A. Overview of Starwoods Hotels & Resorts Worldwide Inc.
Starwood Hotels & Resorts Worldwide Inc. is one of the largest hotel companies in the world. It was originally formed by a real estate investment firm Starwood Capital under the name of Starwood Lodging and was run by the ambitious Barry Sternlicht. Later on Starwood Lodging came to be known as Starwood Hotels & Resorts Worldwide Inc after Barry Sternlicht stepped down as CEO. The company owns and operates hotels leading brands such as Sheraton, Westin, St. Regis, Four Points, and it’s recently developed W brand. The majority of Starwood's hotels are owned by franchisees, and the company directly owns or leases about 170 of its approximately 750 hotels worldwide. Nearly 500 of the …show more content…
The threat of new entrants in the industry is low due to the following factors:
1. Economies of Scale
Due to the difficulties of achieving the economies of scale in this industry, threat of entry is low. Economies of scale enable companies to produce profits and help to ensure a steady stream of income for the operation. Economies of scale would act as a barrier to entry to entrants because of the difficulties they would face in order to compete on a large enough scale in the market. A substantial investment would be needed to create the size required to have the volume necessary to lower costs. However, because the size of the consumer market is not fixed and continues to grow, additional investment would not be needed to expand the market to allow for the incoming firms’ inclusion.
2. Product Differentiation
Another barrier is the brand identification and customer loyalty that the incumbent firms possess. Because the main competitors in the market have been in operation for numerous years, these firms already possess many characteristics that give them a competitive advantage over other companies just joining the industry. These incoming firms would have to invest large amounts of time and money on creating enough brand identification and customer loyalty to even compete on the same scale as those companies already competing