European Tour Operation Managing Strategy - Essay Example

?MANAGING STRATEGY al Affiliation) The analysis of the European Tour Operation will take a two dimensional approach. It will first examine the individual models of PESTEL, Porters Five Forces and Industry Life- Cycle, and how their general implementation shaped the European Tour operation based on the provided literature. The analysis will then examine the cases provided of the TUI and Thomas Cook and further provide critical analysis of the overall attractiveness of the industry and identify the opportunities and the threats. Keywords: PESTEL, Porter’s Five Step, Industry Life Cycle. Introduction PESTEL is a model that considers the Political, Economic, Social, Technological, Environmental as well as legal aspect (Thomson & Strickland, 1998). It is considered as one of the models that can be successfully used particular for groups that are considered to be more private focused. Such groups may be victims of being oblivious to the effect of the external forces since their focus is laid on the internal forces. In studying the European Tour operation, PESTEL had been exhaustively practiced to arrive at the current status of the industry. Discussion According to the study, Political factors such as Government policies and trading policies were central to the growth. A case in point is the outcome of the competition authority clearance which witnessed the merger between Thomas Cook and the British Competitor MyTravel, an integrated international group. The economic situations and trends were also awakened the industry, where players like TUI responded to the actions of Thomas Cook by the acquisition and merger with First Choice. These home economic situations and trends tighten the competition in the European Tour and Operation Industry. The economic situation was also concerned with the Industry specific factors where the Thomas Cook adopted flights that gave the customers choices of chartering plans rather than DO It-Yourself and thus assured security and good value for the vacationers. Economic factors such as interest rates also influenced the operations of players like TUI. This was witnessed where an anticipation of a sustained weakness of the pound against the Euro and the expected increase in unemployment made TUI to cut summer capacity by 27% to the British travelers in 2009. These economic factors also saw Thomas Cook undergo reorganization after experiencing continuing decrease in revenue. On consideration of the social factors, TUI got involved in low cost airline which was expected to get to the average families as well. TUI also got itself different brands all over Europe and world at large to present different images in different environment, which they successfully did through travel agents as well as having there different brands of Tour operator selling not only fully packaged tours but also individual travels components. Competing Technological Development also shaped the tours operations in Europe. The observation that call centers and online bookings combined, in 2005 accounted for 25% of the sale gave an indication that technology had given the business of Tour operation a new face all together. This is also observed when online Travel Agencies are noted to have been moving quicker than the traditional Tour Operators who were seen to be going down the hill. The Literature also elaborates that tours operators no longer competes exclusively amongst themselves but face competition from online channels. The maturity of technology seemed to have played a very significant role in the development of tour operation in Europe. When it comes to environmental factors, clearly, Consumer buying patterns played a role in the determination of the progress of the industry the fact that a number of structural changes between US and UK. This was grounded on the understanding of the differences between the US markets and the European markets. The study notes that the Europeans take more vacations than Americans and that US travelers tend to be more independent and prefer booking individual components over preset packaged tours and lastly that the climate of Northern Europe makes for the success of 1-2 weeks winter breaks to summer destinations such as Southern Mediterranean countries. Michael Porter’s model is also noted to have played a part in the provision of the industrial framework in the case of the European Tour Operation. This model is stem on the understanding that business is influenced by five forces: Supplier power; Barriers to entry; threat of substitutes; buyer power as well as; Rivalry. The Industrial concentration of the European Tour had a very significant bearing on the development of the industry. This concentration is noticed between Cook and TUI when they both are trying to gain the advantages of the merging trend in Europe. A lot of innovation and creativity is seen between Cook and TUI by actions such as employing technology and cutting cost to the vacationers at certain times. The rivalry seemed to have heightened in 2008 during the economic recession, which was characterized by slow market growth and high fixed costs. Threat of substitutes was noted in the European Tours operation when Cook began to provide the all inclusive package for the vacationers since this seemed to provide value and security to the customers who could now have options against the players who could only provide specific services. The Buyer power significantly shaped the destiny of the industry. To reduce succumbing to monopsony, TUI, reduced the cost of travel to the British so that the buyer’s price could remain in control and keep the industry on the go. Barriers to Entry or threats to entry in the business kept the big players in the industries like Cook and TUI in the market. Considering that barriers to entry are more than the normal equilibrium adjustments that markets typically make, TUI and Cook managed to make the price of their services artificially low as a strategy to prevent potential entrants from entering the market. Patents and propriety knowledge in the industry portrayed Cook and TUI as mavericks in the market. Porter examination of the rivalry is however not trying to remain static. It is trying also to look at the dynamics that are experienced in the industry. In the case of the European Tour Operation, it is evident that emergences of the players like in Africa and America have significantly compelled the industry to respond in a way to keep in on the move (Porter, 1980). The case study of the European Tours Operation could also be examined through industrial life cycle. A study notes that companies of different size usually vary their possibilities to work in the fields that are not directly their core business areas. In the case of the case study of Cook and TUI, by using Raymond Vernon’s life cycle approach, an analysis of Cook’s Company can be divided into, exploration, growth, maturity and decline. In this case, both TUI and cook seemed to have focused more on the process by trying to explore various methods of cost saving opportunities. Cooks examined the infrastructural alternatives by investing on other areas like accommodation and even the cars. This ensured that they heightened their efficiency regardless of the environmental factors therefore promoting the growth of the Company. The maturity approach as postulated in Vernon’s life cycle assessment is also a key mechanism that the industry employed. By franchising the companies into the world they managed to understand the customers demand and knowing the environmental differences that could be possible barriers for their progress. This also enabled them to brand themselves gain entrance into the green market. The Company has taken measures that will ensure that quality service provision is guaranteed to their customers hence propagating their development. By the adoption of the three models, the European Tour and Operation has stood firm. They have managed to consider the dynamics that comes as a result of the external forces and have strived to remain relevant in the field. The industry conducted their research to understand that Europeans love vacations more than the Americans, an observation that has act as a pivot to help them invest their capital in the right market. This has also enabled them to stay relevant to the demands of the huge buyer of the service. The industry has however not exploited the emerging market among the middle class and the upper class Africans who have also invested in the tourism industry. Little focus has also been laid on the domestic tourist especially in Africa who would rather tour their areas but need facilities that would enable them have comfort, something that may be provided with the market leaders like Cook and TUI. 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