Course Hero Logo

When markets are loyal to firms it makes it even more

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 19 - 21 out of 74 pages.

When markets are loyal to firms, it makes it even more difficult for potential competitors to enter the market.For instance, hotel firms in the luxury market segment have high barriers to entry owing to higher start-up costs.Therefore, firms in this market segment can sustain their profitability through higher rates during high peakseasons and, to some extent, shoulder seasons. Coupled with this is the brand loyalty effect, which prevents newentrants from moving in with any level of optimism. But this is not true for the economy segment where the barriersto entry are relatively low due to lower start-up costs and the brand loyalty effect. Moreover, the cyclical nature ofthe business also creates a barrier to entry.Firms need to establish loyalty during high seasons to sustain theirbusiness through low seasons. Above all, market segments in which large chain hotels have been able to sustaintheir brand effects over a period of time, thereby creating loyalty, would have lower threats of new entrants.Table 3.3Porter’s Five Forces Model CharacteristicsTask Environmental ForcesCharacteristics1.Potential CompetitorThis threat is high when industry barrier to entry is low.Established firms hold their position and discourage firms from entering theirmarket through price and margin reductions.This threat is low when firms have established best practices in marketing,management, production, and administration.High brand loyalty enables firms to mitigate this risk.2.Competitiveness amongIndustry IncumbentsThis threat is high when the industry growth rate has slowed down.It is low if the environment is liberal, seen especially in growing markets.Firms avoid direct competition in mature markets.3.Buyers Influenceis a threat when buyers’ buying power and influence on the firm arehigh.Buyers’ influence comes in the form of price discounts, demand for better qualityand level of service, especially after-sales service.Buyers could switch to other products and services quite easily when switchingcosts are low4.Suppliers InterestThe threat from suppliers is high when they can charge higher prices for rawmaterials and finished goods.
20STRATEGIC MANAGEMENT IN TOURISM AND HOSPITALITY :BME2[email protected]Threat arises when few suppliers can provide customized goods with access tounique raw materials, technology, and other relevant resources.Threat is high when suppliers can control the quality and price of raw materials.When the supplier has higher influence, incumbent firms have no choice but toaccept or switch suppliers, which is difficult when only a few suppliers exist.5.Substitute ProductsFads, trends, and consumer buying behaviour influence markets to pursuealternative products.

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 74 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
N/A
Tags

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture