What are the Porter's Five Forces of Marriott International, Inc. (MAR).

Introduction

When it comes to evaluating the competitiveness of a company, one of the most popular frameworks used by business analysts is Porter's Five Forces. This model, developed by Michael Porter in 1979, helps to identify the major forces that shape a company's industry and ultimately determine its profitability. In this chapter, we will apply the Porter's Five Forces framework to Marriott International, Inc. (MAR), one of the largest hotel chains in the world. By analyzing the strength of each force, we can gain a better understanding of the opportunities and challenges facing Marriott, as well as its potential for success in the years ahead.

Bargaining Power of Suppliers in Marriott International, Inc. (MAR)

Bargaining power of suppliers is one of the critical components of the Porter's Five Forces analysis. It helps in determining the level of competition in the industry, and how suppliers can influence the business and profitability of the company.

Marriott International, Inc. operates in the hospitality industry and has a wide range of suppliers for its products and services. The company's suppliers include food and beverage suppliers, linen suppliers, furniture suppliers, travel agencies, and marketing agencies, among others.

While Marriott International, Inc. is a significant player in the hospitality industry, its bargaining power is relatively low compared to that of its suppliers. The industry is highly fragmented, and there are many suppliers available in the market.

However, Marriott has implemented various strategies to reduce this bargaining power. One of the strategies is to build long-term relationships with their suppliers. This helps in creating a sense of loyalty and commitment, which can lead to better prices and more favorable terms.

In addition, the company has implemented strict quality control measures to reduce its reliance on suppliers for quality assurance. This ensures that Marriott is not at the mercy of its suppliers when it comes to maintaining their reputation and brand standards.

Marriott International, Inc. also has a strong bargaining power due to its sheer size and market share. The company is a dominant player in the industry, with more than 7,000 properties worldwide. This gives it a strong bargaining power, which it can use to negotiate better terms with its suppliers.

• Overall, the bargaining power of suppliers in Marriott International, Inc. is relatively low due to the fragmented nature of the hospitality industry.
• The company has implemented various strategies to reduce this bargaining power, such as building long-term relationships and maintaining strict quality control measures.
• Despite this, the company still faces challenges from suppliers but can use its size and market share to negotiate better terms.

The Bargaining Power of Customers

Customers play a significant role in the success of any business. For Marriott International, Inc. (MAR), the bargaining power of customers is a crucial factor that affects its operations. This force is one of the Porter's Five Forces, an analytical framework that evaluates the competitive intensity and attractiveness of an industry. The bargaining power of customers refers to the ability of buyers to negotiate prices, quality, and other terms of the products or services they purchase.

In the hospitality industry, customers have a relatively high bargaining power since they have numerous options to choose from. They can switch from one hotel to another easily based on their preferences and needs. This means that Marriott and other hospitality companies have to continuously improve and differentiate their products and services to attract and retain customers. Marriott's ability to offer personalized experiences, rewards programs, and high-quality services has helped to increase customer loyalty and bargaining power.

Another factor that influences the bargaining power of customers is their price sensitivity. In economic terms, elasticity of demand measures the responsiveness of buyers to changes in price. Customers who are highly price-sensitive can easily switch to alternative options if Marriott increases its prices. These customers have a higher bargaining power since they can negotiate for lower prices or discounts. On the other hand, customers who are less price-sensitive are likely to stay loyal to Marriott and are less likely to bargain.

• Overall, the bargaining power of customers is a critical force that Marriott and other hotel companies must consider in their strategic planning. By understanding customers' needs and preferences, Marriott can offer tailored experiences that differentiate its brand from competitors and increase the loyalty of its customers.
• Marriott should also segment its customer base to identify price-sensitive and loyal customers and develop pricing and marketing strategies that cater to each group.
• Focusing on customer satisfaction through superior service and amenities can help Marriott to reduce the bargaining power of customers by increasing their loyalty and willingness to pay.

The Competitive Rivalry of Marriott International, Inc. (MAR)

One of the five forces that shape the competitive landscape of Marriott International, Inc. (MAR) is its competitive rivalry. The company operates in a highly competitive industry where brand differentiation is key to success. This is particularly true in the hotel and lodging sector where there are numerous players vying for market share.

Marriott faces stiff competition from both domestic and international players. Major competitors include Hilton Worldwide Holdings Inc., Hyatt Hotels Corporation, and InterContinental Hotels Group. Many of these companies have established brands and loyal customer bases, making it challenging for Marriott to capture new customers.

Furthermore, the rise of sharing economy platforms such as Airbnb has disrupted the traditional hotel industry. These platforms offer alternatives to traditional hotel rooms, allowing travelers to access more affordable and personalized accommodations. This poses a threat to Marriott and other hotel operators, who now face competition from non-traditional sources.

Strategies to Address Competitive Rivalry

To address the competitive rivalry, Marriott has implemented several strategies. One of the most effective strategies has been to focus on brand differentiation. Marriott has a portfolio of brands that cater to different types of travelers. For example, the company has luxury brands such as Ritz-Carlton and St. Regis, as well as more affordable brands like Courtyard and Fairfield Inn. By targeting different segments of the market, Marriott can differentiate itself from its competitors.

Another strategy that Marriott has employed is to enhance its loyalty program. The Marriott Bonvoy program offers members exclusive benefits, such as free room upgrades and access to VIP lounges. This has helped Marriott build a loyal customer base, which has been crucial in a highly competitive industry. By offering incentives to customers, Marriott can retain its existing customers and attract new ones.

Conclusion

The competitive rivalry is one of the key forces that shape the industry landscape of Marriott International, Inc. (MAR). The company faces strong competition from other hotel operators and sharing economy platforms. To address this, Marriott has focused on brand differentiation and enhancing its loyalty program. These strategies have helped the company build a loyal customer base and establish itself as a leading player in the industry.

The Threat of Substitution

The threat of substitution is one of Porter's Five Forces that affect Marriott International, Inc. (MAR). This force refers to the availability of alternative products or services that could satisfy the same customer needs.

• One substitute for Marriott's hotel services is the home-sharing platform, Airbnb.
• This platform allows travelers to rent out portions or entire homes rather than booking a traditional hotel room.
• For some travelers, Airbnb offers a more affordable and authentic travel experience, as well as more space and privacy.
• Another substitute is online travel agencies (OTAs) such as Expedia and TripAdvisor.
• These platforms allow travelers to compare prices and book hotel rooms from multiple brands, which can offer more options and flexibility.

The threat of substitution is significant for Marriott because these alternatives can offer comparable services at a lower cost or differentiate themselves in other ways that appeal to consumers. To mitigate this threat, Marriott must differentiate its services and offer unique value propositions that cannot be matched by substitutes. This could include loyalty programs, unique amenities or experiences, and personalized service.

The Threat of New Entrants

The threat of new entrants is one of the five competitive forces that determine the attractiveness of an industry. In the case of Marriott International, Inc. (MAR), the threat of new entrants is high due to the relatively low barriers to entry in the hotel industry.

• Low Switching Costs: It is relatively easy for customers to switch between different hotels based on price, location, and amenities. This makes it easier for new entrants to lure customers away from established players like Marriott.
• Low Capital Requirements: The hotel industry is highly capital intensive, but new entrants can enter the market by acquiring or leasing existing properties, rather than building new ones from scratch. This lowers the initial investment required to enter the market.
• Low Brand Loyalty: While Marriott has a strong brand reputation and loyal customer base, many travelers are willing to try new hotels, especially if they offer lower prices or other incentives.

However, there are some factors that help Marriott maintain its competitive advantage against new entrants:

• Economies of Scale: Marriott has a vast network of properties around the world, which allows it to achieve economies of scale in procurement, marketing, and operations. New entrants would struggle to match Marriott's scale and efficiency.
• Strong Brand Recognition: Marriott's brand is well-known and respected around the world. This makes it easier for the company to attract customers and negotiate favorable deals with suppliers and partners.
• Loyalty Programs: Marriott's loyalty program, Marriott Bonvoy, rewards customers for their loyalty and encourages repeat business. New entrants would not have such an established loyalty program and would struggle to attract and retain customers.

Overall, the threat of new entrants is a significant challenge for Marriott, but the company's scale, brand recognition, and loyalty programs give it an advantage over potential competitors.

Conclusion

Marriott International, Inc. (MAR) has been a dominant player in the hospitality industry for decades. However, with the emergence of new technology and changing consumer preferences, the industry is undergoing a major transformation. In this blog post, we explored the Porter's Five Forces model to analyze the competitive landscape of Marriott International.

Through our analysis, it became clear that the company faces significant threats from new entrants, substitute products, and the bargaining power of suppliers and customers. However, Marriott International has been able to maintain its competitive advantage by leveraging its brand strength, global reach, and operational efficiencies.

As the hospitality industry continues to evolve, it is important for Marriott International to adapt its strategies and remain vigilant of the changing market dynamics. While the company has faced some challenges in recent years, it has demonstrated resilience and remains a top contender in the industry.

• Marriott International has a strong brand reputation that gives it an edge in attracting customers and employees.
• The company's global reach and diverse portfolio give it the flexibility to adapt its strategies to different markets and consumer segments.
• Marriott International's operational efficiencies and economies of scale enable it to offer competitive pricing and maintain profitability.
• However, the company faces significant threats from new entrants, substitute products, and the bargaining power of suppliers and customers.

Overall, the Porter's Five Forces model provides valuable insights into the competitive landscape of Marriott International. By leveraging its strengths and addressing its weaknesses, the company can continue to thrive in the dynamic hospitality industry.