Five Forces Analysis of the Hospitality Industry - Research Paper Example

Industry Analysis College Industry Analysis Five Forces Analysis of the Hospitality Industry Rivalry among Existing Firms The hospitality industry has many players, explaining why there is increased rivalry between the firms. There is a remarkably slow growth of tourists’ demands, a factor that compels many hotels and restaurants to compete rigorously. Revenues from the hospitality industry depend on customer traffic, and only players that have gained competitive advantage can survive the increasing competition. In the case of Mamas on Washington Square, gaining competitive advantage has been the main priority (Adams, 2006). Notably, Mama’s needs to exhibit a level of differentiation to gain the competitive advantage over other players in the North Coast Beach. Threat of New Entrants In the hospitality industry, there are low entry barriers. For this reason, several investors can afford the capital required to set up a business in the hospitality industry. Additionally, the franchise component of the industry has served to lower the cost of setting up a new business in the restaurant industry. The rate of product differentiation in the hospitality industry is relatively low because many entrants have focused on providing customers with high quality as well as remarkable products. In the case of Mamas on Washington Square, there is a salient need to increase the level of product differentiation. Currently, many customers prefer Mama’s because of the tasty dishes served. Both product and service differentiation can help Mama’s gain competitive advantage over new entrants in the industry. Threat of Suppliers In the hospitality industry, there is a moderately low threat from suppliers. Many of the players in the industry contribute to the percentage of suppliers since they need to have access to quality supplies (Pizam, 2010). Mama’s can benefit from identifying reliable suppliers who provide quality goods since it intends to continue serving delicious meals to customers. Threat of Buyers In the hospitality industry, buyers have a strong bargaining power because there is a very low switching cost between one restaurant and the other. Customers are well aware of the prices as well as the expected quality of products (Enz, 2010). For this reason, Mamas on Washington Square needs to develop strategies for addressing the threat of buyers in the industry. Threat of Substitutes In the hospitality industry, there is an increasing threat of substitutes. Many players are likely to provide customers with substitute products that are of similar quality to Mama’s and within the same price range. Therefore, customers would register a limited switching cost. There is a salient need for Mama’s to develop strategies for surviving in the highly competitive Industry. Ethnic Cuisine in the United States There is an increasing demand for ethnic cuisine in the United States. Specifically, Asian cuisines are gaining popularity and slowly becoming part of the mainstream food. Therefore, the hospitality industry has to specialize in providing customers with a diverse range of ethnic cuisines. Many restaurants and hotels have recognized the increasing demand for ethnic cuisines and are currently serving different cuisines. Tourists expect to experience new places and new foods. For this reason, the hospitality industry, specifically hotels and restaurants have included different ethnic cuisines in their menu (Pizam, 2010). Some ethnic cuisines such as Greek cuisines, California fresh cuisines, Asian cuisines, Italian cuisines as well as Italian cuisines are becoming very popular. Many tourists also want to have a taste of Mexican and Swedish cuisines. Currently, Mama’s on Washington Square offers a few items in the menu that can be categorized under Italian and California fresh cuisines. Mama’s also offers a variety of modified Asian cuisines. Preference for Healthy Eating There is an increasing preference for healthy foods by both adults and children. The increasing obesity rates have motivated many people to be conscious of what they eat. Therefore, restaurants and hotels in the hospitality industry need to introduce healthier items on their menus. Many people prefer different varieties of vegetables a factor that explains why the prices for vegetables have gone high (Kim & Mauborgne, 2015). There is an increased preference for low carbohydrates and high protein diets to combat the soaring rates of obesity. Customers are more likely to prefer restaurants and hotels that offer a diverse range of healthy foods. Mama’s has made efforts to provide customers with numerous health items on its menu. However, there is a salient need for Mama’s to exhibit more effort in diversifying its range of healthy foods. Environmental Sustainability Players in the hospitality industry are affected by environmental degradation. The level of environmental sustainability determines the level of success that players can register. In the case of Mamas on Washington Square, environmental sustainability of the North Beach is likely to determine the number of visitors to the beach. Businesses operating on the North Beach should promote environmental sustainability. Additionally, businesses operating on the North Beach should take part in corporate social responsibility initiatives that promote sustainability (Kim & Mauborgne, 2015). If hotels implement environmental and social initiatives that promote a measure of environmental sustainability, then the industry is likely to be more profitable. Many hotels and restaurants have adopted green practices and have placed emphasis on customer service. Some of the green practices include environmental conservation and prevention of pollution and consumption of energy. Promoting environmental sustainability may result in reduced costs in the hospitality industry. Social Media Impact on Restaurant Business Technological factors have an impact the hospitality industry. For example, the use of social media and Internet marketing has transformed the hospitality industry immensely. Many restaurants have recognized the potential of social in promoting their products. Social media platforms allow customers to share their experiences at a certain hotel or restaurant. Therefore, the exchange of information on social media platforms may benefit some players in the industry. There is a salient need for companies in the hospitality industry to exploit the full potential of social media to create awareness about their services and products. Mamas on Washington Square can use the social media in increasing awareness of its unique products and services. Through interactive social media sites, the company can maximize the potential of its virtual space to register competitive advantage. Restaurants can rely on social media platforms to interact with customers and establish favorable relationships with the customers. Research indicates that social media platforms can initiate interactive relationships with customers, an aspect that can benefit the business. Future Strategic Direction As highlighted above, the hospitality industry is highly competitive. The key driving forces in the industry are innovation and technology. For this reason, Mamas on Washington Square should focus on both products and service innovation to gain competitive advantage. Product differentiation may prove to be a challenge because of the increasing number of potential substitutes. Mamas on Washington Square is currently enjoying a high level of customer loyalty because it offers unique products (Harrison & St, 2010). With increasing entrants in the industry, Mama’s needs to formulate new strategies for gaining competitive advantage. Service innovation will allow Mama’s to provide customers with exemplary service, a factor that will increase the restaurants market share. The healthy eating trends are proving to be of critical significance in the hospitality industry. Many customers are conscious of their health and prefer healthy meals at different tourism destinations. Additionally, customers want to explore different ethnic cuisines. With the increasing emphasis on healthy eating, as well as a remarkable preference for ethnic cuisines, Mama’s needs to make adjustments on the items on its menu. Product diversification will allow Mama’s to meet the needs of different customers. Mama’s can also take advantage of the potential presented by social media platforms like an effective promotion strategy (Das, 2011). The hotel needs to create awareness of its diverse range of unique products. In a highly competitive industry, Mama’s needs to counter the competition by developing unique strategies and improving customer service. References Adams, D. (2006). Management accounting for the hospitality, tourism and leisure industries: A strategic approach. London: Thomson Learning. Das, G. D. (2011). Tourism marketing. Delhi: Pearson. Enz, C. A. (2010). Hospitality strategic management: Concepts and cases. Hoboken, N.J: John Wiley & Sons. Harrison, J. S., & St, J. C. H. (2010). Foundations in strategic management. Mason, Ohio: South-Western Cengage Learning. Kim, W. C., & Mauborgne, R. (2015). Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Boston, Massachusetts : Harvard Business Review Press. Pizam, A. (2010). International encyclopedia of hospitality management. Amsterdam: Elsevier/Butterworth Heinemann. Read More