. Its idiographic makes the hotel became the primary pick for the invitees who would wish to hold a deluxe and go outing stay in Dubai. In comparing this hotel with other new entrants. Burj AL Arab hotel possess competitory advantages in term of cost advantages such as engaging cost. enrolling cost. and runing cost. and strong trade name acknowledgment among top-tier travelers.
Dickering Power of Buyers
The power of purchasers is the impact that clients have on a bring forthing industry. In general. when purchaser power is strong. the relationship to the bring forthing industry is near to what an economic expert footings a monophonic music – a market in which there are many providers and one purchaser. Harmonizing to Fred ( 1995 ) . the analysis of competition of purchaser power for Burj AL Arab hotel can be express in the undermentioned points:
* Price sensitiveness
* Product distinction
* Brand Identity
Majority of clients ever pay close attending to the hotel’s monetary value. Therefore Burj AL Arab hotel should raise or take downing monetary values to derive a impermanent advantage based on the alterations of high season or low season. A low degree of merchandise distinction is associated with higher degrees of competition. On the contrary. Burj AL Arab has great merchandise distinction with the lone room type-suit suites. It helps lower the competition degrees.
Burj AL Arab hotel is a individual marketed trade name hotel. It doesn’t have the trade name acknowledgment when compared with Sheraton. Hyatt or the Le Meridien concatenation of hotels. However. this does non impact Burj Al Arab Hotel seem the hotel aims for a high profile client who is willing to pay premium monetary value for their alone experiences and first category services. In add-on. it manages to keep a high “buyer volume” with big figure of guest remaining at the hotel throughout the twelvemonth and with high tenancy.
Dickering Power of Supplier
“Suppliers are steadfast and persons that provide the resources needed by the company to bring forth its goods and services” ( Kotler et al. 1999 ) .
Under the undermentioned conditions. provider can asseverate big influence in the concern dealing:
* There are few dominant providers of a peculiar merchandise
* There are no substituted merchandises
* Switch overing to another merchandise is really dearly-won
* The merchandise is highly of import to hotel
If these state of affairss occur. Burj AL Arab hotel has to confront a force per unit area from their providers. However. the hotel can cut down the bargaining power of provider by partnering with travel bureau or large supermarket concatenation. buying highly high volume of merchandises. and cut down its dependence on providers by bring forthing portion of its ain merchandises such as detergent. pastry. etc. Furthermore. the proprietor of Burj AL Arab Hotel is the sheik premier curate of UEA. therefore it helps to construct better relationship with providers in Dubai. Indirectly. this provides the hotel with some economic advantages resulted from political factors.
Menace of Substitute Products or Servicess
Knowles ( 1999 ) suggested that all houses in an industry are viing in a board sense with industries bring forthing replacement merchandises. therefore making gross and net income force per unit areas. Following is the cardinal points of substitution’s menace:
* Fair monetary value public presentation
* Low exchanging cost
* Buyer’s leaning
The main point is the similarity of replacements the being of close replacements presents a strong competitory menace. restricting the monetary value a company can bear down and therefore its profitableness ( Hill et al. 2001 ) . However. if a company’s merchandises have few close replacements. the great chance does be to raise monetary values and earn extra net incomes.
The competitory menace of the permutation for Buri AL Arab Hotel in Dubai is non critical strong. because of different room type ( merely suit suites available ) and valuable outlook from the service quality ( designed as the first 7 star hotel in the universe ) . Hence the room rate for Buri AL Arab is around $ 900- $ 7000 per dark. which maximize the hotel profitable ability.
Porter’s Competitive Strategy and Competitive Tacticss
As Wit ( 1998 ) mentioned that competitory scheme can be defined as the hunt for a favorable competitory place in the industry. Michael Porter determined that a concern could follow one of three generic schemes: cost leading. distinction. and focal point.