3.

0 Current Situation

In December 31, 2006 the management reported that Shangri-La net income was 202.2 million
dollars from its services and products. The company's sales continued to improve in 2006 with
1,002.9 million dollars sale compared with 842 million dollar in 2005.

As shown in the table below, Shangri-La performance in the industry seem to improve every
year and ascend to better market positioning.

Shangri-La Income Statement (Exhibit-3)

Revenue Gross Profit Operating Income Total Net Income

($mil.) ($mil.) ($ mil.) ($ mil.)

2006 1002.9 594.1 273.3 202.2

2005 842 496.4 188.4 151.0

2004 725.5 417 142.7 113.5

3.1.1 Strategic Positioning

All of the hotels and resorts of Shangri-La are located at strategic locations that are frequented by
a high number of people, either for business purpose, travelling or other reasons. The location
selected usually consists of places that are well known for their tourism industry and that are
highly visited each year.

3.1.2 Competition

Competition in general is one of the factors that affect company's existence and growth. Even
though Shangri-La is one of the top luxurious hotels in Asia, there is still fear from other top
companies operating in the diversified hotel management industry. The profitability of every
company depends on efficient operation because many costs are fixed and on effective
marketing. The top four competitors of Shangri-la hotel are:

UK based IHG with 51 hotels in china.

Marriott chain is the second competitor of Shangri-La; in China with 26 hotels and will
expand to 100.
The third competitor is Accor 30 hotels under development in china.
Wingate Inn brands with 60 hotels and planned to expand its china business to 40%
annual rate.

Since Shangri-La is an Asian Company, it is highly recognized in Asia, the hotel chain had a
competitive advantage as far as brand awareness is concerned. However, as many prestigious
and luxurious hotel chains started expanding in the Asian continent Shangri-La faced more
intense competition than before.

3.2.3 Hotel strategies

Strategy defined as the formulation of a set of actions to achieve a major organizational goal
(Enz, 2010, p.4). An effective and integrate strategy is vital for firms to stand out of competitors.

Business-Level Strategies

(1) Diverse business and management Segments business into three types (hotel operation;
hotel management & property rentals) that reduce potential risks and saving labor cost.
(2) Focused differentiation Constantly develop in Mainland China as the main target
markets of Shangri-La

(3) Global expansion Review opportunities to establish properties in gateway cities around

the world, etc.

Functional-Level Strategies

(1) Superior Efficiency (Upgraded of start-of-the-art reservation technology and

modern facilities; Extensive training programs for workers etc.)
(2) Outstanding Quality (Multi-channels of reservation; Safety product system like
HACCP; Professional training centre in China etc.)
(3) Innovation Renovation program for major hotels; continuously develop new
concepts (e.g. Eco-friendly products)

(4) Superior Customer Responsiveness including loyalty program establishment

(Golden Circle); Reward points procedures etc.