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Competitive Analysis of the Hotel Industry - Paper Example

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University of California, Santa Barbara
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Question #1: Competitive Analysis of the Hotel Industry Using Porters Six Forces

Completing a Porters Analysis to the hotel industry provides an effective way of understanding the competitive forces in the industry. These forces include threat of new entrants, threats of substitute products, bargaining power of suppliers, bargaining power of buyers, rivalry among existing competitors, and complementary products CITATION Che13 \l 1033 (Cheng, 2013). New entrants into the industry signal the introduction of new competitors. The ease of entry into the industry is influenced by a number of factors, such economies of scale, the degree of product differentiation, capital requirements, legal requirements and regulations, and existing brand loyalty. There is low competitiveness intensity in the hotel industry with regard to the threat of new entrants. This is because of the obstacles in the industry that limit new entry, such as economies of scale, high capital requirements, and economies of experience. Existing or potential substitute products and services pose threats to businesses in the industry because they could be of better quality, relatively cheaper, and provide better value to the customer. The hotel industry is not threatened by any specific substitute product. However, during recession, international travel could be replaced by domestic travel and some cheaper destinations may replace expensive ones CITATION Gor15 \l 1033 (Goral, 2015).

The bargaining power of suppliers is high when the supplier enjoys monopoly, the switching cost from one supplier to another is high, there is input diversification, and when the supplier sales volume is high. The hotel industry faces low level of indirect pressure on its competitiveness from the bargaining power of suppliers CITATION Che13 \l 1033 (Cheng, 2013). This is because hotels engage in business with many suppliers, both local and international. The bargaining power of buyers in an industry is high when the customers are concentrated than players in the industry, thereby being able to force down prices and reduce industry margin. When the products lack differentiation and there are no switching costs, buyers may switch to alternative companies in the industry. The level of competitiveness intensity in the hotel industry with regard to the bargaining power of buyers is medium. This is because while the limited nature of hotel customers makes it difficult for one customer to purchase several rooms, it is not possible to avoid corporate guests who demand special offers for large-scale booking. Rivalry among existing competitors is high when competitors are strong, fixed costs are high, there are barriers to exit, and differentiation is insufficient. There is high competitiveness intensity in the hotel industry. This is because the existing strategic and economic barriers to exit, services cannot be sufficiently differentiates, and markets are highly shared CITATION Gor15 \l 1033 (Goral, 2015). Complementary products can be of benefit of harmful to businesses in an industry depending on the prevailing situation. Complementary products to those in the hotel industry can bring about low, medium, or high competitiveness intensity. For example, when the business of a company that provides complementary products operates at an average level, the intensity of competitiveness of the business in the hotel industry will be moderate.

Question #2: Five trends in the external environment scanning process that will affect most businesses

The trends in the external environmental planning process that will affect most businesses can be classified into political, economic, social, technological, and environmental trends. There are several political trends that affect businesses. For example, effort by the United Nations agencies, such as International Monetary Fund, to improve infrastructure and mechanisms of making payments provides opportunities for increased trade and investment and an increase in competition between and within markets CITATION Hil09 \l 1033 (Hill, 2009). With regard to economic trends, global economic growth has continued to affect international business. The aggregate sales made by businesses are highly influenced by the global demand. Changes in inflation and interest rates within a nation will also impact on businesses. Social trends do not only affect the buying behavior of consumers, but also the composition of workforce in business organizations. Values and attitudes of buyers keep changing over time, which impacts on the buying patter. For example, consumers have continued to become health conscious. Changes in population structures have also continued to affect demand patterns CITATION Dra05 \l 1033 (Dransfield, 2005).

Today, there is no any business that is not affected by technological trends in the external environment. Technological advancements have continued to provide opportunities for businesses to efficiently and effectively carry out various operations and coordinate with business partners for mutual benefit CITATION Hil09 \l 1033 (Hill, 2009). For example, cloud computing, which enables businesses to effectively store their data and centralize information database, does not only help employees to remain in constant contact with one another, but also help businesses to improve their international communications. Finally, environmental trends, such as the need to increase the use of and investment in renewable energy and recycling impacts on businesses.

QUESTION #3: Strategic Group Map for the Retail Industry

A strategic group refers to a group of businesses that follow either the same or similar strategy along the strategic dimensions. A strategic group map is a tool for analyzing strategic groups. It helps to display the competitive positions that are occupied by various businesses in the industry. Businesses in the retail industry that are considered for this task include Wal-Mart, Kmart, Lauren Ralph Polo, Sears, Banana Republic, Kohls, Avenue, Marcus, Marcys, Dillards, and T.J Maxx. The strategic group map is illustrated in figure 1 below.


Few Localities High Price Low

The map above compares these retail enterprises in terms of similarities in the strategy employed, with regard to price charged for the products, and locations of the outlets. For example, Wal-Mart and Kmart are in the same strategic group because they operate in many locations and charge relatively lower prices for their products.

Question #4: Industry Matrix featuring KPMG and two competitors: Deloitte and PWCThe five key success factors that are critical for a strategic audit firm, such as KPMG include low cost structure, brand reputation, range of products, customer retention, and successful promotions. These factors are essential to the company if it intends to succeed in the industry. An industry matrix helps to summarize these key success factors in the industry by weight of each depending on its importance. The matrix also helps to determine how different competitors are responding to each of the key success factors. The matrix is illustrated in figure 2 below.

Figure 2: Industry Matrix featuring KPMG and two competitors: Deloitte and PWC

KPMG Deloitte PWC

Critical Success Factors Weight Rating Score Rating Score Rating Score

Low cost structure 0.23 4 0.92 3 0.69 3 0.69

Brand reputation 0.31 2 0.62 2 0.62 3 0.93

Range of products 0.11 3 0.33 4 0.44 4 0.44

Customer retention 0.20 1 0.20 1 0.20 1 0.20

Successful promotions 0.15 4 0.60 3 0.45 2 0.30

Total 1.00 2.67 2.40 2.56


The above industry matrix shows that KPMG performs better than Deloitte and PWC because it has the highest total score. KPMG has the highest score with regard to low cost structure and successful promotions. Just like the other two companies, KPMG performs poor in customer retention, with a score of 0.20. Additionally, it has lowest range of products compared to its competitors.


BIBLIOGRAPHY \l 1033 Cheng, D. S. (2013). Analyze the Hotel Industry inj Porter's Five Forces Model. The Journal of Global Business Mnagement, 9(3), 52-57.

Dransfield, R. (2005). GCE AS Level Applied Business Double Award for OCR. Oxford, UK: Heinemann EducationmPublishers.

Goral, R. (2015). Competitive Analysis of the Hotel Industry in Konya by Using Porte's Five Forces Model. European Journal of Economics and Business Studies, 3(1), 106-115.

Hill, J. S. (2009). International Business. California, USA: SAGE Publications.



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