5

THE EXTERNAL
ENVIRONMENT:
COMPETITION
INTRODUCTION
COMPETITION ANALYSIS IS USED TO REVEAL THE
OPPORTUNITIES AND THREATS THAT EXIST IN THE COM-
PETITIVE ENVIRONMENT WITHIN THE TOURISM INDUSTRY.
THE ANALYSIS OF THE COMPETITIVE ENVIRONMENT WHICH
FOLLOWS IS DIVIDED INTO A NUMBER OF SECTIONS.

IN ORDER FOR A TOURISM ENTITY TO UNDERSTAND ITS

COMPETITIVE ENVIRONMENT IT MUST ESTABLISH THE
BOUNDARIES OF COMPETITIVE INTERACTION.
THESE 3 PROVIDES USEFUL ORIENTATION.

STRATEGIC
INDUSTRY GROUPS MARKET
INDUSTRY IS FOCUSED ON PRODUCTION.
MARKETS ARE FOCUSED ON CUSTOMERS AND
THEREFORE ON THE DEMAND SIDE.
MARKET SEGMENT IS A GROUP OF CUSTOMERS WHO
HAVE SIMILAR NEEDS WHICH CAN BE
DIFFERENTIATED FROM CUSTOMER NEEDS IN
OTHER PARTS OF THE MARKET.
STRATEGIC GROUP IS A COLLECTION OF
DEFINED SUPPLIERS WHO COMPETE ON A
SIMILAR TERRITORY.

Strategic group analysis can be used to focus on defined

business units (which may be part of a larger organisation)
which compete on similar territory.
The following is a list of characteristics that may be
used as a basis for establishing strategic groups
which are in competition with each other.

Pricing policy Geographical coverage

Quality of products Market segment served
Product range Distribution channels used
Extent of branding Size of organisation.

ERICA LENN S. VILLAGRACIA

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THE EXTERNAL
ENVIRONMENT:
COMPETITION

Porter’s five forces: is used to analyse the competitive

environment
The five forces proposed by Porter are:
the threat of new entrants
the bargaining power of buyers
the bargaining power of suppLier
the threat of substitutes
the degree of rivalry between competitors.

The threat of new entrants is the ease with which

new firms may enter an industry.
The bargaining power of buyers is the relative power
of customers in relation to the producers.
The bargaining power of suppliers is the relative
power of suppliers in relation to producers.
The threat of substitutes is the likelihood of other
services or products being used in place of any
existing product or service.
The degree of competitive rivalry is an overall
measure of the intensity of competition in an
industry.

Porter’s diamond: four factors that could be used to under-

stand the origins of competitive advantage in regions.

The four factors are:

Factor conditions
Market structures
Organisations and strategies
Demand conditions
Related and supporting industries

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I CAA L LE ENNNN S S. . V VI LI LL LAAGGRRAACCI A
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