A common objective for operating any business is to succeed in high profitability and increase performance. A competitive strategy is one of the factors that have a major influence on objective achievement. Developing the competitive strategy, however, is a challenging task for many hoteliers because the hotel industry is changing dramatically in the face of intense competition, increasing customer sophistication, and rapid technological advances. Harrison (2003) proposed some considerations for a hotel's strategic development before it implements any competitive strategy, such as: (1) How can the hotel take advantage of changes that are expected to occur in the industry? (2) Are there any resources or capabilities the hotel could develop to achieve competitive advantages?
Enz (2010:17) defines the meaning of strategy as: (1) “a pattern that emerges in a sequence of decision over time”, or (2) “an organizational plan of action that is intended to move a company toward the achievement of its shorter-term goals and, ultimately, its fundamental purposes.” Since strategy can be implemented over a short period of time, hoteliers become opportunistic, seizing all possibilities thrown up by the environment. A truly strategic approach would be to take into consideration as many factors as possible that impact on the hotel's performance. Regarding the external factors, Porter (1985) proposed the analysis of the industry boundaries based on the five forces of competitions (potential entrants, customers, suppliers, substitutes, and rivalry among existing firms). The concept of this approach is that the greater the weakness of the five forces that affect the firms, the greater the expected profitability in the industry. The existing hotels can apply five forces for some specific actions such as implementing new strategies for the current environment or a decision of leaving from the business (Enz, 2010). In the mean time, the internal factors can be explained by resources and capabilities possessed by an organization, which is represented as the resource-based view (Barney, 1991). Some common competitive resources are physical resources (e.g. buildings, equipment, and location), human resources (e.g. skills and well-trained staff), and general organizational resources (e.g. brand names and firms’ reputation) (Barney, 1991). From the resource-based perspectives, many strategic methods have been applied in the hotel industry until present such as branding, technology innovation, niche marketing and advertising, pricing tactics, cost containment, service quality management, computer reservation systems, and employee relationship (Olsen et al., 2008, Lu and Chiang, 2003 and Wong and Kwan, 2001). In the past, most researches tend to emphasize on single factor, either external or internal for strategic development. However, these days, these two theories – five forces and resource-based – dominate strategic management discourse today (Chathoth and Olsen, 2007, Galbreath and Galvin, 2008 and Kim and Oh, 2004).
Kim and Oh (2004) explored the conceptual difference of the Porter's five forces model and the resource-based approach in measuring hotel performance, and how the theories explained the hotel firm ability to compete. Galbreath and Galvin (2008) investigated the role of firm resources and industry structure on business performance in manufacturing and service firms. They argued for future research in other industry which may provide different phenomena. Chathoth and Olsen (2007) found significant relationships among environment, strategy, structure, and performance in the restaurant business. Olsen et al. (2008) studied the co-alignment of relationships among environmental events, strategy choice, firm structure, and performance in the hospitality industry. The notion of these researches is that external and internal factors create the best value of competitive strategy over time in order to succeed high performance.
The current study aims to address the research gaps that have been identified in the literature. First of all, following the lead of Galbreath and Galvin (2008), this study integrates two approaches: industry five forces approach and resource-based theory. However, Galbreath and Galvin's study was limited by industry uniqueness, such that the factors operated differently in the restaurant industry compared to the hotel industry. Hence the current study will focus on investigating these two approaches in the hotel industry for more in-depth insight into strategy implementation. Secondly, previous studies investigated the direct impact of five industry forces and firm resources on firm performance (Kim and Oh, 2004 and Galbreath and Galvin, 2008). This study has adapted from the co-alignment model of Olsen et al. (2008), utilizing industry structure (defined by the five forces) as the antecedent variable for developing competitive strategies (for building firm resources) and consequently explaining hotel performance. In other words, competitive strategies are the mediating variables between industry forces and hotel performance. Therefore, the purposes of this study are (1) to explore the influence of industry forces on implementing competitive strategies, and (2) to assess the relationship of competitive strategies on hotel performance.
