Q5.

MISSION AND VISION

Mission
To improve the quality of life of the communities we serve globally through long term
stakeholder value creation based on Leadership with Trust.

Vision
25% of the world’s population will experience the Tata commitment to improving the
quality of life of customers and communities. As a result, Tata will be amongst the 25
most admired corporate and employer brands globally, with a market capitalization
comparable to the 25 most valuable companies in the world.

SWOT ANALYSIS

Strengths
IHCL has a very dominant position in the Indian hospitality industry with the largest
distribution of hotels around the country. Its key advantage is the established ‘Taj’ brand
name. It has got a much diversified hotel and brand portfolio catering to different
market segments which helps in capturing a wider customer base. The company has
got sales and marketing reach globally. The parent company being Tata sons limited
which is one of the largest companies in India is an added advantage. Their presence in
every segment namely luxury, upper upscale, upscale and budget allows more flexibility
and stability. They have a well-diversified business model of subsidiaries, associates,
joint ventures and management contracts which help in reducing risk and fuels faster
growth. This asset light policy will help in revenue stability during economic turndown.

The company has introduced a strong loyalty programme which helps in retaining
customers. The company’s alliances and partnerships have helped it in entering into
new markets such as wildlife lodges and air catering. They have the advantage of a very
strong corporate purchase chain whereby they can considerably reduce raw material
cost. As the parent company is present in the production of FMCG they are able to
procure items at a much competitive price. The company even has introduced loyalty
programmes in conjunction with all leading airline companies.
Weakness
The less established brand name of the company in the international scene can be
viewed as a weakness. Nearly 75% of the company’s income is generated by domestic
operations resulting in greater dependency on the Indian market. In the domestic
market, 66% of their revenue and nearly 90% of profits come from the top six hotels in
four cities. Even slight fluctuations in the country’s economy can affect profitability. The
high dependency on the higher-end luxury market can also be viewed as a weakness.
Nearly 54% of the revenue is generated by these properties. Comparative size in line
with international chains and insignificant international presence is a setback. The hotel
industry in India is heavily staffed.

Opportunities
Rapid growth in inbound and domestic tourism is a great opportunity for the company.
Domestic tourism is growing at a phenomenal rate of 15.5% annually. Growing demand
for budget and mid-segment hotels due to the growth of the Indian middle class can be
viewed as an opportunity. Healthy salary increases in the corporate world are expected
to create demand for leisure tourism. Launch of incredible India in both domestic and
international markets to promote destinations can be a boost in business. The
introduction of medical visas may promote more volume and extended stay in all key
destinations. The company’s entry into new markets such as wildlife lodges, luxury
residences, and spas will create new growth prospectus. Budget airlines now have
connectivity across the country with competitive rates and attractive offers which will
inspire domestic tourism. Increased business opportunities in India again have paved
the path for growth of conference and event tourism.

Threats
Growing presence of international hotel chains such as Marriott international, The Four
seasons, Accor group, Shangri-La, Dreams resorts and spas etc. can be considered a
growing threat to the company. The expansion plans of Indian hotel chains like ITC India
limited, The Leela group, The East India Hotel Company and The Lalit may affect the
market share of the company. Due to the arrival of international airline operators and
affordable international travel, there has been massive growth of outbound tourism
mainly to south East Asia, Europe and Australia. This has increased risk for the
domestic leisure segment. Due to the company’s portfolio of foreign currency debts, it
is vulnerable to fluctuations in currency and interest rate risks. The debt equity ratio of
the company shows a drastic hike from the previous years which can really be a threat .
“Debt to equity ratio indicates how the firm finances its operations with debt relative to
the book value of its shareholders equity”. This indicates the comparison of equity and
debt the company is using to back its assets. If the ratio is high then the company is
said to be chancy as it is financed more with debts and it might become even worse if
the interest rates are high.

Q6. Porter’s five forces

Competition plays a major role in today’s world. Competition can have both beneficial
and unfavourable effects. Competition for profits goes beyond established market rivals
to include four other forces as well. They are Customers, Suppliers, New Entrants, and
Substitute products. To understand industry competition and profitability, we must
analyse the industry’s structure in terms of the five forces.

Threat of new entrants: New entrants can put pressure on prices, costs, and the rate of
investment necessary to compete. Due to globalisation and rapid economic growth of
the Indian market a favourable market has emerged for International hotel chains. Hotel
chains like Four Seasons, Marriott International IncStarwood Hotels and Accor Hotels
have recently come up with projects across India. New International hotels such as
Shangri la, Mandarin, Movenpick and Ritz Carlton are in the pipeline. Entry of non-
hospitality companies into the hotel sector can be a threat; such as Reliance Industries.
Due to dilution in the market the profitability of IHCL can be at stake.

Bargaining power of suppliers: Suppliers have more power if they have the monopoly or
do not depend heavily on the industry for its revenues. As the hospitality industry is
hugely labour oriented, their trade unions and labour suppliers are powerful. As hotel
chains are looking for rapid expansions and prime properties, the power of property
owners is high. Inbound tour operators are having an upper hand as they provide a huge
volume of business to the hotels. Infrastructure suppliers have moderate power over
the company.

Bargaining power of buyers: Powerful customers demand more value by forcing down
prices for better quality and more services. This results in higher operating costs
thereby bringing down profitability. Corporate clients due to their huge volumes have
negotiated rates. Company had to come up with a loyalty programme for retaining
customers which incurs costs.

The threat of substitutes: A substitute does the same or a similar function as an

industry’s product by a different means. The threat of a substitute is high when it offers
an attractive price and service to the similar industry’s product. Luxury serviced
apartments, camping and lodges are in demand. The Government’s introduction of bed
and breakfast hotels can really be a threat. Web 2 which enables video conferencing is
an emerging product which can be a threat to MICE (Meetings, Incentives, Conferencing
and Events)

Rivalry among existing competitors: Rivalry among hotel chains results in discounting of
price, new product launch, advertising campaigns, and improvement in service. If there
is high rivalry the profitability of the company can be affected. The hotel products are
highly perishable, which creates an urge to cut prices and sell the inventory below its
profitable rate to cover the fixed cost.

PEST Analysis

Political:
Political instability in some parts of India made foreign investors cautious; in turn
brought down investment from abroad and business travel. Due to the recent terror
attacks on hotels in Mumbai, there has been a drastic drop in tourists arrivals. Most of
the Embassies have sent travel advisory regarding African and Asian countries which
has reflected tourist inflow. As the Government of India has reduced the tariffs and
duties on various items, trade relations have improved. It encouraged travel and trade
which resulted in growth of the hotel industry. The Ministry of external affairs has
implemented visa on arrival for several countries in an effort to promote tourism. The
government has released a five-year tax holiday to promote the growth of new hotels.
External Commercial Borrowings have been eased by the Ministry to elucidate the
problem of liquidity being encountered by the hotel industry due to economic slowdown.
The Ministry of Home Affairs has agreed to grant Long Term Tourist Visa of 5 years
duration with Multi-entry facilities carrying a condition of 90 days on each visit to the
nationals of the following 18 countries which are France, Iceland, Germany, New
Zealand, Luxembourg, Japan, Netherlands, South Korea, Belgium, Argentina, Finland,
Brazil, Spain, Chile, Switzerland, Mexico, Norway, and Vietnam on request of tourism
ministry.

Economical:
Early 1990’s saw economic liberalization which led to a boom in the hospitality industry.
The Government has allowed Foreign direct investment and Foreign institutional
investment; which favours business travel. Compared to other Southeast Asian
countries; tax structure in India is very high. Inadequate infrastructure facilities like
Airports, Communication facilities and commuting facilities is a challenge for the
Tourism sector. The effect of recession is causing serious problems for many hotels,
especially luxury hotels in particular. Hotels in certain global markets, mainly those
operating in the leisure sector, are less affected. All geographies are not equally
affected by recession.(have to include graph from the site quoted in link , leading hotels
of the world)

Social:
Indian customers are highly sensitive to price. A lot of them tend to compare services
offered with price. Hoteliers face a challenge to design price strategy in each sector.
There is a conflict between the local community and hotels on space availability
especially at beach destinations. The company has got an advantage of the world's
largest concentration of young educated workforce and thus decreasing the labour
costs. Two religious communities being Hindus and Muslims have religious sentiments
towards beef and pork which is consumed by foreign tourists. This raises conflicts
between the organization and religious groups. Large scale tourism operation results in
environmental pollution and an increase in carbon emission.

Technological:
The launch of E-commerce has revolutionized the hotel sector by reducing cost and
increasing functionality. The introduction of the Global Distribution System allows
customers to access current time availability of products. The growing influence of
video conferencing has had a negative impact on MICE (Meetings, Incentives,
Conference and Events) division. It is possible to get critical information on clients and
products while away from the desk due to wireless technology. This has improved
customer relationships, saved time and increased revenue and profit.