Nigerias premier and largest indigenous integrated energy services - Free Essay Example

Sample details Pages: 12 Words: 3575 Downloads: 9 Date added: 2017/06/26 Category Energy Industry Essay Type Research paper Did you like this example? Section 1 Company Analysis Oando Plc was founded in 1956, and is Nigerias premier and largest indigenous integrated energy services provider, with primary listing on the Nigeria Stock Exchange (NSE) and a secondary listing on the Johannesburg Stock Exchange of South Africa. The company currently has a market capitalisation of approximately US $1.3 billion and is in the top ten (by market capitalisation) Nigerian controlled companies quoted on the Nigerian Stock Exchange. (OANDO PLC, 2007-2009) Comprising of 5 major business units, the Oando group is vertically integrated, originating from downstream petroleum products marketing and rapidly expanding to Supply Trading, Gas Power, Exploration Production and Oando Refining. Don’t waste time! Our writers will create an original "Nigerias premier and largest indigenous integrated energy services" essay for you Create order All these subsidiaries provide integrated energy services in Nigeria West Africa, with presences in Bermuda the British Virgin Island. Financial Performance This will be analysed using the IFRS  [1]  (International Financial Reporting Standards) figures rather than the NASB  [2]  (Nigerian Accounting Standards Board) for ease of interpretation. Table 1 OANDO PLC: FINANCIAL SUMMARY  2009 2008 2007  US$000 US$000 US$000 Revenue 2,283,557 2,686,544 1,501,794 Gross Profit 241,614 326,105 173,280 Operating profit 152,610 138,057 64,129 Profit before income tax 94,831 90,925 60,692 Profit for the year 75,234 74,579 49,804     Return on net operating assets (RNOA) 9.10% 10.25%  Financial leverage (FLEV) 274.88% 207.12%  Return on equity (ROE) 21.20% 20.74%  Assets turnover 1.72 2.43  Over the past 3 years, Oando group has witnessed a notable performance with an increase in revenue YoY  [3]  . According to reports by financial analysts in May 2010 (Meristem Analysts, 2007), Oandos profit after tax has grown at a CAGR of over 50% on the average. In the recent FY09 results, PAT  [4]  was about 21 %( See Table 1 above). This growth is as a result of expansions in its downstream operations, exploration and production upstream earnings as well as increased income from its gas distribution subsidiary. Although the companys turnover is advancing at a CAGR  [5]  of 35% (VETIVA, 2010), assets turnover decreased from 2.43 in 2008 to 1.72 in 2009. This decline was driven by the 15% reduction in sales from US$2.7 billion in 2008 to US$2.3 billion in 2009 and a 20% increase in average net operating asset. Table 2 This may signify that Oando was not efficient in using its assets to drive revenue in 2009 but Oandos strategy to expand upstream led to huge C APEX  [6]  due to ongoing financing of EP assets  [7]  . Also profit margins have been low due to issues with market price caps in Nigeria  [8]  in downstream marketing which is Oandos largest revenue contributor to date. Another significant financial factor for the company is the increase in financial leverage from 207.12% in 2008 to 274.88% in 2009. This increase was driven by the increase in average net debt and the slight reduction in average book value of equity from US$360m in 2008 to US$355m in 2009. The large debt to equity ratio is attributable to expansion plans and trading activities of Oando in importing refined products to Nigeria. As noted by VETIVA, a capital investment company and a reliable source of companys financial analysis in Nigeria, Oando group uses debt financing to fund its asset acquisitions and utilizes short term facilities such as import finance (VETIVA, 2010) to fund its working capital requirements, leading to the reduction in Return on Ne t Operating Assets and high interest payments. Oando enjoys relatively large Returns on Equity (ROE) as a resultant effect of its high financial leverage. Fin24, South Africas leading and biggest source of business, economics and personal finance news reported Oandos explanation of the groups drop in revenue in 2009 as a result of depreciation of the local currency (naira) to the US dollar by about 26%, the Group revenue reduced by about 15% compared with the corresponding period of 2008. (Fin24, 2009) Capital Cash Flow Growth In an effort to raise capital for further expansions into gas and power (to refinance its acquisition of upstream assets by buying onshore oil blocks from multinational oil majors: Shell, Chevron, AGIP and some West African Oil Companies to boost production  [9]  ), Oando has raised about $142 Million this year through the capital market in Nigeria and South Africa. This will also reduce its financial leverage and provide operating capital. In a recent newspaper publication (OSO, 2010), Oando has plans to raise about $250 million by selling up to 49% stake. Cash flow has been on the rise in 2009 due to one of the increasing production of the OML125 asset. Non-Financial Performance Market Position The market position of Oando is based on the companys strengths and weaknesses and how it will use these factors to align explore opportunities or mitigates risks posed by threats in the sector. Strengths: Oando, integrated into almost all the segments in the oil and gas value chain, has a very strong brand perception in the industry and country as a whole. The company has moved fast to become number one in the downstream sector in Nigeria, with above industry average earnings and turnover growth. With strong competences in downstream marketing distribution, it is pioneering the development of Sub-Sahara Africas largest gas pipeline network Independent power plants in strategic locations in Nigeria. Oando leveraged its capabilities in oilfield services to integrate backward into upstream EP. The companys entry into Refinery makes Oando poised to exploit opportunities presented by the new laws requiring indigenous companies obtain contracts and win bids so long as they are capable, in order to promote the Nigerian content the oil industry. Weaknesses: Oandos major weakness is its high gearing as a result of its capital intensive operations, high costs of interests and extended payback periods in some of its subsidiaries due to high sunk costs. Production and Reserves Growth Oando operates about four oil blocks in different stages of development. In 2008, it acquired a 49.8% stake in OML 125 OML 134 from Shell Nigeria Exploration Production Company (SNEPCo). These deep offshore blocks, co-owned by Italian oil giant, AGIP were won in an international bidding process in competition with BP, two Chinese national oil companies and the Korean National Oil Company, making Oando the first indigenous oil and gas company in Nigeria to have a stake in a producing deep offshore asset. (RIGZONE, 2008). Although data for proved/unproven reserves has been difficult to find via available resources, analysts research has shown that Oando is fast adding new assets with quick production yields and hopefully, this will help sustain their production and reserves growth. Costs Oando in the last 3 years has pursued its future strategy to be the no 1 Integrated Energy Solutions Provider in Africa and this has led to high capital expenditures as well as operating costs. Their FDA  [10]  costs in 2008 in the EP segment was above US$625.7 million  [11]  and the cost of capital (interests) attributed to the observed increase in its financial gearing. Costs in the downstream and distribution segments will decrease as soon as the refinery goes into operation. Section 2 Sector Analysis According to the Reference case projection from the International Energy Outlook 2010, (International Mining, 2010), world marketed energy consumption is set to grow 49% between 2007 and 2035, driven by economic growth in the developing nations of the world. This demand has led to the sectors strong drive to create and manage the supply and as such has defined the energy terrain with the following trends: Increasing difficulty in developing and improving the efficiency of traditional fossil fuels The dynamism of the roles of government and other institutions such as regulatory bodies and stakeholder expansion Reducing the GHG emissions from the burning of fossil fuels Exploring alternative sources that can be integrated into, leveraging current assets and competences These trends have affected the business strategies of oil and gas companies and their entire value chain. It has impacted governments and new regulations have to be put in place especially due the risk p osed current and future activities of the sector to our environment. Trend in the Oil and Gas Sector in Nigeria Looking at the sector within the Nigerian context, the upstream oil industry is the most important sector in the Nigerian economy and the VETIVA research publication of January 2010 revealed that the sector attracted Foreign Direct Investments and earnings and had led to the enormous growth in government revenue and GDP as shown in the Figure below: The Federal Government intends to boost production levels to about 4 million barrels per day, while also increasing the countrys oil reserves which currently stands at about 36.2 billion. Looking more closely at the factors affecting Oando with respect to the trends, the oil and gas sector is characterized by three types of ownership structure: National Oil Companies, International Oil Companies (IOCs) and the Local Oil Companies. Oando is indigenous and privately owned and in competition with IOCs and other local oil and gas companies. In the distribution and Supply segment where Oando has its largest turnover, the company leads all others in terms of market share as stated in the 2008 NNPC Annual Statistical Bulettin, where , Oando has the largest market share(Oando had 17.87%, Total 15.84%, African Petroleum 14.44%, Conoil 7.52%, NNPC Retail 5.13%, Mobil 4.58% and Texaco 4.47%.) (Placeholder11) Most of the LOCs listed above are mid-sized firms focused on the petroleum products marketing segment of the industry. Oando, in line with its growth strategy has delved into upstream business as well as refining, thereby competing with IOCs like Mobil, Agip, Total Chevron(Texaco) in the integrated energy business from exploration(onshore, offshore and deep offshore) to products marketing. With the bulk of Oandos operations being in the downstream petroleum marketing and supply and distribution segments, it faces the challenge of its products being commoditized and price dominated in the future hence to enhance its earnings; it is highly committed to building a 360,000 capacity refinery in Lagos. (Meristem A nalysts, 2007) Opportunities: High Demand for Petroleum Products: Nigeria is in the emerging market phase with a lot of petroleum consumption and demand driven by businesses individuals. According to the EIA, in 2009, total oil production in  Nigeria  was slightly over 2.2 million bbl/d, making it the largest oil producer in  Africa. (US EIA, 2010) This may be attributed to GDP growths leading to automobiles affordability and the poor power supply in the country, characterized by consumers generating power (electricity) in homes and offices across the country. The current and forecasted high demand for petroleum products in Africa has necessitated a need to increase power production to homes and businesses. The BMI Report forecasts that between 2010 and 2019, there will be an increase in Nigerian oil and gas liquids production of 55.3%, with volumes rising steadily to 3.40mn b/d by the end of the 10-year forecast period. Oil consumption is set to increase by 82.9%, with growth slowing to an assumed 7.5% per annum towards the end of the period and the country using 708,000b/d by 2019. Gas production is expected to rise to 126bcm by the end of the period. With demand rising by 205.3% between 2010 and 2019, export potential should increase to 65bcm, largely in the form of LNG. (Business Monitor International, 2010). Source: Nigeria Oil Gas Report from BMI (Business Monitor International, 2010) 2001 2009 2014 African Oil Use 2.98mn b/d 3.60mn b/d 4.14mn b/d Africa Oil Export 4.86mn b/d 6.08mn b/d 7.66mn b/d Africa Oil Production 7.84mn b/d 9.69mn b/d 11.79mn b/d Abundant Oil and Gas Reserves: The oil and gas reserves are huge and this gives latitude for production growth, especially when the reserves-to-production ratios are high. Nigerian Fuel Market Deregulation: The Nigerian government plans to implement a full deregulation policy in the petroleum products market which will eliminate the price caps on the products. This policy will encourage companies to invest in the refining segment and reduce the importation of refined products into the country. Petroleum Industry Bill (PIB) The PIB was recently signed into law (April 2010) and is aimed at reforming the oil and gas sector. Its aim is to turn the National Oil Company and its subsidiaries into profit making ventures and local content participation in the sector, especially important to Oando is the  privatization of downstream  activities, the release of unused assets previously owned by IOCs and the planned increase of natural gas production to fuel power stations in the country. Threats Niger Delta Violence  [12] One of the most recent threats has been the resistance and violence in the Niger Delta area in demands for regional resource sovereignty which hampered exploration and production operations, lowering production output since 2007. Pipeline vandalism is another threat to the oil and gas sector in Nigeria as it sabotages production efforts by the companies (bunkering activities). Lack of Adequate Infrastructure Nigeria is rated as the worlds 10th largest exporter of petroleum products  [13]  , yet, due to poor refinery facilities as well as transportation in Nigeria has led to a substantial amount of gas flaring and heavy reliance on road transport, increasing carbon footprint. In spite of the high reserves to production rates, poor distribution facilities have left Nigeria importing almost all its fuel. This is a key reason why vertical integration in the sector is popular as companies have to develop their own infrastructure to support their businesses and reliance on others within the value chain may cause unwanted variability. Another limiting factor in the sector is the problem of ports congestion which delays imported products time to market. Delayed Subsidy Payments The delays in the subsidy payments by the government pose a big threat to increased investment and negatively impact the cash flow of the companies in the sector. This is further aggravated by the delay in passing the fuel market deregulation bill. Low Carbon Future The effect of the future low carbon economy will be enormous on the oil and gas companies in emerging markets as they will be jumping on the train too late. This implies that Fossil fuel production in Nigeria may increase at a time when export demand for it will decrease. The US is the largest importer of crude from Nigeria, accounting for 40% of (the 80% total Production volumes) total crude exported out of Nigeria. With the drive to lower GHG emissions and increasing utilization of alternative energy sources, export demand will drop by over 50% in the next 10-20 years. The discovery of unconventional gas which may likely be cheaper poses a threat to the companys gas operations. Source: (EIA, 2010) Volatile Oil Prices The sudden increase in oil prices translates to lower margins for operators in the downstream sector due to importation of refined products which is tied to crude oil prices. Oando incurs high costs due to exchange rates and instability of Nigerian Naira. In summary, the business strategy of Oando which is aimed at serving the West African Market reduces its dependence on the global trends in the short run as these do not align with the local trends peculiar to Oandos region of operation. Section 3 Scenario Analysis Oando Business Strategy Oandos key strategy is diversification into upstream oil and gas production while maintain leadership position in the downstream sector in West Africa. Most of its recent strategy implementation has been geared towards actualizing this goal. Oando is currently investing in infrastructure to gain competitive advantage in the industry by moving the company into a price setting position in the market. The commencement of the pipe-laying project across the country is to strategically equip the company for domestic gas distribution nationwide, making it the number one energy supplier of choice to homes and businesses. The Institute for the Analysis of Global Security has highlighted that due the USAs search for sources of crude oil and the move to reduce the worlds dependence on the reserves in the Middle East(After 9/11), oil production in Africa, especially Nigeria has boomed. (Placeholder1) But as Nigerias oil reserves have been predicted to peak within a decade from now (oil rese rves will decline by 2020), Oandos EP operations need to be focused on delivering energy through traditional crude quickly and expanding its operation into alternative energy sources or renewable in order to boost the efficiency of their integrated operations providing energy and becoming the leader in market share in the Sub-Saharan Africa region. The Shell 2050 Scenarios Former Shell CEO, Jeroen Van Der Veer predicted that Energy demand will double between now and 2050, based on forecasts that world population is set to grow by 50%, thereby causing increased CO2 emissions. CO2 concentrations need to be limited to 450ppm (parts per million) The decisions that will be made in the next few years by OG companies will shape the future of the planet. Business managers in the energy sector need to consider the future of energy, alternatives that may abound and align their strategies to avoid risks and exploit opportunities inherent in the scenarios for their companies. The 2050 scenarios present two outlooks for future trends in energy supply and demand, and the climate change impacts of each. . These scenarios are described briefly below (Taken from the Shell Energy Scenarios to 2050 report): Scramble: Where policymakers pay little attention to more efficient energy use until supplies are tight and GHG emissions are not seriously addressed until th ere are major climate shocks. Blueprints Where growing local actions begin to address the challenges of economic development, energy security and environmental pollution. A price is applied to a critical mass of emissions giving a huge stimulus to the development of clean energy technologies, such as carbon dioxide capture and storage, and energy efficiency measures with the aim of lowering carbon dioxide emissions. Scenario 1 SCRAMBLE With 40% of the US crude oil imports from Nigeria alone, it brings Nigerias Oil and gas market to the forefront as a major global supplier. As earlier mentioned, the USA is pitting against the Middle East oil producers by encouraging African countries to increase their production of crude oil for export purposes to maintain existing lifestyles. There is little collaboration seen between nations as each is trying to maximize their energy supplies. In Nigeria, we see this scramble in the recent activities in the sector with the Chinese OG firms competing rigorously for oil blocks and refineries in Nigeria. As China must import about 60% of its oil needs, this scramble reflects that the interest and inter-country trades are aimed to ensure continued supplies and economic prosperity, rather than building a sustainable global future. Oandos business strategy in partnering with Russias Gazprom  [14]  to develop oil and gas assets and infrastructure in Nigeria and some parts of Wes t African, though seen as a profitable strategic alliance by Wale Tinubu (CEO, Oando), smacks of Russias deliberate intent to monopolize the European gas market by sabotaging EU chances of getting oil via the Trans-Saharan gas pipeline from Nigeria within the next decade. (IHS Global Insight, 2008) The Nigerian governments involvement in the deal is also to promote FDI and grow its GDP. Chinas interest in the oil and gas sector in Nigeria and its fierce bid for about 90% of the government offered oil blocks in 2008, along with the resistance from American and European IOCs in the country show that lowering climate stresses are not the priority for these investments, rather the 5 to 10 year strategy of these international trade relationships is to ensure the security of energy imports. Oando is currently investing in upstream oil projects and the focus for the future is addressing increasing demand and supply pressures. Online research on Oandos strategy has not produced any low carbon initiatives support which allows me to suggest that climate change is low on the companys focus priorities in the near future and this can be said to of Nigeria. Some other reasons why Oando may not be exploring alternative energy production such as renewable may be due to lack of infrastructure to carry out these innovations, the countrys relatively low CO2 emissions w.r.t. USA and China may give companies in Nigeria a false air of not contributing to the risk of the GHG emissions, the cost associated with addressing climate change. Scenario 2 BLUEPRINTS One of the trends in Nigeria that will spur a move towards energy efficiency is the deregulation of the downstream market. The increase in price of petroleum products will bring about a change in the use of these products, towards efficiency and finding alternative sources. Oandos diversification strategy necessitates that it pursues new oil and gas discoveries as well as drilling technologies to tap into conventional and unconventional reserves in Nigeria and West Africa. Oandos strategy for the future (15 30 Years) should be to collaborate with the IOCs and government, leverage their technical competence, and boost production of both oil and gas. With the move towards lowering the demand for crude by the developed nations, Oando has invested in infrastructure that will enable the company meet local demands adequately. The gas distribution network is also a good foundation for Oandos long term strategy, contributing to the success of Nigerias plan in developing and monet ising the countrys Liquefied Natural Gas plans. The advent of alternative energy sources in other countries around the world may bring about its importation into Africa and lead to demand reduction for fossil fuels. Oando has to leverage its gas station networks to provide charging bays for electric vehicles across West Africa. Proactive strategic alliances with international companies skilled in carbon capture and storage technology to enhance oil recovery post its assets oil peak. In an article on The Future of CCS in Nigeria , West Africa, and particularly Nigeria, represents the highest potential for CO2-EOR and CO2 storage in oil and gas fields. (ANASTASSIA, FREDRICK, MALCOLM, 2009) Oando can enter into an agreement under the Clean Development Mechanism (CDM)  [15]  via the Nigerian government with government of other nations interested in Nigerias reserves, pioneering the promotion of low carbon emissions in the country. This is another source of competitive advanta ge and will ensure business sustainability.

The Creation of Abner Snopes in William Faulkners Barn...

The Creation of Abner Snopes in William Faulkners Barn Burning William Faulkners Barn Burning is an intriguing story about a young boy named Colonel Sartoriss (Sarty) love and hatred for his father, Abner Snopes. Ab is a brutal and frightening man who instills fear into whom ever he seems to be close to. What is the cause of Abner Snopess cruel-heartedness? Maybe its his alienation from the higher class in society that causes him to act in this manner. When such a separation occurs in a community one can feel that he doesnt belong and because he does not belong that the only way the higher class will give him the time of day is if the person acts out and tries to prove that he doesnt need law and conventional society, much†¦show more content†¦He had no traditional schooling and did not have the typical urban setting as a child. This undeveloped mind of his is what leads to his ignorance and insensitivity as an adult. If all you knew as a father was what you yourself thought to be the correct way to raise a family then it is inevitable what will become of that family. Obviously Ab Snopes was not raised according to tradition, he sets boundaries and rules for his children to abide by and yet he himself has no concept of a lifestyle controlled by someone else. The only laws Ab can abide by are the ones he has created himself, which is ironic since he doesnt always practice what he preaches. I look at it through a formalist point of view, if Ab had grown up having to obey the law of the land and new what it was to have a higher authority then he probably would not have been so rebellious towards those who were above him in his clan or community, particularly the wealthy. Since Ab seemingly was not raised in a structured environment he could have learned these unknown skills through education. Abners wolflike independence and conviction in the rightnessShow MoreRelated William Faulkner’s Barn Burning: Abner Snopes Character Analysis1049 Words   |  5 Pages William Faulkner’s short story â€Å"Barn Burning† describes a typical relationship between wealthy people and poor people during the Civil War. The main character, Abner Snopes, sharecrops to make a living for his family. He despises wealthy people. Out of resentment for wealthy people, he burns their barns to get revenge. Abner’s character over the course of the story is unchanging in that he is cold hearted, lawless, and violent. First, Abner’s unchanging character shows his cold heartednessRead MoreWilliam Cuthbert Faulkner s Life1128 Words   |  5 PagesWilliam Cuthbert Faulkner is more than a famous Mississippi writer. He is a renowned figure, not only for Southern writers, but for writers throughout the world. Faulkner drew the scenes and characters for his novels and short stories from observations made during his childhood and adult life in his hometown, Oxford, Mississippi. During what is generally considered his period of greatest artistic achievement, a span of forty years, from 1929 to 1942, Faulkner accomplished more than most writers accomplishRead MoreBarn Burning: Abner Snopes Character Analysis Essay1088 Words   |  5 PagesWilliam Faulkners short story Barn Burning describes a typical relationship between wealthy people and poor people during the Civil War. The main character, Abner Snopes, sharecrops to make a living for his family. He despises wealthy people. Out of resentment for wealthy people, he goes and burns their barns to get revenge. Abners character over the course of the story is unchanging in that he is cold hearted, lawless, and violent.brbrFirst, Abners unchanging character shows his cold heartedness

Analysis Of Ab Snopes - 798 Words

To the reader, Ab Snopes, the antagonist and father of Sarty, is portrayed as pyromaniac with no sense of respect of compassion for others property. However, authors Fargnoli, Golay, and Hamblin illustrates him as â€Å"mean spirited father, known for burning down barn† (58). The story begins with Ab being on trial for allegedly setting a man’s barn on fire. Ab was eventually acquitted of the pending charge due to lack of evidence and was ordered out of town. The reader assumed Ab possibly made a mistake, and would learn from his lesson. Faulkner implicates Ab as an abusive audacious man who expects, his children to conceal his crimes. The reader interprets this when Ab interrogates Sarty around the fire, â€Å"You’re getting to be a man. You got to learn to stick to your blood or you ain’t going to have any blood to stick to you.† (Barn Burning 9). Ab advised Sarty of this shortly after hit struck him in the head after he assumed Sarty was going to reveal his crime. Ab speaking that line implies that he is a dictator, whom rules his family with abuse and by intimidation. The Snopes arrive at the estate of Major de Spain, where he and Sarty are African American servant advises them de Spain wasn’t at the residence. Opposed to Ab leaving the residence and returning at a later hour, he bombards into the residence heaving the servant out the way. While Ab was inside the residence he purposely ruined a hundred dollar France imported rug with his boots. De Spain advises Ab he will payShow MoreRelatedBoth sides of the Coin in William Faulkner’s short story, Barn Burning812 Words   |  3 PagesWilliam Faulkner’s short story, â€Å"Barn Burning,† the character Abner Snopes, who is Sarty’s father as well as a main character of the story, stands out the most compared to other characters because of Faulkner’s description with a sense of irony and critic. Faulkner presents multifaceted charact eristics in Abner Snopes that makes the readers think beyond the view of the narrator based on logics and circumstances in Abner’s conditions. The setting of ‘‘Barn Burning’’ is the post-Civil War South, theRead MoreSarty Snopes’ Struggle for Freedom: William Faulkners Barn Burning1777 Words   |  8 Pagescourageous, difficult decision we must review the important events in the story and the effect they have on him. Faulkner’s first introduction of his protagonist, Colonel Sartoris Snopes or Sarty, appears in the second sentence of the story. Sarty is the ten-year old son of a dirt-poor, migrant, tenant farmer, Abner Snopes. Faulkner’s opening scene brings us into a general store that also serves as a make-shift court. Abner is being sued by a neighbor, Mr. Harris, for burning down his barn. Sarty’s

Research Proposal on Hotel Cultural Management free essay sample

This paper is based on â€Å"A review of the literature on the culture in hotel management research: What is the future? † by Chen, Cheung and Law in 2012. The fundamental paper provides insights into the previous research into culture in the hotel industry, and provides directions for future research. In previous studies, there is lack of clarity among researchers on the different terms used to describe culture, and it is difficult to define the boundaries between different levels of culture. Thus, the paper has summarized and made clearer grouping of the different types of culture into six categories: Corporate Culture, Industry Culture, National Culture, Organizational Culture, Cross-culture, and Multi-culture. The paper also investigates the years that those studies were published, and the geographic area which they were focusing in. Among the six categories of culture, National Culture and Cross-culture is very important for nowadays hotel industry. Due to the trend of globalization, tourists are more eager to travel aboard. Hotel industry is an international industry, which serves guests from various countries and different cultural background. There is high chance for people from different cultural background to come together, resulting in cross-culture interaction. Culture, National Culture and Cross-culture Pettigrew, 1990 defined culture as general assumptions, values, and patterns of behavior. Cultural difference affects human behavior. Growing up in different cultural background, the values, habits, preferences hold may differ from person to person. McCleary et al. (2006) discovered that many origin related significant differences relating to satisfaction with the destination, perceived value, service quality and intent to return. The difference in origin affecting people’s behavior has developed the term â€Å"national culture†. Hofstede (1990a) defined national culture as a system of values and beliefs learned during childhood. Via national culture, one can distinguish the differences among groups. As each person grows in a different background, his own family, school, country affect the values and beliefs he learns. And hence, the behavior of people from different countries differs. Since tourists are from a wide range of country and cultural background, a hotel needs to deal with people of different behavior, and try their best to satisfy them every day. Therefore, understanding international travelers’ behavior has become a fundamental marketing strategy with the increase in importance of international travel markets. Knowing the impact of national culture on hotel operation and management can narrow the cultural gap (Holtzman et al., 1991) and increase the quality of interpersonal relationships (Sparks and Callan, 1992). Hence, learning more about the difference in the needs of different culture, it can bring better experience for tourists. Statement of Problem The aim of this study is to find out â€Å"How is Hong Kong’s hotel industry’s ability in fulfilling Eastern and Western consumer expectations? †, and to find out the result, two aspects can be focused: i) H ow does Eastern and Western tourists satisfied with the hotel services during their trip in Hong Kong? What is the difference in hotel staff’s attitude towards Eastern and Western guests? To simplify, Eastern tourists refers to the tourists from Asia and Western refers to all other tourists from out of Asia. Importance of the problem to Hong Kong According to the Hong Kong economic reports from the government, the services sector is the key driver of Hong Kong’s economic growth, contributing 93. 1% of GDP in 2011 and 88. 4% of total employment in the first three quarters of 2012 (2012 Economic Background and 2013 Prospects, 2012). Tourism industry belongs to the services sector, and is a major pillar of the economy of Hong Kong. In 2011, it contributed to 4. 5% of Hong Kong’s GDP and 6. 5% of total employment. This reveals the importance of tourism industry to the overall development of Hong Kong. Hence, it is important to have a stable development in tourism industry in order to maintain the stability of the city’s economy. Apart from this, Hong Kong has been chosen as one of the 50 greatest places in must-see destinations of a lifetime by National Geographic Traveler Magazine (Apple Daily, 1999). It shows that Hong Kong has high attractiveness to tourists. However, mentioned by Tsang, 2007, there are still weaknesses in Hong Kong’s tourism industry. The Consumer Council in Hong Kong has received 1,909 cases complaints in 2005, which has increased by nearly 140% from 810 cases in 2001. And Freemantle (2003) has also recognized that there is no one Asian country that consistently excels at service. One reason behind the inconsistency of service may because of the lacking in understanding of the needs of consumers from different background. People from different culture, they have different needs, and also different aspects of service quality. To remain Hong Kong’s competiveness and hold the place of becoming a popular tourist destination, the quality of services and products provided by Hong Kong’s tourism industry needs to achieve consumer satisfaction. Literature Review Due to the globalization of tourism industry, it brings tourists to Hong Kong from different countries. With the gathering of people from varying country of origin and cultural background, it makes national culture and cross-culture matter. In Hsieh and Tsai’s study in 2009, they mentioned when the provider and consumer of the service belong to different cultures, cross-culture service will take place (Stauss, 1999; Weiermair, 2000). Situations like these often tend to generate cultural shock (Cushner and Beislin, 1997; Weiermair, 2000). Therefore, cultural elements have great impact upon consumers’ perceptions and responses. In 2007, Tsang’s study for the service culture in Hong Kong’s tourism industry, the difference in service style of Chinese (Eastern) and Western have been pointed out. Chinese service providers adopt a â€Å"take it or leave it† attitude and fail to understand and be attentive to customers’ needs; while Western service based on creating an interaction experience for both the customer and service provider, achieving mutual satisfaction. Hong Kong is a city of China, though she has been a colonial city of Britain, the service style in Hong Kong also has a tendency towards the Eastern style. To remain the competiveness of Hong Kong, it is significant to transform the style and pay more attention to customers’ needs. The study also locates the obviousness in understanding the impact of culture on the tourism industry. Winsted (1997) investigation on the difference of how consumers in the United States and Japan evaluated service encounters has been used as an example. The Japanese and American gave different ratings on restaurant employee behaviors. Themes of friendliness, being personal, authenticity, and promptness seem prevalent in the dimensions and behaviors that emerged fromthe U. S. factor analysis. Hofstede (1990b) divided the values of national culture into five dimensions: â€Å"individualism†, â€Å"power distance†, â€Å"uncertainty avoidance†, â€Å"masculinity†, and â€Å"long-term orientation†. According to the study of Hofstede (1983) and Hosfstede and Bond (1988), comparison has been raised upon Eastern countries (Taiwan, Japan) and Western countries (America, British), to investigate the difference in their perceptions on service quality. Based on the studies, it shows that consumers from Eastern countries has higher power distance (people believe in the unequal distribution of power), so that they pay more attention upon the tangibles, reliability, reaction and empathy of service quality. Besides, Asian tourists have high uncertainty avoidance and it is because of their culture – people tend to be anxious about their career or future and they are afraid of failure. They tend to be easily worried, nervous and irritable; they are not adventurous. On the other hand, Westerns are short-term orientation; they regard time as a kind of finite resource. Therefore they are more impatient and demand for efficiency. These studies provide basic knowledge on the perceptions and behavior of the difference in Eastern and Western tourists. In the study by Ozdipciner, Li and Uysal in 2012, they suggested cultural difference affects tourists’ motivation, satisfaction, information search, vacation preferences, travel characteristics, etc. (Pizam and Sussmann, 1995; Kozak, 2002; Litvin et al. , 2004; Yuksel et al. , 2004; Reisinger and Mavondo, 2006). In previous studies, there are plenty of information to illustrate the difference in the Eastern and Western style of service and customers’ perception. However, these are only basic introduction to answer the question how is tourists’ perceptions towards Hong Kong’s hotel industry. In Chen, Cheung and Law’s review of past literature on culture in hotel management, the focusing geographic areas of previous research have been analyzed. Based on the analysis, most of the previous studies are focusing in Western countries which 28% focusing in America and 19% in Europe. Only 2% of previous studies are focusing in the hotel industry of Hong Kong. Therefore, it is proposed to conduct a survey to deeper understand how the Hong Kong hotel industry satisfies the tourists with different cultural background. In the aspect of hotel staff, Hosfstede (1980. 2004) conducted a study examining the behavior and attitudes of an international computer company in over 60 countries and fount that national culture appeared to explain more of the differences in work-related attributes and values than did position within the organization, profession, age, or gender (Tsang, 2007). From the study, the culture impacts on the staff’s working attitude can be understood – for both attitude towards their work and attitude towards customers from other nations. Thus, it is also significant to look in to the difference in attitude of hotel staff towards their guests. Research Method It is proposed to conduct the survey using both quantitative and qualitative study. There are two groups of research subject: one is inbound tourists to Hong Kong, and they would be further divided into tourists from Eastern countries (Asian, especially China) and Western countries; another one is the hotel staff in Hong Kong. After interviewing tourists and hotel staff, analysis would be done to discover their opinion, and then further look into the relationship between tourists’ satisfaction and hotel staff’s attitude towards different group of tourists. Quantitative study would be set up by using a questionnaire to interview tourists’ satisfaction with their in-house experience staying in Hong Kong’s hotel. Another set of questionnaire would be set up to ask for the difference in perception as well as the attitude towards tourist from the East and from the West. Quantitative methods offer advantages for cross-sectional organization research and large-scale studies (Cooke Rousseau, 1988). Using quantitative research methods can interview large group of inbound tourists and hotel staff. On the other hand, qualitative study would also be used to interview random tourists and hotel staff. The interview would be done in group based, and interviewees can talk about their experience in hotels (tourists) and their normal working attitude towards different groups of tourists (hotel staff). Using qualitative research can help in understanding such manifest level elements of culture as artifacts and stories. During the interview, observation is also encouraged as this can observe how respondents behave differently for different interview questions in a way they perceive to be socially desirable. Limitations There are limitations for finding the difference in customers’ satisfaction and individuals’ value. For tourists, as suggested by previous research, the difference in cultural background results in different needs of consumer. Due to the cultural difference, it was proposed that customer evaluations of the service encounter would be significantly lower for Asian leisure travelers than their Western counterparts (Tsang, 2007). Thus the needs would vary from person to person and it is hard to interpret and quantify vales (Rokeach, 1973). For hotel staff, it is also difficult to interpret and quantify their value. Apart from the national culture would affect staff perception and attitude to different guests, the corporate, organizational or occupational culture would also make each value different. Furthermore, observation suggested in the research methods may also lead to fraud in assessment. As observers have their own values, the observation may subjectively influenced by the observers’ values, resulting a misunderstanding in assessment (Rokeach, 1973). Conclusion Based on previous research on the culture of hotel management, the trend of globalization in the tourism industry has been described. With more tourists from different countries and cultural background come together, the importance in knowing the needs of guests from different culture has become an issue. As hotel industry is a multi-culture industry, hotel staff needs to satisfy guests’ needs and expectations every day. To maintain the competiveness of Hong Kong’s hotel industry, we need to know how is Hong Kong’s hotel industry’s ability in fulfilling Eastern and Western consumer expectations currently, and then develop better service quality in the industry, and to retain tourists coming back to Hong Kong.