TUNE HOTELS &PORTER’S FIVE COMPETITIVE

FORCESRiska

GhudyWeerayutThabang

Porter’s 5 and Tune

Hotels, how can?!

INTRODUCTION

• Tune Hotel is a low cost hotel associated with Air Asia company.

• Until now, it has 5 hotel in Malaysia and 1 hotel in Indonesia still under construction.

PORTER’S COMPETITIVE FORCES

THREAT OF NEW ENTRANTS

THREAT OF NEW ENTRANTS

Question:“How easy/difficult is it for new entrants – anybarriers?”

Consider:• Switching costs• Brand loyalty

THREAT OF NEW ENTRANTS

• Switching Costs & Brand Loyalty– Not a likely barrier – budget business means

consumers go where needs are satisfied– Consumers consider whatever is cheapest and still

has the services needed ie

Consumers know to expect “lower standards”therefore biggest hurdle would be the costadvantage that [hotel] has established

THREAT OF NEW ENTRANTS

New entrants would merely need to:

• Pick convenient locale ie city centre or near airports to be in position of strategy

• Establish good marketing strategy - like kulula in SA did with airline

Tune does not even have most of its hotels in these "strategic" places - only KLCC and KLIA, but key is their affiliation with AIR ASIA

BARGAINING POWER OF SUPPLIERS

BARGAINING POWER OF SUPPLIERS

Question:“How strong is position of sellers – are there any

potential suppliers?”

Suppliers in this case:Pensonic, King Koil, Nippon Paint, Johnson

Suisse

BARGAINING POWER OF SUPPLIERS

Tune has managed to overcome the bargaining power of suppliers by making longterm deals with their suppliers:

• They do in-hotel advertizing for their suppliers• They have named the floors of their hotels

after their suppliers

BARGAINING POWER OF CONSUMERS

BARGAINING POWER OF CONSUMERS

Question:“How strong is position of buyers – can they

work together to order “large volumes”?”

Tune already has market cost advantage meaning customers don’t have any competitors to threaten them with

BARGAINING POWER OF CONSUMERS

• Large volumes is actually the business model of budget businesses:

• On days of expected high bookings (peak seasons), prices go up (this could be point of consumer empowerment / concern)

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

LOW COST

• Tune hotel believes with enjoy 5 stars hotel but pay for 1 star hotel.

• Limited service concept that means less service provide.

• embrace with five reasons to choose the hotel.

• Some services and facilities require extra price.

COMPETITION

FireFly Flight and Hotel• Introduction• Low cost• Firefly is a flight company and provide hotel

service.• Firefly is wholly owned subsidiary of

Malaysian Airline System Berhad.• It is a low cost airlines.

COMPETITION

• Most of the prices are including flight package.• Service and facilities are standard

international hotel.• Bit expensive rather than Tune Hotel but more

focus on facilities and service.

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

• Tune is more cheaper but service is limited, people may pay more to get comfortable.

• Tune hotel perfect for people who stay for a while not for holiday.

• Tune hotel does not have many facilities and people may think twice for extra price.

• Firefly provide more valuable for customer with services and facilities compare with Tune Hotel.

RIVALRY BETWEEN EXISTING FIRMS

RIVALRY BETWEEN EXISTING FIRMS

Question:“Does strong competition exist- is one morepowerful, or is there balance?”

Market research revealed: Most "low end" budget hotels charge around RM20 for rooms; meaning Tune has established cost leadership and although market sharing may increase, they are still a leader – competitive advantage

RIVALRY BETWEEN EXISTING FIRMS

Question:“what will define competition for Tune?”

Consider:• Market growth rate• Dimensions of competition

RIVALRY BETWEEN EXISTING FIRMS

• Market growth rate– Fact that it’s likely to be low– ie growth of any competition likely to be at detriment to

Tune and other firms because of “specific” target market (low budgeters)

• Dimensions of competition– Likely that Tune focuses competing on price dimension,

rather in marketing / location etc– Gives competitors chance to take advantage of other

dimensions