The Porter’s Fives Force Analysis

Running head: STRATEGIC DEVELOPMENT
STRATEGIC DEVELOPMENT
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Author Note

STRATEGIC DEVELOPMENT
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The fundamental plan of creating, establishing and operating a business is known as
strategic development (Ansoff et al., 2018). The purpose of the paper is to represent two
cases on strategic development from taking examples from a specific industry. The industry
selected for this paper is hospitality industry. Two cases involving the information regarding
strategic development will be Ramada Resort from Phillip Island and Marriot Australia. The
paper will be concluded by presenting a summary regarding the strategic development
strategies of the organizations in hospitality industry.
Hospitality industry involves the characteristics and functionality of service industry,
which includes food, beverages service, lodging, transportation, entertainment, tourism and
event planning businesses. The dependence of hospitality industry is based on availability of
disposable income and leisure time. Hospitality industry involves direct operations,
maintenance, housekeeping, marketing, human resource, management and kitchen staff.
The current state of hospitality industry of the world majorly contributes to the global
economy and stimulates numerous job opportunities in all over the world. The hospitality
industry contributes around 8.3 trillion dollars by generating 313 million job opportunities.
The industry is growing with the association of consolidation. The industry has witnessed
corporate acquisition of around 20 billion dollars. With the investment of around 30 billion
dollars on the construction of hotel industry in the year 2017, the industry is expected to grow
and expand on a global scale. The hospitality industry has grown 10-12 percent in the
financial year 2018-2019.
The Porter’s Five Force Analysis of Hospitality industry will reflect the micro-
external environmental analysis of hospitality industry. One of the factors is Competitive
rivalry, hospitality industry is high due to the cost associated with switching and product
differentiation is very low (Chernev, 2018). The industry is growing with the inclusion of
numerous brand and hotel chains that are investing in the infrastructure and growth of service

STRATEGIC DEVELOPMENT
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quality. The major brands in Australia are, Ramada, Marriott, Park Hyatt Sydney and Saffire
Freycinet. Another factor is barriers of new entrants, barriers for new entrants in hospitality
or hotel industry is moderate. The increasing expansion plans of the big brands or hotel chain
have established barriers in terms of differentiation strategy and total cost associated with
commercializing the operational plan. The capital cost in hospitality industry is very high in
terms of resource utilization and managing human resources. However, the increasing rate of
internalization of the hotel chains from international to domestic country avoids the barriers
to entry. Another factor is bargaining power of suppliers; supplier power in hospitality
industry is low due to the increasing brand values of the established brands. The main
supplier of this industry involves labour, personnel and staff members for monitoring,
executing and maintaining the planned services to the target consumers (Haider et al., 2019).
The suppliers also include manufacturers of furniture, bed sheets, décor and washroom
essentials. The bargaining power of supplier is low due to the multiple existences of local and
international suppliers. Another is bargaining power of buyers, bargaining power of buyers is
high due to the low cost in switching and high availability of options in Australia (Baker,
2016). Threat to substitutes is another aspect of Porters Five Force Analysis. The threat of
substitute is low due to the increasing rate of disposable income in the world and increasing
growth in the complementary tourism industry. Therefore, after the conduction of Porters
Fiver Force Analysis, it can be deduced that the hospitality industry is attractive for both
Ramada and Marriott (established companies) for growing in the market. However, both the
companies should address the changing demand of customers for competing with new
entrants in the market.
The PESTLE analysis of Australia will stimulate the macro-external environmental
analysis of Australia. Based on the information regarding political factors, Australia has
stable political environment but is criticized for the immigration policies and poor