Porter's Model Of 5 Forces Pest Analysis Essay


Porter's Model Of 5 Forces PEST Analysis

Value Chain Analysis

The paper is an analysis of the Holiday Inn Franchise. The paper will start giving an introduction of the franchise and its success followed by the main body which will include the objectives and values of the hotel as they stand today. The management functions, planning and organization of the hotel will also be discussed here followed by leadership styles, SWOT analysis, and Porter's model of 5 forces, PEST Analysis and the value chain analysis. This will be followed by conclusions and recommendations on the future aspects or growth potentials of the hotel

Holyday Inn is the part of InterContinental Hotels (IHG) and is one of the most prominent brand hotels. It has a global reputation to provide best quality services, value and comfort. It has one of the world's largest networks of hotels which include a total of 238,440 bedrooms and 1301 hotels in different parts of the world and 315 more hotels are on its way. More than 100 million visitors prefer to spend their nights every year in the Holiday INN franchises, globally (Supplementary Information, 2009).

Holiday Inn, in 1963 came into long-term contract with the Gulf Oil Corporation. In this deal it was decided that Holiday Inn would be accepting Gulf Credit cards for the charges of food and accommodations, at all its hotel which are in USA and Canada. In return for this they would be establishing services stations on the premises of most of the properties of Holiday Inn, particularly the ones which are near major highways. We can still see many old Holiday Inns, including those which are not the part of the chain, have those same services stations still intact today, whether they are operating or closed. There are only a few services stations in eastern parts of U.S. that are still operating but hardly any of them are Gulf outlets. In the year 1973, this strategy of payment of food and lodging through Gulf credit card was copied by many competitors and oil companies. Due to oil crisis of 1973 those agreements ended with disappointment. The agreement between the Gulf and Holiday Inn came to an end in the year 1982 (Supplementary Information, 2009; The News and Courier/Evening Post, 1990).

For almost twenty years Holiday Inn Corporation could not operate in the location of Niagara Falls, Ontario because the name Holiday Inn was already used by the local hotel. This hotel was there from the early 1970's and was using similar logo as that of the Holiday Inn. The directory of Holiday Inn Corporation mentions that this hotel was not part of Holiday Inn system. The domain holidayinn.com was also owned by that hotel, which made the Holiday Inn Corporation to forcefully use another domain name i.e. holiday-inn.com. But in 2006, a settlement was made between the IHG and the owner of Niagara Falls, Ontario hotel which resulted to acquisition for both the domain Holidayinn.com and the hotel by IHG system (Supplementary Information, 2009).

In 1960's and early 1970's, in Myrtle Beach, South Carolina Holiday Inn hotels was just called as Holiday because there was a motel, located in that area, already with the name of Holiday Inn. In the year 1973 the name was challenged by Holiday Inn, Inc. In U.S. District Court for South Carolina (Florence Division). Since Holiday Inn of South Carolina had franchised the name from Stand Development Corporation, so a counterclaim was filed by Holiday Inn of South Carolina against Holiday Inns, Inc. The claim went in favour of Myrtle Beach hotel and it is still operating with the name of Holiday Inn, however, they have to use a different font (InterContinental Hotels Group, 2008; Holiday Inns, Inc. v. Holiday Inn, 1973).

Main body


Achieve excellence in quality and provide customers with best quality products (Lollis, 2007).

Holiday Inn Values:

• Respect and value people in general and its customers

• Communicate clearly and openly

• To have honesty.

• Committed to achieve their goals (Lollis, 2007).

Management Functions:

• Planning

• Managing

• Coordinating

• Leading (Lollis, 2007)


Long-Term Plan:

Two of the most important long terms plans for holiday inn are to earn a high reserve ratio and to become a leading hotel franchise (Lollis, 2007).

Short-Term Plan:

Courteous, caring, friendly and best quality service to its customers is one of the short-term objectives of Holiday Inn and to make customers feel welcome (Lollis, 2007).

For the purpose of achieving long as well as short-term objectives, the overall plans are formatted in advance. Executive managers are ones who are concerned with the plans related to financial matters (Daily News, 1990). Middle level and different employees are involved in decision making and short-term planning because they play a very important role for the achievement of the desired objective (Lollis, 2007).

Management structure:

The organizational structure of Holiday Inn can be seen with the help of their Organization chart. The organizational...


Centralized Power
2. Vertical Structure

3. Definitive and Hierarchical Reporting Relationships

4. Formal Control System (Lollis, 2007)


Through different incentive and facilities Holiday Inn inspires, leads and motives its employees (InterContinental Hotels Group, 2009).

Different facilities and incentive that they provide includes:


The employees of IHG can stay at IHG hotel franchises in any part of the world at very nominal prices and can also enjoy each and every facility provided (The New York Times, 1990).

An employee is always paid fairly with the amount of work he puts in, even when he has worked one minute more than his shift (InterContinental Hotels Group, 2009).


Facilities that employees enjoy include:

Facility for lunch

There is 1 lunch break for each employee doing a shift of 9 hours. During the shift 2 tea breaks are given (HIClubVacations.com, 2008).

Facility for locker is also provided to each employee (InterContinental Hotels Group, 2009).

This all are provided to motivate employees so that they can perform their very best (InterContinental Hotels Group, 2009).


Salaries are given keeping in mind the nature of the job. It also observes its competitors like Hilton and Pearl Continental while setting salaries. The salaries set are mostly more then what their competitors offer. For Example: Salaries of waiters working at Hilton and PC are given $7,000 where as in Holiday Inn the salaries for waiters are $8,000 (HIClubVacations.com, 2008).

Training Labour: Employees are given regular trainings for their specific field. A training section is conducted after 6 months for the purpose of learning and improvement in the overall performance (HIClubVacations.com, 2008).

SWOT Analysis


Image of the company: A well-known organization, the Holiday Inn has been successful in making its name renowned all over the world (Amason et al., 1995).

Quality Standards: Holiday inn is very much conscious about its quality standards and has been successful in maintaining top quality and high standards over the years since its initiative (DeFillippi and Arthur, 1998)

Distinctive Architecture: Being the first hotel to have a swimming pool on the top of the building gives Holiday Inn the unique advantage of an innovative architectural design. Approach of high techniques and innovative designs are used when building Holiday Inn outlets all over the world (Hobday, 2000).


Production cost: the changes in the administration and the structure of the holiday inn have increased its costs significantly (Forster, 2005).

Budgetary constraints: due to the constraints imposed on the budget, the advertisement has become limited (Forster, 2005).


Fresh packages:

The experts have predicted an increase in the market share if Holiday Inn will launch its new package with low rates (Beech and Crane, 1999).

Change in the social trend:

The people now not only demand for high quality services that are able to satisfy their wants, but the demand of having the best is also rising. The Holiday Inn has been able to fulfil these demands for its customers (Cannon-Bowers et al., 1995).



The most important threat that Holiday Inn is facing is from its competitors like Hilton and PC. The business will have to face difficulty if its competitors lower the rates of their services (Polley and Ribbons, 1998).

Industrial Analysis

Porter's model of 5 forces:

The following ways shows how Porter's model of 5 forces affect the Holiday Inn:

1. Rivalry

The major factor highlighted in Porter's five forces is the competitors and Holiday Inn's competitors include Hilton and Pearl Continental Hotel as aforementioned (Turner and Keagan, 2001).

2. Threats of the new entrants:

Competitive businesses always face the threats of new entrants. This increases the competition in the market. This threat for holiday inn is not too intense nowadays. It is because the businesses globally are facing loss nowadays due to the economic recession (Turner and Keagan, 2001).

3. Bargaining power of the customers:

Holiday Inn is a five star hotel which is why there isn't much room for the bargaining power of the customers to pose much threat to the hotel and its overall rates and expenses (Turner and Keagan, 2001).

PEST Analysis

Political factor

i. The changing of the government has a significant influence on the business. There is usually a contract between the government and the hotels, which states that only those political figures and people, are allowed to stay in the hotel who have accepted the contract (Sapsed et al., 2002).

Economic Factor

i. The increasing inflation allows only the high class people to have regular visits to the…

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