The Five Forces model of Michael Porter is an business unit strategy tool that is used to make a business model analysis of an industry structure .The aim of the porter’s five forces model is to identify if there are factors in the environment which influence the capability of an organization to position itself to such advantage (Gerry Johnson & Kevan Scholes).
Threat of New Entrants
The highly rated hotel in Malaysia like 3stars, 4stars, 5stars hotel industry is primary dominated by few competitors like Sunway, Berjaya, Shangri-La, Hilton and few others international large hotel company, so for new entrants that wish to enter the luxury hotel market will be very hard because it may need large capital, initial investment and build up hotel image against those highly rated hotel. So the threat of new entrants is very low for Hotel industry.
Bargaining Power of Suppliers
Bargaining power of supplier in hotel industry is very weak. Hotel is a service field and they need a lot of manpower to run their business and provide services to consumer, so hotel staff as their main supplier in-charge of daily operation. Besides, each of hotel staff receive income every monthly and bonus every year and have the right to negotiate salary and resign the position
Bargaining Power of Customers
Bargaining power of customers tend to be relatively greater when there is more hotel and competitors. Therefore, it depends on location, some places only have one hotel and few hotel or some even have more than 10 hotels within one area. It means that if there are more hotel competitors within a tourist hotspot, bargaining power of customer will be higher because customer able to do comparison and hotel will use different type of
promotion, prices, advertisement or other way to attract customer.
Threat of Substitutes
In recent year, hotel industry facing a threat of substitutes, which are cottage and B&B (Bed and Breakfast), Inn is getting more popular and acceptable for consumer because it provides a standard service with very reasonable price. The main reason cottage, B&B descent increased in last decade was investor doesn’t need high capital, high budget to maintain the business, it just need an acceptable environment for consumer for example clean small room with bed and toilet for them to overnight. Normally cottage or B&B located in tourist hotspot like Malacca city town, Taman Negara in Pahang, Port Dickson and more places, so consumer has more alternative. So the threat of substitutes is considered high.
Degree of rivalry
Rivalry among competitors can lead to an aggressive pricing and promotion in battles to benefit and attract more customers. In hotel industry, there is low switching cost for consumer, they can change hotel anytime so degree rivalry is very high.