TUI is the proven market leader in the Western european tourism industry catering to over 25 source marketplaces globally with a product portfolio greater than successful brands. Since its inception the management has gradually developed a sturdy business model to pursue its vision to be the market head in the Western european tourism market. The business level strategy of the group from its commencement was to acquire operators along the whole supply chain and incorporate all tourism related services under one global umbrella. This progressive strategy empowered TUI to assimilate its supply string, to stream brand and harmonise businesses, thereby achieving a lesser cost base in comparison to its challengers. Backward integration helped TUI develop key competencies that have been inimitable by challengers, which empowered it to deliver high quality services to all or any its aim for customers. Their capability to deliver services appreciated by customers at an efficient cost and their strategy of being a one stop shop for all services has facilitated TUI to support its command in the Western travel and leisure industry.
Tourism is the world's major industry and one of the most dynamic and quickest growing industries of the economy of many nations. The probable of travel and leisure as a socio-economic development tool has been acknowledged. Specifically, the critical role of travel and leisure in achieving many of the United Nation's Millennium Development Goals, such as poverty alleviation and employment creation opportunities has been stressed (United Nations World Tourism Company, 2006 cited in Saffu et al, 2008). The travel and leisure industry in European countries has gone through many fluctuations and periodical deviation in the last decade or so. TUI started out with a binge of acquisitions to establish itself on the market, in so doing changing industry dynamics. By this plan TUI reduced its competition to a meagre 3 to 4 major players like Thomas Cook. The release of the Dot com companies brought the concept of online arranging along with them, as a result forcing major players to conform, thus so that it is the most profitable route of selling in the industry.
An environment is what gives an organisation their means of survival. Evaluation for business strategy development is performed in light of both the external and internal environment.
Source: Designed from Johnson et al, 2008
Provides frameworks for analysing factors impacting on business at the macro level and which can be external to company.
The "radical and ongoing changes happening in culture create an uncertain environment and also have a direct effect on the functions of the complete firm" (Tsiakkiros, 2002). A number of checklists have been developed as ways of cataloguing the multitude of possible conditions that might affect a business. PESTEL examination is one of these that are merely a construction that categorizes environmental affects as political, economic, socio-cultural, scientific, environmental and legal causes. Kotler (1999) boasts that PESTEL research is a good tactical tool for understanding market growth or decrease, business position, potential and way for procedures.
TUI travel is a leading international leisure travel group, and has 200 brands throughout the world, working in 25 source market segments. As the company has a occurrence worldwide, it requires to understand the political situations and government plans in each of its source markets for sustainable development.
Tourism being one of the most promising market sectors in the late nineties underwent an interval of flattened development scheduled to various terror attacks in New York (2001), Djerba (2002), Bali (2003) and Madrid (2004), supplying rise to basic insecurity and doubt among international travellers. Terror attacks are one of the major risks to global tourism and governments throughout the world should make an effort to ensure tourist protection and safeness for stable travel and leisure revenues
A good successful marriage with different tourism boards across focus on marketplaces has facilitated proper market penetration and has helped TUI achieve sustained market control.
The levy of Hotel luxury tax by certain government authorities like France post 2005 has affected the tourism industry by eating to their margins and increasing their costing structure (Propertywire, 2008).
The cultural motives of tourists have been central to their cause because the inception of the industry. The ability to seek and understand new ethnicities is what has drawn travellers to various scenery, plus a rapidly increasing urge for food for historical sites. Increased life expectancy due to quick progress in the medical field has catalysed retired persons to tour and explore new terrains. Increasing involvement rates of women have provided a increase to travel and leisure, because two income people have higher discretionary income. The Demographic profile of TUI customers differs from university students to retired individuals. They may have customised travel packages for people, individuals and various social groups (As per Show 3).
The monetary downturn has already established a significant effect on the life-style and travelling patterns of people. Because of a lower disposable income and reduced occupation, there's a noticeable change in selecting holiday deal durations. Post downturn tourists choose shorter and cheaper deals to match their budget constraints. Because the advancement of the downturn there can be an increasing tendency towards local travel somewhat than international excursions. This could result in visitor migration to smaller hotels and lodges (Guardian 2009). Another growing cultural dimension of tourism is the fascination to terror hit spots like THE WORLD TRADE CENTRE after 9/11 (For further analysis make reference to Appendix 1).
Although this model provides useful perception into a few of the important functionalities, they have some limitations. PESTLE does not allow you to identify the real strategy. When looking at socio-cultural factors, there are distinctions in ethnic and social communities, not all groupings have the same behaviour and this influences that they view various products and services. Its analysis of forecasting future styles cannot be very appropriate.
In essence, the job of the strategist is to comprehend competition and deal with it. Yet competition for profits goes beyond founded industry rivals to include four other competitive causes as well: customers, suppliers, potential entrants, and substitute products. The prolonged rivalry that results from all five pushes identifies an industry's structure and shapes the type of competitive connections within an industry. A wholesome industry framework should be just as much a competitive matter to strategists as their company's own position. Understanding industry framework is also necessary to effective strategic placement. As a focused market innovator TUI should strive to reduce the chances of the competitive causes and shape them in a company's favour to support overall strategy (Porter, 2008). (For even more analysis refer to Appendix 2).
Porter's Five Forces model based at first on the economical situation in the eighties assumes relatively static market composition and hence it isn't able to consider new business models and the dynamism of the companies, such as technological innovations and dynamic market entrants from start-ups that will completely change business models within short times. Therefore, it isn't advisable to build up a strategy exclusively based on Porter's Model, but to analyze it in addition to other proper frameworks of SWOT and PESTEL research.
Porter (1979) defined a proper group as a set of firms in a industry that act like one another and various from firms outside the group using one or more key dimensions of the strategy. For Porter, tactical groups are consistent structural top features of market sectors that are bounded by ability to move barriers. Mobility obstacles (a generalization of the concept of entry barriers) limit admittance in to the group by retarding imitation (Dranove et al, 1998).
Analysis of the travel and leisure industry based on strategic groups unveils that TUI is a full range service provider on account of its extensive product collection and global occurrence. TUI has established a worldwide penetration credited to well-timed mergers and acquisitions aided by backward integration through acquiring its suppliers. TUI has a wide product portfolio encompassing all travel services and endeavours to provide all travel related services under one umbrella.
Source: Designed from Johnson et al, 2008
Is a good tactical tool if the industry is fragmented, somewhat than when it's concentrated.
It deals with analysing the source of information basic of TUI and how it uses them to build up key competencies and achieve sustainable competitive gain.
Balamuralikrishna and Dugger (1995), state that SWOT examination can generally help to portray a strategic organizational situation also to identify what information is necessary and what decisions are likely to be made on a personal as well as a business level (cited in Chermack & Kasshanna, 2007). This tool helps look at the organization's current performance (advantages and weaknesses) and the organization's future (opportunities and dangers) by accounting for the factors which exist in the external environment. SWOT is a robust and sometimes highly successful technique that may be put on individuals, groups, teams, organizations, or even plans (David, 1997 cited in ibid). Hence, relating to SWOT thinking, professionals should begin by identifying and analyzing those factors that help or prevent the company in getting its potential (Chandler, 1962 cited in Chermack & Kasshanna, 2007). (For further analysis make reference to Appendix 3).
A range of critics however have said that the productivity from a SWOT examination is often either trivial or so broad concerning be relatively meaningless in the context of making actual marketing decisions. Mintzberg (1990), for example, claims that the assessment of advantages and weakness may be unreliable, being destined up with dreams, biases and expectations.
One of the historical deficiencies of SWOT research was the inclination to rely on a very general, categorical analysis of internal features. The resource based mostly view came up to exist in part as a remedy to the void in the proper management field.
Swot evaluation is often inconsequential or so broad, that it seems futile in the point of view of making critical strategic decisions.
Strategy has been thought as the match an organization wakes between its interior resources and skills and the opportunities and hazards created by its external environment. Recently there's been a resurgence of interest in the role of the firm's resources as the building blocks for company strategy (Grant, 1991). The resource-based view stresses the internal capabilities of the business in formulating strategy to achieve a sustainable competitive benefits in its market segments and establishments. Its internal features determine the tactical choices it creates in competing in its exterior environment (Henry, 2007). Therefore, the RBV emphasises proper choice, charging the firm's management with the key tasks of determining, growing and deploying key resources to maximise comes back (Fahy, 2000)
Strategic capability of an company is the resources and competencies needed for it to endure and contend (Johnson et al, 2008).
Resources: Resources may be thought of as inputs that enable an organization to handle its activities. They may be threshold or unique.
The resources needed to meet customers minimal requirements and therefore to can be found. The threshold tangible resources required by businesses like TUI to make it through in the travel and leisure industry would whether it be Hardware, Financial resources like capital and liquid working capital, recruiting and tour providers or brokers to service customers and complete the resource string. The intangible part would pertain to presenting online booking facilities and human being capital with basic industry competence which is very important in an understanding motivated business.
According to Barney (1991) a firm's resources can be considered a source of continual competitive benefit, when they are exceptional, valuable, imperfectly imitable and non- substitutable. The tangible unique resources for TUI could be the hotels, low cost airlines, restaurants and various other property it attained to assimilate its supply string. The intangible resources would be strong brand commitment, goodwill in industry due to responsible travel and leisure and friendly to the environment tourism and included ERP software like CRM to assimilate information over the value string. Tacit knowledge about value string synergies can be an important advantage for TUI. Knowledge for obtaining functional synergies and providing quality differentiated services provides TUI with the right platform for technology and suffered competitive benefit.
A competence is the capabilities that businesses require to become able to be competitive available on the market. In this respect, all firms own competencies. It really is a prerequisite for contending in a industry. However, competencies in themselves do not confer any competitive advantages for the organization (Henry, 2007).
Competence required by an organisation to remain competitive in a marketplace. Threshold competencies for the tourism industry would be an efficient and user-friendly online booking service to service aim for customers and an effective comments from customers and re-addressable system. Creating proper links with various service providers in the supply chain is crucial for service delivery in the travel and leisure industry. Corporate tie up ups with suppliers for package dealers gives customers proper options to choose from.
Prahalad and Hamel (1990) dispute that the critical job of management is to build an organization with the capacity of creating products which customers need but have not yet even dreamed. To do this management must successfully operate across organisational restrictions rather than give attention to discrete individual proper sections (SBUs). Thus a center competence or proper ability can be thought of as a cluster of capabilities that an business possesses which in turn allows it to achieve competitive advantage. It may simply be that the organization has configured its collection of resources so that allows it to remain competitive more efficiently Core competencies are based on the collective learning of individual members within an firm and their ability to work across organizational boundaries (Henry, 2007).
TUI has achieved central competence in providing respected holiday packages at an inexpensive by integrating its source string through backward integration. Just how TUI has configured it value string, and the functional synergies achieved scheduled to it, has allowed them to attain sustainable competitive edge. Acquisition of ERP software has facilitated proper information circulation through the supply chain of TUI and has helped incorporate geographically dispersed information across efficient silos. An ERP system helps make a central repository for data storage space accessible to all or any departments all the time, thus permitting cross functional integration also to inter departmental coordination (Davenport 1998). CRM as an ERP component helps evaluate customer responsiveness, by monitoring consumer buying behavior through purchase patterns, thereby enabling them to provide customised deals.
First, the various contributions lack a single integrating framework.
Second, little work has been made to develop the functional implications
of this theory (Grant, 1991).
The strategy clock construction develops and adds to Porter's original model, and therefore some aspects are open to similar criticism. However, it is a more sophisticated methodology, which recognises and deals with a few of the criticisms of porter and in particular recognises that using circumstances a 'hybrid' mixed strategy can achieve success (Evans et al, 2003). (For further analysis make reference to Appendix 4).
Contradicts Porter's assumption that no company can follow two general strategies concurrently, without concrete empirical research.
The value chain is a organized approach to examining the introduction of competitive edge. The chain consists of some activities that create and build value. They culminate in the full total value delivered by an company. Value chain analysis can help an establishment determine which type of competitive advantage to pursue, as well as how to pursue it. A couple of two components of value chain research: the industry value chain and the organization's inside value string. The organisation value string is split into 'major activities' and 'support activities (Porter, 1985).
The principal activities of TUI contain inbound services provided by the suppliers the hotels, low priced airlines and the restaurants which in cases like this have been purchased by TUI to combine its business design. The operations level handles assembling these fragmented products into consolidated program trips for customer servicing. The outbound logistics of TUI handles the sourcing the package offers to end users by using intermediary programs like the internet, Television set stations or calling or through middlemen like head to operators or travel companies. The offering is positioned to the supposed user through various settings of marketing like online marketing, viral marketing, communal marketing or by person to person. The after sales support to customer at TUI is provided through call centres and customer addressable modules like CRM.
The secondary activities focus on the procurement of inputs through backward designed materials. The technology advancements for TUI are by using internet for reserving facilities and CRM for tracking customer buying patterns. The human source of information management component handles identifying unique resources and using them to develop main competencies which can be ably supported by the vision statement. The firm infrastructure contains an internet based business module supported by information systems to assist proper planning at TUI. (Refer to Appendix 5).
TUI's original vision statement incorporated the purpose of achieving leadership in the industry, hence the business model and the business level strategy was developed appropriately. Their strategy entailed acquiring set up tour operators to operate with a accepted brand, inherit valuable business romantic relationships and gain access to a rich data source of customers. TUI developed its tactical capabilities to obtain strategic fit with its perspective.
The unique resources were used to increase on functional synergies achieved due to backward integration of the resource chain and core competence originated around this framework. An integrated resource chain helped TUI leverage great things about economies of scale and bring down their overall cost foundation helped it achieve market control. Operational synergies established consequently of integration, facilitated quality service delivery at an inexpensive, which was inimitable by rival companies like Thomas Make. Its value chain configuration was built around its unique resources to accomplish sustainable competitive advantage, which resulted in development of a sturdy business design. These factors aided with a supportive management helped TUI tide in the downturn with way too many adverse influences and helped it preserve its market leadership
Amalgamation of more countries into the European Union may enhance business potential customers for major players like TUI, by simplifying the visa issuance process and by making it more efficient.
The Impact of the imposition of luxury taxes for accommodation providers may eat in to the margins of small players but may further boost profitability for major players like TUI by providing opportunities for leveraging economies of level through backward integration.
The exponential progress of global terrorism could have severe implications on the tourism sector as safe practices and physical condition of tourists is one of the main element parameters for selection of travel destinations in that way increasing risk component of TUI as a package deal provider
De regulating FDI in travel and leisure by government authorities of prospering third world countries like China and India provides TUI with opportunities to penetrate further which in turn would enhance their global presence
Fluctuation of frequently exchanged currencies like Euro and Pound would effect the dynamics of inbound and outbound travel, like a stronger pound would encourage outbound travel from UK, phoning for a big change in plans provided by organisations like TUI
Frequent oscillation of fuel costs might affect the margins of TUI adversely and push it to restructure its cost basic, consequently increasing product prices.
Post recession well packaged long luxury tours maybe a rewarding option for TUI as there could be a significant move in demand habits facilitated by increased buying vitality.
Increased threat of pandemics like Swine Flu would have an effect on tourism all together and would inhibit further growth of TUI in affected areas
As promoters of sensible tourism TUI could focus on accelerating business progress in underdeveloped countries where tourism is a significant contributor to the gross local product (GDP)
With a fleet of 150 aircrafts and cruise ships, TUI should turn to further reduce its carbon footprints and promote friendly to the environment tourism
TUI also needs to look at the extent of drinking water air pollution in its accommodation services to contribute towards curbing increasing concerns about ecological imbalance and global warming
TUI should look to capitalise on technological innovations like Location structured services by making use of them in their business model to device progressive modes of advert, therefore exploiting the first mover advantage
TUI should protect from too many mergers and acquisitions as they will find it difficult to set up further synergies, which might impair their competitive advantages and they should be wary of monopolistic trade practises
TUI must be aware and aware of competitive cycles to safeguard new entrants from concentrating on its softer segments
With an imminent risk of substitutes since the onset of recession, TUI might have to adapt its business model and strategy to support its market leadership
The potent risk posed by the introduction of large cap dot com organisations like Expedia may warrant a far more focused strategy for every profitable segment
TUI should guard against, major rivals like Thomas Make meals trying to replicate its business design and imitate technique for competitive advantages.
This article analyses the business enterprise level strategy followed by TUI to pursue its perspective of sustaining market command in the tourism industry. Evaluation of the strategy followed contingent on three degrees of study macro analysis, micro industrial examination and assessing interior strategic capabilities. It was discovered that TUI has stronghold in the Western Tourism market due to its dynamic capabilities and primary competencies proven through operational synergies of its processes. Considering its strategy of backward integration TUI has strived to lower costs and achieve a sustainable competitive benefits through it. With a robust business model and investment in valuable acquisitions TUI has ridden over the economic downturn to sustain its market command in the Western european tourism industry