Hong Kong Peninsula’s OLI study of Qatar market Essay

?Hong Kong Peninsula’s OLI study of Qatar market 1 Ownership Advantages According to Dunning’s eclectic OLI framework [1993], the ownership specific advantage is talking about control issue such as cost, benefit and risk of inter-firm relationships. These issues can be justified as three elements: Firm Size, Multinational Experience, and Ability to develop differentiated Products. Dunning and McQueen [1981] also point out that the foundation of the firm entering new market is able to acquire income generating assets.

Referring to Peninsula, it is a famous hotel chain under a big company which means it has enough capital and tangible resource to support the cost of enter foreign market. Also, the sustainable investment maybe in needed so capital is a big factor of entering new market and Peninsula can gain more competitive advantage by enough capital. This advantage can support Peninsula using acquisition as the entry method to enter Qatar market. Moreover, Peninsula has very good reputation on its service but it only has nine hotels operating at this moment.

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The reason is it needs to keep high control on the hotel operation to maintain the service quality and brand image. Therefore, the entry mode of foreign market must fit the Peninsula’s operating philosophy and the acquisition would be the best placed of choice. The Peninsula can enter the market quickly by acquisition and maintain intensive control on hotel operation. However, Qatar is a country located at Arabian Peninsula and it has very different culture and operating environment comparing to Asian and Europe.

The Peninsula may need to invest time and resource to understand the culture, tradition, diet, religion such target markets requirement. Understanding the requirement is the soul of producing good service quality. Thus, it is essential for Peninsula to do this. Another relevant factor of ownership specific advantage is the sourcing capability, which related to the Peninsula’s intangible assets including management resource, operating experience and brand reputation.

The professional management staff plays a big role on reducing marginal cost and providing service quality (Dunning and McQueen, 1981). The professional management resource is believed that can bring advantage to Peninsula. In general, the international hotel with Multinational Corporation will have greater capabilities comparing local hotel (Dunning and McQueen, 1981). Moreover, a professional management team can provide good training to staff and the hotel would benefit from having great planning and designing of hotel operation. Locational Specific Advantage According Dunning’s theory that some factors will attract the hotel operator to enter foreign market or particular country, one of the biggest factors is the growth of tourism. The official Qatar tourism authority announces that the World Travel & Tourism Council suggested last year that tourism in Qatar would grow by 13%. The data show strong overall growth in the Qatar’s hospitality sector. Moreover, the DTZ research (Qatar Q3, 2013) had done the research about Qatar’s hospitality market overview.

According the World Travel & Tourism Council (WTTC) the total revenues for hospitality industries in Qatar dealing directly with international and domestic tourists in Qatar grew by 36% over 2012 to reach QR 33. 2 billion. That was an incredible number. Besides, the increase of foreign tourist arrivals in Qatar rises from approximately 2. 5million in 2011 up to 3. 5 million over 2012. The Qatar Tourism Authority (QTA) aims to contribute some 3 percent to the country’s gross domestic product by 2030(QTA official website) and it would invest US$ 20 billion on tourism related infrastructure projects in advance of Qatar 2022 (Qatar Q3, 2013).

The objectives of this policy are to boost the growth in tourist arrivals by 20% per annum. In addition, Qatar is successful to win the competition of hosting FIFA World Cup and the 2022 FIFA World cup will be held at Qatar. The FIFA World Cup would bring a huge number of tourists to watch the FIFA World Cup match so it is believed that the Qatar tourism will only keep growing for a period with holding FIFA World Cup. In 2012, Qatar has total 81hotels, 13407hotel rooms and 60 occupancy percentages.

These information shows that Qatar’s hospitality is growing rapidly and more tourists go to Qatar for travel every year. Also, the Qatar government concern on tourism development and provide policy support and resource investment on infrastructure. These factors show that Qatar is a growing rapidly and great potential market. Thus, the Peninsulas enter the Qatar’s market will be a wise decision. The other factors: political stability, economic development, technology application would be analyze in PEST analyze. Internationalization Advantages The internationalization advantages is talking about advantages by own production rather than producing through a partnership arrangement. David de matias batalla explain that the internalization advantage would exist in that the firm believes that its ownership advantages are best exploited internally rather than sold directly through spot markets or some some contractual arrangement such as licensing, joint venture and management contracting. [David de matias batalla 2012].

The MNES (Multinational Enterprise) is a “large company with substantial resources that performs various business activities through a network of sub-sidiaries and affiliates located in multiple countries’ (Cavusgil, 2008). The MNES explain why the number of contract would keep increasing in developing country. Therefore, the different internationalization strategy and market entry mode are important for understanding the internationalization advantages. Acquisition is a common way of international hotel would use to enter the foreign or new market.

Dunning and McQueen [1981] discuss about the difference about acquisition. The first acquisition is aim at gaining assets by building portfolio so it is not a direct investment without intention to run the hotel. The second is the acquiescing with intention to run the hotel. However, the risk of investment always exists. The change of market in long run is unpredictable and the result will be referring to change the cost. Nevertheless, every investment and business those have their potential risk existing.


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