Michael Porter's Five Forces
I. COMPETITIVE STRATEGY This article focuses on strategic analysis and strategic development of today’s dynamic, competitive business environment for companies. Industry analysis: Michael Porter introduced a model known as Porter’s five forces for analyzing the structure of an industry. His model is recognized as the foundation for a thorough competitive analysis.
1. Threat of new entry A firm’s new entrance to a market will affect the existing firms in the market. It leads to lose of market share, lose control with customers and suppliers so on. There are nine major barriers for a new firm’s entry. They are:
a) Economies of scale: - if economies of scale come into play in the industry,
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e) Capital requirements: - there must be a huge capital is required to a new firm whether for manufacturing equipment, research and development or advertising expenditure. This all will leads to hold back new entrants to the market.
2. Bargaining power of suppliers Powerful supplier group possess one or more several of the following characteristics.
a) Supplier concentration: - if the industry is dominated by few suppliers, this provides little choice for the buyer.
b) Unique product: - when there are few feasible substitutes for the materials a firm is trying to procure, the supplier gains more power in the relationship.
c) Serves multiple industries: - if a supplier’s product can be used by several buyers for several purposes then the supplier can be demanding about whom they do business with.
d) Viable forward integration threat: - if suppliers have the ability to enter themselves then it will prevent the buyer from getting too greedy.
3. Bargaining power of
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A hotel will be subject to powerful buyers only if its marketing strategy concentrates on attracting tour groups, provided no oversupply for the hotel’s target market develops. Hence substitute products are not a major threat to hotel industry as a whole.
3) Bargaining Power of Suppliers In most commonly the only supplier which might exercise power over any company would be labor and experienced trained personnel, which is in great demand in the Hotel industry all over the world. 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 in relation to other industries. In order to sustain in the market hotels will have to maintain permanent cost advantage over potential competitors in higher strategic groups.
4) Bargaining Power of
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