Hotel’s background
Ramada Plaza Hotel is a hospitality facility located in Newark, New Jersey. The hotel was established in the early 1980s, and is historically acknowledged for its role in housing plane crashes victims between the 1990s and 2000s (“Ramada Worldwide: Ramada Plaza Newark Liberty International Airport” par. 2). Ramada Plaza Hotel is strategically situated due to its proximity to the Newark International Airport. The business is currently rated as a 2-star hotel with an accommodation capacity of 178 rooms. It is believed that the lodge registers a stand out financial performance throughout any given year.
Business Strategy
Porter’s four competitive strategies
According to Porter, there are four competitive strategies that an organization can adopt. These include cost leadership, low-cost differentiation, differentiation, and low-cost focus (Grant 54). The Ramada Plaza Hotel combines two strategies; differentiation and low-cost focus strategies. Using the differentiation strategy, the hotel provides unique products and services. For instance, the hotel provides airport shuttle services to its guests at no cost (“Ramada Worldwide: Ramada Plaza Newark Liberty International Airport” par. 2).
In line with a low-cost focus strategy, the company targets a niche audience. Rather than marketing its products and services to the entire New Jersey population, Ramada Plaza Hotel mostly focuses on airport service users. As a result of this strategy, Ramada has been branded as the cheapest provider when compared to other facilities within the same category.
Porter’s five forces analysis
Coined by Porter, the Five Forces Analysis is centered on the idea that five critical forces, which often determine an organization’s competitive power, exist (Porter 27). Foremost is supplier power. The vast range of products and services provided by the hotel implies that Ramada is served by a set of suppliers. A good example of such suppliers is the internet provider for wireless connections. The hotel does not have the ability or the capacity to provide for its internet needs. Therefore, it must rely on internet providers, who have the power to determine the level of price to charge for their services.
The second force is buyer power. As it has been determined previously, the company targets a niche market implying that it only serves a small number of customers. As Porter stated, each customer presents a paramount value to a company. Therefore, the loss of any one of them may lead to significant losses (102). Inferring from this, the hotel’s customers have the ability to drive prices down meaning that they have high buyer power.
The third point of analysis is the competitive rivalry. As Porter revealed, what is essential in this case is the number, along with the capability of the competitors (33). There are several competing hospitality facilities in Newark. Among these includes the Renaissance Newark Airport Hotel and the Holiday Inn Newark Airport Hotel. These facilities are known to offer high value to their customers with a range of integrative and unique products. Therefore, the Ramada Plaza Hotel is faced with a very intensive competition.
The threat of substitution is also a significant factor. Considering that the hotel provides unique services and products to a specified niche market audience, the threat of substitute is low. Indeed, there are very few substitutes for airport service users. For instance, there are hardly any secure accommodation alternatives in Newark.
The ultimate effectual factor is the threat of new entry. To operate in the market that Ramada focus upon, it necessitates extensive resources and capital. Aside from this, it requires a host of legal formalities, and widespread advertising. Therefore, establishing and sustaining a business in this market is very expensive, often beyond the capacity of most prospective investors.
Works Cited
Grant, Robert. Contemporary strategy analysis and cases: text and cases, London: John Wiley & Sons, 2010. Print.
Porter, Michael. “The five competitive forces that shape strategy.” Harvard business review 86.1 (2008): 25-40. Print.
Porter, Michael. Competitive advantage: Creating and sustaining superior performance, New York: Simon and Schuster, 2008. Print.
Ramada Worldwide: Ramada Plaza Newark Liberty International Airport. Web.