The report titled "International Business Strategy: Market Entry of Oberoi Hotels in Uruguay" provides a comprehensive analysis of the international expansion opportunities for Oberoi Hotels. It explores key strategies for market entry, organizational design, marketing, and human resource management, using frameworks like SWOT, Porter’s Five Forces, and Dunning’s Eclectic Paradigm. The report focuses on Uruguay’s favorable business environment, including political stability, a strong middle class, and a high standard of living, while considering challenges like the global economic downturn. Strategic recommendations for establishing a luxury hotel in Montevideo are provided, highlighting the importance of localization and leveraging existing alliances.
Market Entry of Oberoi Hotels in Uruguay
Executive Summary
This report presents the International Business Strategies in the context of Oberoi Hotels and Resorts’ market entry into Uruguay. Insights are generated based on secondary research of publicly available data from credible sources. Frameworks like SWOT, Porters Five Forces, Dunning’s electric paradigm (OLI) model, 4Ps of Marketing are used to provide insights for market entry. Recommendations on type of International Strategy to pursue, the Entry Mode to be chosen, Organizational Design, Marketing and HRM Strategies are discussed in detail for company’s success.
Uruguay presents a positive business environment and economic indicators trend which encourages Oberoi Hotels to capitalize the opportunities. This report is a continuation of research performed on the external environment and key country factor conditions presented in the Internationalization of Oberoi Hotels report (Jacinth 2022) submitted to Deakin University. Mandarin Oriental, its strategic alliance partner in other locations could play a prominent role with its experience in neighboring Latin American Country of Chile (Mandarin Oriental 2021). The ongoing pandemic and a looming economic recession which bring in many uncertainties pose some questions on timing part of market entry especially in a hospitality industry which is prone to volatility.
The planned international hotel is recommended to be set up in the city of Montevideo which offers a host of benefits compared to other locations. Since experiences and culture play a crucial role in hotel industry, a polycentric approach is recommended in marketing and staffing strategies (ITA 2021). Being a tech savvy market, digital marketing and using technology can help to position itself as a strong new entrant in Uruguay hotel industry.
1. Introduction
The Oberoi Group's Vision emphasizes the necessity of operating abroad, with a global scope - “We see the world dotted with hotels of The Oberoi Group, in strategic commercial and resort locations” (Oberoi Hotels, 2022a). In the context of identifying international opportunities and formulating recommendations in line with organizational capabilities, various frameworks and extensive secondary research data is analyzed and presented. The recommendations are also ensured to be socially and culturally responsible for the Uruguay environment in which they operate.
International strategies for entering foreign markets are discussed using the SWOT analysis and Porters five forces model. Preferred entry modes are presented based on Dunning's Eclectic Paradigm Model based on ownership, location and internalization. Along with that a mention on the time and scale of entry is also presented for a wholistic approach to market entry. Recommendations on international organization design along with its control activities and control systems is presented to have a competitive advantage in harnessing strategic capabilities. 3 dimensions of an organizational structure are considered namely the vertical and horizontal differentiation mechanisms along with integration. International Human Relations strategies are recommended on staffing policy, recruitment, training, labor relations etc. International marketing strategies for Oberoi hotels in Uruguay are discussed covering the 4Ps of marketing namely Price, Product, Promotion and Place. A brief mention about the production and supply chain is also presented to have a sustainable competitive advantage. Please refer to the pictures, tables and appendix sections which provide in depth research details wherever cited.
2. International Business Opportunities
The country of Uruguay presents immense international business opportunities for the Oberoi Hotel group to make its market entry. According to the World Bank's Gini Index study, Uruguay has one of the most evenly dispersed income distributions in Latin America, resulting in one of the largest middle classes and above per capita (International Trade Administration 2021). A SWOT analysis is performed and Porter’s five forces are analyzed to understand the international business opportunities that the company can pursue.
Uruguay presents a positive external business environment which has a stable political environment, a developed country, located in the temperate zone with good climate, educated and wealthy population, offers equal footing for locals and foreigners in setting up a business, good GCR 19 numbers, a strong legal system all of which are beneficial for market entry as per Internationalization of Oberoi Hotels Report (Jacinth 2022). Strengths of Oberoi group include a strong financial position of the company to expand into new markets as per the company’s Annual Report 2020-21 (Oberoi Hotels 2021). It has established a high brand value as a symbol of luxury and comfort along with many international accolades. The experience of Mandarin Oriental group can be leveraged which already has a presence in some of the South American countries as both the groups already have a strategic alliance in place for other regions. The Capital city of the country Montevideo is a promising place for Oberoi group to consider an entry given the strategic business location and tourism potential the city holds. A high concentration of hotels gives a high bargaining power to the business with its suppliers.
Other opportunities include the growing economic indicators, government support to businesses, opening up of the international borders after the pandemic, strong institutional performance, rise of tourism and business travel, etc (Gov UY 2021). In line with globalization of markets principle, Uruguay provides right market opportunity for its expansion. Some of the weaknesses to consider are the cultural differences and lack of experience of running business in Latin American countries. The timing of the entry due to pandemic and an over looming recession pose a threat to market expansion plans (UNCTAD 2022). Please refer below picture for a snapshot and Appendix B for key opportunities to leverage.
Table 1: SWOT for planned Oberoi Hotel in Uruguay
The hotel industry requires a significant initial expenditure, which presents a unique high barrier to entry for newcomers. The rise of disruptive innovations like AirBnB, advanced video conferencing tools like zoom, MS teams including metaverse and web3.0 all of which pose a moderate threat of substitution to the premium hotel industry business. Because of the high concentration of hotels in Montevideo, long term relationships with suppliers, lack of trained personnel, disruption of international supplies due to regional issues and pandemic suppliers have a moderate bargaining power. Customers who are tech savvy exploring online and finding the most cost-effective alternative that best meets the budget has become extremely easy. Less switching costs, less brand loyalty with the customers, bulk bookings by corporates who negotiate strongly, etc. result in a high bargaining power of customers. Rivalry among existing competitors is fierce in the hotel industry. While the economic climate in Uruguay is not without its issues due to the recent global pandemic and various other factors discussed above, it is one of the more business-friendly countries in Latin America (Statista 2022).
3. International Strategy
As Oberoi hotels envisage an entry into Uruguay, an international strategy which drives optimum results need to be chosen. International strategies normally have two types of pressures which are the pressure for cost reduction and pressure for localization. Since hospitality industry is driven by destinations and experiences, the pressure for localization is much higher compared to cost reductions. Oberoi group has positioned itself to be a premium hotel chain and more value driven rather than cost driven. In this context, the Multi-Domestic Strategy would be the approach to be considered for a sustainable competitive advantage (Hill 2019).
The company needs to maximize local responsiveness by tailoring both their product offering and marketing strategy to the various national conditions in which it operates, in our case Uruguay. Customizing the offerings and experiences to local needs is of prime importance in the hotel industry and it can be seen in Oberoi group international locations like Egypt, Middle East and South East Asia. However strategic alliance with Mandarin Oriental hotels in place internationally comes with a signature oriental charm but same time offers the best of local culture experiences (Watkins 2017).
Oberoi group strongly believes in delivering strong returns to shareholders, best in class service to its customers and consistent value to all its stakeholders in all the locations worldwide. The international strategy also needs to be in line with the global Oberoi group’s purpose-led strategy for future growth with their outlook stated as ‘Endure – Revitalize – Flourish’ (Oberoi Hotels 2021).
4. International Entry mode
For international expansion, there are a variety of entry mode alternatives accessible, and the choice of entry mode can be influenced by a variety of circumstances. To provide a viable entrance method, Dunning's Eclectic Paradigm theory is applied, which analyses the worldwide market advantages in Ownership, Location, and Internalization i.e., the OLI Framework (Theme Grill 2018). Hotel industry is more about the services offered and experiences provided, where having ownership advantage is not significant. This is seen in the successful strategic alliance of Oberoi group with Mandarin Oriental hotels. Location plays key role in all customer facing B2C businesses and having a presence is key locations is advantageous and of strategic importance. Internal production, rather than contracting with a host nation company to operate services offer moderate advantages (Economic Times 2017).
Uruguay offering conditions such as fair market, equal opportunities for local and foreign players, clearly laid out rules and frameworks, positive economic indications, less corruption, law in place, proven hotel industry in the city of Montevideo all of which suggest establishing a wholly owned Subsidiary of the Oberoi group along with a Strategic Alliance with Mandarin Oriental similar to Oberoi hotels in Egypt, Indonesia, Morocco and the Middle East (Mohile 2020). The experience of in Mandarin Oriental in Chile can be leveraged and help partners to achieve synergy and competitive advantage by facilitating market access, risk sharing and competitive advantage (Hill 2019). On the time and scale of entry, starting business in Montevideo, Uruguay is late entry strategy having its own advantages of less costs to educate customers and benchmarks already setup with stakeholders. Since this is a new foreign market where Oberoi group do not have a prior experience a small-scale entry with one location is recommended.
5. International Organization Design
All corporate activities are built on the foundation of organizational design, which includes critical issues such staff integration between divisions and the management hierarchy inside the organization. For the Oberoi hotel in Uruguay an international division needs to be set up with a mix of centralized corporate strategy and same time allowing some decentralized decision making (Harzing - 2016). As the hotel industry is highly customer centric and experiences driven, a polycentric company approach would be more suited for its operations to suit the foreign market. All foreign efforts are coordinated and monitored by the head of international division, who reports directly to the chief executive officer (Gov UY 2021).
Figure 1: Organization Structure for Oberoi, Uruguay
Under the Oberoi International division at Uruguay, the six key departments listed are Rooms, Finance & Accounting, Marketing and Sales, Purchasing & Admin and Food & Beverage. Sub divisions are added for each of the functions such as front office and house keeping which come under rooms. Control activities at personnel level, strategic, cultural and bureaucratic are required for monitoring and regulating activities in a firm to achieve or maintain a targeted performance. Control systems through financial accounting, policies and procedures, performance ratios help in effective operations of the business unit to meet its organizational objectives (Hill 2019). Uruguay culturally avoids ambiguity and uncertainty, and to maintain high level of customer excellence structures need to be in place for people and processes.
For Oberoi hotel in Uruguay based on a multi domestic and world-wide area structure, vertical differentiation needs to be decentralized, with less need for central coordination and fewer integrating mechanisms. There would be less performance ambiguity and less need for cultural control as per Harzing 2016.
6. International Marketing Strategy
A company's marketing is just as vital as the product or service it sells. It aids in the creation and maintenance of the brand image with which the company wishes to align its goals. For Oberoi Group hotel in Montevideo, a differentiation business strategy helps to have a sustainable competitive advantage. Hotel industry is about value and unique experiences providers can offer. There are quite a few premium hotels in the city and the marketing managers must help create items, pricing, promotions, and distribution strategies that set the company apart from its competition. Also, with a multi domestic localization strategy, a polycentric approach helps in customizing the hotel offerings to suit the specific target market. The 4Ps of marketing framework present the key factors to be considered while marketing the hotel offerings (Hill 2019). Product core is the premium hotel experience and comfort of which premier rooms and suites are the actual services and rest are the augmented level experiences. As possible customers, the hotel should target corporate offices, higher-income groups, and urban travelers, and use a Premium Pricing Plan that is more value-based than cost-based. A combination of promotion policies to be in place to create the required brand awareness in the new country which include both the online and offline channels (Expedia 2021). For the place, as recommended earlier, Montevideo is the city to leverage on both business and tourism customers.
Table 2: 4 Ps Framework of Marketing Management
Looking through the STP framework, a global standardization strategy is recommended where Oberoi Hotels cater to affluent segment of customers. The company targets the CEOs, business heads, high net worth individuals, successful entrepreneurs, rich and the above middle-class families. Positioning as a luxurious hotel brand with a global presence attracts the affluent and right set of customers as well as setting it apart from the competition.
7. International Human Resource Strategy
Based on the degree of internationalization and centralization of the company's operations, international human resource management include attracting, developing, and sustaining an effective staff for the operation of Oberoi Hotel in Uruguay. A polycentric staffing policy approach will help the new company to have Uruguay
Figure 2: HRM Staffing Chart for Oberoi, Uruguay
nationals as its international managers as they will understand the local environment and nuances better to customize offerings and experiences (Hill 2019).
To ensure the industry benchmarks set by Oberoi group are followed, have the required control and culture Indian managers also need to be placed at few senior positions. High level staffing positions required to be filled are presented in the above picture.
To fill in all the positions, three key factors need to be considered in candidate selection namely managerial competence, appropriate training and adaptability for both Uruguay nationals as well as Indian nationals chosen for the roles. Well defined and transparent processes to be in place right from resume screening, interview rounds, compensation, onboarding etc. to select the right candidates for right jobs. Training and Development program to include both onsite and offsite modules for international managers (Hill 2019). Refresher trainings with a mix of standardized and customized modules to be in place along with performance appraisal to reward good performance and align with performance objectives of the staff. These training programs build a strong unifying culture and informal management network beneficial to the company. For Uruguay nationals above industry standard compensation is recommended as per the experience and skillset to get the best talent. For international managers, the balance sheet method to pay is recommended, which seeks to balance the host vs. home costs for income taxes, social security, goods and services, and housing.
8. Recommendations
As seen in sections above, Uruguay presents a vast number of international businesses opportunities for Oberoi group of hotels to make a market entry. The positive external business environment and economic indicators offer an attractive market to set up a hotel in the city of Montevideo. However, the timing need to be contemplated due to the effects of the pandemic and recession (UNCTAD 2022). The social conditions in a developed condition like Uruguay are considered as a positive criterion as the population has a high disposable income to afford premium hotels. A multi domestic strategy is recommended where the service offerings of the hotel and experiences will be customized to suit the culture and social norms of Uruguay.
With a polycentric approach in marketing and organization structure, Uruguay nationals will be part of the management and leadership teams who understand the market better and can cater to the specific localization and cultural needs. With a special attention on the discourse of nature and cultural legacy, the Oberoi group implements the best environmental and ecological practices globally in technology, equipment, and operating processes. Uruguay should be no exception.
The Oberoi Group's global market supremacy has been achieved by consistent and best in class internal business methods that have considerably increased the company's competitive advantage. In order to propel the market position of the company, futuristic research should look into ways to enhance market share, risk management, service diversification, new locations, growth and expansion in the Latin American country of Uruguay.
8. References
BTI 2022, BTI 2022 Uruguay Country Report, BTI 2022, viewed 14 May 2022, <https://bti-project.org/en/reports/country-report/URY#pos6>.
Economic Times 2017, ‘EIH to add more properties in India, overseas markets’, The Economic Times, viewed 13 June 2022, <https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/eih-to-add-more-properties-in-india-overseas-markets/articleshow/60069584.cms>.
Expedia 2021, Creating A Hotel Marketing Strategy, Welcome to Expedia Group.
Gov UY 2021, Economic structure and activity (1), viewed 13 May 2021, <http://deuda.mef.gub.uy/innovaportal/file/6473/1/economic-indicators-november-2021.pdf>.
Harzing -, A-W 2016, Research, Harzing.com, viewed 11 June 2022, <https://harzing.com/research>.
Hill, CWL 2019, International business : competing in the global marketplace, New York, Ny Mcgraw-Hill Education.
International Trade Administration 2021, Uruguay - Market Overview, www.trade.gov.
Jacinth 2022, Internationalization of Oberoi Hotels Acadmic Report, Deakin University, Australia.
Klaus Schwab 2019, The Global Competitiveness Report 2019, https://www3.weforum.org.
Mandarin Oriental 2021, Luxury 5 Star Hotels & Resorts Worldwide | Mandarin Oriental Hotel Group | Hotels Map, Mandarin Oriental The Hotel Group.
Mohile, SS 2020, ‘Oberoi Group, Mandarin Oriental in strategic tie-up to expand global reach’, Business Standard India, 30 September.
Oberoi Hotels 2021, EIH Limited - Integrated Annual Report 2020-21, Eihltd.com, viewed 11 June 2022, <https://www.eihltd.com/images/eihltd/investors/flipbooks/eih%20limited%20-%20integrated%20annual%20report%202020-21/index.html#p=11>.
Statista 2022, Economy - Uruguay | Statista Market Forecast, Statista, viewed 16 May 2022, <https://www.statista.com/outlook/co/economy/uruguay#:~:text=The%20GDP%20(gross%20domestic%20product>.
Theme Grill 2018, Eclectic Paradigm/OLI Paradigm EXPLAINED with EXAMPLES | B2U, B2U - Business-to-you.com.
UNCTAD 2022, Foreign direct investment in Latin America plunges by 45% amid pandemic | UNCTAD, unctad.org.
Watkins, MD 2017, Demystifying strategy: The what, who, how, and why, Harvard Business Review.
9. Appendix
A. SWOT Framework
Strengths | Weaknesses |
Strong Financial Position as per the Financial Reports of the company (Oberoi Hotels 2021) Global Brand with a presence in multiple countries (Oberoi Hotels 2021) Strategic Alliances with Mandarin Oriental hotel across the globe (Mandarin Oriental 2021) 80 Years of Experience running hospitality and hotel business (Oberoi Hotels 2021) Leadership Practices with the Training center, R&D facilities and strong governance in place (Oberoi Hotels 2021) | Lack of experience in Uruguay as seen in the Internationalization pf Oberoi hotels report (Jacinth 2022) Cultural Differences given by the CAGE and other frameworks (Jacinth 2022) No First Mover Advantage as already there are many international hotels doing business in the city of Montevideo (Gov UY 2021) Less customer loyalty, the switching costs are very less due to advances in technology and digital tools (Oberoi hotels 2021) Volatile industry to economy (International Trade Administration 2021) |
Opportunities | Threats |
Plenty, summarized in Appendix C
| Global Pandemic (UNCTAD 2022) Economic Recession Forecast globally and in Uruguay, (UNCTAD 2022) Technology advances (ITA 2021) Disruptive Startups in the recent years have changed how hotels do business (Klaus Schwab 2019) |
Table 3: SWOT Appendix with details
B. Key Opportunities in Uruguay to leverage
Uruguay Key Business Factors | Opportunities for Hotel Industry |
Democratic Republic Country | Positive |
Developed Country | Positive |
Temperate zone location | Positive |
Well defined organizations | Positive |
Feminine society | Positive |
Political Stability | Positive |
Educated and wealthy population | Positive |
Less corruption | Positive |
Equal footing for foreigners and locals | Positive |
Anti-corruption laws and penalties | Positive |
High per capita income | Positive |
ICT Adoption | Positive |
Strategic Alliance with Mandarin Hotels | Positive |
Oberoi Financial Position | Positive |
Montevideo Location | Positive |
High Barriers to Entry for Hotels | Positive |
Ease of Doing Business | Positive |
Reopening of International Borders | Positive |
Uruguay Gov Policies for Businesses | Positive |
Holy week in Uruguay | Positive |
Indian Companies in Montevideo | Positive |
India Uruguay Bilateral Relations | Positive |
Experience of Mandarin Group in Chile | Positive |
Table 4: Key opportunities in Uruguay to Leverage
Note: This is a summary of the key country findings, individual sources and are added in the report main body as and when cited. For complete discussion please refer Internalization of Oberoi Hotels Report, Jacinth 2022.
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