Business Strategy

Porter's Five Forces Model Industry Structure 

         Bargaining power of customer: 

      In this force, we ask ourselves how easy it is for the customer to drive the price of the service or the product down.  If the customer has the power to lower the price of the product or has the power to demand a higher quality product/service then its power is strong. Both scenarios lead to a lower profit for the company. Typically, buyer exerts strong bargaining power when:

1.      Buying in large quantities

2.      Only few buyers exist

3.      Buyers are price sensitive

In the case of Comfort Inn, the customer has a weak Bargaining power due to the fact that they already offer the lowest rate around with a high quality service/product, and its customer demand, which is larger in that specific area thanks to its close-range location to Rutgers.

Threat of substitution:

      Product substitution refers to a product’s ability to satisfy consumers’ needs effectively as an alternative.  In the case of Comfort Inn, the strength of substitution is strong. There are different ways in which families or tourists can travel and accommodate. One of the biggest threats would be RVs and campers. RVs are fairly easy to rent and only need gas and propane to run. Depending on the state, the overall price of the trip could potentially cost less than a motel accommodation.

         Bargaining power of suppliers:

      This force deals with the amount of pressure that suppliers can place on a business. It is all about how big of an impact the suppliers have on the company’s production process, volume, and margin.

      In this case, Comfort Inn has to deal with two layers of suppliers: Service suppliers and maintenance materials’ suppliers. The service part, refers to the housekeepers supplying the business with their expertise and skills; in the case of strike or unionization, the cost of operation will go up leaving low profit and low margin giving them strong power to bargain. For the other layer which is maintenance materials, the bargaining power is weak due to the vast amount of suppliers across the nation to choose from that will offer low cost supplies in order to get a big account like Comfort Inn. Switching to a new supplier would not be as painful as switching an entire fleet of housekeepers.

         Threat of new entrants: 

      This force refers to the level of difficulty new companies/businesses encounter when trying to set foot into a well-established market. The easier it is for new companies to break in, the more cutthroat rivalry there will be. At this market level, it is relatively difficult for a new business without brand recognition to break into the hostel industry, especially around the area that Comfort Inn is located in. It has too many entry barriers that would not allow just anyone to come in and be “open for business”. This force is weak to Comfort Inn because the market scope is really narrow and the entry capital needed to even compete remotely close to it is reasonably large.

         Rivalry:

Force	Example	Force Strength	Response
Bargaining power of customer	“I won’t make a reservation or book with Comfort Inn unless the rates come down”	Weak	Lowest rate in the area near Rutgers campus
Threat of substitutions	“I can rent a Motor-Home or RV”	Strong	Continental breakfast included, access to gym facilities and pool
Bargaining power of suppliers	“Cost of maintenance, and supplies are going up more than expected”	Medium	Find other suppliers from out-of-state or country; maintaining a good relationship with housekeepers and their union (In case of unionization)
Threat of new entrants	“New motel in the area”	Weak	There are a lot of entry barriers that make it difficult and expensive to open up a new motel in Somerset
Rivalry among existing   firms	“I’ll book only at a Marriot or Double Tree Hotel”	Strong	Strong marketing in selected states where people visit from the most, such as Providence, Connecticut etc; Lower rate for group bookings and large group reservations

      This last force describes the intensity between competitors in the same market. A market with a high amount of competition tends to bring low margins, even if the market exhibits high sales rate, the profits will still be in the low range.  Comfort Inn’s biggest competitor is the Holiday Inn, The Double Tree and The Marriott just down the road, due to the fact that they are an upscale chain of hotels that have more features and recognition. The big advantage of Comfort Inn is that its cost based strategy allows them to compete in a field that big chains are not able to, which is family friendly rates on weekends. Also, Comfort Inn manages to collect data that allows them to focus their advertisements on a specific geodemographic that eventually brings more customers to their doors.

   

       Competitive Strategy 

            The Comfort Inn and Suite in Somerset NJ has a convenient location providing easy access to Rutgers University, Garden State Exhibit Center, The Palace, and State Theater. It also has nearby sporting venues like Protect Hockey Ponds, and Colonial Park, as well as businesses including MetLife, Philips, SHI, Liberty Mutual, Veeco, and Robert Wood Johnson University Hospital. Guest's can also visit historic downtown New Brunswick, Bridgewater, or New York City, which is a short drive away.

      There are about 18 other two-star hotels in the Somerset NJ area. All offer low rates and convenient locations for leisure travelers. Comfort Inn and Suite differentiates itself from competitors by engaging in a cost focus competitive strategy. Comfort Inn does this not only by catering to leisure travelers but also to business travelers, while still offering low rates.

      Business guests can utilize the business center and two meetings rooms. The hotel is also able to accommodate 40 people for banquets, and 60 for conferences. The hotel offers useful amenities for business guest's which include a computer with internet, a copy machine, a fax machine, an in-room desk, and free Wi-Fi. They also have business friendly services which include nearby car rental, convention center, currency exchange, and a teleconference service. They provide a shuttle available from 8:00am to 3:00pm that travels to 12 different businesses in the area. 

     

       

An organization can create and sustain a competitive advantage in its industry by having a competitive strategy. According to Michael E. Porter, a leading authority on competitive strategy, states there are four competitive strategies a firm can engage in. A firm can have the lowest cost across the industry (cost leadership) or within an industry segment (cost focus). A firm could also have a competitive strategy of providing a better product/service across the industry (differentiation) or within an industry segment (differentiation focus). 

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