Nature of Industry

Nature of the industry

Porter’s 5 Forces

i. Threats of New Entrants

The threats of new entrants is considered moderately high in Malaysia’s Hotel Industry. The reason for this is because it would be easy for another hotel or motel to open in the marketplace. But the threat of new entrants for luxury hotel market will be very hard because it may need large capital, initial investment and build up hotel image against those highly rated hotel. That is why the threats of new entrants for overall hotel industry is moderately high.

ii. Threat of Substitute Products and Services

In recent year, the threat of substitutes seems to be high and the threats of substitute are cottage and B&B (Bed and Breakfast). Budget Inn is getting more popular and acceptable for consumer because it provides a standard service with very reasonable price. Normally cottage or B&B located in tourist hotspot like Malacca city town, Taman Negara in Pahang, Port Dickson and more places, so consumer has more alternative. For example when the travellers travel with their friends or family which in a big amount, where they needed a bigger space, service apartment or motel which be the first choice for them and biggest competitor for the hotel industry. Next, hotel industry may also bring a threat such as technology advances. So the threat of substitutes is considered high.

iii. Bargaining Power of Buyers

Bargaining power of buyers tend to be relatively greater when there is more hotel and competitors. The level of bargaining power of buyers may differ on different occasions. Individual customers who consume hospitality products have little or no bargaining power. The only thing that they are able to do is to search for better prices or search for different alternatives. But due to technology advancement, the bargaining powers of buyers are increasing where tourist can to make reservation all over the world no matter where they are. And depending on which firm in the...