Threat from Substitute Products

If there are similar services that can be used as substitute then the demand for a particular service will increase or decrease as it moves upwards or downwards in price relative to substitutes. Consultancy market is very price sensitive. Though there are no substitutes to particular services the consultants render to any firm in the hospitality industry, the price differentiation and the quality of service often determine the competitive edge of any consultancy firm.

Hence it becomes important that the consultancy firms maintain the price and quality of the services lest there will be shift in the consumer demand to the other alternatives firms available in the market. The switching costs to the buyers to the alternative service firms are also not heavy which makes this force a serious one in determining the competitiveness of the industry.

Extent of Competitive Rivalry

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The impact and intensity of all the above four forces, will determine the competitiveness of the consultancy firms in the hospitality industry. The competitiveness of the market will also be affected by the following factors in addition:

• The number of competitors present in the market and the degree of their concentration
• Rate at which the industry grows
• The cost structure of the firms
• The exit costs.

When the exit costs are high, the firms would like to stay back in the market by accepting lower margins. Reviewing the intensity of the forces acting on the consultancy firms within the hospitality industry it can be said that the consultancy firms face a stiff competition in terms of availability of alternatives and high bargaining powers of consumers.

Internal Analysis of Tricon Food Service Consultants

Tricon is one of the leading consultancy firms in catering consultancy in Europe and Middle Est. The company provides integrated management and design consultancy services to the large and mid-sized firms in the hospitality industry. The company has an established standing in the market for over thirty years contributing to the creation of some successful ventures in the hospitality industry. The company claims to have expertise and knowledge in providing consultancy services in various sectors like business and industry, exhibitions and conference centers, health care and hotels, and restaurants (Tricon, n. d. ). A SWOT analysis of the consulting firm Tricon would show the strengths, weaknesses, threats and opportunities of the firm.

Strengths

• Ability to provide comprehensive consulting service in all functional areas of hospitality industry
• Extended operations in Europe and Middle Eastern countries
• Experienced staff and established reputation over 30 years
• Established clientele in all sectors of hospitality industry
• Specialization in food service for different sectors

Weaknesses

• High cost of consultant fees and salaries
• Specialization exclusively in food service limits the scope of progress
• Employee turnover within the firm might cause disruption of consultancy works

Opportunities

• Presence in different geographical locations enhance the chances of getting more clients due to changes in social environments increase the demand for such firms
• Extension of hospitality industry to other areas and venues like theme parks, and internet kiosks increase the scope of business
• Middle Eastern countries offer good scope for expansion of consulting business in food service

Threats

• General recessionary trends in the global economies restrict the growth of the industry
• Changes in business models of hospitality industry may reduce the demand for the consulting agencies.

Results

The external environmental analysis of the consulting market within the hospitality industry presents a gloomy future due to the recessionary tendencies in all the economies in the world. Because of lower spending capacity of the people the leisure and tourism sectors in the hospitality industry are the worst hit areas.

This in turn, affects the growth and business prospects of the consulting firms acting within the hospitality industry. Despite the downward economic trend, the competition among the firms in the hospitality industry is fierce resulting in a heavy compromise on the prices. With an enhanced knowledge the expectations of the customers has gone up tremendously and this reflects on their demand from the services they demand from the firms in the hospitality industry.

Though in one angle this enhances the scope of business of the consulting firms to advise the hospitality firms to enhance the customer service at reduced costs, the general downward trend in the business of the hospitality firms limits the scope of the business of the consulting firms in the industry. The competition among the firms within the consulting industry is also fierce, as all the firms within a particular service area have to compete for limited available business opportunities. This enhances the bargaining power of the buyers and results in lowering of the prices for their services by the consulting firms.

Since there are no restrictions for entering into the industry, a number of consulting firms enter the business to enlarge the competition. In order to meet the competition the consulting firms have to increase the quality of their services. This requires the appointment of intelligent and high-performing consultants in their staff role. The consulting firms have to pay handsome pay and allowances to these consultants to retain them. This increases the cost to the firms and affects the bottom line of the firms largely.

Another issue that the firms in the consulting industry face is their specialization in a particular field. Though it acts as strength, when there is high demand for the services, it also acts as a deterrent to growth when there is no demand. Lack of knowledge in other areas prevents the firm to diversify their services. This is one of the biggest weaknesses of the firms operating in the hospitality industry. For instance, the recent economic recession severely affects the chances of getting new clientele for a consulting firm like Tricon analyzed within this paper.

There are other serious issues like delay in the payment of the bills of the consulting firms by the clients, which affects the cash flow position of the consulting firms. Because of the reduced business caused by the current economic situation, the hospitality firms have a severe cash crunch. This has its own impact on settling the bills of the consulting firms. Consequently, the consulting firms find it difficult to operate in the absence of timely cash inflows.

Conclusion

Ability of the consulting firms to recruit and retain quality consultants as staff and to adapt to changing market trends would enable them to sail through the tough times in their business caused by the changing economic environment. This report on an analysis of the external environment of the hospitality industry has found that the recent downturn of the economic situation has severely hit the business growth of the firms in the industry. Consequently, the consulting firms, which serve the firms in the hospitality industry, are made to struggle to run their business because of the delays in getting their bills settled by the clients.

This has affected the cash inflows of the consulting firms in the hospitality industry. Inability of the consulting firms to pay the salaries to their staff in time would result in the loss of able and experienced consultants, which in turn would affect the quality of service being provided by the consulting firms. Recommendations In order that the firms in the consulting industry like Tricon could swim through the current economic turmoil, the following are few recommendations that might help the firms to sustain their business growth and profitability.

1. Apart from providing just the consultancy services, looking for outsourcing opportunities in the catering and other service areas would provide additional sources of revenue. Increased number of operators including educational institutions, local authorities, healthcare providers and other businesses have started outsourcing hospitality facilities with a view to cut down their costs (Prospects, 2008). This has presented huge opportunities for food service providers, which can be converted into possible business opportunities for the consulting firms too.
2. Concentrating on innovative technological measures that will help clients to reduce the number of staff would be another area, which the consulting firms need to concentrate. These technological innovations should not only contribute to the reduction of the staff but also increase the productivity of the clients at all levels.
3. Consulting companies can concentrate on undertaking event managements and conducting conferences on behalf of clients. The consultants can add value to the events and conferences by contributing their technical excellence and professionalism in conducting these events. This would be a profitable avenue of business for the consulting companies.
4. The consulting firms should add additional service portfolios to their existing consultancy lines by way of diversification. One example is that the consulting firms can also act as recruiting agents suggesting suitable professional candidates to various firms in the relevant sectors. The consulting firm can apply their professional expertise in selecting a suitable candidate to suit the requirements of the clients. Conducting professional training programs is another area where there is scope for increased business.
5. Enabling the existing staff to acquire knowledge and skills in other related areas so that the firm would be able to provide consulting service to many other industrial clients is another avenue open to the consulting firms to sustain their business. Firms like Tricon can use their current market standing and reputation to clinch new contracts in related industries/sectors.

References

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2. Fahey, L. , 1999. Competitors.  New York: John Wiley & Sons. Fahey, L. & Narayanan, V. K. , 1986. Microenvironmental analysis for strategic management (the west series in strategic management). Oxford UK: West Publishing Company.
3. Hamel, G. & Valikangas, L. , 2003. The Quest for Resilience. Harvard Business Review, 81(9), p. 52-63. Hitt, M. A. , Duane, I. R. & Robert, H. E. , 2002. Strategic Management Competitiveness and Globalization Edition VI. : Thomson South-Western. Keim, G. , 2001.
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