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Porter 5 Forces Analysis of Indian Trave

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Information about Porter 5 Forces Analysis of Indian Trave
Business-Finance

Published on January 22, 2009

Author: sapphirez

Source: authorstream.com

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Travel Agency Distribution : Travel Agency Distribution Porter’s Five Forces Porter’s Five Forces: Travel Agency : Industry Rivalry : Highly Fragmented Industry with Intense Rivalry Highly Fragmented Industry. Organized players would barely have 15-20% of the marketplace Most of organized players are present in metros & mini-metros Large disposable incomes in towns like Lucknow, Jaipur, Coimbatore etc. serviced by family run unorganized players Industry rivalry is intense but not cutthroat Rivalry Intense because of low switching costs, low levels of product differentiation, perishability of products diversity of rivals Rivalry is not cut throat since exit barriers are not high, fixed costs are not high, market growth is good Porter’s Five Forces: Travel Agency Porter’s Five Forces: Travel Agency : Threat of Substitutes: Low Threat of Substitutes, as travel moves up the list of household priorities Lot of Possible Substitutes , Threat of Substitution Low India is witnessing a growth of discretionary spend as % of income from 30% in 2005 to around 70% by 2025. Travel , being a discretionary spend poised to gain. Travel has moved up the list of household spending priorities Unlikely to be substituted by a durable purchase or investments Education & Recreation will occupy 9% share of wallet in 2025 as compared to 5% now. Travel Industry currently at $16 billion, is expected to touch $26 billion by 2010 Porter’s Five Forces: Travel Agency Porter’s Five Forces : Travel Agency : Buyer Power: While buyers are fragmented, their diminishing brand loyalty and ability to switch (for most products) gives them reasonable buying power Buyers are fragmented Diverse retail buyer and corporate buyer profiles Switching costs for buyers is not high as brand loyalty is low/diminishing Credible threat of backward integration Buyers can directly buy from suppliers (hotels, airlines etc) Luxury segment is brand conscious to and willing to pay a premium for great experience and service quality Porter’s Five Forces : Travel Agency Porter’s Five Forces : Travel Agency : Supplier Power: Supplier usually sell commodity products . Concentration & ability to sell direct gives power to suppliers like airlines. Other suppliers are fragmented Forward integration by suppliers like airlines selling direct Attempts by suppliers to sell packages and complex itineraries not very successful While suppliers concentrated in some areas like domestic airlines, there is widespread fragmentation in hotels, tour operators, car rentals etc. There is no significant cost to switch suppliers and products like airlines, car etc. are fairly commoditized Travel agency cannot typically buyout suppliers like airlines Porter’s Five Forces : Travel Agency Porter’s Five Forces : Travel Agency : Barriers to Entry & Exit : While entry and exit barriers are low, difficult to build scale because of lack of ready distribution channels Government regulation of direct FDI in retail restricts entry of foreign retailers There are low level of proprietary travel knowledge and asset specificity. This makes it relatively easier for new players to enter industry and does not provoke very aggressive rivalry from existing players Low minimum efficient level allow entry of small startups, however significant scale is necessary to negotiate profitable deals Due to a fragmented market , travel agencies do not have access to ready distribution channels Online channel is growing at a rapid rate but is primarily selling air and rail Porter’s Five Forces : Travel Agency Implications of Analysis on Distribution : Implications of Porter Analysis for Distribution While buyers are fragmented, their diminishing brand loyalty and ability to switch (for most products) gives them reasonable buying power Companies that thrive will not just meet travellers’ needs, but also please their tastes and sensibilities – and do it for less Supplier usually sell commodity products . Most suppliers are fragmented. Multi-linked channels and product offerings continue to proliferate The explosion of product offerings and channels continues to erode profit margins and fragment markets Implications of Analysis on Distribution Distribution Strategy Imperative : Strategic Imperative : To serve this segment, Travel Agencies must drive out costs and build efficiencies Build on products that fit well with core competencies and create customer delight To out source low-cost, off-the-shelf packages for frequent destinations Improving technology and sharing routine functions with other players Leveraging data to increase accuracy, build volume or purchase bulk inventory at discount Distribution Strategy Imperative Call Sapphirez: Rajjeet Chandra : Call Sapphirez: Rajjeet Chandra Mobile : +91  9867974602 Email : rajjeet@sapphirez.co.in

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