Park Place Hotels Mis Project – Feasibility Study Running Head: Feasibility Study. Park Place Hotels MIS Project MBA 2000 – Cohort Team Three Mark Carey, Tim Swanson, Sherri Nelson, Sherri Thomas City University, Tacoma WA March 20, 1999 STRATEGIC NETWORKING, INC. Park Place Hotels, Ltd. – Installation of a Hotel Management Information System March 20, 1999 Internal Feasibility Report Number SNI-FS-990320 STRATEGIC NETWORK, INC. Park Place Hotels, Ltd. – Installation of a Management Information System March 20, 1999 Research Team Mark Carey Sherri Nelson Tim Swanson Sherri Thomas Internal Feasibility Report Number SNI-FS-990320 Read and Approved: Jonathan Edwards, CEO Date EXECUTIVE SUMMARY SNI has been sought out to implement a Management Information System for Park Place Hotels in South Korea.

The MIS project, part of a hotel management system, will be an integral part of positioning Park Place Hotels as a world class facility appealing to affluent business travelers. We have researched the project with respect to technical requirements and cultural risks of conducting business in South Korea. SNI has successful, relevant experience in developing and installing a similar system for Comfort Suites in Texas eighteen months ago. Based on this experience and the close parallel in system requirements, we believe SNI possesses the technical expertise to be successful. The project is expected to generate $1.28 million in revenue. Doing business in a foreign country will be new to SNI.

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South Korea is an excellent place for this expansion of our market. Korea, with its abundant skilled workforce, well-developed social infrastructure, and large domestic market .. will create an environment in which business can prosper (American Chamber of Commerce in Korea, 1998). We have explored the extensive research available on Korean culture and protocol and believe that with proper preparation our technicians and managers will succeed in building successful working relationships. We believe this project presents a unique opportunity for SNI to expand its market and will likely result in additional opportunities in Korea and potentially other countries.

We recommend a team be assigned to negotiate an agreement with Park Place Hotels for the development, installation, training, and maintenance of their Hotel Management System. TABLE OF CONTENTS Page I. Introduction 6 II. Method and Criteria 6 Sources of information 6 Project elements 6 Technical 6 Cultural 6 III. Evaluation and Analysis 7 About SNI 7 Mission Statement and Vision 7 Organizational Chart 7 Strategic Business Plan 8 Management Strategy 8 Project Description and Purpose (Goal) 8 Overview 8 Current Situation and Project Objective 9 Proposed System 10 Software Hardware, Manpower Resources Required 10 Financial Breakdown and Implications 11 Critical Success Factors 12 Design, Training, and Implementation 12 Anticipated Difficulties in Development and Implementation 12 Cultural Success Factors 13 Overview 13 Language, Education, and Work Ethic 14 Legal and Financial Issues 15 Social and Ethical Issues 16 Korean Business Practices 17 Customs and Protocols 18 IV. Conclusions and Recommendations 20 V. Annotated Bibliography 22 VI. Appendix A. Capabilities of LMS PRO 1.4 24 B.

Financial Breakdown of Park Place Hotel Project 26 C. Gantt Chart 27 I. INTRODUCTION Strategic Networking, Inc. (SNI) is an innovative information services and business solutions company. This feasibility study explores the advantages, disadvantages, and critical success factors in expanding our reach beyond the borders of the United States into the global marketplace.

Specifically, SNI was approached to implement a Management Information System for a hotel chain in South Korea. Remarkably, the project is nearly identical to the Comfort Suites Project SNI completed eighteen months ago in Dallas, TX. Our success and reputation resulting from that project came to the attention of our potential Korean partners. Does SNI have the capability and available resources to implement this project? Absolutely! This paper explores the financial benefits and risks associated with conducting business in Korea. Extensive research was conducted concerning the cultural, political, and social environment in Korea. It is our belief that the financial rewards of this project outweigh the numerous challenges we will face. II.

METHOD AND CRITERIA Sources of Information Information in this paper should be considered extremely reliable. It is based on extensive research on American/Korean business practices conducted through the U. S. Department of State, U.S. Embassy, Seoul, Korea, U.S. Department of Commerce, Korea-U.S.

Committee on Business Cooperation (CBC), Korean American Chamber of Commerce, Central Intelligence Agency, area Korean business leaders, as well as traditional library and internet sources. Project Elements There are two elements to this feasibility study: 1. Technical – Does SNI have the software, hardware, manpower, and training assets available to successfully implement the project? 2. Cultural – The cultural risks associated with this project are immense. We will assess political, legal, ethical, and social issues and how they may impact the project.

III. EVALUATION AND ANALYSIS About SNI Mission Statement and Vision SNI is an innovative information services and business solutions company. SNI helps companies become more productive. SNI helps create new business lines and enter new markets. SNI delivers services and solutions focused on each client’s needs, with particular emphasis on helping clients more effectively serve their customers. SNI integrates three core disciplines in providing solutions and services to its clients: business integration, systems integration and applications development, and information technology infrastructure services.

Strategic Networking, Inc. Organizational Chart Figure 1. Strategic Business Plan SNI’s business strategy is controlled growth through selective partnering. SNI believes that quality vs. quantity at an affordable price will separate SNI from other, larger MIS consulting firms. While numerous opportunities exist domestically, SNI has recognized the value of the Internet and the growing global economy.

SNI participates in numerous international trade shows in order to develop business contacts. Management Strategy At SNI, people are our most valuable assets. SNI LISTENS attentively to our customers. Every member of our team, including our CEO, is available 24 hours a day, seven days a week, to go anywhere, anytime, to SERVE OUR CUSTOMERS. Strategic Networking, Inc. .. LEADS by example Understands that today’s business problems require a MULTI-DISCIPLINARY approach to finding the best solutions.

Will not accept a project that we can not deliver the EXPECTED RESULTS at the EXPECTED TIME. Project Description and Purpose (Goal) Overview SNI was introduced to Mr. Park Chon He at the annual Hospitality Industry Technology Show in Los Angeles, CA in December 1998. Park Chon He is the son of Mr. Park Soon Lee, founder and owner of Park Place Hotels, Inc.

of Seoul, Korea. Park Place Hotels, Ltd. is an upscale, family owned, super-deluxe hotel chain in South Korea. The chain consists of three properties located in Seoul, Puson, and Inchon. The 69-year-old family patriarch heads the business with Mr.

Park’s three son’s co-managing the properties. The hotel chain caters to the affluent business traveler. Each hotel is ideally located in major business districts. The younger Park Chon He believes that a competitive advantage can be achieved through the use of information technology by enhancing their ability to deal with competitive hotel chains penetrating their marketplace. He believes that their long-term strategic success ultimately depends on how well Park Hotels executes their primary mission of delivering the lowest cost, highest quality travel experience to their business customers.

Park Chon He has gained the confidence of his father to save the ailing family business and has been tasked to modernize the family hotel chain. Current Situation and Project Objective Foreign hotel chains such as Hyatt and Hilton are encroaching on Park Place Hotel’s established client base. Business travelers from the United States, Europe, and other Asian countries are accustomed to business amenities such as secretarial, translation and interpretation services, telecommunications, in-room Internet access, business services, and sophisticated reservation systems. Traditional Korean ambiance, the hallmark of Park Place Hotels, is not enough to attract critical (and profitable) business meetings and conventions. Bookings are down 22% from a year ago. This is a hotel chain in trouble.

Hotels in Korea are classified into five groups: super-deluxe, deluxe, first class, second class, and third class. In order for Park Place Hotels to compete in the profitable super deluxe (business) segment, they must modernize their information systems capabilities to meet the needs of their business customers. If they slide down the quality scale, their profitability and future existence will be impacted. Mr. Park Chon He is the change agent for this modernization.

His goal is to turn Park Place Hotels into a world class hotel chain by computerizing their guest management system, modernizing their telecommunications capabilities, and increasing awareness of his facilities via the World Wide Web. SNI’s objective would be to develop and install the guest management system and Internet portal. Proposed System Software, Hardware, Manpower Resources Required The software program selected for the project is an off the shelf program called LMS PRO 1.4. manufactured by Inter-America Company. LMS includes the following functions.

(See Appendix A. for details). * Reservations * Registration * Charge Posting * Guest Services * Guest Settlement * Housekeeping * Travel Agency Accounting * Telephone Service * Package Plans * Night Audits *Management Reporting * Guest History SNI installed the LMS PRO 1.4 software in a large hotel chain headquartered in Dallas, TX eighteen months ago. Our experience with its capabilities offers SNI a huge competitive advantage. Mr.

Park Chon He, hearing of our reputation, sought SNI out at the Hospitality Industry Technology Show. We recommend using the IBM AS 400 running NT Network. The Dallas project continues to run smoothly using this hardware. However, since Koreans use 220 volts as their power source, converters with power stabilizers to ensure the computer doesn’t see power bumps will also be required. Our on site Korea team will consist of four programmers and one project manager from SNI.

A local, Korean programmer and interpreter will be hired to supplement our work team. Two Internet programmers and one lead project manager will be utilized domestically. Financial Breakdown and Implications Project cost breakdown is as follows: (See Appendix B. for detailed breakout) Chart 1. Total Project Revenues Chart 2.

Source of Revenue as % of Total Project Critical Success Factors Design, Training, and Implementation The actual design of the system is fairly straightforward. LMS PRO 1.4 is a proven software program that we have experience implementing. Even though Mr. Park Chon He is the change agent for this project, his father exerts considerable influence on the project. It is critical Mr.

Park Soon Lee be involved in all phases of the project. We recommend doubling the normal planning and design phase of the project in order to ensure: An adequate role of user in the implementation process Complete management support for the implementation effort Increased user involvement in the design and operation of the hotel information system. Involving users in development offers opportunities to design the system according to their priorities and business requirements. They are more likely to respond positively because they have been actively involved. Cultural differences between SNI and the client need to be considered in the analysis, design, programming, testing, and conversion phases of the implementation.

Anticipated Difficulties in Development and Implementation The following issues summarize the anticipated difficulties in development and implementation of the Park Place Hotel MIS system: Implementation team must include Korean representatives, preferably support personnel and end users. LMS PRO 1.4 is an off-the-shelf program. We must build flexibility into the program to anticipate future needs of the organization. Time and money required for software development is often underestimated. Time and money required for proper testing is often underestimated.

Users must be significantly involved in testing. Training must be completed prior to conversion. To compensate for cost overruns and delays, we should factor in an additional 25% in man months. Performance and training standards must be established with proper documentation written in both English and Korean. Provisions for system maintenance after our three-year service agreement must be established.

It is clear that SNI has the capability to implement such a project in the United States. Our performance at Comfort Suites, a much larger project in scope, demonstrates this. Our biggest challenge with Park Place Hotels is the Cultural Success Factors that we must adapt to. Cultural Success Factors Country Overview No foreign business enterprise can hope for success in Korea without a thorough understanding of the people. The Republic of Korea, better known as South Korea, or Land of the Morning Calm, has a rich history spanning over 5,000 years. Today, Korea is an important trading partner for the United States.

Korea’s population of forty-five million people inhabits an area slightly larger than Indiana. As one of the Four Dragons of East Asia, South Korea has achieved an incredible record of growth. Three decades ago its GDP [Gross Domestic Product] per capita was comparable with levels in the poorer countries of Africa and Asia. Today, its GDP is already up with the lesser economies of the European Union. This success through the late 1980s was achieved by a system of close government business ties, including directed credit, import restrictions, sponsorship of specific industries, and a strong labor effort. The government promoted the import of raw materials and technology at the expense of consumer goods and encouraged savings and investment over consumption. The Asian financial crisis of 1997/98 exposed certain longstanding weaknesses in South Korea’s development model, including high debt/equity ratios, massive foreign borrowing, and an undisciplined financial sector. Also, a number of private sector conglomerates are near bankruptcy.

At yearend 1997, an international effort, spearheaded by the IMF, was underway to shore up reserves and stabilize the economy. Growth in 1998 was sharply cut. Long-term growth will depend on how successfully South Korea implements planned economic reforms that would bolster the financial sector, improve corporate management, and open the economy further to foreign participation (CIA World Fact Book, 1999). Language, Education and Work Ethic Korean is the spoken language in South Korea and Hangul the written language. English is widely taught in Junior High and High School. Korea enjoys a 98% literacy rate (CIA, 1999). Most Korean professionals speak English, and most meetings can be conducted in English without an interpreter. Generally speaking, catalogs, promotional literature, and instructional material are acceptable in English.

Don’t take it for granted that those who speak English will understand everything you say. If a statement is met with silence, it may mean that you were not understood (Van Horn, 1989 page 211-212). Koreans have a very strong work ethic, working, on the average, over 54.7 hours per week. It has been said that the Koreans are the only people in the world who can make the Japanese look lazy (Van Horn, page 211). Because we will be working with the hotel service industry, we expect few language barriers requiring the use of interpreters on site. However, tight social and business inner circles make it extremely difficult to enter the Korean market without a qualified Korean representative. Local representation is essential for foreign firms hoping to be successful in the Korean market (Dept. of State Country Commercial Guide – FY 99). We will be required to appoint a registered agent in order to handle government import paperwork. Their commission rate of 7-10% has been factored into the overall project costs.

Legal and Financial Issues Legal advice in setting up our contract is strongly recommended. Though Americans may regard a written contract as legally binding, a Korean may regard the same contract as a ‘gentlemen’s agreement’ which is subject to further negotiations dependent upon new circumstances (Dept. of State). If a contract is violated in Korea, the legal procedures in Korea can be lengthy, cumbersome and expensive (Dept of State). We must extensively research our mutual requirements, understandings, and responsibilities, record it on paper, and be prepared to modify the meanings of the terms afterwards.

The estimated cost of legal representation is $20,000. The Park Place Hotel project will exceed $1.28 million and is financially attractive to SNI. SNI, of course, must ensure payment. The continuing slowdown of the Korean economy, increasing deficit, and falling won add to Korea’s economic difficulties which makes Korean banks hesitant to extend credit for businesses. U.S.

companies should consider dealing only on a confirmed letter of credit basis with new and even familiar clientele. A confirmed l/c [letter of credit] through a U.S. bank is recommended because it prevents unwanted changes of the original l/c, and it shifts responsibility for collection onto the familiar banks involved, rather than onto the seller (Dept. of State). Bank of America, SNI’s current bank, has a branch in Seoul and has agreed to handle the letter of credit for a modest fee of $5,000.

Social and Ethical Issues The Korean culture is over 5000 years old. Modern societal values remain firmly rooted in the values of Confucianism. Confucianism is not a religion, but a philosophy of social conduct …