An Analysis Of The Tui Group Tourism Essay

An Analysis Of The Tui Group stayism EssayTUI a steer foreign leisure choke group which has over 200 different touristry brands around the world. The harvest line activities of the TUI Group were attributed to the tourism, logistics and the former constancy divisions. Objective of this report is to dismember the strategic position of TUI by applying non-homogeneous tools such as PESTLE, Five displumes framework, bring up and contemplate and predict the future implications of its strategic capabilities victimisation generic strategy and Ansoffs matrix to the case study. Limitations of the tool applied are discussed with the outline.2.0 BACKGROUNDTUI group earlier know as Hapag Touristik Union of Preussag launched itself in tourism market place at the end of 1997 with the purchase of Hapag-Lloyd AG. TUI expended its bloodline using the expansion strategy through acquisition, mergers, and investment through joint ventures every over europium. TUI AG was parcel out in three sectors TUI croak (tour run, airlines and incoming agencies),TUI Hotels Resortsand the cruise ship job form the World of TUI. TUI AG brooks, in addition, a fiscal investment in the container shipping industry. TUI in 2005 was the tour leaders with 3500 give-up the ghost agencies in 17 countries with 37 incoming agencies. TUI featureed much than light speed aircrafts and was the largest Hotelier in Europe with 285 hotels (Case study). Currently, the group owns 43,3 percent stake in Hapag-Lloyd AG. Inthe 2008 financial yearTUI AG returned a taxation of 24.9 billion with total bread (underlying EBITA) of 759 gazillion. As at 31 December 2008 the Group had 70,200 employees (TUI group, company profile).3.0 ENVIRONEMNTAL outlineTo catch and apply the Environmental abbreviation on TUI it is essential to perform an internal and an external analysis. a modality analysis on an industry is further sub-divided in two environment macro-environment and micro-environment. In social club to translate the likely refer of these environments on the tourism industry PESTEL analysis and Porters five forces is under taken for practical impacts on the industry competitive strength and advantage over competitors.3.1 PESTLE ANALYSIS3.1(a) POLITICAL semipolitical factors read a moderate impact on the performance and the festering on tourism industry. Where political instability generate negative publicity and the risk perception influences the tourers endings which results in an un reduceable decrease in tourist arrivals (H every(prenominal) and O Sullivan, 1996). On the other side Terrorism has led serious tourism crisis, and has been affecting the financial condition signifi rattly in recent periods (Sonmez et al 1999). Terrorist attacks, the Iraq war has reflected a decline of approximately 6.6% in TUIs tourism turnover from the first six months of 2002 to the first six months of 2003 (excluding turnover contributed by Nouvelles Frontiers, which we a cquired later in 2002). Health Crisis like SARS in 2003 has also had a traumatic effect on international travel (Case study).3.1(b) ECONOMICAL touristry is one of the growing industries, fuelling the maturement and employment and has become a critical component of the world of economy. Due to Recession, a downward momentum was seen be receive most of the tourism operators were handicapped by the broad(prenominal) take of fixed assets and less able to manage their airlines and hotel industry(case study). Fluctuations in fuel make ups, Exchange rates and currency fluctuations, The Growth of low cost airlines has lead to economic risk in tourism industry.3.1(c) SOCIO-CULTURE switch in lifestyle has changed the demands of consumer they have become more price sensitive and has increased its demand for smart experiences. Consumer has developed a newly attitude of WAIT AND SEE ATTITUDE (Reisinger 2009) facilitated by last chip purchase resulting in late bookings. As tourism involve movement of people to different locations which calls for pagan clashes. touristry has also Led to commercialization of local culture, standardization of destinations and adaptation to tourist demands (coastlearn.org)3.1(d) TECHNOLOGY usance of information technology gave a boost to tourism business for reservations and administrative operations. With the advent of the net income, tour operators ignore now spread out their activities and make available appropriate information, conquering new customers (Wyner, 2000). With launch of touropa.com in Germany, TUI captured a top position in European market in 2005 with a turnover of 2.6bn euro (Case study). too in Island locations high-tech venue networking was adopted to attract new visitors and to communicate to tourists (The daily concern Buzz, Nov. 2/09)3.1(f) LEGALAir trip out Organizers License ATOL Regulations were imposed on any person who advertises or sells air-inclusive holidays in the United Kingdom,granted by the Ci vil Aviation Authority. A number of TUIs businesses operating in the United Kingdom, including Thomson Holidays and Lunn Poly, hold ATOLs. There were many European and national restrictions on airline ownership which could loss of airline operating and route licenses and cause other adverse effects on tourism business. TUIs hotels and destination agencies are drug-addicted to a variety of laws and regulations in the countries in which they operate and, on a periodic basis, must buzz off various licenses and permits. They are subject to a broad locate of labour, environmental and health and safety regulations in each jurisdiction in which they operate (Listing Memorandum, TUI group).3.1(g) ENVIRONMENTALInternational tourism can buoy play the mathematical function of both victim and villain when it comes to climate change(Holmes 2007 BBC news). To attain sustainability TUI is continuously improving on environmental performance, TUI focuses on ISO 14001 environmental standards. He nce TUI strongly supports the environmental protection policies like, species protection, nature protection and landscape protection. TUIs main scope of concern is the efficient use of energy and climate protection. (TUI Group, environment management)3.2 PORTERS FIVE FORCES FRAMEWORKA theatre needs to neutralise as many as possible of the five forcers in order to compel competitive advantage.(Porter 1998) Porter defines five forces impacting a firms fight- threat of substitutes, threat of new entrants in the industry, bar pile uping condition of suppliers, bargaining power of customers, and the intensity of competition within the industry. Understanding the nature of each of these forces gives organizations the necessary insights to enable them to create the appropriatestrategiesto be successful in their market (Thurlby, 1998) .3.2(a) Threat of New Entrants (Medium)For a new company to launch itself in the tourism industry needs a high investment and sophisticated ideas to sust ain its presence in the highly competitive tourism market. The existing company have the capabilities of providing bespoke deals on cheap prices because of their established brands and long chains of tour operator. TUI being the market leaders of tourism industry does non have much effect of threats developed by new entrants.3.2(b) Bargaining index finger of Buyers (High)Tourism industry fluctuates with the buyers changing needs. With increase in competition, buyers have a broadr range of services to subscribe to from hence the tourism industry are forced to comply with changing demands and needs of customers. As the turn cost is non too high Brand loyalty is low and with increase in purchasing power of a buyer the likelihood of travelling also increases. Buyers even eliminate the tour operators and privilege make a direct sale from suppliers (hotels, airlines ect).3.3(c) Bargaining Power of Suppliers (Low) TUI uses backward integration which means it has its own suppliers in fact TUI itself acts as its own suppliers.3.3(d) Threat of Substitutes (High) With the growing world of tourism there is a demand for strategic differentiation. Customers are looking for new experiences, diversified attractions around the world. The large spread of TUI in Europe increases the threat of substitute due to harvest-festival of tourism industry in other part of world.3.3(e) Competitive Rivalry (medium)Tourism industry involves many competitors with an approach of performing better than the other. The competition direct increases because of distribution of market based on the regional operators, privately owned, highly fragmented, and geographically marketed. Even though there was a moderate level of service differentiation, TUI has sustained the competition because of its brand and leaders in market4.0 TUIS CURRENT POSITION AND STRATEGYTUIs strategic goal is to create superior shareholder prize by being a global leading leisure travel group providing customers wi th a wide choice of differentiated and flexible travel experiences to meet their changing needs. TUIs five strategic priorities for sustainable study are Embedding, Climate Change, Destinations, Our People and Our Customers (TUI Travel PLC, schema) .Since 1998 to 2005 main focus of TUI was on achieving cost control and differentiating its product in market. This was carry throughd by adopting Hybrid strategy which is a combination of differentiation, price and cost control (Campbell 2002) bear on to Appendix (A). TUI creates enhancing margin quality through product differentiation by creating unique travel experiences for its customers which helps them strive brand loyalty and competitive advantage. With controlled distribution process the cost of acquisition can be decrease and flexibility is achieved.The five key elements of TUI strategyExpand our core tourism businessExploit synergies and cost efficiencies across our markets and productsLeverage the get aheads of our verti cally integrated tourism model and our wide distribution network chance on new trends and exploit developments in the tourism industryContinue to grow our container shipping business all over the days TUI has maintained its position as the market leaders of tourism industry by covert all the stages of tourism value chain by owning its own travel agencies, hotels, incoming agencies, airlines and cruises (Business week 2009). It has positioned itself to be its own supplies, buyers and travel services and had become a strong example of vertical integration. Vertical growth can be accomplished by forward and backward integration. Though the vertical integration does non give 100 percent success guarantee in complete value chain, TUI has successfully pee its business with selection of travel agencies in European market by having Thomas cook airlines with 100 aircrafts and owning more than 3000 travel agencies (case study). Vertical integration also helps in attracting more customers, differentiate its product and gain more power in market and gain economies of scale by reduce the coordination cost and reducing the profit margins of intermediaries (Enz 2009). Other advantages and disadvantages can be referred in Appendix (B).Major strengths on which TUI had built its leadership and its weaknesses which empowered them to overcome and maintain its position.4.1 STRENGTHSTUIs greatest strength is its brand recognition and fully integrated business model with wide spread distribution network to provide operational advantages. TUIs confidence is based on (i) ability to recover increases in input costs, (ii) flexible business model, (iii) delivery of merger synergies, and (iv) diversity of the Groups businesses(TUI Travel Plc, third quarter report). Appropriate strategic choices with the diverse work force and economic of scale in competitive marketing and efficient distribution has proved to be its core competence. TUIs global presence provides wide variety of holida y services and has successful container shipping business.4.2WEAKNESSTUI Travels existing shareholder loan amounts to approximately 900 million is the major drawback for TUI (financial times 2009). The consumers are increasingly holding off on booking holidays in order to save money in recession. Whereas limited bookings transparency (growing trend toward short-term travel bookings uncertain earnings performance) has also effected the revenue growth of TUI. some other factor is the impact of seasonality on sustained growth and performance of nature based tourism.5.0 CHANGING TRENDS AND TUIs FUTURE5.1 Key Drivers of changeBeside PESTLE (Appendix (C)) it is important to give away the number of key drivers of changes which are forces likely to affect the structure of a business (Johnson et al 2005). To understand the drivers of changes in tourism industry it is required to analyse the change in consumers behaviour, lifestyle and priorities. In years to come the demographic shifts (ag eing population), technology penetration, changes in work pattern, time pressure and changing modes of consumption (further destinations, great expectations, more specialization) will make heavy impact on travel and tourism industry(Lockwood and Medlik 2002). According to shit Long, chief executive of TUI Travel (sustainable development report 2008), Sustainability is one of the four key drivers for growth in TUI, the four main drivers for a sustainability programme for TUI TravelAviation and climate changeProtecting destinations from the impact of climate changeProtecting destinations from the impact of tourismShifting demographics and consumer trendsThese aspects will analyse progress of TUI which is make towards providing holidays that cause minimal environmental impact, respect the culture and people of destinations, and offer real economic benefit to local communities.5.2 Ansoffs MatrixAccording to Johnson et al. (2008) Ansoff produce/market growth can be used to analyse the implications of corporate strategy applied to look for the opportunities open to the industry. This matrix consists of four quadrants which are used to valuate four types of strategic decision(Appendix (D)). It allows marketers to consider ways to develop the business via existing and/or new products, in existing and/or new markets.With an initial start in tourism business from end of 1997 to 1999 TUI adage a real scope of penetration of its business in German market with its existing products and beat to increase its market share. With a vision of new opportunities TUI expanded its horizons by stepping into European market in 2000 with complete dominance and strong market share with existing products in new markets by winning over Thomson travel group, Nouvelles Frontieres(France) and Fritidsresor(Scandinavia) developing its market. With time TUI focused on Product development and introduced low-cost travel airlines in 2003, setting up TUI china and then increased its cash exe cute by subscribe joint ventures in Russia. In 2005 with launch of a virtual tour operator, TUI captured the top position in tourism industry and was able to develop a successful brand Image. In 2005 TUI penetrated in most of the Europe, tourism division was subdivided into the five sectors Central Europe, Northern Europe, Western Europe, destinations and other tourism activities. TUI was diversifying geographically and that has helped to wrap up the ups and downs of soul countries, which can be due to any macroeconomic factor. TUI has diversified geographically in Europe, India and China. They have also diversified in their business segments in logistics of container shipping department in order to achieve economies of scale. TUI opted consolidation for long term growth and global brand development to ensure cash flow from developed market in economic downturn hence TUI considered consolidation has one of their product and market strategy suggested by Johnson et al.(2008).5.3 EX TERNAL OPPORTUNITIES AND THREATSOPPOURTUNITESChanges in emerging and fragmented markets provide greater opportunity for growth in TUI, acquisition and joint ventures can provide a platform to build stronger product portfolio. up(a) TUIs local business, improving in marketing, sales and distribution can support growing demands for specialist holidays. Tour operators still have scope for consolidation by easing geopolitical tensions. Refer to Appendix (E) for more information about the opportunities and TUIs approach towards it.THREATSProtracted economic downturn has been a major threat to the tourism industry. Geopolitical uncertainties (terrorist attacks and natural calamities), operators relatively high debts, limited earning transparency of some companies and seasonal-led volatile earnings performances are some other setbacks for tourism industry. Less attention towards environment and global warming may cause a devastating impact on travel business.6.0 LIMITATIONS OF TOOLS6.1 P ESTEL FACTORSPESTLE analysis is done to simplify the decision making process while following a strategy. PESTLE factors helps in identifying the past trend of an arrangement on which future trends are identified. Practically PESTLE analysis makes it difficult for a company to analyse the entire macro-economic factor as it can be very time consuming and costly. In this degraded changing environment, capturing adequate data might be difficult and capturing too much of data can cause Paralysis by analysis this predicted data might not be accurate. PESTLE does not help is finding out the level of uncertainty in an organisation. For effective results this process needs to be undertaken on regular basis. (Cipd, 2008).6.2 PORTERS FIVE FORCEPorters five forces model works on relatively dormant market structure because of which it cannot explain or analyze todays dynamic changes (Recklies 2001). This model equally imply to all the competitors in an industry and this model cannot be applie d in isolation where porter accepted that way out by applying his framework were only relevant while the macro environment remained constant (Campbell et al., 2002). Five force analyses takes into consideration industry as a whole but it does not segregate different segments. The individual analysis of each of the segment can be of much assistance than industry as a whole. It even assumes that relationships with competitors, buyers and suppliers are adversarial. It oversimplifies industry value chains (Grundy, 2006) and It ignores the human resource aspect of the strategy6.3 SWOTThe SWOT analysis gives an overview of the subject but doesnt help to get the details. The categorization of some aspects as strengths or weaknesses, or as opportunities and threats is to some extent subjective. From the case study numerous strength and weaknesses were identified, but those all were a snapshot of the success and failure on TUI over all business performance. According to Mintzberg (1990) the assessment of strengths and weaknesses may be unreliable, being bound up with aspirations, biases and hopes. Moreover, Frost (2003) describes SWOTs downsides from a managers point of view as it would be difficult for a manager to identify strengths than things they see as wrong with the organization and managers prevail to describe an effect as a weakness and do not get to the causes. (Zarkos et al., 2007) states, an opportunity can also be a threat for a company hence the same problem appears in the distinction of strengths and weaknesses.6.4 ANSOFFS ground substanceAnsoffs matrix is only focussed on growth of a company it focuses on the tangible aspects of products and services and very little attention is paid to intangible aspect like brand. Another weakness of the Ansoff Matrix approach is that it doesnt really address the issue of brand elasticity as a part of the strategic decision-making process.( pringle and field, 2008). the use of Ansoff matrix as a marketing tool may not be really useful as the matrix is critical for analysing the strategic path that the brand may be following, and does not essentially identify marketing options(Macmillan et al., 2000).7.0 CONCLUSIONIn this report the strategic analysis is carried out on TUI tourism industry using various tools. Firstly, macro-environment was analysed to understand the possible impacts on the industry competitive strength and advantage over competitors and develop an appropriate strategy. On a corporate level hybrid strategy and vertical integration was discussed in support to TUIs success. Next segment of internal analysis described TUIs core competences and focussed on future trends of TUI. The analysis of this case study concluded high level of sustainable development which is inimitable.8.0 REFERENCE LISTCampbell, D., Stonehouse, G. and Houston, B. (2002), Business Strategy an introduction, 2nd Edition, Butterworth-Heinemann publication, Oxford, UK.Enz, A. C., (2009), Hospitality strategic direction Concept and Cases, 2nd Edition, Haboken, New Jersey.Frost, A. (2003), The Use of strategical Tools by Small and Medium-Sized Enterprises an Australasian study, Strategic Change, Volume. 12, Page 49-62.Grundy, T. (2006), Rethinking and reinventing Michael Porters five forces model, Strategic Change, Volume. 15, Page 213-229.Hall, C. And OSullivan, V. (1996), Tourism political stability and violence in Wahab, S. and Christopher P. C.,(2001), Tourism in the age of globalization , pp-234, Routledge.Johnsons, G., Scholes, K. and Whittington, R. (2005), Exploring Corporate Strategy, 7th Edition, Prentice Hall, UK.Johnsons, G., Scholes, K. and Whittington, R. (2008), Exploring Corporate Strategy, eighth Edition, Prentice Hall, UK.Lockwood, A. and Medlik, S., (2002), Tourism and Hospitality in the 21st Century, Butterworth HeinemannMacmillan, H. and Tampoe, M. (2000), Strategic Management, Oxford University Press. Available at http//www.coursework4you.co.uk/ansoff.htm, Access o n 21st Oct 2009, 17.23pm.Mintzberg, H. (1990), The convention School Reconsidering the Basic Premises of Strategic Management, Strategic Management Journal, Volume. 11, Page 171-195.Porter, M. E,. (1985), Competitive Advantage Creating and Sustaining ace Performance. The Free PressPringle, H. And Field, P., (2008), Brand immorality how brands can live long and prosper, Kogan page, IPARecklies, D. (2001), Five Competitive ability (porter), Available at http//www.12manage.com/methods_porter_five_forces.html, Assessed on 28th Oct 2009, 8.45pm.Reisinger, Y., (2009),International Tourism Cultures and Behaviour Elsevire Ltd.Snmez, F. S., Tarlow, P.,(1999) Tourism in Crisis Managing the effect of Terrorism Journal of Travel Research, Vol. 38, No. 1, 13-18Thurlby, B., (1998), Competitive forces are also subject to change, Management decision LondonZarkos, S., Morgan, R. E. and Kouropalatis, Y. (2007), Real Options and Real Strategies, Strategic Change, Volume 16, Page 315-325.http//www .cipd.co.uk, (2008), PESTLE analysis, CIPD, Accessed on 3rd Nov 2009 at 15.56pmhttp//www.tui-group.com/uuid/68045be7dc26a80404db1d381be42f4b TUI Group Listing Memorandum, Accessed on 1st Nov 2009 at 19.24pmhttp//www.scribd.com/doc/17015152/TUI-Environmental-ReportTUI TUI Group Environmental report, Accessed on fifth Nov 2009 at 12.03amhttp//investing.businessweek.com/research/stocks/snapshot/snapshot_article.asp?ric=TUIGn.DE Business week 2009 , TUI AG(Consumer Directory sector, hotels restaurants and leisure) Accessed on 8th Nov 2009 at 13.33pmhttp//www.dailybusinessbuzz.ca/2009/11/02/pe-cutting-edge-technology-to-boost-tourism/ Daily business buzz, Cutting -edge technology to boost tourism 8th Nov 2009 at 22.54pmhttp//www.coastlearn.org/tourism/why_socioimpacts.html Coast learn, sustainable Tourism Socio-Culture Impact, Accessed on 6th Nov 2009 at 16.22 pmhttp//www.tui-group.com/en/sustainability/env_management TUI Group , Environment management and bionomic sustainability, Acces sed on 29th Oct 2009 at 16.16pmhttp//news.bbc.co.uk/1/hi/world/7094559.stm Holmes, S., 2007 How to make tourism greener , BBC news, Accessed on 8th Nov 2009 at 23.08pmhttp//www.tui-group.com/en/company/profile TUI Group, company profile Accessed on 30th Oct 2009 at 09.52amwww.tuitravelplc.com/tui/uploads//TUITravelQ3Results.pdf TUI Travel Plc, third quarter report 2008, Accessed on 25th Nov 2009 at 11.52amhttp//www.ft.com/cms/s/0/258da2ca-acd0-11de-91dc-00144feabdc0.html Yuk, K. P., 2009 TUI Travel takes steps to refinance loan, Accessed on 7th Nov 2009 at 22.14pmhttp//sd2008.tuitravelplc.com/tui-sd/pages/aboutthisreport/datamaterialityTUI Group, sustainability report 2008, Accessed on 28th Oct 2009 at 20.22pm9.0 adjunctAPPENDIX (A) food market price responsivenessPrice insensitivity Price sensitivityCost-based StrategyDifferentiation StrategyStuck in the middle strategyHybrid strategiesAppropriate strategic approachAdopted form David Campbell, George Stonehouse andBill Houuston , Business Strategy (2000), 2nd edition.APPENDIX (B)Advantages and Disadvantages of vertical IntegrationAdvantagesDisadvantagesCan eliminate steps and reduce duplicate1)need for overheads to coordinate vertical integrationAvoid time consuming tasks and negotiate contractsBurden of excess energy if not at all output is used.Improve marketing or technological intelligenceobsolete process may be penetratedCan create differentiation through coordination processReduce strategic flexibility due to being locked in a businessProvide superior control of firms market environmentMay link to an unprofitable adjacent businessOffers an increased ability to create credibleness for new products.May not be potential for synergyAdopted from Enz, A. C., (2009), Hospitality Strategic Management Concept and Cases, 2nd Edition.Appendix (C)FACTORSREASONSPOLITICAL/LEGALPolitical instability of developing countriesGovernment regulations and regulative reforms.High taxation policies of developed countries .labour, environmental and health and safety regulationsECONOMICALRise in fluid income in developing countriesCurrency fluctuation.Rise in fuel costEmerging market.SOCIAL changing priorities of consumersHealth and safety concernsUrbanisation.Disposal income in consumer levelTECHNOLOGYUse of information technologies systems for reservationsUse of internetImplementation of new sales and distribution channelsEnhanced flexibilityENVIRONMENTNatural calamities globular warming limitation on carbon emissionAppendix DSTRATEGIC DIRECTION ANSOFF MATRIXExisting Product New ProductAMarket PenetrationConsolidationBProduct DevelopmentCMarket DevelopmentDDiversificationExisting MarketNew MarketAdapted from H. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6Appendix (E)OpportunityOur goalEmbedding into our core businessEnsure our business decisions take into account sustainable development principlesOperational impactsMinimise the negative sustainability impacts (particularly on climate chang e) of our day-to-day operationsSupply chain managementSupport our supply chain in managing their sustainability impactsChoice alterEdit out the holiday options that do not meet our minimum sustainability standardsChoice influencingMake it piano for customers to choose a more sustainable holidayAwareness raisingHelp customers appreciate the sustainability impacts of tourism, effort demand for more sustainable holidaysChanging behaviourEncourage customers to change their actions in a way that maximises the positive and minimises the negative impacts of their holidayInnovation and product developmentDevelop new, more sustainable experiences in response to demandCollaborating with our industryShare best practice with others in the tourism industry where our competitiveness is not affectedAdvocacyUse our influence responsibly and in line with our commitment to sustainable developmentPutting something backPut something back into the environment or community wherever we cannot avoid a n egative impacthttp//sd2008.tuitravelplc.com/tui-sd/pages/ourapproach/ourstrategy?whoareyou=addstudent=truesubmit=SubmitThreat of new EntrantInnovative ideasWide range of holiday packagesThreat of substituteWorldwide tourism attractions