Porters 5 forces analysis for hotel industry

BARGAINING POWER OF SUPPLIERS The term 'suppliers' comprises all sources for inputs that are needed in order 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 the industry. There are no substitutes for spas and five star hotels. The hotels customers are fragmented, so they have to reduce their bargaining power to attract the customers. The Taj, ITC& Oberoi are having various rates and tariffs. Because they are having their own brand image. The hotel chains are operating different services like Spas, Boatels, Resorts, City Centers, Heritage HOTELS, etc. 2 . BARGAINING POWER OF CUSTOMERS Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes. The hotel industry is one of the most invested in its fixed assets. So they are trying to recover their amount quickly. The suppliers are providing better information about them to attract the customers Here the buyers are highly informed. If the hotel price changes are moderate, the Customers have low margins and are price-sensitive. Some unseasoned timings the hotels are offering discounts and incentives to reduce the bargaining power of buyers. 3. THREAT OF NEW ENTRANTS The competition in an industry will be the higher; the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction 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 affects the new entrants. Access to raw materials and Distribution channels are controlled by Existing 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 by over 30%. Effective tax in the South East Asian countries works out to only 4-5%. 4. THREAT OF SUBSTITUTES A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for

existing players. This category also relates to complementary products. Brand loyalty of customers (TAJ, ITC, LEELA PALACE, etc,) is dominating the substitutes. The hotel relationship with customer and costs also the reasons to switching to substitutes. The price variation of same class hotel services from various brands is one of the reasons to choose a substitute. The present demand and supply of hotel rooms is one of the reasons to choose a substitute. More fixed cost and switching costs affects the business. 5. COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry. The top competitors in hotel industry are having the same services like five star, spas, boatels and motels, heritage hotels and palaces. The healthy competition among the all players is helping to increase the industry growth. Intense in metro cities, slowly picking up in secondary cities

Michael Porter identifies five forces that influence Automobile industry. These forces are Degree of Rivalry Despite the high concentration ratio seen in the automotive sector, rivalry in the Indian auto sector is intense due to the entry of foreign companies in the market. The industry rivalry is extremely high with any being product being matched in a few months by the competitors. This instinct of the industry is primarily driven by technical capabilities acquired over years of gestation under the technical collaboration with international players. Threat of Substitutes The threat of substitutes to the automotive industry is fairly mild. Numerous other forms of transportation are available, but none offer the utility, convenience, independence and value offered by automobiles. The switching cost associated with using a differen t mode of transportation, may be high in terms of personal time, convenience and utility. Barriers to entry The barriers to enter automotive industry are substantial. For a new company, the startup capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive. Although the barriers to new companies are substantial, establishing companies are entering the new markets through strategic partnerships or through buying out or merging with other companies. However, a domestic company, with local knowledge and expertise, has the potential to compete its home market against the global firms who are not well established there. Supplier s power In the relationship between the industry and its suppliers, the power axis is ti pped in industry s favor. The industry is comprised of powerful buyers who are generally able to dictate their terms to the suppliers. Buyers Power In the relationship between the automotive industry and its ultimate consumers, the power axis is tipped in the consumers favor. This is due to the fairly standardized nature and the low switching costs associated with selecting from among competing brands.

INDIAN AUTOMOBILE INDUSTRY

Strengths Large domestic market Sustainable labor cost advantage Competitive auto component vendor base Government incentives for manufacturing plants Strong engineering skills in design etc Weaknesses Low labor productivity High interest costs and high overheads make the production uncompetiti ve Various forms of taxes push up the cost of production Low investment in Research and Development Infrastructure bottleneck Opportunities Commercial vehicles: SC ban on overloading Heavy thrust on mining and construction activity Increase in the income level Cut in excise duties Rising rural demand Threats Rising input costs Rising interest rates Cut throat competition

Government Policies towards Indian Automobile Industry Automobile industry in India also received an unintended boost from stringent government auto emission regulations over the past few years. This ensured that vehicles produced in India conformed to the standards of the developed world. Though it has an advantage in India, thanks to low costs and government polic ies it soon faces stiff competition from it multinational competitors all eyeing for a share in the ever growing Indian auto sector. The policies adopted by Government will increase competition in domestic market, motivate many foreign commercial vehicle manufactures to set up shops in India, whom will make India as a production hub and export to nearest market. Bring in a minimum foreign equity of US $ 50 Million if a joint venture involved majority foreign equity ownership Automatic approval for foreign equity investment upto 100% of manufacture of automobiles and component is permitted FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 per cent of the paid-up equity capital of the investee company, subject to appro val of the board of directors and of the members by way of a special resolution. . Investments in making auto parts by a foreign vehicle maker will also be considered a part of the minimum foreign investment made by it in an auto -making subsidiary in India. The move is aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts.

Specific component of excise duty applicable to large cars and utility vehicles will be reduced to 15,000 rupees per vehicle from 20,000 rupees earlier. The Proposal by the Govt. to set up an expert group to advise on a viable and sustainable system of pricing petroleum products, as this will surely had an impact on the Automobile Industry. The announced reduction on the basic customs on bio -diesel is great news for all companies working on environmental saving technologies.