Porter's Five Forces Analysis in Business

This assignment examines the application of Porter's Five Forces model in understanding industry competition. Students are expected to analyze an industry of their choice, identifying the five forces – threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, and rivalry among existing competitors. The analysis should shed light on the level of competition within the industry and provide insights into potential competitive advantages.

Business Organisation and
Environment in Global
Context

INTRODUCTION
Business environment refers to external and internal forces that influences operations
and decision making process of an organisation. In current scenario, every company wants to
spread its business in global market for the purpose of expansion and profitability. National
and international environment affects the enterprise in running business in global
marketplace. This report is about Holiday Inn which is hotel chain and subsidiary of
Intercontinental Hotels Group. It wants to expand business in Poland. In this study, business
environment of Poland will be discussed and how it could affect the expansion process of this
company.
Information of Holiday Inn
Figure 1 Holiday inn, 2017
Holiday Inn is a hotel brand of Intercontinental Hotels Group (IHG) which is one of
leading hotel chain in world. This is founded in 1991. Their main focus is to offer specified
services at fair and reasonable price. This hotel chain has approx. 24,69 hotels with around
240,000 rooms all over the world. It is known as express by Holiday Inn in Europe and it’s
first location was Scotland. Their marketing strategies are very strong as they have a ad
campaign names as ‘Stay smart’ which shows ordinary people having superior feats.
Properties of this group are built according to corporate architectural prototypes which
includes 60-80 rooms along with suites and high standard rooms (Bromley, and Powell,
2012).
Their strategy is focussed towards strengthening diverse portfolio by expanding in
key markets and building lifetime relationships with their customers in order to generate

more profits with low costs and direct channels of service providing. They are taking
disciplined approaches to allocate their capital for the purpose of future development. This
helps them in having sustainable growth in profitability and providing high returns to
shareholders in long term. Top level executives are responsible for ensuring leadership with
reviewing all its hotel’s activities in effective manner (Bryson, 2011). Board sets strategic
directions and goals that are focussed towards building long term value for customers and
shareholders. .
According to them their culture is responsible for their success. It has an environment in
which staff, customers and other parties seeks confirmation that company is following their
values, and this brand is maintained with a responsible business culture. They have attained
success through effective leadership and governance that encourages sensible attitudes and
behaviours in business. They ensure that their employees are getting important legal and
reputational issues. This hotel chain is also ensuring the safety and security of staff and
visitors (Henson, and Humphrey, 2010). They are having effective risk management and
control in internal environment.
They are committed towards making high standards for corporate governance. As it is listed
in London Stock Exchange and New York Stock Exchange it complies with principles of
government and they have adopted concept of corporate governance. Board heads the
strategic directions and long term objectives for growth of this hotel. Their aim is to monitor
the performance of its staff in order to manage the risks. Various key decisions are taken by
board itself. Such decisions are related with expansion plan, investment proposals and
managing its operations and financial performance (O’Brien, 2012).
Large scale delivers huge advantages in hotel industry due to which they are
spreading at the global, national and local levels. They are concentrating on attractive market
places and countries from where they can get benefits of economies of scale, higher profit
margins and strong operating leverage.
Recently, they have announced to grow their presence in Poland by spreading
Holiday Inn brand in this country. In Europe they have around 291 Holiday Inn hotels. Now,
they are moving towards Warsaw West Station by building another hotel there. This new
hotel will be hallmark of this brand. There will be open lobby where guests can enjoy in
combined restaurant, lounge area and bar along with some area for entertainment zone. It will

also feature big size event and meeting hall where family and corporate events will take
place.
Background information about Poland
Poland is one of the largest country in Europe. It is bordered countries like Germany,
Slovakia, Belarus, Ukraine and Russia. Marine borders include Denmark and Sweden. Its
total area is approx. 312,685 km² which makes it larger than Italy but quite small then US and
Mexico. It has an approx. population of 38.5 million and national language is Polish. Its
capital is Warsaw which is largest city of this nation.
Political system- Poland politics works on unitary semi-precedential framework. Prime
minister is the head of country and President governs the states of this nation. Legislative
power is divided into two chambers of parliament i.e., Sejm and Senate. Its political system is
defined in Polish constitution (Smith, Bins, and Tushman, 2010.).
Economic conditions- Poland has as dynamic economic scenario. Its economic growth
reached around 3% in 2016 which is quite less as compare to 2015. Growth took place due to
increase in foreign direct investment. It maintained positive growth during global economic
crisis. There are several benefits in this economy as it utilizes its resources in efficient
manner and having strong banking system and domestic demand. New taxes have resulted in
high foreign investment and government is also making efforts to buy strategic assets from
international investors. In Poland main sectors are agriculture and manufacturing. Agriculture
contributes for person to GDP whereas manufacturing contributes around 33 per cent of
GDP. Other emerging sector is tertiary sector which is basically involved in service
providing. In this logistics and hotel services are at boost. Some of its economic data are
 GDP ( In billions ) – 467.59
 GDP Per capita – 12,316
 INFLATION RATE - -0.6
 UNEMPLOYMENT RATE – 6.1

Figure 2 Economic outlook of Poland, 2016
Hospitality sector -Poland has large number of visitors as it is amongst most famous tourism
market in world. Hospitality and tourism sector contributes the most to its economic growth.
its famous cities are Kraków, Warsaw, Wrocław, Gdańsk, Poznań etc. It is 17th most visited
country due to its historical monuments, lakes, mountains, forests. This is the reason why
most of the famous hotel chains wants to invest in this country. As there are high number of
tourists who visits this country, these hotel groups can earn huge profits. Hotel and hospitality
sector in this country is at boom due to which investors are looking it as a good alternative for
allocating their capital. It will be profitable to invest in hotel market of this nation due to
increased traffic of tourists (Mellahi, and Collings, 2010).
Business environment in Poland
It is very important to analyse the business environment if Holiday Inn is expanding
its business in Poland. It will help in analysing several factors that could affect expansion
strategies of this company. Business environment is a combination of various elements that
are required to be considered while starting operations in new country. PESTLE analysis is
very important in deeply analysing the environmental factors of Poland. It is concerned with

political, legal, economic, social, technological and environmental issues of this nation.
Analysis of business environment is as follows-
Political environment- Poland is amongst most politically stable country in Europe. It
is attractive place for Foreign Direct Investment because of its large number of states. This
country has approx. 14 Special Economic Zones which are the areas that are free from
income tax rules and regulations. These areas have proper infrastructure for starting new
business. Political environment of Poland is suitable for FDI as government of this nation
sees it as mode for development of economy. But there are few restrictions for FDI as it has
strict regulatory framework. According to World Bank this country’s rank is 45th amongst
189 countries in terms of ease in doing business. They have also found that taxation system is
complex and not updated (Bristow, 2010). An average of 685 days is required to enter any
contract in Poland. Holiday Inn has to do proper research about taxation system of this
nation. In case of property registration, there are so many procedures. Political factors may
play a critical role in long term profitability of this hotel. There are less risks in travel and
hospitality industry of this country as compare to other nations. To achieve more success this
group should make systematic and diversified policies for the purpose of expansion. This
hotel chain can analyse following issues before investing in one more state of Poland –
 Political stability and importance of hospitality sector in this country.
 Level of corruption in service sector.
 Interference of government in this industry.
 Legal regulation regarding enforcement of contract.
 Trade regulation and tariffs related with hospitality sector.
 Pricing regulations.
 Intellectual property act of this country.
 Industrial safety regulations regarding this industry.
Economic environment- It was the only country which has experienced growth in
GDP during global finance crisis. GDP growth in Poland ranged from approx. 1.6 % to 6.8
%. Recent changes in fiscal policy are focused towards developing economic growth by
increasing the budget and reducing restrictions on fiscal measures. Demand for hospitality
services is constantly growing due to large number of tourists and other visitors. So, Holiday
Inn can experience success and increase in wealth by expanding its business to more states in

Poland (Werther Jr, and Chandler, 2010). It will also help in economic growth of this nation.
Business of this company will be in better position due to planned relaxation of fiscal policy
by government of this country. Holiday Inn must consider all micro and macro environment
factors of Poland so as to identify its impact on their business. Macro environment includes
inflation rates, interest rates, foreign exchange rates etc. whereas micro environment includes
elements like competition and impact of competitive advantages in their company. According
to this analysis main factors are as follows-
 Poland is a stable economy.
 Intervention of government is free when it comes to service sector.
 There is high standard in infrastructure which is again a positive point of this
organisation.
 Highly skilled workforce is available in this country.
 Labour coat is reasonable.
Social environment – Such factors are related with demographics, cultures, values, beliefs
and attitudes of citizen of this country. In Poland around 60.9 % people lives in urban areas.
Religion plays an important role as they follow Roman catholic culture. Holiday Inn should
recognise religious factors of this country in order to avoid any unethical function. Business
should be done as per innovative ideas and new thinking to reduce level of risks that occurs
in new market place. There is shared belief and attitudes of people which plays an important
role in marketers of Holiday Inn in order to design effective marketing strategies and design
the message to target them in appropriate manner. Social factors that may assist this hotel
chain in expansion are as follows-
 Demographics and skill levels are high.
 Class structure and power structure of society is high.
 Educational level of people is high.
Technological environment- There is growing technological scenario in this country. This
will facilitate in growing business as technology plays a significant role in development of
every type of business. Recent developments in technology are beneficial for hospitality
sector as there is beneficial impact of this in expansion process. Strong marketing campaign
can be done by this hotel chain as they can adopt high tech techniques for the purpose of
advertising.

Environmental factors- Before entering in new market it is required that business firm
should analyse environmental factors of that country. In case of Poland climatic conditions
are very impressive as government is very strict regarding environmental issues. They have
strong policies and rules related with environment protection (Nadkarni, and Herrmann,
2010.). Due to its stable climate it is key attraction of tourists from many countries. Holiday
Inn can open one more branch in Warsaw they can get large number of consumer traffic in
this state of Poland. Important factors to be considered in this context are as follows-
 Weather and climate cycle.
 Laws related with pollution.
 Water and air pollution rules for travel and hospitality sector.
 Recycling and waste management.
 Attitude of government towards renewable energy.
Legal environment- Legal framework and issues are another important factors in order to run
business in legal and ethical manner. Some of the legal factors of Poland that are necessary to
be analysed by Holiday inn are employment law, health and safety law, consumer protection
law etc. In this country laws related with employment re liberal whereas health and consumer
protection laws are strict. So, this company has to keep these issues in mind before starting
operations after expansion (Schaltegger, and Wagner, eds., 2017).
Therefore, these are few elements of business environment. Analysing such issues in
effective manner will help in expansion process. Since, Holiday Inn is already present in
Poland so it would be very much familiar with these elements. But, deep understanding of
such components will assist it in expanding its hotel chain in this country.
Porter’s five force model-
This model is very important in order to achieve various competitive advantages.
When a business is growing in global market then there is huge risk of existing competitors
and business rivalry (Benn, Dunphy, and Griffiths, 2014). Since, Holiday Inn is increasing its
presence in Poland by introducing one more business unit in Warsaw so this model will help
in making strong and effective strategies for expansion and achieving competitive
advantages. Five forces in this model are as follows-
Existing rivalry- It includes competitors who are already existing in new market
place. In Warsaw there are so many hotels delivering high quality services. Industry size of

hospitality sector is very large as it is an important tourist destination. Along with that
hospitality industry is fastest growing field so there is huge opportunity for success. It could
be done by formulating effective strategies for attaining competitive advantages.
Threat of substitute- As there are so many competitors in hotel industry so there is
huge risk for this company as customers can easily get substitute if they are not satisfied by
once service provider. It is required to use effective and quality services with various ranges
in pricing which will suit all level of consumers.
Bargaining power of suppliers- This force is related with bargaining and switching
power of suppliers. In hotel industry suppliers have high bargaining power and they easily
changes the parties in order to supply their products and services to those who will pay higher
amount in exchange. Holiday Inn has to maintain strong and trustful relationship with their
supplier. This will help in retaining these suppliers and they will not easily switch with other
competitors.
Bargaining power of customers- This is another important force which is related with
switching power of customers. This company should have effective pricing strategy and good
quality services in order to increase consumer loyalty.
Threat of new competitors – The company has to face the problem of high
competition because hospitality sector is most emerging field in Poland due to which various
hotel groups seeks to invest in this country (Cavusgil, and et.al. 2014). Holiday Inn should
have effective and strong marketing strategies in order to reduce such problems that a
company can face.
Strategies
Improve team building- Higher authorities of organization have to improve team
building among employees in order to attain target within time period and maintain
performance in effective manner.
Motivate employees- Leaders and managers of business organization try to motivate
existing employees towards complete work on time. Also communicate them in order to
identify their issues and try to resolve them as well.

Implement plans- Employers are responsible to frame plans and strategies which are
helpful for the continuous growth and development of company. After this try to implement
the same in effective manner.
Recommendations
Various possible recommendations must be providing to companies in to maintain
performance in effective manner and enhance work quality as well. Organizations have to use
various tools and techniques for enhance overall performance and work quality.
CONCLUSION
Business environment is very important to be analysed when an organisation plans to
expand its business in global market place. As Holiday Inn is growing its presence in Poland
by opening another hotel in Warsaw so it will be beneficial to understand factors of business
environment in effective manner. This will facilitate in understanding the impact such
elements can have on its expansion process. This will help in making strong expansion
strategies which will be suitable as per new market place. Porters five force model will help
in identifying level of competition and achieving competitive advantages in intense
competition.

REFERENCES
Books and journals
Cavusgil, S.T., and et.al. 2014. International business. Pearson Australia.
Benn, S., Dunphy, D. and Griffiths, A., 2014. Organizational change for corporate
sustainability. Routledge.
Schaltegger, S. and Wagner, M. eds., 2017. Managing the business case for sustainability:
The integration of social, environmental and economic performance. Routledge.
Nadkarni, S. and Herrmann, P.O.L., 2010. CEO personality, strategic flexibility, and firm
performance: The case of the Indian business process outsourcing industry. Academy
of Management Journal. 53(5). pp.1050-1073.
Werther Jr, W.B. and Chandler, D., 2010. Strategic corporate social responsibility:
Stakeholders in a global environment. Sage publications.
Bristow, G., 2010. Resilient regions: re-‘place'ing regional competitiveness. Cambridge
Journal of Regions, Economy and Society. 3(1). pp.153-167.
Mellahi, K. and Collings, D.G., 2010. The barriers to effective global talent management:
The example of corporate elites in MNEs. Journal of World Business. 45(2). pp.143-
149.
Smith, W.K., Binns, A. and Tushman, M.L., 2010. Complex business models: Managing
strategic paradoxes simultaneously. Long range planning. 43(2). pp.448-461.
Henson, S. and Humphrey, J., 2010. Understanding the complexities of private standards in
global agri-food chains as they impact developing countries. The journal of
development studies. 46(9). pp.1628-1646.
Bryson, J.M., 2011. Strategic planning for public and nonprofit organizations: A guide to
strengthening and sustaining organizational achievement (Vol. 1). John Wiley &
Sons.
Bromley, P. and Powell, W.W., 2012. From smoke and mirrors to walking the talk:
Decoupling in the contemporary world. Academy of Management Annals. 6(1).
pp.483-530.
O’Brien, K., 2012. Global environmental change II: from adaptation to deliberate
transformation. Progress in Human Geography. 36(5). pp.667-676.
Online

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