1. Barrier to Entry
According to Michael Porter (1980), threat of new
entrants are determined by barriers to entry which include
economies of scale which include size and scope of
operations required to achieve viable cost structure;
product differentiation, switching costs and customer
loyalty created by quality, reliability and brand image;
capital requirements which involve size of cash and
financial resources required to establish and run a
business; cost disadvantages independent of scale as
opposed to advantages held by existing competitors such
as location, patents and experience; access to distribution
channels which include means to reach customers;
government policy ...view middle of the document...
If the products and services purchased by buyers lack
differentiation or switching costs, they can easily find
acceptable alternative sources of supply. Buyers can pose
a threat of backward integration as large group of buyers
can acquire the supply source.
Certain buyer groups exercise bargaining power as a
result of their concentration or bulk purchases of hotel
rooms. These groups would include tour operators,
domestic or international airlines and large customers,
such as convention organizers.
The bargaining power of buyers varies significantly
within the industry, depending upon a hotel’s target buyer
group, but this factor becomes acute in a situation of
oversupply or where buyers of hotel rooms are
Threats of Substitute Products
There is no major threat of substitute products specific to
a hotel’s product and service. A hotel may not appear to
be particularly vulnerable to intense rivalry because of the
fragmented nature of the competition in its strategic group
and the potential growth rate of its target market.
Bargaining Power of Suppliers
However, the only supplier which might exercise power
over any company would be labor, which is in great
demand in the Hotel Industry all over the world. In
relation to other industries, hotels are not significantly
subject to the bargaining power of their suppliers and
suffer low levels of indirect pressure on their
competitiveness from this source.
Jockeying for position among current competitors
The rivalry for market share becomes intense when
product differentiation and switching costs are low.
Rivalry becomes more intense in fixed costs such as the
Hotel Industry in most metropolitan cities. There are
strong pressures to sell capacity by price-cutting except
weekends and holiday seasons. Capacity augmentation
exists as large additions to capacity can disrupt the
demand and supply balance and leads to intense rivalry.
Despite low or negative profitability and diversity,
companies and industries may have different origins,
goals and strategies and an overlap in target customers.
2. PEST for global and local trends
Government charges huge amount of tax and has a huge impact
with the political changes that occur. The hotel industry is
getting huge incentives and the state governments are supporting
the development of the hotels and their growth.
(The politics in the USA is very stable. Several policy initiatives
will positively contribute to the continued expansion of
America’s travel and tourism exports. First, any extension of the
visa-waiver program to additional countries will add to arrivals.
Second, a number of bilateral initiatives between China and the
“These include interest rates, taxation changes, economic
growth, inﬂation and exchange rates.” The economy will grow
and inﬂation rate will not be hight enough to prevent people
(The US has many foreign...