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August
2016

Gracie K’s
Comparative
Management Analysis
NATASHA FULTON
Table of Contents
1.0 Introduction ...................................................................................................................................... 1
1.2 Purpose and Scope ...................................................................................................................... 1
2.0 Country Overview – Algeria and Peru ............................................................................................. 1
2.1 Political and Legal Environments ................................................................................................. 1
2.2 Economy and Trade ..................................................................................................................... 2
2.3 Infrastructure and geography ....................................................................................................... 3
2.4 Tourism......................................................................................................................................... 5
2.5 Culture .......................................................................................................................................... 6
3.0 Comparative Management Analysis ................................................................................................ 8
3.1 Entry Strategies ............................................................................................................................ 8
3.2 Organisational Structures............................................................................................................. 9
3.3 Management Decision and Control.............................................................................................. 9
3.4 Leadership Strategies ................................................................................................................ 10
3.5 Motivation Opportunities ............................................................................................................ 11
4.0 Recommendations and Conclusions ............................................................................................. 11
References ........................................................................................................................................... 13

Table 1 Infrastructure comparisons ....................................................................................................... 4

1.0 Introduction

1.2 Purpose and Scope

Gracie K’s is a 5 star hotel chain started in Australia. Gracie K’s is now in 15 different

countries and is looking to expand to either Algeria or Peru. Gracie K’s has hotels in

many unique and diverse areas of the world and wants to add another hotel in a unique

place in the world to provide special holidays for everyone. Therefore the purpose of

this report is to compare Algeria and Peru so that Gracie K’s can choose the country

that will best achieve their strategic business plans. This report will briefly look at both

countries political and legal environments, economy and trade, infrastructure and

geography, tourism and culture. Furthermore this report will discuss the strategies

required to enter and be successful in either countries tourism market. Finally this report

will conclude with recommendations to which country Gracie K’s should expand to.

2.0 Country Overview – Algeria and Peru

2.1 Political and Legal Environments

Algeria is a bicameral presidential republic. The president is Abdelaziz Bouteflika and

the prime minister is Abdelmalek Sellal (The World Factbook, 2016). The Algerian

political environment is rife with fraud and corruption with Algeria ranking 36/100 in the

corruption perception index (Transparency International, 2016). Algeria uses both civil

law and Islamic law, and there are no business courts to deal with disputes. When

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expanding to Algeria the 49/51 Investment law must be taken into account. This law

requires that any foreign business must have a majority Algerian partner (U.S.

Embassy, 2015). Starting a business in Algeria can be time consuming and fraught with

bureaucratic problems (U.S. Embassy, 2015) Algeria has a large terrorist threat, with

westerners and their places of work often being targeted (Department of Foreign Affairs

and Trade, 2016).

Peru is a constitutional presidential republic (Group 15, 2016). On the 28th of July, 2016

Pedro Pablo Kuczynski was elected to president (The World Factbook, 2016).

Corruption and bribery are high with Peru also scoring 36/100 in the corruption

perception index (Transparency International, 2016). Peru uses a civil law system (The

World Factbook, 2016) and has a court designed to hear commercial cases (World

Bank Group, 2015). While there are some laws regarding foreign business in Peru,

none pertain specifically to the hotel industry. Peru’s government encourage foreign

businesses, granting foreign investors the same permits and regulations as local

investors (U.S. Embassy, 2015). Since 2010 relations between Australia and Peru have

rapidly expanded with senior levels of both country’s governments working closely

together, mostly in the areas of mining, energy and tourism (Department of Foreign

Affairs and Trade, 2016).

2.2 Economy and Trade

Algeria is a developing country with an upper middle income level (Michigan State

University, 2016). Australia and Algeria have no trade or economic agreements. The

Algerian government have no outlook to increase foreign trade and continue to restrict

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imports by foreigners (The World Factbook, 2016). Unemployment is at 11%, Gross

Domestic Product growth rate is 3.7% and inflation is at 4.8% (Michigan State

University, 2016).

Peru is also a developing country with an upper middle income level and is trending

towards free market reforms (Group 15, 2016). Peru has a very business friendly

outlook for foreign investors and this is expected to continue for the foreseeable future

(Department of Foreign Affairs and Trade, 2016). Making business easier for

Australians in Peru is the Trans- Pacific Strategic Economic Partnership agreement

(TPP). This agreement has been designed to advance economic integration in Peru,

Australia and 10 other countries (Department of Foreign Affairs and Trade, 2016).

Unemployment is at 4.2% (Group 15, 2016), GDP growth rate is 2.35% and inflation is

at 3.2% (Michigan State University, 2016).

2.3 Infrastructure and geography

Algeria is in North Africa and borders Libya, Mali, Mauritania, Morocco, Niger, Tunisia

and the Mediterranean Sea (Infoplease, 2016). Algeria has a land size of 919, 590

square kilometers with 85% of this being covered by the Sahara desert and is mostly

inhabitable (Infoplease, 2016). The majority of the people live along the coastline called

the Tell region which consists of mountains, plains and plateaus (Infoplease, 2016). The

capital of Algeria is Algiers and the weather consists of wet winters, hot dry summers

with high risks of sandstorms (The World Factbook, 2016).

Peru is in Western South America and shares borders with Bolivia, Brazil, Chile,

Columbia, Ecuador and the Southern Pacific Ocean (Infoplease, 2016). Peru has a land

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size of 494, 208 square miles. Peru has an arid coastline to the west, mountains

plateaus and valleys in the middle and think jungle that leads to the Amazon on the

eastern side of the country (Infoplease, 2016). The capital city is Lima and the weather

consists of tropical in the east, while the west is dry (The World Factbook, 2016).

Below is a table comparing Australia’s, Algeria’s and Peru’s infrastructure (The World

Factbook, 2016). For comparison the population of each country has been added to the

bottom of the table. One thing to note is that while both Algeria and Peru have over

100,000kms of highways most of these are in very poor condition (Department of

Foreign Affairs and Trade, 2016).

Infrastructure Item Australia Algeria Peru

Phone Lines 10.47 million 3.2 million 3.42 million
Internet Lines 15.81 million 4.7 million 9.158 million
Kilometers of
823,217 kms 113,655 kms 140,672 kms
Highway
Kilometers of
38,445 kms 3973 kms 1907 kms
Railway
Airports 480 157 191
Computers per 100
82.3/ 100 1.1/ 100 10/ 100
people
Percentage of the
Population with 100% 99.3% 85.7%
Access to Electricity
Percentage of the
Population with
100% 84% 87%
Access to Clean
Water
Population 22,751,014 39,542,166 30,444,999
Table 1 Infrastructure comparisons

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2.4 Tourism

The Australian government advises against tourism and business in Algeria due to high

threats of terrorism against westerners (Department of Foreign Affairs and Trade,

2016). It is advised that all foreigners remain anywhere between 100 and 450 kms from

all borders of Algeria. Travel by road in southern Algeria should be avoided and police

must clear travel outside cities. There is no Australian embassy in Algeria (Department

of Foreign Affairs and Trade, 2016). Visas are needed for travelers and workers to enter

Algeria, but they are difficult to get as visitors must be invited by an Algerian, this limits

potential tourist customers (Lonely Planet, 2016). Tourism can be difficult during

Ramadan and most businesses are closed every Friday and Saturday throughout the

year for the Muslim Sabbath (Communicaid, 2016). Most sights of Algeria are in their

cities, such as Casbah, which offer amazing scenes of ancient architecture (Lonely

Planet, 2016). The average hotel room starts at $45 per night for a budget hotel and

goes up to $300 per night for a top end hotel (Lonely Planet, 2016).

The Australian government has no warnings against Peru except to remain vigilant of

your belongings and person (Department of Foreign Affairs and Trade, 2016). It is

however advised to stay at least 20kms away from the Columbian border because of

guerilla forces and drug trafficking. Also the border with Ecuador should only be crossed

at official points (Department of Foreign Affairs and Trade, 2016). Crime is high in Peru

with drug trafficking and violent and petty thefts being of particular concern (Department

of Foreign Affairs and Trade, 2016). To work in Peru requires a visa, however to visit

Peru for a maximum of 183 days as a tourist does not require any visa making it easy

for tourists to visit Peru (Lonely Planet, 2016). Peru has some stunning landscapes and

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sights to see including the Amazon Rainforest, the Andes Mountains, the Inca Trail,

which attracts over 75,000 people per year and Machu Picchu, one of the 7 wonders of

the world (Lonely Planet, 2016). The average hotel room starts at $25-85 per night for a

budget hotel all the way to $300 per night per room for a top end hotel (Lonely Planet,

2016).

2.5 Culture

Algerian culture is largely based on religious beliefs with 99% of Algerians being Muslim

(The World Factbook, 2016). Islam plays a large part in Algerians lives and sacred

holidays and prayer times must be considered when organizing meetings and other

business activities (Communicaid, 2016). Special consideration for a hotel business

needs to be looked at as Ramadan requires Algerians to fast until sunset for the

duration of the holiday, therefore food, cigarettes, beverages and entertainment should

not be served during sunlight hours during the holy month of Ramadan (Communicaid,

2016). The official language of Algeria is Arabic although French is also used to conduct

business (Communicaid, 2016).

Algeria is a collectivist society, placing much importance on family (Hofstede, 2016).

Trust must be gained before Algerians will do business with foreigners. Algeria is a

hierarchical culture and is also very restrained, most likely due to their strong religious

beliefs that guide every aspect of their lives (Communicaid, 2016).

Best known for the Inca Empire, Peruvian culture is very unique and is expressed

through dance, clothing, literature, music and festivals. The official language is Spanish

and all business is conducted in the official language (Communicaid, 2016). 81% of

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Peruvians are Roman Catholic and this plays a large part in their culture (The World

Factbook, 2016). Peruvians are very welcoming of foreigners and are extremely

friendly. Peruvians are very relaxed and often operate on their own time, therefore

businesses must ensure patience and a preparedness to wait (Communicaid, 2016).

Peru has a very low score on individualism, meaning they are a collectivist culture

putting less importance on individual preferences (Group 15, 2016). Personal

relationships are required to conduct successful business in Peru (Group 15, 2016),

furthermore Peru is a high hierarchical culture and decisions should be made with high

level managers for them to be considered (Communicaid, 2016).

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3.0 Comparative Management Analysis

3.1 Entry Strategies

To enter the Algerian market in any business, it would be imperative that a multi-

domestic join venture be the entry strategy used (Peng, 2013). A joint- venture is

necessary to abide by Algeria’s 49/51 law. It would be wise to find a joint- venture

partner fluent in English or hire a translator to overcome the language barrier and to

help understand Islam customs. Building a relationship before entering a joint venture

with any partner should be done first (U.S. Embassy, 2015). Gracie K’s needs to

consider the 49/51 law as this gives the Algerian partner majority ownership of the hotel

in Algeria (U.S. Embassy, 2015). A multi- domestic approach allows for Gracie K’s to

cater the hotel towards Algeria’s conservative culture and to ensure the hotel follows

any religious holidays and customs (Hubbard & Beamish, 2015).

Peru has a thriving tourism scene that can be quickly over-run by too many competitors.

Therefore a multi- domestic acquisition approach should be used. Acquisition would

allow Gracie K’s to retain ownership of the hotel in Peru (Peng, 2013). Market research

conducted on the 11th of August 2016 (Mondinion, 2016), showed that there are many

hotels available for sale in Peru, allowing for fast acquisition of not just the hotel, but

staff and the current customer base. Gracie K’s would need to consider issues that may

arise from acquisition such as staff not accepting new management and the need for re-

branding to a Gracie K’s hotel (Peng, 2013). A multi- domestic approach allows Gracie

K’s to market the hotel to the tourism strengths that exist in Peru (Lonely Planet, 2016).

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3.2 Organisational Structures

Algeria should follow a centralized approach with a global area division structure.

Algeria scored very high on the power distance of Hofstede’s cultural dimensions,

meaning Algeria is a very hierarchical culture (Hofstede, 2016). This can be seen in

their disapproval of not using people’s titles in business (Communicaid, 2016). For this

reason a centralized approach where top management makes decisions, together with

a global area division structure will be strategically best for Gracie K’s (Vance & Paik,

2015). This will keep the hierarchical systems Algerians prefer while allowing hotel

managers in Algeria to specialize the hotel to meet Algerian customs, culture and

tourism attractions (Vance & Paik, 2015).

Peru has a slightly high power distance with a very low Individualism score, therefore

they are a very collectivist culture. Hofstede (2016) noted that rather than having

autonomy in their job, Peruvians prefer conformity. Therefore a centralized global

product division structure is recommended as this structure removes a lot of autonomy

(Vance & Paik, 2015).

3.3 Management Decision and Control

Algeria is a very conservative and hierarchical country therefor a centralized decision

making approach will work best. All decisions for the Algerian hotel would come from

the very top at the Australian based headquarters. Managers should never consult

those below them as this can cause problems (Commisceo Global, 2016). Algeria will

need to focus on an internal control approach as Algerians are so conservative that

change is seen as a threat and therefor often try to avoid it (Commisceo Global, 2016).

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Algerians are also very collectivist and any decisions made need to be seen as for the

good of the group. Control also needs to be direct, this is to ensure that business

relationships are built and maintained (Commisceo Global, 2016).

Peru is a very hierarchical and formal country where a centralized decision making

approach would also work best. However decisions would come from a top regional

manager, living in Peru, who has the ability to build and act on the interpersonal

paternalistic relationships that Peruvians thrive on in business (Commisceo Global,

2016). Peruvians are ready for change however when implemented decisions need to

be proven to work as failure can cause detrimental confidence problems (Commisceo

Global, 2016). Therefore in Peru an external control approach can be taken if decisions

are made sensibly. Direct control will also be needed to build not just business but

personal relationships with Peruvian staff as this is of utmost importance (Commisceo

Global, 2016).

3.4 Leadership Strategies

Algeria and Peru use both Authoritarian and paternalistic approaches to leadership. In

both countries sub-ordinates are told what to do and how to do it, and because of their

hierarchical cultures these sub-ordinates would never question leadership decisions or

directives (Commisceo Global, 2016). It is also deemed inappropriate for managers in

these countries to liaise with sub-ordinates in decision making. Orders and decisions

are always made by top management and followed without question by sub-ordinates

(Commisceo Global, 2016). It is also essential when leading sub-ordinates to never yell

at them, talk down or do anything else that would make an employee loose face. Both

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countries paternalistic approach comes from their cultures importance placed on family

and relationships, because of this, managers in these countries often show concern for

employee’s families, health and other personal concerns (Commisceo Global, 2016)

3.5 Motivation Opportunities

Algeria and Peru are both highly collectivist cultures and therefore group based rewards

and incentives will work best (Sweeney & McFarlin, 2015). Both countries place high

importance on family and relationships (Commisceo Global, 2016), as a result

motivators that allow employees to have a great work- life balance with a focus on

family would be extremely successful (Sweeney & McFarlin, 2015). Both countries have

high unemployment rates, poor safety and low wages (The World Factbook, 2016), thus

motivators should focus on more hygiene factors such as competitive salaries, job

security, safety training and safe work environments and conditions (Sweeney &

McFarlin, 2015).

4.0 Recommendations and Conclusions

While both countries offer unique hotel opportunities Algeria’s lack of support for foreign

business plus their 49/51 law and invitation to visit requirements make the country very

unfriendly to both foreign business and tourists. Algeria’s highly religious culture makes

doing business all year round without interruption difficult. Both countries have danger

however Algeria’s terrorism problems are often aimed at westerners. In contrast Peru’s

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government and people are more accepting of foreign investment and tourism. Peru

also allows Gracie K’s to expand without the need to acquire a partner. For these

reasons it is recommended that Gracie K’s expands to Peru. For this to be implemented

successfully the Peruvian collectivist culture must always be considered and adhered to

and relationships must be built and maintained.

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References
Commisceo Global. (2016). International Management Guides Algeria. Retrieved August 13, 2016,
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management-guide
Commisceo Global. (2016). International Management Guides Peru. Retrieved August 13, 2016,
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Communicaid. (2016). Algeria factfile. Retrieved August 09, 2016, from Communicaid:
https://www.communicaid.com/country/algeria/
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