5 porter forces(Tourism Industry)

Edit 0 15

Analysis tourism industry in Malaysia by 5 porter forces

During the last several decades tourism has emerged as one of the major industries in the world economy. Tourism revenues have grown to the third largest industry after oil and automobiles. Malaysia has some of the most attractive holiday destinations in the world. Tourism in Malaysia has contributed significantly to nations economy. The tourism industry in Malaysia is an important foreign exchange earner, contributing to economic growth, attracting investments and providing employment. As with other countries in the world, tourism industry can be claimed as an important sector for the Malaysian economy. Malaysian Tourism Industry Forecast to 2012, international tourist arrivals in Malaysia will grow at a CAGR of around 8% during the forecast period (2011-2013) and tourism receipts from overseas tourists are expected to rise at a CAGR of around 8% during the same period, thereby, surpassing RM 70 Billion (over US$ 22.4 Billion) by 2013. Apart from the ASEAN countries, it is anticipated that tourist arrivals from China, India, and the Middle East will strongly grow during the forecast period (2011-2013). Malaysian tourism industry will continue to grow rapidly in coming years, on the back of increasing promotional activities by the government and growing reputation of the country as a shopping hub.

The competitive environment

The threat of entrants The power of suppliers The power of consumers The threat of substitutes Competitive rivalry

Porters Five Forces

1. The rivalry among established companies that is a function of three main factors: industry competitive structure, demand conditions, and the height of exit barriers in the industry. 2. The threat of new potential entrants that is a function of the height of barriers to entry that depend on three main sources: brand loyalty, absolute cost advantages, and economics of scale. 3. The pressure of substitute products that can limit the price a company can charge for its products and services. 4. The bargaining power of buyers. Buyers are able to force down prices or they may demand higher quality and better services which may increase a companys operating costs. 5. The bargaining power of suppliers. Suppliers are able to force up the price of their products or reduce the quality of products supplied which may decrease a companys overall profitability. MALAYSIA TOURISM INDUSTRY ANALYSIS The activities of Tourism Industry in Malaysia are directed towards improving the Malaysian tourism services. Owing to the good standards the Tourism industry in Malaysia maintains, it also appeals to many investors to invest in the Malaysian tourism industry. This inflicts a positive influence on the economy of Malaysia. Tourism industry in Malaysia provide ample scope for employment. There are several people who are recruited either in tourism industry directly or related industries. (http://www.economywatch.com/world-industries/tourism/malaysia.html)
http://books.google.com.my/books?id=6SAiXqi5xTIC&pg=PA120&lpg=PA120&dq=STEEP+analysis+t ourism+industry&source=bl&ots=4WUccfvD0I&sig=D0V3gcVrvqiwCQtzh_FTimfpWc&hl=en&sa=X&ei=cOVzT_yBBMzprQfR24nHDQ&ved=0CEQQ6AEwAw#v =onepage&q=STEEP%20analysis%20tourism%20industry&f=false

Over the years Malaysia tourism industry had been expanded .The Malaysia tourist promotion board(MTPB) vision is to make the tourism industry a prime contributor to the socio-economic development of the nation, and aims to market Malaysia as a premier destination of excellence in the region.In 1999, Malaysia launched a worldwide marketing campaign called Malaysia, Truly Asia which was largely successful in bringing in over 7.4 million tourists.and got some awards in marketing and also became afamouse advertising brand for Malaysia tourist industry. Regarding to the MALAYSIA TOURIST ARRIVALS 2010

(http://www.tourism.gov.my/facts_figures) ,it shows Malaysia tourist arrival in 2010 compare to 2009 in january-december ,The total grand growth was 3.9 it means that the industry is expanding year by year and the tourists from around the world whom intersted to see Malaysia are increasing. Regarding to the star-news ,Malaysia has been ranked ninth in the United Nations World Tourism Organisations (UNWTO) list of 10 most visited countries, with 24.6 million international tourist arrivals in 2010. As Malaysian ambassador to the Philippines Datuk Seri Ibrahim said regarding to Malaysia tourism ranking and governors plans on tourism industry that "The Tourism Ministry should consider refining its promotion strategies as current campaigns mostly feature islands and beaches". However there is threat of new entrants it means that the other eastern asia countries are preparing them selves to increase their tourist industry facilities.as Dr Ng said "2011 had been a tough year for the national tourism industry, which was affected by the tsunami in Japan, floods

in Thailand, the European economic crisis and the opening of a casino in Singapore" She hoped that with the ministry's new plans for 2012, the industry would thrive again. Within concerning on above paragraph it shows that there is very high Competitive Rivalry within the industry competitors like Thailand which is gaining a lot of attraction among the world,Indonesia,Singapore its casinos became a famous attracting for the visitors and also they developed lots of other tourism attractions it shows that they put their afford to gain their tourism industry and attract a lot of people around the world to visit their country. Our ongoing analysis found that, the Malaysian government is continuously making efforts to establish its tourist industry at the global front and has somehow succeeded after getting top position among the top 10 tourist destinations in the world. Besides, the government included tourism industry in the five year plan and regards it as a major part of the economy. The countrys tourism promotion board is also coming up with new promotional packages to attract tourist from various destinations. Besides, authorities. are pouring huge amount of investments to develop tourist industry, thus creating employment to thousand numbers of people in the country. (http://www.travelweekly.asia/news/tourism/2524-malaysian-tourism-industry-set-to-flourish-onstrong-government-support) REDANG Redang Island together with its 8 neighboring islands (Lima Island, Paku Besar Island, Paku Kecil Island, Kerengga Besar Island, Kerengga Kecil Island, Ekor Tebu Island, Ling Island, Pinang Island) are known as the Asia paradise in the South China Sea regions. Being the main island of the Archipelago. Redang Beach resort is one of tthe famous resorts in Redang Island this resort got every thing you need to relax like the private beach they got there to provide their brilliant services,also they have some packages for scuba diving. Instead of all the entertaining packages and relaxation plans,and funny stuff they have some problems for providing their services one of all is that they dont have online payment in the website, Online payment refers to money that is exchanged electronically. Typically, this involves use of computer networks, the internet and digital stored value systems. this is one of the threats because in today life its all about not to waste time,wasting time means wasting money,so in my view its better to add online payment in their website to book online and pay online. One of the other suggestions that I have is that the hotel managment should plan to make some events specially for their Resort and diffrent offers they can provide to the people to intrest them to visit their resort as a tourist.and on that dates they can make some events for diffrent moments and come up with celebrations. at the end another suggest that i want to say here is the promotion pricing for diffrent dates.

PORTERS FIVE FORCES FOR MALAYSIAN TOURISM INDUSTRY

the early 70 spelt the beginning of a new era. The old tourism department of 1959 was then upgraded into the tourism development corporation. The formation of the tourism department corporation in 1972 and placing it under the purview of the ministry of trade and industry for strategic planning and focus charted a new era in the history of the tourism industry. That was the same year Malaysia airlines was formed. It was the dawn of a new beginning and both departments were giving the task to put Malaysia on the world tourist map. Since then, the Malaysian economy remains relatively robust a with manufacturing and tourism taking the lead. Today , the tourism industry has experienced a rapid growth and gained an importance in the Malaysian economy. It is the second largest foreign exchange earner, after manufacturing. This Is in line with the governments objective to accelerate the domestic private sector and stimulate the services sectore to spearhead economic growth.

http://www.soopertutorials.com/wp-content/uploads/2009/07/porters-five-forces-model.jpg

In our research conducted, the structure of the analysis is according to each of the five forces of Porters model, Porters 5 forces analysis. The 5 components inside this model which includes 3 forces from horizontal competition (rivals, new entrants, and substitute products) and 2 forces from vertical competition (bargaining power of supplier and buyer). As one of our research objectives is to determine the factors that allow Malaysia to gain more revenue from its tourism industry, Porters 5 forces analysis was significant. This model is applicable to our research topic because we need to analyse all the five components in order for Malaysia to gain more revenue from its tourism industry. According to Harvard professor Michael Porter, the five industry forces determine an industrys overall attractiveness and potential for long-term profitability Tourism Destinations As per Malaysias official tourism website, following are some of the destinations considered to be tourist attraction spots: Kuala Lumpur: The 88-storey PETRONAS Twin Towers is the main attraction in this capital city. Penang: It is a popular beach spot in Malaysia, lined up with a string of
International-standard resorts. Wind surfing, canoeing, and parasailing are some of the activities that can be enjoyed here. Also, Penang is a favorite spot among medical tourists.

Malacca: This place is famous from historic point of view due to the
Portuguese colonization here from 1511 to 1641. Malacca, is another city well-known among tourists for medical procedures.

Kedah: A cluster of 99 islands with the best of many worlds, beautiful beaches, world-class infrastructure, rich flora and fauna, and duty-free shopping make this place a haven for travelers. Langkawi beach is a well known place among tourists.

BARGAINING POWER OF SUPPLIERS

The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services. There are no substitutes for spas and five star hotels. The hotels customers are fragmented, so they have to reduce their bargaining power to attract the customers. The hotel chains are operating different services like Spas, Boatels, Resorts, City Centers, Heritage hotels, etc. . BARGAINING POWER OF CUSTOMERS Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes The hotel industry is one of the most invested in its fixed assets. So they are trying to recover their amount quickly. The suppliers are providing better information about them to attract the customers .Here the buyers are highly informed. If the hotel price changes are moderate, the Customers have low margins and are pricesensitive. Some unseasoned timings the hotels are offering discounts and incentives toreduce the bargaining power of buyers THREAT OF NEW ENTRANTS The competition in an industry will be the higher; the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry.

The foreign hotel chains are tied up with Indian hotels to reduce the initial cost and using the latters brand name THREAT OF SUBSTITUTES A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract aignificant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products.

Brand loyalty of customers is dominating thesubstitutes. The hotel relationship with customer and costs also the reasons to switching tosubstitutes. The price variation of same class hotel services from various brands is one of thereasons to choose a substitute. More fixed cost and switching costs affects the business. COMPETITIVE RIVALRYBETWEEN EXISTING PLAYERS This force describes the intensity of competition between existing players(companies) in an industry. High competitive pressure results in pressure on prices,margins, and hence, on profitability for every single company in the industry.

The top competitors in hotel industry are having the same services like five star,spas, boatels and motels, heritage hotels and palaces. The healthy competition among the all players is helping to increase the industrygrowth. Intense in metro cities, slowly picking up in secondary cities.
Redang Island together with its 8 neighboring islands (Lima Island, Paku Besar Island, Paku Kecil Island, Kerengga Besar Island, Kerengga Kecil Island, Ekor Tebu Island, Ling Island, Pinang Island) are known as the Asia paradise in the South China Sea regions. Being the main island of the Archipelago, Redang Island offers nature lovers an adventure holiday to get away and relax in the solitude and serene beauty of our tropical isles. Nature is at its best here - fresh air, gleaming soft white sand and crystal clear water. First thing that the resort should be have the low cost and good quality for everything that tourists want. Also the manager of the resort should be knows there are many resorts and island in Malaysia, in this case they should have something different compare with other resorts. Transportation is the one of the important to increase the quantity of tourists, it means this resort should have separate ferry to transport tourists from hotel to pier.