Analysis of the Structural Attractiveness of the Hotel Industry in Kenya Using Porter’s Modified Model
Abstract
Industry attractiveness is the high potential profitability of an industry that is
measured through the long-term return on the capital invested as determined by the
five forces of competition (Porter, 1980). Industry attractiveness depends on the
combined strength of industry forces. Porter (1979) argues that, industry competition
is determined by five industry forces which determine its attractiveness and form the
basic industry characteristics. The forces are supplier bargaining power, customer
bargaining power, threat of new entry, threat of substitute products and competitors
rivalry. Wheeler and Hunger (1990) included a sixth force; that is other stakeholders.
Palvia et al (1990) added government and logistics while Aosa (1997) added power
play. McFarlan (1984) added information technology (IT) while Grant (2008) added
complements. All the above industry forces form Porters modified model. The aim of
the study was to determine how attractive the hotel industry in Kenya is using Porters
modified model. To achieve this objective, the study adopted a descriptive research
design. Questionnaires were e-mailed to hotel General Managers or Managers in
charge of corporate strategy of the sampled hotels. Where such positions were
nonexistent, Managers in charge of marketing were targeted. Descriptive statistics
were used to analyze collected data. The research findings show that Porters modified
forces are at play in the hotel industry but at different levels. The forces with the
strongest effect on profitability were found to be customer bargaining power, threat of
substitute products and competitors rivalry. Forces with average effect are threat of
entry, stakeholders, IT, complements, government and logistics though infrastructure
was found to be having a strong effect on hotel profitability. Bargaining power of
suppliers and power play were found to be weak. The findings agree with the existing
theory that, industry attractiveness depends on the combined strength of the industry
forces at play. The study findings have made it possible to understand the
attractiveness of the hotel industry in Kenya and the strength of the different forces
that are at play in the industry. The management of Kenyan hotels and the
government will benefit from these findings in policy formulation. It’s recommended
that the government gives special attention to improvement of tourist arrivals in the
country as well as the infrastructure so as to boost the hotel industry growth.
However, the study was on hotels registered with Kenya Association of Hotelkeepers
and Caterers (KAHC) only. Not all hotels are members of KAHC hence further
research is needed that covers all the hotels in Kenya. The overall conclusion is that
the hotel industry in Kenya is not attractive either for new entry or further investment
by existing hotels.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
The following license files are associated with this item: