Growing Your Company - Academic Examination of Growth Strategies of Chinese Companies

This review concerns an academic article discussing the strategies used by the top three Chinese hotel companies to successfully grow their domestic market share in the face of foreign and domestic competition.  By paying close attention to the market and adjusting strategies appropriately, each company was able to achieve greater success than before.  Examining some of the strategies, we can see tactics that can be applied to grow one's own company.


Article Link: http://www.sciedu.ca/journal/index.php/jms/article/view/759

The article, "Successful Growth Strategies of Three Chinese Domestic Hotel Companies," by Yu Qin, Howard Adler, and Liping Cai, derives its research both from examination of the companies and interviews with executives.  Prior to this study Porter's Five-Forces model of competition had been applied to the structure of companies in the Chinese lodging industry by Schaffer.  This case study seeks to build on prior work and examine how the strategies either fit into or challenge Porter's model.

The context of the lodging industry in China lies in changing government policies, an increasingly mobile middle-to-upper-class population, and increased international traffic due to globalization (Qin, Adler, and Liping 41).  In the midst of this dynamic environment, new strategies were required.

The first common strategy Qin, Adler, and Liping identify is one of innovative positioning in the market (43).  As international lodging firms took interest in China, they focused on upper-class demographics.  In contrast, there was little competition for less affluent Chinese.  By noticing and focusing their efforts on this demographic, each company was able to grow significantly by seizing this unutilized market share.  Environment analysis

Maintaining low costs was the second strategy prioritized by the companies (Qin, Adler, and Liping 44).  Recognizing that many of their customers did not have a large budget for lodging, the companies strove to keep costs modest while maximizing the value for the customer.  By reducing the barriers to utilizing their services as well as standardizing inventory, the companies were able to grow significantly in the volume of customers without costs ballooning up (Qin, Adler, and Liping 44).  One's own company could benefit from the reduction in redundant inventory and overhead.

Another strategy that can be applied to one's own company is the rapid expansion that the Chinese companies utilized.  Due to the large increases in market share and targeting of new customers, significant amounts of new facilities needed to be created to service more customers.  Qin, Adler, and Liping's data show that the companies were growing by over 30% per year.  This allowed the companies to achieve competitive advantage by utilizing economies of scale (Qin, Adler, and Liping 46).  This is a positive aspect for a company due to reducing costs per unit, allowing a greater volume of service and level of profit.

Quality consistency and extensive training were another area identified (Qin, Adler, and Liping 46, 47.)  The companies prioritized training their employees to be functional in multiple roles rather than specializing in one so that the hotels could function if personnel were not available.  Maximizing the value of one's support systems leads both to a higher quality of product, and greater consistency leads to less money lost from defects, returns, or lost customers.

The other successful strategies identified by Qin, Adler, and Liping focused on leveraging Chinese industrial and cultural practices, a product of examining the domestic market (47-48).  For one's own company, it can be proposed that careful analysis of the domestic market and utilizing its cultural personality can be important in getting customers to identify with a brand and retain their interest.