Porters 5 Force for Hotel
Porter’s Five Factor Model and the Hotel Industry:
Review and Recommendations
Management Information Systems
Introduction
The combined forces of an economic recession and H1N1 epidemic are causing the hotel industry to suffer in a time of great challenge. Business travel is down because of the recession and the pandemic has significantly reduced tourism. This paper considers three types of hoteliers in current market conditions in light of Porter’s theories. Now, more than ever, Porter’s well regarded thoughts on business strategy and the Internet, first published in 2001, are crucial to consider and they contribute to an analysis and critique of the hotel industry’s internet strategy. In his Harvard Business Review article of 2001 Porter said “To find the answer we need to look beyond the immediate market signals to the two fundamental factors that determine profitability: Industry structure, which determines the profitability of the average competitor and sustainable competitive advantage which allows a company to outperform the average competitor” (Porter, 2001). This paper examines the five forces which impact competitiveness within and thus the profitability of a competitor in the hotel industry. From the guidance provided in the Five Factor Model recommendations are made to enhance and refine internet strategy for the considered hotel chains.
Hotels
The hotels chosen for this paper are: Vintage Inns primarily located in Niagara-on-the-Lake, Canada, Sheraton Hotel chain and Best Western Hotel Chain. “Every business must design a strategy for achieving its goals, consisting of marketing strategy and compatible technological strategy and sourcing strategy”. (Kotler & Keller,2006) “To identify rivals in the international hotel industry, current practice is to use price, segment and proximity” (Matthew, 2000). In previous work, Michael Porter outlined three additional generic strategies that could be used. These are: overall cost leadership,
Review and Recommendations
Management Information Systems
Introduction
The combined forces of an economic recession and H1N1 epidemic are causing the hotel industry to suffer in a time of great challenge. Business travel is down because of the recession and the pandemic has significantly reduced tourism. This paper considers three types of hoteliers in current market conditions in light of Porter’s theories. Now, more than ever, Porter’s well regarded thoughts on business strategy and the Internet, first published in 2001, are crucial to consider and they contribute to an analysis and critique of the hotel industry’s internet strategy. In his Harvard Business Review article of 2001 Porter said “To find the answer we need to look beyond the immediate market signals to the two fundamental factors that determine profitability: Industry structure, which determines the profitability of the average competitor and sustainable competitive advantage which allows a company to outperform the average competitor” (Porter, 2001). This paper examines the five forces which impact competitiveness within and thus the profitability of a competitor in the hotel industry. From the guidance provided in the Five Factor Model recommendations are made to enhance and refine internet strategy for the considered hotel chains.
Hotels
The hotels chosen for this paper are: Vintage Inns primarily located in Niagara-on-the-Lake, Canada, Sheraton Hotel chain and Best Western Hotel Chain. “Every business must design a strategy for achieving its goals, consisting of marketing strategy and compatible technological strategy and sourcing strategy”. (Kotler & Keller,2006) “To identify rivals in the international hotel industry, current practice is to use price, segment and proximity” (Matthew, 2000). In previous work, Michael Porter outlined three additional generic strategies that could be used. These are: overall cost leadership,
References: Luck, D, Lancaster, M, (2003) Managerial Auditing Journal. Bradford: 18-3, p213 Matthews, V McNurlin, B. C., & Sprague, R. H., Jr. (2006). Information systems management in practice (7th ed.). Upper Saddle River, NJ: Prentice Hall. Porter, M. (2001). Strategy and the Internet. Harvard Business Review 79(3). 62-78 http://www.newsrx.com/library/topics/Fairtheworld.html> Fairtheworld Trehan, R.(2005) http://www.hotel-line.com/News/PR2005_3rd/Aug05_ http://www.starwoodhotels.com/corporate/company_info.html