They were discussing a possible management contract under which Majestica would be the operator of a new luxury hotel there owned by Shanghai Industrial Holdings. Majestica Hotels Inc. The expansion into mainland China had been on management's agenda since The opportunity emerged in late when a close friend of Majestica's chief executive officer CEO revealed that CPS was looking for an operator for its new luxury hotel under construction in Shanghai.
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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. Majestica Hotels Inc. 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 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. 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.
Hence, comparatively, this alternate would be the best for both the parties This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution. Search Case Solutions Search for:. Check Order Status. Search for:. How Does it Work?
Majestica Hotel in Shanghai Harvard Case Solution & Analysis
Majestica Hotel in Shanghai? Case Study Analysis & Solution
Case Solutions. Majestic Hotels, Inc. S and UK. Since Majestica tried to enter the mainland China.