Porters 5

PORTERS 5 OF IHCL
Rivalry among existing competitors: Rivalry among hotel chains results in discounting of
price, new product launch, advertising campaigns, and improvement in service. If there is
high rivalry the profitability of the company can be affected. The hotel products are highly
perishable, which creates an urge to cut prices and sell the inventory below its profitable rate
to cover the fixed cost.
Threat of new entrants: New entrants can put pressure on prices, costs, and the rate of
investment necessary to compete. Due to globalisation and rapid economic growth of Indian
market a favourable market has emerged for International hotel chains. Hotel chains like
Four seasons, Marriott International Inc., Starwood Hotels and Accor Hotels have recently
came up with projects across India. New International hotels such as Shangri la, Mandarin,
Movenpick and Ritz Carlton are in pipeline. Entry of non-hospitality companies into hotel
sector can be a threat; such as Reliance Industries. Due to dilution in the market the
profitability of IHCL can be at stake
The threat of substitutes: A substitute does the same or a similar function as an industry’s
product by a different means. The threat of a substitute is high when it offers an attractive
price and service to the similar industry’s product. Luxury serviced apartments, camping and
lodges are in demand. The Government’s introduction of bed and breakfast hotels can really
be a threat. Web 2 which enables video conferencing is an emerging product which can be a
threat to MICE (Meetings, Incentives, Conferencing and Events)
Bargaining power of buyers: Powerful customers demand more value by forcing down
prices for better quality and more services. This results in higher operating costs thereby
bringing down profitability. Corporate clients due to their huge volumes have negotiated
rates. Company had to come up with loyalty programme for retaining customers which
incurs costs.
Bargaining power of suppliers: Suppliers have more power if they have the monopoly or
do not depend heavily on the industry for its revenues. As hospitality industry is hugely
labour oriented, their trade unions and labour suppliers are powerful. As hotels chains are
looking for rapid expansions and prime properties, the power of property owners is high.
Inbound tour operators are having an upper hand as they provide huge volume of business
to the hotels. Infrastructure suppliers have moderate power over the company.
PORTERS 5 OF MAHINDRA HOLIDAYS
COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS
This force describes the intensity of competition between existing
players(companies) in an industry. High competitive pressure results in
pressureon prices, margins, and hence, on profitability for every single company
inthe industry.


The top competitors in hotel industry are having the same services like fivestar,
spas, boatels and motels, heritage hotels and palaces.


The healthy competition among the all players is helping to increase theindustry
growth.


Intense in metro cities, slowly picking up in secondary cities.
THREAT OF NEW ENTRANTS

The competition in an industry will be the higher; the easier it is for
othercompanies to enter this industry. In such a situation, new entrants
couldchange major determinants of the market environment (e.g. market
shares,prices, customer loyalty) at any time. There is always a latent pressure
forreaction and adjustment for existing players in this industry.

The foreign hotel chains are tied up with Indian hotels to reduce the initial
cost and using the latter‘s brand name.

Brand loyalty of customers like TAJ, ITC, and LEELA PALACE affectsthe
new entrants.

Access to raw materials and Distribution channels are controlled byExisting
players like TAJ, ITC, and LEELA PALACE.

The cost of land in India is high at 50% of total project cost as against
15%abroad. This acts as a major deterrent to the Indian hotel industry.

In India the expenditure tax, luxury tax and sales tax inflate the hotel bill byover
30%. Effective tax in the South East Asian countries works out to only4-5%.
THREAT OF SUBSTITUTES
A threat from substitutes exists if there are alternative products with lowerprices
of better performance parameters for the same purpose. They couldpotentially
attract a significant proportion of market volume and hencereduce the potential
sales volume for existing players. This category alsorelates to complementary
products.


Brand loyalty of customers (TAJ, ITC, LEELA PALACE, etc,) isdominating
the substitutes.


The hotel relationship with customer and costs also the reasons toswitching to
substitutes.
The price variation of same class hotel services from various brands is oneof the
reasons to choose a substitute.


The present demand and supply of hotel rooms is one of the reasons tochoose a
substitute.
BARGAINING POWER OF CUSTOMERS
Similarly, the bargaining power of customers determines how muchcustomers
can impose pressure on margins and volumes.


The hotel industry is one of the most invested in its fixed assets. So theyare
trying to recover their amount quickly.


The suppliers are providing better information about them to attract
thecustomers. Here the buyers are highly informed.


If the hotel price changes are moderate, the Customers have low marginsand are
price sensitive.


Some unseasoned timings the hotels are offering discounts and incentivesto
reduce the bargaining power of buyers.
BARGAINING POWER OF SUPPLIERS
The term 'suppliers' comprises all sources for inputs that are needed inorder to
provide goods or services.


The high class hotels are operating by few hotel chains like-TAJ,EIH, ITC&THE
LEELA PALACE so they have a control over theindustry.


There are no substitutes for spas and five star hotels.


The hotels customers are fragmented, so they have to reduce theirbargaining
power to attract the customers.

54


The Taj, ITC& Oberoi are having various rates and tariffs becausethey are
having their own brand image.


The hotel chains are operating different services like Spas, Boatels,Resorts, City
Centers, Heritage HOTELS, etc.'
Lemon Tree Hotels Opening Doors for Everyone
Competitive rivalry
The competition among the firms help in identifying the lucrativeness of an industry where
companies are competing hard in order to maintain their power within the industry. The
Lemon Tree Hotels Opening Doors for Everyone competition is moreover on basis of
diversity, the development within the sector and the barriers related to entrance in the
market. The competitive rivalry is the analysis of the brands and the product, its strengths
and weakness along with the strategies, competitors and the share in the market.
Threat of new entrants

It is in the favor of the companies that exist in the market to create barriers for the new
entrants to prevent them from entering into the industry. The organizations could be the
new companies or the companies that are planning to diversify itself in the market. The
barriers can be both industrial and legal. Apart from this the size and the reputation of the
companies that are already operating in the market also play an important. Furthermore
the cost related to the entry, access to raw materials, barriers related to culture and
technical standards also play a major role and can affect the decision of the new entrants in
the market.
Threat of Lemon Tree Hotels Opening Doors for

Everyone substitute products
The Lemon Tree Hotels Opening Doors for Everyone substitute products are an alternatives
that are available in the market at comparatively better prices. Such products prevail due to
the technological and innovative advancement. Due to which the products being produced
by the companies that are already existing in the market and is using the same technology
are than replaced by the other company’s products that are comparatively better in terms of
price and quality and are being produced from sectors with significant profits. The
substitute products are dangerous as the companies are under constant threat of being
replaced.
High threat of substitute leads to low profitability as it limits the industry profits by placing a
price ceiling due to the fear of being substituted by other product. Apart from this it also
affect the growth potentials of the industry as a whole but reducing the profitability
margins.
Lemon Tree Hotels Opening Doors for
Everyone Bargaining power of
customers
The buyers having strong bargaining power can highly influence the profitability of the
suppliers operating in the market by imposing condition that are not much favorable for the
suppliers in terms of price, quality or service. Therefore choosing clients often become
crucial for the organizations as to avoid the situation of being highly depended on the
buyers. The level of interest and concentration of buyers toward the product gives them
more or less power.
Powerful buyers could flip the side of the powerful supplies by forcing the prices to move
downwards and by demanding high quality and services by creating a competition between
the participants in the industry on the basis of price and quantity. Customer are deemed
strong if they contain negotiating leverage specifically if the industry is sensitive to price, the
buyers can pressure suppliers for further price reductions.
Bargaining power of suppliers Lemon Tree Hotels

Opening Doors for Everyone
Powerful suppliers possess Lemon Tree Hotels Opening Doors for Everyone more power to
capture significant value for themselves by demanding high prices while limiting the quality
and the quantity of the product or services or by transferring the cost on the participant of
the industry. Many condition imposed by the suppliers generally include the increase in
price while compromising the quality and quantity.
A bargaining power of a supplier in the market is strong if:
 It is more concentrated than the industry it is selling to.
 It is not heavily relying on the industry for its profits
 If the participants in the industry have to incur high cost for switching suppliers or
the firms are located adjacent to the suppliers manufacturing facilities.
 The product being offered by the suppliers are highly differentiated.
 And when there is no close substitute available for the products being supplied by
the suppliers.

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PORTERS 5 OF IHCL

THREAT OF NEW ENTRANTS

Threat of new entrants

Threat of Lemon Tree Hotels Opening Doors for

Bargaining power of suppliers Lemon Tree Hotels

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