Porters Five Forces Analysis Marketing Essay

Porters quintet Forces Analysis Marketing EssayIntroductionThe main purpose of applying the v forces analysis is to identify the key factors in the industrial environment that bow the organizations capabilities to position itself in nightspot to merit competitive advantage. It is a simulation for attention analysis and caper strategy development formed by Michael Porter.An industry is a group of firms that market products which ar close varys for each other (e.g. the car industry, the hotel industry).Some industries ar to a great extent profitable than others, the answer lies in understanding the dynamics of competitive structure in an industry. Porters Five Forces puzzle is one of the most influential analytical models for assessing the nature of emulation in an industry.Porter explains that there be five forces that determine industry attractor and long-run industry profitability. These five competitive forces are the menace of mod competitors entry, the affright of substitutes, the bargaining power of debaseers, the bargaining power of suppliers, and the degree of rival in the midst of existing competitors.Porters five forces diagram.http//www.b2binternational.com/china/ catchs/stories/sections/porters_five_forces.gifSource www.value ground management.netIntroduction to hotel industryA hotel is an institution that provides a short-term paid residence. In the past, hotels were bonny a downhearted room with a bed, cupboard, and a table, but flat it has totally changed to something else. Nowadays hotels are luxurious residences that include different types of facilities. some of the hotels now include spas, swimming pools, fitness centers, conferences rooms and international restaurants. dismantle the rooms are now bigger and include many alleviate facilities.Malaysian Association of Hotels (MAH)was established in 1974. It is now being formally recognized as a National Hotel Association. Now it sets the regulations and minimum unobje ctionable levels for being a legal verified hotel in Malaysia. It has 2,184 registered members and 17 more hotels in the next 3 years.Table Hotels and rooms supply 2010/2011 negotiate power of suppliersThe term suppliers comprises all sources for inputs that are needed in order to provide goods or services. The two key suppliers to the Hotel industry are labors and real(a) body politicOver all the suppliers in this market are delimit as property owners, developers and real estate companies, interior design and furnishings companies, architects, management and culture service providers, marketing companies, industry consultants and ICT manufacturers. houseRating 1-10Remarks come of suppliers6 (medium) Considerable no. of local and Chinese contractors Small spell of quality training providers and skilled employees.Availability of substitute6(medium) alternatives for property (real estate agents), designers, and employees are available.Switching appeal category2 (low)-substitute for hotel are few..Suppliers threat of fore consolidation2 (low) Suppliers are highly unlikely to forward integrate into the hotel creaseIndustrys treat receding(prenominal)s integration5 (high)-hotels could backward integrate to own real estate federation. They could have their own training wing. component part to quality5 (high)-Property development and real estate companies loan to the quality so does skilled labor and quality trainingContribution to hail2 (low)-Most suppliers are much weenyer companies compared to hotel companies.-Hence hotel companies have a much higher bargaining power. suppliers contribution to appeal is lowOverall, the identification number of suppliers for the Hotel industry is quite large and each supplier is actually small in size compared to the leading players in the industry. These few powerful players are indispensable to the suppliers. Substitutability of the suppliers is also quite feasible and inexpensive. Switching amidst real estate agents is not goingto affect a particular Hotel company meaning(a)ly. However in name of quality, training centers for employees and ICT manufacturers who provide IT systems thatfor property management are relatively more difficult to replace. Therefore in wrong of substitute suppliers industry drawing card is moderately high.Unlike the supplier is threat offorward integration, Industry is threat of backwardintegration is pretty high since large hotel chain like ITC or IHCLwould have no qualms expanding into the real estatebusiness or developing employee training facilities in-house. alsothe industry is contribution to both constitute and quality isrelatively high. Overall bargaining power of suppliers is low and industry is pleasingness in terms of supplier bargaining power is high (4). talk terms POWER OF BUYERSThe bargaining power of buyers determines how much customers can impose cart on margins and volumes.The end-users of the high-end hotel industry are-Leisure trave lerBusiness travelerCustomers who require space for conferences or other eventsCategoryRating 1-10Remarks-Number of Buyers7(high)-Buyers are numerous and small in size.- Losing one customer cannot going to run a difference. Their bargaining power is low-Availability of substitutes(medium)-Multiple substitutes for a given hotel or note is available-Informal accommodation for friends and family is available alternative-Corporate guest houses for the business traveler-Switching cost2(low)-Switching costs arenegligible Buyers are price sensitiveexcept in the-Buyers threat of backward integration5(high) Customers are will notconstruct a hotel or buy a place of residence for each place they visit.-Contribution to quality2(low) extra facilities suchas spas, gyms etc. are usedmy hotels to improve thequality of customers stay-contribution to cost5(high) Brand image is very principal(prenominal) in this industry and leads to extra cost, Additional amenities,training of staff, positioningr ent (like close to airport)etc.-Buyers profitability2(low) minor buyers profitability- In the mid-segment, there are numerous buyers, of very small profitability In the premium segment, buyers are very affluent, and they have greater bargaining power comparedto the mid-segmentIndustrys threat of forward integration.4(medium)-low chances or forward integrationThis industry has many customers who are relatively very small in size. Loss of a genius customer has little impact on a hotel company and this drives down the buyers bargaining power. Similarly buyers threat of backward integration is almost impossible and so the industry is under threat of forward integration. However the industry does have several substitutes such as camping and recreational vehicles for tourists, corporate guesthouses for business travelers and other informal federal agency of accommodation with friends and family. Switching cost for all these options is very low, except for the RV. isolated from the pro vision of accommodation, hotels also provide additional facilities and services such as restaurants, gyms, spas, conference halls, ball rooms, lounges etc. Therefore their contribution to quality as well as cost for the buyer is very high.Barriers of entryCategoryRating 1-10RemarksEconomies of scale5(high)High economies of scale- Very classical to operatea chain of hotels in multiplelocations, especially for the premium segment. This reduces thedependence on tourismtrends at any given locationProduct differentiation4(medium)Highly differentiated- Brand name and valuesare very important in attracting and retaining customers- punctuate identity4(medium)Brand is very important.-switching cost2(low)-low switching cost-capital requirement4(medium)-capital intensive.-staff, dcor, infrastructure e.t.c is very expensive.-Access to technology3(moderate)-ICT is very important for property management.-Access to raw material4(medium)-Labor, land and other essentials are clear to obtain.-gove rnment justification3(moderate)-The tourism industry receives government.-exit barriers2(low)-High exit barriers.Specialized assets for the industry.Brand names are very important in the hotel industry. Companies use their strong brand names to attract new customers and retain old ones. Besides, economies of scale are also a huge factor in this industry. Profitability of hotel bondage is drastically higher than individual operations. A new entrant cannot contest with established players in terms of quality, price and even services. If they cannot establish significant economies of scale.Being a capital intensive industry with a large get along of it tied down in fixed costs, makes entry more difficult. Similarly high exit barriers due to specializedassets make the industry less attractive.The hospitality industry is strongly influenced by travel and tourism trends. Government protection for the tourism industry is very high and this in turn rubs murder on the hotel industry mak ing it thereby making the industry attractive in general. combative power of rivalry playersThis aspect describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results or leads to pressure on price margins and on profitability for every single company in the industry. The following table shows the analysis of the rivalry between hotels.factorsRatings (5)Remarks.No. of competitions4 (high)Small number of large operatorsIndustry proceeds3 (medium)Annual growth rate of 15%Fixed cost1 (low)Highly capital intensivedifferentiations4 (high)Strong brand name commands a very high price premium.Switching cost2 (moderate)Low cost switching to similar brandsOpenness to terms of sale4 (high)Price, taxes etc. are knownExcess depicted object2 (moderate)Only 70% rooms occupiedStrategic put on the line2 (moderate)Although large hotel companies have diversified they still have a majority stake in the hotel industry.Summary Porter Five Forces elementCurrentFutureRating(5)Key principleRatingKey RationaleThreat of New Entrants4reasonable5sensibleCompetitive Rivalry4reasonable5sensibleThreat of Substitute Products3average4reasonableSupplier coitus purchasing Power5sensible4reasonableBuyer Relative Buying Power4 reasonable4reasonable decisionPorter five forces analysis was used effectively to determine the hotel industries in Malaysia based on treat of new entrants, competitive rivalry, and treat of substitute products, suppliers-relative buying power, and buyer-relative buying power. Hotel is a very flourishing industry in Malaysia with not so many substitutes so the treat of substitute products is very low. Rivalry between hotels is not very high because rivalry is based on classification (5-star hotels compete against other 5-star hotels). Finally in the forthcoming relative buying powers will decrease because there will be many new entrants.