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International Hotel Management

In: Business and Management

Submitted By Qinchao
Words 1557
Pages 7
1. Barrier to Entry
According to Michael Porter (1980), threat of new entrants are determined by barriers to entry which include economies of scale which include size and scope of operations required to achieve viable cost structure; product differentiation, switching costs and customer loyalty created by quality, reliability and brand image; capital requirements which involve size of cash and financial resources required to establish and run a business; cost disadvantages independent of scale as opposed to advantages held by existing competitors such as location, patents and experience; access to distribution channels which include means to reach customers; government policy such as licensing, subsidies or tax incentives; and expected retaliation from existing competitors which are determined by current rivalry, history of vigorous retaliation and strengths of incumbents. The Hotel Industry on a global basis is characterized by high capital costs and a high proportion of fixed costs to total costs. There are considerable economies of scale in the local Hotel Industry.
The growth of the Hotel Industry in most metropolitan

cities is limited by the availability of suitable locations.
Access to distribution channels can be a problem, but this factor can be mitigated by a connection with an international hotel chain. The industry exhibits high entry barriers restricting new entrants, particularly because of the combined factors of economies of scale and high capital cost of entry, together with the limited supply of suitable locations.
Bargaining Power of Buyers
Porter (1980) mentioned that the buyers of goods and services from an industry may be powerful if they are more concentrated than the players in the industry and are able to force down prices as well as reduce the industry’s margin. They can purchase from the industry in…...

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