Essay Example on Microeconomic Issues of Hotel Industry

Published: 2022-10-21
Essay Example on Microeconomic Issues of Hotel Industry
Type of paper:  Research paper
Categories:  Hospitality Microeconomics
Pages: 5
Wordcount: 1200 words
10 min read

Adding value for customers, employees and owners is the main aim in strategic management of hospitality industries. For a firm to create value to these stakeholders, it should acquire a Competitive Advantage (CA). By understanding the needs of its customers which keep changing and being responsive to new market entries, a firm can achieve a CA over its competitors. A firm's single most goals are making a CA (Kim, Byeong & Oh 65). The reason as to how am interested in this is because some executives have discovered why some companies have been able to maintain a CA while others have not. A firm will have less productive basis to exist without achieving a CA but will languish after a while. There are three approaches that managers can take to complete CA.

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Hospitality executives have made minimal or no attempt in comprehending how CA is attained, despite identifying the origin of CA becoming a priority in the marketing field. Managers have attempted to understand the source of CA by use of systematic approaches. Directors may have problems like establishing new resources, execute strategies that are efficient and effective and attaining market that is high. Three methods are required to address these problems;

  • PFA
  • RBA
  • RA

This approaches may be known to directors they may not examine and identify their effects. Each approach alone may not offer an understanding of the issue related. It is thus essential to integrate the methods to understand the sources of CA better.


Five forces influence the industry. Warning of new market entry, replacement of resources, bargaining power of buyers, bargaining power of suppliers and a competitive power among company bearers. PFA views CA as a stemming from the five company forces. It is assumed that the resources are similar in industries for conclusions to be made. The success of a firm depends heavily on how the evolution of the structure of the company will accurately be predicted. There is variation in the power of the forces in different lodging industries. There is still a warning in investing in hotels owned by people who do not know the industry, even though the lodging industry has high entry barrier like investments of huge amounts required in the building.

The lodging industry is faced with the threat of substitutes as a significant factor. Resources can generate CA. There has been international expansion by hotel firms to obtain a location advantage. This trend requires new leaders who have great global knowledge. Technological resources are being used by hotels to manage its customers effectively. The organizational resources can create CA.


In RBA, the qualities and quantities of resources are not equally dispersed among competitors thus contrasting with PFA (Barney & Jay 99). Sharing and adapting of assets are the different opportunities presented by organizations. Resources that are developed internally and which features of values that are rare, inimitability and which cannot be substituted are used in RBA since the competitors cannot acquire such resources. Thus RBA views CA as the use of competitive resources. Resources include assets, capabilities, information, competencies, and knowledge (Dyer, Jeffrey & Singh 660). The RA not only acknowledges the importance of unique and internal resources but it emphasizes on firms linking to improve their CA. Cooperation between firms has become valuable as competition and the service economy growth in the lodging industry increases. A buying firm can deliver product and services of high quality to its consumers and take the CA in the marketplace by collaborating with its suppliers.


This approach focuses on inter-firm linkages, for example, joint ventures. CA can be achieved by engaging in a relationship which may not have been made if the firms were isolated.

CA can be achieved by using the three approaches. The three approaches aim at the same goal of attaining CA but in different methods. Plans should be integrated so that the strategic management can be obtained. If managers adopted the PFA, RBA an RA approaches, they would better understand CA. Companies are likely to establish long-term profitability and growth if they adapt themselves to an environment that is changing rapidly (PFA), develop new resource continually (RBA) and build a strong relationship with consumers and supplier ( RA). Companies can sustain their CA over their competitors since the competitors will find it hard to imitate resources from various sources. A strategic plan that is effective will also be established by integrating approaches.

Each approaches its weakness. Traditionally, PFA assisted executives to learn how their businesses could be positioned for the successful environment that is competitive and how forces of the industry could impact investment return. Managers are nowadays required to recognize recent developments like globalization, advancement in technology and the web as new CA origins. PFA states that companies accomplish CA over their customers or competitors. The perspective does not, however, take full considerations precedence of having a good relationship with sellers and consumers. Collaborative relationships with customers who are volatile can lead to CA.

RBA focuses on internal based resources that are specifically developed by the company. However, the common market needs the internally developed resources may not reflect compositions like consumers and competitors. Market-based resources like firm market orientation need to be looked at since the funds need to overcome useful resources limitations through the merging of the company and the domain (Srivastava, Fahey & Christensen 777). Market orientation is the capacity of a company to offer goods and services that are unique and creation of consumer worth based on understanding the needs of consumers and competitors better (Kohli, Ajay & Jaworski 1).

RA emphasizes business-to-business relationships without giving a treatment that is balanced to the business-to-customer relationship. A good customer relationship is essential in an organization. This is because ongoing relationships with the service providers are pursued by customers to reduce evaluation risks. Customers form relationships with members of the organization than with goods.


Integrating the approaches will help provide a method that is comprehensive that is built by the strength of each approach. Managers can seek a way to enhance the CA of the company by understanding the three criteria. Competition in the organization has its pros and cons. There is a competitive advantage to the consumers since competitors provide services and goods of high value, by either reducing prices or by providing greater services and benefits at a higher price. Competition is also undesirable to firms since it brings a condition that may cause a firm to underperform. The game in the microprocessor industry is essential in firms since it fuels growth in other firms and encourages economic development worldwide.


Yong Kim, Byeong, and Haemoon Oh. "How do hotel firms obtain a competitive advantage?." International Journal of Contemporary Hospitality Management 16.1 (2004): 65-71.

Barney, Jay. "Firm resources and sustained competitive advantage." Journal of Management 17.1 (1991): 99-120.

Dyer, Jeffrey H., and Harbir Singh. "The relational view: Cooperative strategy and sources of interorganizational competitive advantage." Academy of management review23.4 (1998): 660-679.

Srivastava, Rajendra K., Liam Fahey, and H. Kurt Christensen. "The resource-based view and marketing: The role of market-based assets in gaining competitive advantage." Journal of Management 27.6 (2001): 777-802.

Kohli, Ajay K., and Bernard J. Jaworski. "Market orientation: the construct, research propositions, and managerial implications." The Journal of Marketing (1990): 1-18.

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