Majestica Hotel in Shanghai Harvard Case Solution & Analysis

Majestica Hotel in Shanghai  Case Solution

Majestica Hotel in Shanghai

Majestica is a leading company of constructing luxury hotels. The opportunity emerged for Majestica to expand its operation in China. Moreover, Commercial Properties in Shanghai was looking for an operator to build its new luxury hotel in Shanghai. Due to Majestica's reputation in Hotel construction business across the world,this led CPS to request Majestica to build a luxury hotel in Shanghai. For this reason, both negotiated and signed a letter of intent and started to negotiated their terms and condition. However, several critical issues arose between Majestica and CPS, which need to be solved.

Problem Identification:

Majestica Hotels Inc. faced several issues during the process of negotiations with Commercial Properties of Shanghaiover the contract for the new luxury hotel in Shanghai. Majestica was very much concerned about its operating philosophy in which itwas not willing to make any compromise. There were several issues to be negotiated between the two parties. Majestica was also concerned about its growth and expansion in the Asian market. CPS was also willing to make alliance with Majestica due its globalrecognition in the luxury hotel industry. However, there was another issue as well, but the most critical was the operating philosophy of Majestica in whichthey were not willing to make any compensation. Their operating philosophy was to make a contract term of almost 50 to 60 years, and to run its luxury hotels under its own brand name regardless of the country it operates.Majestica highlighted that hiring appropriate and skilled employees is critical to maintain its operating philosophy, as Majestica trained and developed its employees’ attitude according to the international standards of hotel management. Therefore, in order to achieve and sustain the consistency of Majestica's staffs’ attitude and service standards, Majestica would need to have exclusive rights in staffing personnel for a hotel.

Majestica also expected to name the hotel as Majestica Hotel Shanghai. Another central issue was regarding the General Manager for the Hotel. Majestica believed that the Chinese national would not be able to manage the world-class hotels at this level, as CPS was willing to hire a Chinese general manager other than an expatriate. However, CPS also didn’t want to make any amendments in their negotiations.

 Recommendations and Conclusions

I would recommend Majestica to stay in Shanghai and negotiate its terms and conditions. Majestica has to show flexibility while negotiating sinceCPS has resources for further development in China. Although Majestica has a competitive advantage due to its operating philosophy and it is clear that Majestica would not compromise upon its policy hence, the company can think over few compensations such as length of contract and equity level in the hotel. CPS Shanghai would own the hotel and Majestica would be the operator of a new luxury hotel, which would be the best alternate for both parties.Nonetheless, the only problem would be the loss of control of the hotel in management to some extent.This will give an advantage to Majestica of keeping the brand identity alive, and also it will enable Majestica to maintain its standards according to its work style. I would also suggest CPS to agree on Majestica’s demand due to its strong brand image, strong financial position and strong presence in the luxury hotel building industry all over the world. Hence, comparatively, this alternate would be the best for both the parties.....................

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