Porters 5 Forces Analysis For Shangri-La Hotel Sydney

Overview of Shangri-La and Porter’s Five Forces

Shangri-La hotel Sidney is a sub-branch of Shangri-La hotels and resorts, is a multinational hospitality company with its headquarters in Hong Kong. Shangri-La hotels and resorts was established in 1971 by Robert Kuok from Malaysia and according to the latest statistics, the company has over 38000 rooms around the world

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Porters’ 5 forces analysis for Shangri- la hotel Sydney

The use of the porters’ forces in the analysis of Shangri-La hotel will help in the assessment of the market environment more especially the competitive analysis (Dobbs, 2014, p.45). The porters 5 forces analysis engages the following; the competitive rivalry of the hotel, threat of the new entrants into the market, the bargaining power of the suppliers, customers bargaining power, and threats of substitute product.

The competitive rivalry of Shangri-La hotel; the hotel is already established in the industry and though there are infinitely many hospitality companies, Shangri-La hotel is still among the good ones (Yunna, & Yisheng, 2014, p.804) The location of Shangri-La hotel of Sydney provides an extra-ordinary experience to the customers. In addition, the fact that it is an international company, the hotel has a series of branches with high public awareness and good image/ reputation. This gives it a better and high advantage over its competitors.

Threat of new entrants into the industry; there are no entry restrictions into the hospitality industry. However, the cost of establishment and competition is considerably high. This makes it considerably expensive to buy all the requirements and the advertisements costs to mae the company reputation as well as attracting new customers (Indiatsy et al., 2014, p.75). Thence, the hotel still enjoys the advantage of high standard with minimal threats from new entrants

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The bargaining power of suppliers; critically evaluating the hospitality industry, the suppliers almost have a negligible impact. This is because there are infinitely many suppliers, whom of which the hotel can alter. It therefore implies that the suppliers have low bargaining power. This  also an advantage for the hotel (Mathooko, & Ogutu, 2015, p.354) 

Bargaining power of customers; based on the fact that there are infinitely many high class hospitality firms, the customers have a high bargaining power. This offers a threat in determining the prices of the services offered by the hotel. It is therefore important for the hotel to compare its prices with that of its main competitor although it prides in providing high end/ premium services

Competitive Rivalry of Shangri-La Hotel

Threats of substitute product; in the hospitality industry, customer loyalty is an important factor that is viewed with considerable effort. According to Shangri-La’s website, the hotel has over 2500 reviews of which 87% showed very good (thumbs up). With this level of customer satisfaction, the company is able to maintain a high level of customer loyalty and thus minimal threat (Zhao, Zuo, Wu, Yan, & Zillante, 2016, p.144).

Staff turnover may basically be referred to as the rate at which the employees of a given company are replaced with new ones. Staff turnover is a crucial issue to focus on for any company to succeed in its field of operation. An organization is said to have a high staff turnover rate as compared to its competitor when the average number of employees who leave the company in a particular time is higher than that of its competitors. As a company operates, there are some workers who leave the company and have to be replaced by new employees. According to research, it has substantially and imperatively noted that staff turnover in companies have a significant effect on the performance of that company. The effect of the performance may be operational, financial or even reputation (Sölvell, 2015, p.480). In other words, there are consequences that come with high employee turnover, which may either be negative or positive. Adversely employee turnover may cause high operational costs as a result of hiring costs over a short period of time, loss of experienced staff and loss of reputation by the company in the labor market. On the other hand, staff turnover provides access to new and more skilled members to be employed in the company (Han, Bonn, & Cho, 2016, p.106).

As noted in the preceding section, the rate at which employees leave a company and are replaced by new ones is regarded as employee turnover. There are considerably many factors that may lead to employee turnover in a company.  There are usually two circumstances that may lead to employee turnover, that is to say, voluntary turnover and involuntary turnover. Voluntary turnover is a situation when an employee or a group of employees willingly and voluntarily leave an organization, firm or a business. There are considerably many reason why such may happen. It may include but not limited to the following factors;

The search for “greener pastures”; usually, when an employee or staff of a given company gets a better paying job elsewhere, they tend to resign from their current workplace to take over the new and better paying opportunity. In this case, for a company to ensure the maintenance of its experienced employees, it must ensure adequate payment, otherwise, there may be high chances of losing the employees (Hom, Lee, Shaw, & Hausknecht, 2017, p.530).

Entry of New Competitors

Poor working condition/ riskiness of the job; even when the employer pays high/ well, the employee (s) may chose to leave due to high level of life risks at the job site. For example, working with bulky and heavy machines may be so risky and life threatening. A case in point may be; an employee leaves Shangri-La hotel Sidney due to high electricity shocks and explosives in the kitchen where she is working even when they are paying her highly. Furthermore, it may be due to poor working conditions for example, no breakfast, lunch or even dinner, no working holidays among 0thers. The need to create more time for their families, which may also be referred to as work-life imbalance.

On the other hand, there is involuntary stuff turnover. This is where a worker is involuntarily asked to leave the job/ company for some reasons, among which ,ay include low performance than expected by the employer, power quality work due to low skills and training, poor health and conflicting interests of the employee among others (Carnahan, Kryscynski, & Olson, 2017, p.1962).

In regard to the prior section, we it is archetypally true that there are adverse effect on the performance of a company. For the sec of Shangri-La hotel, this may have impacts right from the customers/ guests experience, operational performance to competitive advantage of the hospitality firm.

Basing on the analogy that a worker gains more experience and skills doing the same thing in the same place, it is considerably true that holding a worker for a longer time will definitely imply a better customer experience due to the more skills gained by the employee (Nica, 2016, p.22).

A high staff turnover at Shangri-La hotel Sidney will consequently imply a poor customer experience. The fact that employees need a longer time working in a particular job site before they can familiarize with how the place operates, changing employees will not allow adequate time for familiarization and thence a poor customer experience. Consequently, this will lead to low customer loyalty due to the low standard of service.

Possible impact of employee/ staff turnover on the operation of Shangri-La hotel Sydney.

Keeping in mind that recruiting new staff may be costly and risky, a high staff turnover rate at the hotel will involve high cost of recruiting, including advertising and evaluation processes. This will obviously affect the operational capacity of the hotel.

Supplier Power

Still holding the fact of experience, the staff of the hospitality firm would gain more managerial and operational skills by staying longer in the job. The employees tend to acquaint themselves with the regular challenges of the hotel and therefore know how to handle it. A change of staff in a given department will imply the application of new and trial solution yet the old work managers know how to deal with the issues in a less costly way (Wong, Long, Ismail, & Kowang, 2016, p.3197).

From the consequential effects in the previous sections, the hotel’s standard will lower in value and rating. This will definitely imply a better competitive advantage for its competitors. A poor customer experience as a result of high staff turnover will lower the degree of customer return rate which imply a lower sales and revenues. Additionally, as the hotel holds a high staff turnover, its skilled employees will be recruited its competitors and only recruiting new employees with theoretical skills rather than experience. Moreover, the hotel will be undertaking a high level risks and costs in hiring new staff into the business and yet not operating efficiently. This will ultimately affect the performance of the hotel competitive-wise

In summary, holding a lower turnover rate at Shangri-La hotel would be the best way of maintain a high competitive advantage by offering high customer experience through a strategic and experienced team of staff. Basing on the available research finding, high staff turnover in a company has substantially been identified as one of the core causes of poor organizational performance (Harhara, Singh, & Hussain, 2015, p.500)


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Yunna, W., & Yisheng, Y. (2014). The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable Energy Reviews, 40, 798-805.

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