After researching international markets the Peninsula has not captured yet, we as a team have decided that the ideal destination to open our next establishment will be Seoul, South Korea.
This location perfectly suits the standards that the Peninsula desires. Seoul is the capital of South Korea and the largest major urban complex of the Republic of Korea. It is also the fourth most economically powerful city in the world. Just like Shanghai, Tokyo, Beijing, and Bangkok, Seoul is considered as one of Asia’s major centers of culture, entertainment, art, finance, education, medicine, and tourism, so there is demand for both leisure and business purposes. The Peninsula, Seoul would be designed with the objective of combining our traditional Chinese infused design with the local elegance of Seoul to integrate the culture, atmosphere, and history of South Korea. The hospitality and tourism industry are flourishing day by day in this dynamic city. There is a gradual increase in the number of South Korea Visitors through the five years period (Korea Tourism Organization, 2017) and Seoul is the top destination for tourism in the South Korea(Korea Tourism Organization, 2015). Korea Tourism Organization Statistics (2017)
Seoul falls under our target market which is both business travelers and leisure travelers, who appreciate great value and exponential service.The age group that visits South Korea the most is 21-40 which is mix of Millenials and Gen-X. South Korea's largest tourist demographic is Chinese. By us already establishing a strong and known presence in China we believe that with our new location in South Korea we will make our largest demographic guest feel like they are at home when visiting this country.
In Seoul, there is intense competition, as there are a numerous amount of luxury hotels as well- (Signiel, Banyan Tree Club and SPA, Grand Intercontinental) and our direct competitors- (Four Seasons and Park Hyatt.) These hotels are very similar compared to us in, price range, star rating, target market, and location. The Peninsula, Seoul would add another competitive hotel in this market, but we believe we have direct advantages that will stick out from the others. We have a established our name and Peninsula standards in other countries, we believe that visitors would be more inclined to visit our hotel over others.We also would be a newer property in the region so our competitors would have to update and renovate to keep up with our newer style and look.
What could be your global business goals, and what type of foreign entity would you choose?
The Peninsula hotel chain has many hotels all over the world.
Its showcases are being a luxury 5-star hotel with the objective of applying traditional Hong Kong and Shanghai grace and elegance to embrace the local culture, style, and history. We envision the Peninsula Hotel Brand to be an international name that is synonymous with luxurious comfort and impeccable service.
(A list of the our hotels, their locations and years they opened)
Having three different hotels in both China and United States of America, we believe that there are enough Peninsula Hotels in these countries. With several hotels in other major cities around South-East Asia in countries such as the Philippines, Thailand, Japan, and Myanmar, there seems to be no reason to add another hotel in this area either. Like all the Asian countries mentioned above, they all have a unique culture, history, and style. Seoul, South Korea has become a new international stage for fashion just like Paris, France. It is becoming one of the most significant hotspots for leisure tourists to spend money and shop for fashion. Seoul is also well-known for its entertainment industry and being Asia’s 4th largest economy. With the economies of the world globalizing, it is easier than ever to consume content from countries such as South Korea. With a stable economy and a desire for tourism, there is an opportunity for a Peninsula Hotel to open up a unique South Korean cultured hotel called “The Peninsula Seoul,” giving us the opportunity to diversify our corporate identity. As for the type of overseas presence or foreign entity, we believe that a ‘subsidiary’ would best suit our establishment: “By incorporating a subsidiary in a different country, a separate legal entity is established . The overseas subsidiary has its assets, liabilities, business, and employees.” (Bagley, Dauchy 2018 PP.576) As for the type of overseas presence or foreign entity, we believe that a ‘subsidiary’ would best suit our establishment: “By incorporating a subsidiary in a different country, a separate legal entity is established . The overseas subsidiary has its assets, liabilities, business, and employees.” (Bagley, Dauchy 2018 PP.576)
As for the type of overseas presence or foreign entity, we believe that a ‘subsidiary’ would best suit our establishment: “By incorporating a subsidiary in a different country, a separate legal entity is established. The overseas subsidiary has its assets, liabilities, business, and employees.” (Bagley, Dauchy 2018 PP.576)
We are choosing to go with subsidiary because South Korea is very similar to Japan in the ways they do business. When South Koreans do business, they are expected to retain their relationships with other companies for many years. This is because South Korea is currently thriving in areas of development and technology. “Establishing an overseas subsidiary signals that the U.S. parent has made a long-term commitment to that country that will often enhance the credibility of the parent in the local market.” (Bagley, Dauchy 2018 PP.576)
Another reason is that subsidiary also offers limited liability: “If the foreign business fails or suffers unexpected liabilities (such as a lawsuit), the assets and liabilities of the subsidiary are segregated from those of the rest of the group, including the U.S. parent, as long as proper corporate formalities are observed.” (Bagley, Dauchy 2018 PP.576) Hence with this form of overseas presence, we can limit our parent company’s potential losses by using subsidiaries as a legal shield.
Our third reason for choosing a subsidiary corporation is because of Taxes. This coming from a South Korean document about business “Where the subsidiary is wholly owned, 100 percent of the income received from the subsidiary is not included in taxable income. Where the shareholding in the subsidiary exceeds 50 percent, 50 percent of the dividend received is not included in the taxable income. Where the shareholding is 50 percent or less, 30 percent of the dividend received is not included in the taxable income.” This can give us direct benefits other benefits down the line. As we can earn VAT refunds from South Korea and also can reclaim money that we spent on purchases during our build up of the Seoul Peninsula.
Our Last Reason is Management. South Korea in its recent past has been adapting more U.S. based laws and starting to replace the older European based laws. Already establishing multiple hotels in both the United States and Europe, this should allow us to easily adapt to South Korean laws. A few laws we must follow are the requirement of a minimum wage, retirement plans, equal employment opportunities for both male and females and lastly, support for compatibility of work and family.