Professional Documents
Culture Documents
Managerial Policy
Course Instructor
Dr. Atif Aziz
Submitted By
Muhammad Zohaib
10456
Q1: WHAT MAKES AN INDUSTRY ATTRACTIVE?
ENTERPRENUERIAL PERCEPION
The industry should allow relative ease for a new venture to enter.
GENERAL PERCEPTION
According to general perspective an attractive industry based on these characteristics
High Profitability
Not crowded
Important to customers
High operating margins
Threat of entrants is low.
Bargaining power of buyers is low/weak.
Bargaining power of suppliers is low/weak.
Intensity of rivalry among existing firms is low.
According to ballpark figure, demand will go above supply by 100% within the next 2 years.
Tourism in India is the third largest foreign exchange earner of the country.
The booming tourism industry has had a cascading effect on the hospitality sector with an increase in
the occupancy ratios and average room rates.
The tourism and hospitality sector is among the top 10 sectors in India to attract the highest Foreign
Direct Investment (FDI).
The decision of government is to advance 28 regional airports in towns and to expand Mumbai and
Delhi airports so that the business prospects of Indian hotel industry will progress. The advancement
of highways linking to various parts of India has helped to open new budget hotels.
The Indian government has also taken several steps to make India a global tourism hub.. The
government has introduced e-Tourist Visa (e-TV) for 150 countries as against the earlier coverage of
113 countries (source: Ministry of Tourism).
New entrant still enter into the unattarctive industry in following ways
If the price of the hotel changes is moderate, the customers are price sensitive and have low
margins. (High force)
The hotels are providing more information about them to attract the customers. Sometimes hotels
provide discounts and incentives in order to reduce the bargaining power of consumers
3. BARRIERS TO ENTRY
Economic risks
High capital cost
Scarcity of Land (In India, the cost of land is 50%)
High market captured by other firms in industry (Customers brand loyalty like TAJ, ITC and LEELA
palace)
4. THREAT OF SUBSTITUTES
There is going to be a threat from the substitutes if there are alternative lower priced products with
better performance for the same purpose.
These substitute products can attract a part of the market reducing the sales of existing players.
Hotel connection with the customers and cost are the causes for switching to substitutes
5. THREAT OF INTENSE SEGMENT RIVALRY
High pressure of competition which results in hike on prices, pressure on margins and hence for every
single company in the industry on profitability.
There is an increasing competition from the startups/online industry due to increasing penetration of
the internet
In the long term, the demand-supply gap in India is very real and that there is need for more hotels.
The shortage is especially true within the budget hotels and the mid-market hotels segment. There is
an urgent need for budget and mid-market hotels in the country as travelers look for safe and
affordable accommodation.
Largely depends on business travelers tourists traffic is also on its rise, this would be more good if
tourist guide will be available along with hotel services.
Various domestic and international brands have made significant inroads into this space and more are
expected to follow as the potential for this segment of hotels becomes more obvious.