Assessment type. Case Study
The purpose of this report is develop a case study by critically analysing the effect of the global competitive forces on a hospitality business looking to expand into an overview; market or, the effect of global competitive forces on a hospitality business looking to expand into Australia (the second choice is recommended as it might help you with your last assignment).
Start this assignment by identifying a hospitality business/product (e.g. accessible hotel, healing hotel) and a destination country which they plan to enter, you can use the following guideline to help you complete this assignment: 1. Provide an overview of this hospitality business/product of your choice (i.e. business profile, industry size, market performance etc.) 2. Discuss the rationale of this business/product's global expansion. 3 Apply Michael Porters five forces to critically analyse the destination market of your chosen business. 4. Conclude your report by providing recommendations on the market enter strategy and market positioning of the hotel business based on your previous analysis.
Please provide specific industry examples to support your research, analysis and critical
This is an individual assignment using the report style format. Please include an Executive Summary, Table of Contents, Introduction, Conclusion and Reference List. Appendices are optional.
Title Page Executive Summary Table of Contents Introduction Body Conclusion Reference List Appendices Specific line spacing Specific margins Minimax references.
CASE STUDY USING COMPETITIVE FORCE ANALYSIS
The report states business expansion in the global market requires a thorough study about the market company desires to target. The porter five-force framework is a highly used tool which helps the management of entities to extract information about the targeted market. Sixth Sense hotel, report and spa providing business entity have targeted to make an entry in the Nepal hotel industry. The hotel industry is a subdivision of the hospitality industry, which has trillions of revenue streams, as there is a rapid increase in tourism demands in the market. From the porter five force analysis, the Nepal hotel tourism has made growth in the market has the number of tourists has increased by 24.8% in the marketplace. Sixth Sense can receive benefits and scope of development from Nepal has it is known as the paradise of nature, mountains and attractions. The report elaborates that the Sixth Sense might face challenges of high-end competition in Nepal. However, the introduction of brand positioning and market entry strategy, the company might be able to establish its place within the Hotel industry in Nepal.
The business expansion in the global market requires distinctive marketing and competitive strategies. These strategies help to increase learning about the market, its competition and possible scope of development for the business desires to enter. The report s based on the application of competitive strategic analysis for Sixth Sense Resort, which desires to enter into Nepal hospitality and tourism market.
1. Overview of Sixth Sense resorts
The Sixth Sense is a luxury hotel, resorts and spa service providing company operating in the hotel industry, which is a subdivision of the hospitality industry. It provides accommodation and luxury hospitality and tourism services in Thailand and other major countries (Sixsenses 2019).. In the recent year, the company has introduced global expansion plans to enter in Nepal. The hospitality industry includes different business sectors such as hotels, event-planning businesses, lodging and food services, theme park, cruise line, travelling, tourism and transportation services. The leisure time and disposable income are two important variables of the hospitality industry. The global hospitality and hotel industry has collected about $1.6 trillion from booking over-tourism, accommodation and different business services operating under the industry. The hotels and reports are considered as one of the prime business units of this industry. It contributes 30% of the total collection made by the global hospitality industry. The revenue earned by the industry is estimated at USD 82.77 trillion (Ibisworld 2019). It is expected that the industry is expectedly making the growth of 4.85% by the end of the year 2025. As per the industry size of the hotel industry, the global hotel industry has an estimated revenue of USD 1 trillion in the market place. The industry has fasted growth in comparison to the other subdivisions operating under the hospitality industry. The annual growth of the hotel industry has been estimated at 1% per year. This industry recruits about 9045381 employees and staff members to establish and increase standardised accommodation, lodging and other services (Hotel Association Nepal 2019).. In addition to that, there are about 515458-hotel business operating in the global marketplace. As there is an end number of hotels, the competition is significantly higher in the market.
According to market performance, hotels and resorts in the Asian countries have made about 68% of the occupancy rate in the marketplace. In the year 2018, the hotel and reports business units under this industry have an estimated growth rate of 6-7%. The market size of the hotel market is segmented as per small, middle and large business unit’s categorised under 1 to 5 stars (Jobes 2019). The star ranking is given to the hotels based on their business chains, revenue, customer base and standardised quality. In the present year of 2019, it is expected that the global hotel industry will make stronger growth in the market as demand for travel and tourism has enhanced in the market. The economic statuses so most of the countries in the market are stable, which has increased the demand for hotel and accommodation services.
The Sixth Sense reports and hotel has been planning to make the expansion of its business in Nepal. The hotel, resort and spa service provider company prime source of income come from the tourists in the marketplace. Thus, the customer base could be increased in a market which is attractive for the tourists. The more incoming of tourists in the country increase the scope of generating profit for the entity. The selection of Nepal for making global expansion is effective, as Nepal is one of the highly demanded destinations by tourists within Asia (Forbes 2019). The Sixth Sense will be benefited from the Nepal tourism scope, as the country is known for its richness on nature and beauty. On the other hand, the country shares boundaries from two highly populated countries, India and China. Both of the neighbours of Nepal have a high rate of tourism demands and business growth rate, which can benefit the Sixth Sense Hotel. Nepal tourism is stated as one of the largest industry in the marketplace. The country includes 8 of the top 10 highest mountains around the globe. Thus, Mountain View and valley makes the country more attractive for tourism. Nepal tourism, includes rock climbing, mountain climbing, trekking and adventure exploring options, which increase the scope of customer base creation for hotels and resorts. In the year of 2018, about 1173072 international tourists from different countries of the globe as visited Nepal. This has increased by 24.8% in comparison to the previous year visits to tourism in this country (Adhikari 2018). This estimates there are an increasing scope and opportunity for Sixth Sense to enter into the market. In the case of the hotel industry, there is a booming growth rate in the emergence of Holes in Nepal. It was estimated that different new hotel businesses had added near about 4000 rooms in Nepal in the last two years. The average occupancy rate has been observed 70% in the country, which states there is a rise in the demand for hotel and resort services in the country. It is beneficial for Sixth Sense to enter the market, as there is an increasing rate of tourists located in this country, especially from India and China (Sthapit and Shrestha 2018. The outrebound tourism from India is estimated to increase by 6.5 million by the end of 2020, whereas outbound tourists from China were 122 million of tourists were spotted from China in the year of 2016. This indicates the increasing rate of tourists increases the scope of establishment of new hotels in the marketplace. The Sixth Sense already has its market in different countries, which dictates the company has created a brand name in the market. This can help the business unit to enter to the Nepal market and make an expansion for its business.
The porter five forces are competitive analysis strategic tool, which is used to understand a market. The five forces of this model are focused on generating information about market competition, customer profiling, new business entrances, substitute products and competitive environment. The framework of Porter’s has introduced an understanding of the strengths, impact, effects and interrelationship between these five forces (Meyer and Cohen 2018). The management of business for observing the key issues, challenges, scope and opportunities the business entity could face while entering into a new market. In the case of Sixth Sense, the porter five force analysis has been carried out for extracting information on the Nepal hotel and tourism market to define the scope of the company in this country.
Bargain power of Buyer
The customers usually price sensitive in the market, especially in case they are in a tout of journey or tour. Thus, the hotels providing a low rate of accommodation and quality facilities become the favourable hotel for the customers in the market. This states the bargaining power of customers is considerably higher in the market. Due to the increasing number of hotels in Nepal, the risk of a shift in selecting hotels by customers has increased. These selections are based on price range and quality of services. The customers bar again power is higher as they make choices randomly based on quality, price, accommodation, decoration and other attractions of the hotel.
Bargain power of supplier
The bargaining power of suppliers is moderate in the market. As there is an end number of hotels situated in Nepal, the suppliers have moderate power to bargain. The hotels can opt for other suppliers in the market of the suppliers in the marketplace do not agree with the demands (Yadav 2018). In addition to that, in perspective of suppliers, they do have end number of business units to supply for in the market. Thus, as like customers, there is a possibility of shifting business deals with other hotels to earn income from the suppliers. Thus, the supplying power is moderate in Nepal.
The threat to new entrances
The higher and lower risks of new businesses enter the market defines the threat to new entrances. In the case of Nepal, the threat to new entrances of hotel businesses is considerably higher. The governmental policies, foreign exchange currencies and requirement of economic capital have enhanced the risks of new entrances in the Nepal Hotel industry. The foreign direct investment has been made major changes by the government of Nepal in regards to increase investments in the travel and tourism businesses by companies from outside. Thus, it has declined the barrier to entry for the Hotel business in the marketplace.
The threat to substitute products
The substitute products to the hotels can be a selection of motels, low rate hotels, rental lodges and tourists wish to stay with their friends and families in the market. On the other hand, the substitute product also includes similar destinations, which covers all the tourist attractions and services provided by Nepal (Kim, Barber and Kim 2019). The tourists can opt for other destinations such as Switzerland, China or India, which includes a similar set of tourism services provided by Nepal. Another substituted luxury hotel is readymade foods, which are bought from supermarkets by tourists. These readymade foods decrease the demands for luxury hotel food and beverage services.
In Nepal, there are about 300 hotels situated in different locations; most of the luxury hotels are situated in Kathmandu. Some of the hotels such as Hyatt Regency, Dwarika’s Hotel and Restarts, Barahi Jungle Lodge, Meghauli Serai are the key players in the country (Yadav 2018). These hotels, including others, have their own established market share that can be an issue for the new hotel businesses targeting to entering into the market. Among six prime luxury hotels, 5 of them are situated in Kathmandu which provides 115 to 2873 accommodations and other standard hotel services in the country.
The business entities make expansion in the new market to generate more revenue, competitive edge and market positioning. Thus, different strategic applications for entering to new-targeted market is used and applied by the organisations. The Sixth Sense can include merger and acquisition or franchising strategy for entering into hotel market of Nepal. The company can acquire some of the named hotels in the country to enter to the market. It can also help the company to learn about the market quickly through already established hotels that have better experience and knowledge about it. On the other hand, there might not be necessary for the recruitment and selection of staff members for Sixth Sense in the market. In addition to that, Sixth Sense might also introduce a formal agreement of joint venture with hotel business unit operating in Nepal. The joint venture process helps the Sixth sense to introduce a completely new hotel in the country. The application of this strategy can help to make less investment as every financial attribute will be shared within two business units. The market positioning is the process of creating a brand of the business in the marketplace. For the businesses entering a new market, the positioning plays a key role to build a strong customer relationship and customer base in the market. About occupy in the customer mind, Sixth Sense might require to create proper brand position through promotion and advertising. The company can introduce attractive discounts, coupons, free visits, offers for accommodation, which can attract customers in Nepal. Superlative positioning strategy might be appropriate for Sixth Sense for entering and creating its brand in the new market. The management of Sixth Sense can create a specific service related to spa, accommodation or resort, which is exclusive and has better standard compared to other business units operating in the country.
The Sixth Sense decision making to make expansion in the market of Nepal is beneficial. The rationale analysis stated that there is a high growth rate of hotel business in the country, which can benefit Sixth Sense to enter and flourish in the market. The porter gives forces has explained that due to the rise in the hotels in the country, the competition is a prime challenge for Sixth Sense while entering the country.