Taj Mahal Palace Hotel, the symbol of Indian Hospitality industry was opened on 16th December 1903, and is considered to be Asia’ largest hotel founded by Mr. Jamsetji Nusserwanji, the founder of Tata Group. The interesting story leading to the formation of this iconic brand is that Mr. Jamsetji was once denied entry at the Watson’s Hotel in Mumbai, as non-white Indians were not allowed to enter there at the time of British government which inspired him to create a master piece of his own.
The Indian Hotels Company Limited (IHCL) and its subsidiaries are known as Taj Hotels Resorts and Palaces. There are more than 60 hotels in 45 locations in India under the banner of Taj Hotels Resort and Palaces with an addition of 15 international hotels in Malaysia, United Kingdom, United States of America, Bhutan, Sri Lanka, Africa, the Middle East and Australia
Following is a detailed Porter Five Forces Model Analysis of Taj Mahal Palace Hotel:
Competitive Rivalry – High
The level of competition is quite high in the hospitality industry. Huge players in the market are attracted towards hotel and real estate industry. Although Taj Mahal Palace Hotel holds a great market repute and heritage if the buyer finds an opportunity to shift to substitute options on cheaper rates they will prefer it as the normal user would not go for an apple to apple comparison when it comes to services offered (Linda, n.d.). Main competitors of Taj are Oberoi Hotel, Leela Hotel, and others.
Moreover, by diversifying the customer experience such as restaurants, coffee shops, and casinos many large operators are attracting customers towards them.
Threat of New Entrants – Moderate
The hospitality industry is never short of new entrants as it depends on travel and tourism and with India having a rich heritage attracts a lot of tourist from around the world gives a lot of new entrants the opportunity to enter into the hospitality business (UKEssays, 2015). Having said that level of services varies from organization to organization and requirement of the end user. For example, people who prefer or in other words can afford Taj Hotels are the cream of India which is no more than 20% of the population, remaining would go for other cheaper options available in the market. If new entrants plan efficiently keeping in view the need of customer they can bring a serious competition in the market.
The new entrants can enter the market by opening smaller hotel and motels, however on the larger scale, the industry is capital intensive and requires a huge amount of investment to operate on a lager set up as the upfront investment in buildings, décor, furnishings, infrastructure, and staff are costly.
Bargaining Power of Suppliers – Low
Given Taj Mahal Palace Hotel strategic advantage most significant of which is their brand name they enjoy a great bargaining power over their suppliers, Taj being a huge name in industry attracts a lot of potential suppliers who would want to work with them on their terms which gives Taj an extra advantage when they sit on the negotiation table (Vijaywargiya, 2014). Since most of the suppliers are land owners, developers, architects and consultants they do not have a significant muscle to change terms and conditions of such a huge name.
However, suppliers providing sophisticated technology and systems related to property management, applications, databases, and networks do have a relatively high negotiations power than suppliers of another category due to their strategic importance and limited number.
Bargaining Power of Buyers – High
Hospitality industry is all about satisfaction of the customer, if the customer is satisfied with the services he or she would come continue to visit that particular hotel or restaurant for life and one bad experience can take the customer away for life time which shows that the buyers have a relatively strong bargaining power in hospitality industry. There is no switching cost for the buyers. Although losing a single customer may not be a big threat but since India rely heavily on tourism if the groups start exiting from their customer base it will impact the profits significantly.
Threat of Substitutes –Low
The potential substitutes for the hospitality industry could be other forms of leisure accommodation like camping facilities, guest houses, or recreational vehicles. None of these compare the services and facilities that Taj has to offer. They are not up to the mark of five star hotels. Therefore, the threat of substitution is low for Taj Hotel.
References
Linda, n.d. [Online] Available at: http://www.essay.uk.com/essays/business/essay-nokia-pestle-analysis/ [Accessed 12 June 2017].
UKEssays, 2015. Porter Five Forces Model Of Taj Hotels Tourism Essay. [Online] Available at: https://www.ukessays.com/essays/tourism/porter-five-forces-model-of-taj-hotels-tourism-essay.php [Accessed 19 July 2017].
Vijaywargiya, A., 2014. Taj hotels. [Online] Available at: https://www.slideshare.net/anchitv/taj-hotels-39793263 [Accessed 19 July 2017].