Roaring Dragon Hotel

8 August 2016

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This paper introduces the concept of guanxi neglect through a case study that describes the takeover of a formerly Chinese managed hotel by a western based, international hotel management company. Specifically, it covers the cultural conflict that occurred for employees trying to adapt from the former Chinese relationship (guanxi) based planned methods of hotel management to that of the more market oriented, management company. Conclusions that are drawn highlight cultural characteristics and issues that companies taking over or approaching joint-ventures with SOEs, are advised to be aware of.

In recent years, the hotel business environment in south-west China has undergone significant changes. China’s opening-up has encouraged an outbreak of new hotel construction and property speculation as companies and investors hope to cash in on the domestic and international exposure of the unique region. Prospects for growth in the number of tourists and investors visiting the region in the future were good. 1 Correspondence to: Stephen Grainger The University of Western Australia Perth, W. A. , AUSTRALIA Email: [email protected] uwa. edu. au Grainger, S., ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -1- Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) The Roaring Dragon Hotel, was a famous 40 year old-Chinese SOE. In the second half of 1999 an international management company set about transforming the culture within the hotel from a Chinese hotel that was relationship based environment to a modern market oriented organisation. Following story describes the experience during the transition from a planned to market economy. Methodology

From May to December 1999, June to July, 2001, and November to December 2002, research into the modus operandi of guanxi was carried out at a four-star hotel (referred to here as the Roaring Dragon Hotel) in south-west China. The hotel employed more than 670 people. Interviews were recorded with 35 middle and senior managers from the hotel and a group of 11 officials, academics, and businessmen from this environment. 15 participants were interviewed on more than one occasion across the three research periods. Un-attributed, direct quotes used throughout this manuscript are taken from verbal transcripts of these interviewees.

In addition, a 65-item written survey was conducted with hotel staff the week before the takeover and again three months after the takeover. 439 completed the first survey and 144 the second. Some findings from this survey are acknowledged in the following. The Roaring Dragon Hotel The Red Dragon2 Hotel had been the first four star hotel in the city and since the early 1960s had enjoyed a reputation as the most famous accommodation-provider in the region. Being a state owned enterprise (SOE) with a long and colourful history, it was 2

The names of all people and places have been changed to protect the research sources. Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -2- Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) the region’s premium guesthouse for visiting government officials, dignitaries and guests. To staff the Hotel at its commencement, employees had been transferred in from other SOE or government departments primarily on the strength of their guanxi or connections.

Having gained a position from the opening of the Hotel, Roaring Dragon employees felt ‘excited’ and ‘very proud’. Some recalled ‘if your relatives or your friends knew that you were working in Roaring Dragon, you would be admired’, ‘it was a good work unit – danwei’, and ‘you were lucky if you worked there’3. The original Hotel was a four-storey, rectangular, grey structure built in 1960 in a dull Russian style. By 1993, the provincial government had funded a new extension and the Hotel now consisted of two parts: the old four-storey section joined by a modern sixteen-storey extension perched on a hill behind the old Russian.

There was a contrast in the standard of accommodation. Room rates were cheaper in the old section and so it attracted Chinese visitors searching for quality economy accommodation. Visiting government officials and higher-end customers on the other hand felt more comfortable in the newer and naturally more expensive section. There were two guarded entrances to the Hotel, one on each level. A series of stairways, elevators and a warren of banquet rooms, hallways, storage areas, offices, cafeterias, and a laundry untidily connected the two buildings. Reflection on a 1993 Experience

The Roaring Dragon was a Chinese managed SOE until the opening of the new extension in 1993 when the provincial government decided to contract an international company to manage the Hotel with the objective of improving the quality of customer service. KYZ Corporation was identified as a suitable international management organisation and was contracted to manage the Hotel. Their representative, Mr. Meyer, a Mandarin-speaking German, became the Hotel’s new 3 These quotations are taken directly from the 35 interviews with Red Dragon Hotel employees. Grainger, S., ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -3- Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) General Manager (GM) with the former Chinese GM, Mr. Wen, becoming second-incommand. After a short time under the new management, Wen began complaining that he had lost his privileges. He could ‘no longer enjoy practices such as inviting someone to the Hotel for a complimentary dinner or reap other benefits without first gaining approval from Meyer the KYZ GM.

For Wen and his former management staff, the change of management was an issue of great concern as most of the privileges they had previously enjoyed had been discontinued. This loss of benefits resulted in the Chinese managers’ being reluctant to embrace new management practices as ‘in their hearts the Chinese employees did not want to be managed by Meyer or the KYZ Corporation’. In terms of incentive or financial reward, there were few, if any, reasons for the Chinese employees to make the new arrangement work. ‘Employee salaries had not changed’ and ‘the foreign management did not know the Chinese way’.

From the time KYZ took over the management of the Hotel, business gradually declined. After three months, occupancy was very low’ and the recently opened extension was only in operation above the seventh floor. Finally, after a year of poor performance, the Chinese provincial government told KYZ that they were not performing well and that they wanted to end the contract. KYZ did not receive this notification well and commenced proceedings to claim damages in the courts from the provincial government breaking the contract. The provincial government had guanxi with the local judges and was confident the damages would be minimal.

After a year of apparent non-cooperation and turmoil, the KYZ management left in November 1994 and Wen, the former Chinese GM resumed control. With Wen’s reinstatement came the resumption of the former organisational culture including the practices of nepotism and favouritism. Guanxi cliques in the Hotel resumed operation and the re-establishment of relationships with the local tourist agents resulted in the occupancy levels returning to their former levels. Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -4-

Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) The Roaring Dragon Hotel was eventually required to fund the resulting lawsuit compensation to KYZ. To Wen and the employees it did not matter as ‘the provincial government would pay the damages’. The 1998 Story By 1998, the provincial government had again become dissatisfied that the potential of the Hotel was not being realised, especially as the Roaring Dragon was situated in a famous tourist location. Since the Chinese management’s resumption of control in 1994, the financial performance was still well below its potential.

At times, the Hotel was losing money and the provincial government ‘was not happy with the way it was being managed’. Under Wen, management practices remained outdated and ‘the staff were not developing or expanding the Hotel business’. Among the employees, there was an atmosphere of little concern as their salaries, although ordinary, were secure and they were content in the knowledge that the provincial government would cover any of the Hotel’s losses. The Hotel danwei was highly ranked4 which meant that the working conditions and benefits were good when compared with those of the rest of the population (Walder, 1986).

The ‘580 yuan per month paid to a barman’ or the ‘1500 yuan per month paid to a manager’, combined with the easy work, neat and tidy uniforms, complimentary meals, accommodation and fringe benefits made the Hotel an attractive and respectable place of work. The organisational culture was very relaxed with many employees finding time to read newspapers and enjoy a green tea during working hours. For some managers, conducting private business was easy and from time to time they could be seen leaving the premises for a few hours to attend to ‘other business’.

One example was the Hotel’s Head of Training who had a restaurant just a few blocks away. In the afternoons, he would make regular visits to ensure operations and supplies at his Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -5- Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) restaurant were flowing smoothly. It was easy as the Hotel was overstaffed, jobs were secure, and besides no Chinese manager wanted to be responsible for firing potentially well connected, lazy or unproductive employees.

As Rofel (1999: 108) identified, this type of SOE, as having work cultures that still operated largely under the shadow of the Cultural Revolution and carried employees who ‘did not have commitment’ or a ‘sincere working attitude’. The Roaring Dragon Hotel employees did not want to work hard and were not concerned about the Hotel’s steady decline in popularity and income. China’s new market economy demanded that organisations become profitable, yet the Roaring Dragon’s Chinese management showed little concerns for generating profit and basically did not comply.

During the same period, competition arrived as new hotels opened their doors and as this competition grew, the financial fortunes of the Roaring Dragon Hotel declined even further. As a result, in 1998 the provincial government was again tempted to contract an international management company to arrest the declining fortunes of the Roaring Dragon. They identified Nothill as an organisation with the right international reputation, credentials and brand name to take up the management contract. They felt confident that under Nothill’s management, the Roaring Dragon Hotel’s potential would be realised.

In March 1998, negotiations commenced with the globally respected Nothill Company to take over management of the Roaring Dragon. By mid-1998, it was agreed in principle that Nothill would take control of the management of the Roaring Dragon and, to save face, the incumbent Chinese GM, Wen, would be installed as the GM ‘of a new company, the Roaring Dragon Limited’. The role of Roaring Dragon Limited would be to oversee the activities of Nothill and ‘act as a conduit through which Nothill communicated with the Hotel’s Board’. 4 Each danwei receives a ranking from the government which determine its status in the Chinese community.

This status directly influences the benefits and advantages the danwei is able to gain for its Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -6- Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) Nothill and Harvey’s arrival To negotiate the finer points in the contract and help prepare the Roaring Dragon for a complete management takeover, Nothill sent one of their Australian Managers, Mr.

Harvey, to complete the negotiations and initially co-manage the Hotel with Wen from May 1998. It did not take Harvey long to realise that a management takeover would involve changes in the Roaring Dragon’s organisational culture. Entrenched guanxi practices, the poor quality of customer service and at times significant annual losses had to be converted into more accountable, quality service practices with employees who were prepared to strive for excellence. Harvey’s mandate included identifying efficient and effective staff who would be able to help develop the Nothill standard of excellence at the Hotel.

He realised that this might not be easy as many of the existing staff had been employed there for fifteen years or more. During that time the majority of them had experienced little or no training, and had developed only a limited understanding of the concepts of western professionalism or efficiency. Harvey faced the challenge of transforming a large group of relaxed family-based employees, working under an ad-hoc management style into a professional group of employees operating under a structured international commercial culture.

From the time of his arrival, Harvey ’mixed easily’ with the Chinese people and regularly attending important functions, giving presentations and speeches’, playing tennis with the Governor, and sometimes even chatting at the nearby English Corner. Nothill’s Austrian born Head Chef Thomason, arrived five months after Harvey to take charge of the Roaring Dragon’s Food and Beverage (F&B) Department. Notified of his appointment in England, Thomason had flown into China without a visa and was met at the airport by a provincial government representative.

After a few questions were asked, he ‘was given a 24 hour temporary visa for 100 yuan’. The next morning, ‘a government official took his passport and secured him a long term visa’. He encountered a ‘similar process with his Immigration Health Certificate’. The ease members. Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -7- Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA)with which the two events were taken care of highlighted the advantages of having powerful guanxi within the provincial government. A few months later, problems began to surface. Although officially Nothill’s representative, Harvey could not make any major decisions in the negotiations without consultation and approval of Nothill’s Regional President in Singapore and the Corporation’s Vice President in Beijing. Even though Harvey had negotiated most of the details of the Nothill takeover contract, he was never really in control.

As one Chinese manager commented, ‘all the important decisions were made in Singapore and Beijing’. After ten months, Harvey returned to Australia. There was speculation that he had left because the ‘weather was not good for his health’, but many employees believed that ‘he was fed up with the frustration of nothing happening’. Others believed that ‘the Roaring Dragon Hotel board were against him ‘from day one’ and that was the reason ‘why his management lasted less than one year’. Erhi T Erhi T was a large SOE that had accumulated significant wealth in the region through its tobacco production.

To help eliminate the Roaring Dragon‘s seemingly ever growing debt, the provincial government ‘told the Board of Erhi T to buy the Roaring Dragon Hotel’ so the resulting funds could be used to repay the debt. This request was made soon after Nothill’s arrival. Reliable sources claimed that ‘the Erhi T board was reluctant to make the purchase’ and this was reflected in their delays in signing the contract. Fortune reported that ‘eighty points in the original agreement had to be renegotiated’ between the Roaring Dragon and Nothill after Erhi T had arrived.

By March 1999, after difficult negotiations, Erhi T had ‘purchased sixty percent of the Roaring Dragon Hotel for an estimated twenty million yuan’5. The final contract 5 No where was this sum officially printed or stated. However trusted informants who worked in the Red Dragon Accounts Department indicated that this figure was correct. Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -8- Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA)stated that Nothill would manage the Hotel and Roaring Dragon Limited would continue as the Chinese management arm. This was the first official agreement between the two parties and it had proven a cumbersome task. At the first meeting between the new Chinese shareholders and the Hotel employees, an Erhi T manager made the comment that they ‘did not really want to buy the Hotel’. That seemed to signal an inauspicious beginning and was perhaps, an indicator of the troubles to follow. The Provincial Government As the former government guesthouse, the Roaring Dragon Hotel’s relationship with the provincial government was very important.

To nurture important government relationships, Hotel managers would regularly invite officials to dinner and to enjoy gifts such as moon-cakes and glasses displaying the Roaring Dragon logo. In addition they would arrange meetings with them to drink tea and offer to assist them in resolving any problems they might have. From the Hotel’s beginning, ministers had been the only government representatives who could afford to stay at the Roaring Dragon. As the only four-star hotel in the city for more than thirty five years there had never been a problem as far as low occupancy was concerned.

However, that began to change from late 1998 when the number of hotels with the capacity to receive government and four-star accommodation guests increased from one to three, with a further two more competitors due for completion in mid-1999. Government officials and those who could afford it now had the choice of staying at a hotel that could offer them modern facilities and services at a competitive price. Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ -9-

Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) April 1999 Fortune arrives Following Harvey’s departure, Nothill searched for a new General Manager and found their candidate in their African operations. Mr. Paul Fortune arrived in April 1999, two months after Harvey had left, to finalize the contract and resume preparations for the Roaring Dragon to complete its transition from ‘co-management by Nothill and the Roaring Dragon Limited to full management by Nothill’. This was contracted to begin from the first day of August 1999.

Almost immediately Fortune established a pre-opening budget with the Roaring Dragon which ‘covered Nothill’s expatriate pay roll with effect from August 1’’. He also identified that ‘cash flow was going to be the main issue confronting the Roaring Dragon’. Erhi T may have to come up with working capital for at least the first two or three months before the newly managed Roaring Dragon could generate enough income to operate independently’. With the contract finalised, the Hotel’s Board of management suddenly expanded from four to twenty members.

Among the new additions were ‘the local Communist Party Chief, the Chief Secretary, the Union representative, and eleven Erhi T representatives’. Fortune believed ‘everyone was trying to get a seat on the Board to keep an eye on Nothill’. As was the norm in Chinese management situations, ‘connections and relationships’ had played a key role in deciding all the positions on the Board. Fortune soon realised that it was ‘politically correct to include the Hotel Workers Union and to pay respect to them so as to minimise any problems they may cause’.

In a push for information and to stamp its authority, ‘the Board proposed Nothill supply them with a copy of the Roaring Dragon’s accounts every week’. Fortune politely refused. Fortune and Nothill’s real concerns were ‘whether all the negotiated contractual agreements were going to be met’ and that their ‘brand name would not be brought in and thrown on the building’ with all other contractual agreements falling by the Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract.’ – 10 – Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) wayside or encountering delays. As insurance, it was stipulated in the contract that Nothill would take over the management of the Hotel. However, the Roaring Dragon would not be re-named as a Nothill hotel until such time as significant progress had been made towards improving the quality of service, and that construction was underway on a proposed new five-star wing in place of the old Russian building.

Once the old section had been demolished, and the service quality in the modern extension brought up to Nothill’s international standard’, the Hotel would be “rebranded the Nothill Roaring Dragon Hotel”. The demolition of the old section of the Hotel was to begin by January 1, 2000 and so it was planned that the new five-star accommodation wing and function centre would be completed ready for opening in late 2002. Fortune felt ‘confident that in two years, his team would be able to develop the local Chinese employees to a level whereby they could reproduce Nothill’s world class standard of service’.

The old section of the Hotel was closed and stripped for demolition and all that remained open for guests was the modern, more expensive section of the Hotel. Left with a smaller number of rooms to service, redundancy was going to be an issue that Nothill was going to have to deal with. The remaining 675 employees were well in excess of the 350 employees Nothill estimated would be required to run the reduced number of rooms at capacity. Many staff would need to be re-employed elsewhere or have their redundancy paid out.

In contrast, Nothill ‘planned to bring in eight expatriate staff to manage the takeover’ and later, when the time was right, expand their management team to include ‘pastry chefs, an executive chef, food and beverage managers, and a much stronger professional team’. In preparation for the forthcoming changes, Fortune publicly announced that all employees would undergo a two month training period following which employees would be chosen to be retained by Nothill based on their attitude and ability. Previously valued guanxi networks would supposedly become irrelevant and powerless.

Erhi T or the former Chinese GM would have no control over the selection process and Erhi T would resolve any redundancy issues by paying out existing employee contracts or finding them positions elsewhere’. There was excitement Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ – 11 – Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) among the young staff who could see opportunity working with an international hotel and concern among the older staff for the security of their position.

As none of the employees had ever experienced a redundancy program before, many were unsure as to how this exercise was going to be handled. Fortune quietly suspected that ‘when the redundancy lists were decided, Nothill would see guanxi connections come out of the woodwork’ in an attempt to save some unproductive yet well connected employees from losing their jobs and face6. Emerging competition Meanwhile in the local cityscape, new four and five-star hotels were nearing completion to commence operations that were in direct competition with the Roaring Dragon.

These hotels were operated by international management corporations and enjoyed the advantage of recruiting their employees based on qualifications, appearance, efficiency and ability with no concern for guanxi relationships. The new competitors had hired international recruiting firms to sort through the hundreds of applicants who had applied for positions to identify the best recruits. In contrast, Nothill had inherited an untrained staff, a high percentage of whom had gained their positions through connections.

Those with good guanxi with the HR Manager were usually able to find sons, daughters, relations and members of their guanxiwang7, a position without much trouble. An introduction or a recommendation to the recruiting staff always gave their ‘applicant’ the added advantage. Most of the existing employees had been ‘introduced to the HR Manager at the Roaring Dragon‘ and this ‘introduction’ had usually resulted in them securing a position. Another reason given was that when a parent retired or passed away their son or daughter legally had the right to secure a position as a replacement in the SOE.6 For a deeper investigation of ‘face’ see Brunner and Koh (1988: 39), Chen (1995: 54), Hofstede and Bond (1988), and Yeung and Tung (1996: 57). 7 guanxiwang (‘guanxi net’) means the whole network of guanxi through which influence is spread’ (Ambler, 1995). In China, these networks are like a complex web of trusting relationships. Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ – 12 – Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA)

Historically, the Roaring Dragon’s recruitment policy has been very relaxed. Under former planned economy conditions, there was little need to consider generating a profit, as ‘all costs were financed by the provincial government’. Hence on a regular basis, more employees than were necessary were hired. Fortune realised that the Roaring Dragon’s nepotistic history had the potential to be one of Nothill’s obstacles in trying to choose the best employees to remain at the Hotel. At one time or another there had been as many as 32 families with more than one family member working at the Hotel.

The kitchen had more than 70 chefs, many of whom did very little productive work. Departmental workloads were unbalanced with young employees stationed at the Front Desk and in the Restaurants working harder than older employees who worked ‘behind the scenes’. After older, more experienced, employees had finished their work duties on any given day they would ‘talk, play cards and read the paper and just complete a few extra minor tasks during working hours’. Nothill wanted to change some deeply entrenched behaviour.

Nothill was inheriting the Roaring Dragon’s staff and it was proving to be a very different game to choosing a totally new staff from the beginning. Fortune admitted that Nothill would ‘have to make the best of the given situation’. July In early February 1999, Nothill and the Roaring Dragon had agreed to a freeze on the recruitment of any new employees. However the hiring of new employees by the Chinese HR Department continued even after the agreement was struck, as the managers’ wanted to provide opportunities for the younger members of their guanxiwang to work for the ‘world famous Nothill Hotel’.

During the time between Harvey’s departure and Fortune’s arrival, Nothill did not have a General Manager on site. The Chinese managers took advantage of the moment by hiring some extra young employees with the thought that it would go unnoticed. Fifteen new employees chosen during this period were told they ‘would start work in July 1999, after completing their schooling’. These new appointments faced ‘no evaluation or interview process’ and a training manager’s comment was ’maybe we will just ask a Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract.’ – 13 – Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) few questions’. Thomason, remained the only Nothill employee at the Hotel during that period. He noticed some new faces in his department one day and was told ‘these are your new employees’. He was a little angry that this had been done behind his back as ‘he had no control over who was chosen, their calibre, education, or ability’. Fortune registered his complaint with the Chinese managers and Erhi T.

In late July, Nothill’s international managers arrived to take charge of the F&B, Front Office, Accounts, Housekeeping, and Supply Departments. Fortune confirmed that between August 1st and October 31st, employees would be assessed on their ability and their quality of service. Nothill management would be working with them day in and out to assess their performance under strict, demanding conditions and to determine ‘whose eyes were sparkling’ and ‘who was comprehending and adapting well to the new system’. Any employee who failed to meet the new higher standards would be asked to leave.

When Nothill’s international HR Manager arrived, she was surprised to discover that the Hotel had kept ‘very limited records on employees’ personal details, schooling, and experience’. Her immediate task was to set up and develop accurate files on every employee. This illuminated the difference in standards of professionalism between the old and the new methods of HR management of the Roaring Dragon Hotel. The take over from August 1st caught the imagination of the younger employees as they glimpsed the prestige that they would gain from working for an international hotel.

Recalling the KYZ experience of 1993, older employees agreed that ‘Nothill was more famous’ but cautioned as they ‘were unsure of what the new management would be like’, ‘who would be laid off’ and what future those made redundant would face. Redundancy was a new concept in south-west China and one Chinese HR manager explained that ‘it would be difficult to ask someone to leave their job without a good reason or explanation’. Preserving the ‘face’ of employees made redundant was an issue that would need to be addressed.

A significant event occurred in the same month. NuFu Travel was an agency that had in the past provided much business to the Roaring Dragon. In late July, they offered Grainger, S. , ‘Guanxi Neglect at the Roaring Dragon in South-west China: The Demise of an International Management Contract. ‘ – 14 – Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia (ACESA) the Hotel a touring Japanese group that required a small banquet at the Hotel as part of their tour package.

Nothill Head Chef Thomason, arrogantly told NuFu Travel that their package price ‘was too cheap’ and refused to accept their offer stating he ‘wanted a higher price’. The former Chinese Head of F&B, Madame Fang advised him that ‘if he refused the offer he would effectively be excluding Nothill from any future bookings from NuFu’. Thomason refused to agree on the cheaper price package and as a result, NuFu retaliated by canceling all future’ tours booked to stay at the Hotel. Madame Fang complained that Thomason‘s ‘management was not Chinese and he does not understand’.

The relationship she had painstakingly spent years building up was destroyed in one telling blow by his refusal. In a disappointed tone, she claimed ‘we are in China and must respect the Chinese way’. The guanxi she had developed between the Roaring Dragon and the NuFu agents was seriously damaged as a consequence of Thomason’s lack of understanding of the guanxi dynamic and his guanxi neglect. This resulted in the loss of all business coming from the NuFu at a critical time in the Roaring Dragon’s transition when hotel competition in the

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