Marriott at Myanmar Essay

This report is prepared to be the first document evaluating Myanmar’s attractiveness for consideration of establishing Marriott Hotels and Resorts in this country. The best location for the hotel is chosen to be the city called Yangon since it offers a wide variety of activities for travelers with different interests. Yangon Marriott Hotels and Resorts will be attracted to upscale visitors who wish to stay in a luxury, five-star hotel with exceptional service quality, while enjoying the beauty of the country. The target groups of customers are not limited only to local high income Burmese, but also foreign visitors who come on a business or vacation purposes in Myanmar. Myanmar is a resource-rich country with a lot of unseen and attractive destinations. If developed properly, the country has a high potential for growth in the tourism industry in the future. However, due to the high level of risks of its cultural, economical and political systems, this country is considered not attractive enough to operate the luxury brand hospitality business under Marriott name. Strained relationship with the U. S government and the European Union also makes it more difficult for an international brand like Marriott to establish a new business in this country. II. Overview Summary Information A. Key information regarding demographics of the target country The Union of Myanmar, previously called Burma, occupies the largest geographical area in the mainland Southeast Asia. From North to South, three parallel chains of mountain ranges divide the country into three river systems and create various topographic regions. It shares national borders with several countries: China on the north, Laos on the east, Thailand on the southeast, Bangladesh on the west, and India on the northwest, with the Bay of Bengal to the southwest. The country achieved independence from the United Kingdom in 1948. The population of Myanmar, approximately 54 million people, is highly diverse. There are eight major ethnic groups, which can be subdivided into 135 ethnic minorities. The official language is Burmese; however, several native languages are also spoken. English is usually spoken, particularly by the educated urban elites, and is the secondary language learnt in government schools. Eighty percent of Burmese population is Buddhist, prevalent in Theravada sect. The military government has officially relocated the capital of the country from Yangon to Naypyidaw in March 2006. III. Business History A. History of the company Marriott International, Inc. is a leading worldwide operator and franchisor of a range of value and luxury hotels and related lodging facilities. Nowadays, Marriott International has about 3,150 lodging properties located in the United States and 67 other countries and territories. Its operations are grouped into five business segments, which are full-service lodging, select service lodging, extended-stay lodging, timeshare, and synthetic fuel. Marriott International was formed in 1993 when Marriott Corporation split into two companies: Marriott International and Host Marriott Corporation. The company is headquartered in Bethesda, Maryland. B. Products/services offered and their unique advantage in the target markets The Marriott has become one of the world’s leading hospitality business operators from its excellent quality, service, and value. Throughout the Asia-Pacific region, its brand name has continuously led the company to the consistent growth in Marriott properties in many countries such as China, Japan, Singapore, and Thailand. Each Marriott hotel differentiates itself with exceptional amenities, individualized attention to guests, and careful reflection of local surroundings. As the business expands worldwide, Marriott brand gains a high level of brand loyalty from its guests. This large customer base will help facilitate the business when the brand enters to new-oversea markets. IV. Business Activity A. Industry structure, competition in the country and current economy of the target country Even though the number of travelers visiting Myanmar is very low, tourism is considered the country’s major source for foreign exchange. Burmese government has been trying to promote their tourism industry to outsiders. They launched the campaign of ‘Visit Myanmar Year’ in 1996. After that, according to the Statistics from Ministry of Hotels Tourism, the number of tourist arrivals has been increased. However, this increasing number could not retain on a continuous basis due to the country’s uncertainty and instability in many areas that made people feel uncomfortable visiting Myanmar. Myanmar’s economy is currently mixed and primarily based on agricultural activities, including livestock, fisheries, and forestry. This sector accounts for 50 percent of the country’s overall GDP. The country also possesses several kinds of valuable natural resources, including intensely fertile soil, offshore oil, and gas deposit. It is also the world’s largest exporter of teak and precious stones such as jade, pearls, rubies, and sapphires. Since late 1988, Myanmar moved toward more market-oriented economy. It changed its centrally planned economy to be more liberalized, both in domestic and international trade. The role of private sector was promoted, and foreign direct investment was welcomed. Despite such efforts, Myanmar is still considered the poorest country among the Southeast Asian nations. Although tourist industry has a high potential for growth in the future, it still remains underdeveloped. This is because mismanagement from the military government’s control, ineffective and inefficient policies, poor infrastructures, together with the country’s bad international image have drawn the whole country to the state of underdevelopment. Moreover, since the late 1990s, Myanmar’s economy has worsened due to economic sanctions from many countries such as the European Union, Canada, and the U. S. Foreign investments usually come from China, Singapore, South Korea, and Thailand. V. Market Research A. Market conditions in target country 1. Existing demand There are several reasons why Myanmar should be a good place in consideration for new investment opportunity. The country has vast and virtually untapped natural resources. To this day, Myanmar remains one of the most mysterious and undiscovered destinations in the world. The country seems appealing to many tourists around the world due to its unseen attractions with regard to cultures, history, and natural beauty. There has been an increasing demand from outside the country, especially from those travelers who wish to discover this resource-rich country. Myanmar is viewed as a good destination for people who want to have an exotic adventure, beach vacation, and mountain experience. In addition, advocates supporting Burmese tourist claim that it is the only method to help Burmese poor citizen to have a better standard of living and avoid isolating the country from the rest of the world. Another important issue needed to be pointed out is the message from the leader of Myanmar’s opposition National League of Democracy. Aung San Suu Kyi has in the past asked foreign tourists not to visit the country, as this helps increase the military junta’s power. This is one of the reasons why some people do not want to visit the country. 2. Competition After the Burmese government opened the country to promote several industries, tourism started to develop in Myanmar. Nowadays, there are approximately 500 hotels and guesthouses throughout the country. In Yangon alone, there are only six luxury hotels and approximately 20 moderate and economy hotels. Among those luxury hotels, none of them is operated under the recognized global hotel-chain companies. Most of the hotels are run by local Burmese people or businessmen from neighboring countries such as China, Singapore and Thailand. Therefore, competition in Myanmar’s tourism industry has not reached the intense level yet. VI. Potential Difficulties or Restriction A. Entry requirement The Government of Myanmar posts some restrictions on foreign investors wishing to do business in the country. In order to establish and operate under contractual agreement or partnership, foreign entity must submit all proposals to the Myanmar Investment Commission (MIC) and get approved under the Foreign Investment Law (FIL). Foreign investors can set up their business either in the form of a wholly-owned subsidiary or a joint venture with any partners: an individual, private company, a cooperative society or a state-owned enterprise. In all joint ventures, the minimum equity required from the foreign party is 35 percent. Moreover, the minimum amount of capital requirement to be eligible under the Foreign Investment Law is set to be US $500,000 for an industry, but US$300,000 for a service organization. Tourism industry is one of many sectors allowed under the Foreign Investment Law. Rather than the initial investment requirement, Myanmar also has commercial tax of ten percent levied on service of operation of hotels. B. Intellectual property issues Intellectual property is one important issue that prevents many oversea businesses from entering to Myanmar. The country has a negative outlook on its control with regard to this matter. Myanmar is considered having poor, maybe poorest, intellectual property right laws by the outside world. Marriott brand could be jeopardized since Myanmar’s legislation alone may not be able to protect the ownership of the company’s trademark. In the past, there was an evident showing that some local businesses were registered by using the existing international trademarks or trade name, and that prevented the original owners to register their own names and run the business in this country. VII. Cultural Issues A. Religion and its role in the society Since most Burmese people are Buddhist of Theravada stream, Buddhism has greatly influenced the standards of etiquette in the country. Their core religious belief is karma, the concept that good fathers good and bad fathers bad. This core belief has reflected in almost every aspect in everyday life; however, it does not play a significant role in doing business in this country. With basic knowledge of Burmese culture and custom, foreigners would find it easy to live with the local people. B. Special cultural issues For employer and employee relationship, Burmese employees are hardworking and loyal to their bosses. In return, an employer is expected to give help when in times of need. Such help can be the advice given for personal problems or loan granted in a financial crisis. As in all Asian countries, Myanmar respect people older than them. Therefore, in order to avoid friction in workplace, subordinates should be working under an older supervisor. Friendship, trust, and honesty are valued in a business relationship. Favors received, such as introducing a potential client or supplying a reference, must be repaid at a future time. For the first time in a business meeting, details of the project may not be discussed. Instead, the meeting may be spent evaluating each other’s personality and business strengths and weaknesses. In general, Myanmar business people find it easier to deal with Asians than Westerners. C. Business cultural issues In recent years, both China and India have attempted to strengthen ties with the Burmese government for economic benefits. This situation indicates that relationship with the military government could help smooth out the process or get the deals more easily. Personal relationship is considered one of the key components that could determine the success of the business. Foreign business will be more likely to succeed if the foreign entity can tie with a local partner, ultimately the Burmese government. According to Asian Journal of Political Science, â€Å"all post-colonial Myanmar governments and the business community benefited from their clientelistic networks. Without the help of government officials, many business firms would have gone under quickly; at the same time, without the assistance of business people, it would have been hard for most post-colonial Myanmar governments to keep themselves in power. It is very clear that government-business relations cannot simply be reduced to a zero-sum game. Certain interactions between the military government and the business community were mutually empowering†. Corruption is systemic at all levels of the Government and society. From Bureau of East Asian and Pacific Affairs, â€Å"It is considered by economists and businesspersons to be one of the most serious barriers to investment and doing business in the country. A Byzantine and capricious regulatory environment fostered corruption. † VIII. Service Operation A. Location of service facilities The best location that Marriott Hotels and Resorts could be is in the city called Yangon. Yangon, previously known as Rangoon, is one of the most popular areas for foreign visitors and is considered the gateway to Myanmar. It is the largest and former capital of the country. Even though the city is no longer the capital, Yangon continues to be the most important commercial center of Myanmar. This relatively simple city is attractive in its own particular way. Yangon has earned the name ‘the Garden City of the East’ since it is green and cool with lush of tropical trees, shady parks, and beautiful lakes. The city offers a wide variety of activities for visitors such as diving, cultures, and ecotourism. Therefore, this city has a potential to attract a lot of travelers with different interests. B. Service modification necessary to adapt to local environment Since one of Marriott’s strength lies in its careful reflection of local surroundings, Marriott Hotels and Resorts built in Yangon should hold the same principle. Yangon Marriott Hotels and Resorts should combine the city’s natural beauty of its history, culture and scenery while offering the unique luxury standards. Destination hotels and resorts type might be an appropriate alternative for Marriott in Yangon. The destination resort should be located in the Yangon area with noteworthy natural features, plus an urban setting. IX. Personnel Strategies A. Employment restriction Myanmar has active labor force of about 20 million. They are fairly trained manpower and skilled labor with relatively low cost comparing to other neighboring countries. There is only 23 percent of the overall population working in the service industry; however, these Burmese people are considered hospitable due to the fact that they are generally honest and kind. However, due to the country’s poor infrastructure, Burmese people are not provided with good education. Their skills might not be good enough to fit in Marriott’s high standards of hospitality service. Therefore, it seems necessary for Marriott to provide training sessions to improve their hospitality skills. B. Expatriate issues Since Marriott ties the brand image with its superb service quality, it is vital that Yangon Marriott Hotels and Resorts are equipped with talented management team. Marriott International Inc. might need to import managers from oversea to run the Myanmar operations in order to ensure that Marriott’s core business practice is followed everywhere. This issue brings about big challenge since it will not be easy to find the talented people who will be willing to work in a country with high uncertainty and instability in many aspects on a voluntary basis. Marriott International Inc. might need to provide them with high enough incentives to encourage them to accept this assignment. Nevertheless, under the Foreign Investment Law, Myanmar allows the employment of foreign experts and technicians. Required manpower can be recruited through Township Labor Offices. X. Risks A. Government stability The most important risk exposed in Myanmar deals with its political issue. For the past 40 years, Myanmar has been ruled by the military government or junta, in which the power is centered. The State Peace and Development Council, or SPDC, maintains strict authoritarian rule over the people of Myanmar. The country has a reputation abroad for brutally crushing political dissent, as in the case of house arrests of Aung San Suu Kyi. According to the information from the articles Foreign relations of Burma and Military of Burma, â€Å"Aung San Suu Kyi’s National League for Democracy won a landslide victory in the country’s election of 1990; however, the military — which has controlled Myanmar (Burma) for decades — refused to transition the country to civilian democratic rule. For her part, Aung San Suu Kyi has spent most of the last decade under house arrest for her political efforts. In 1991, Aung San Suu Kyi was awarded the Nobel Peace Prize while still under house arrest. † This case brings about the global awareness and concern on the country’s political abuse and human right violation. B. Legal risk The country also completely lacks of regulatory and legal transparency. â€Å"All existing regulations, including those covering foreign investments, are subject to change with no advance or written notice at the whim of the regime’s ruling general. Myanmar does not accept International Court of Justice. C. Economic risk Myanmar’s economy suffers from serious macroeconomic imbalance. The country’s money currency is called Kyat, which is not stable at all. Volatility happens on a weekly basis. The Kyat is not convertible. This severe situation includes rising inflation, fiscal deficits, and multiple official exchange rates that overvalue the Burmese Kyat. A major banking crisis in 2003 also contributed a large negative impact on the overall disrupted economy. XI. Potential Benefits A. Market potential As already mentioned, Myanmar is one of resourceful countries that have high potential for future growth in tourism industry. The country offers all traditional delights of Asia in one country. If developed properly, the country’s tourism can become one of the world’s famous tourist destinations. Seeing this opportunity, Marriott brand can expand globally throughout the Asian Pacific region. Now Marriott brand has its hotel chains in Australia, China, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand, and Vietnam in this Asia Pacific region. B. Incentive from local government Myanmar’s Foreign Investment Law provides a lot of incentives to foreign investors in the form of tariff and taxes. The business will be granted a tax exemption for three consecutive years beginning the first year of operation. The country also provides the relief from income tax on profit reinvested within one year. Myanmar guarantees that the business permitted under FIL will be protected from being nationalized during the granted period. C. Relationship to the United States However, according to Bureau of Democracy – Human Right and Labor, â€Å"the US and Burmese relation has been worsened after the 1988 military coup and violent suppression of pro-democracy demonstration. Subsequent repression, including the brutal crackdown on peaceful protestors in September 2007, further strained the relationship. † â€Å"In addition, since May 1997, the U. S. Government has prohibited new investment by U. S. persons or entities. A number of U. S. companies exited the Burma market even prior to the imposition of sanctions due to a worsening business climate and mounting criticism from human rights groups, consumers, and shareholders. The United States has also imposed countermeasures on Burma due to its inadequate measures to eliminate money laundering. † As a result of the above fact, it seems inappropriate for Marriott to enter Myanmar at this moment. Since Marriott is a U. S. based company, the company could run into a big conflict with the U. S. government, which could have a seriously negative impact on its hotel operations around the world.