Tools to Make Better Strategic Decisions - Literature review Example

? European Tour Operators Introduction The establishment and development of tour operators and companies providing travel services by offering desired deals and packages to the target market has been at the forefront of leisure travel in Europe. Page and Connell (2006: p129) observe that from the perspective of global travel the European market is considered to be the focal point of advancement and progress with considerable activity in terms of investment and development as companies opt to expand by undertaking measures such as mergers and takeovers. It is understood that the recent wave of expansion that has hit the European travel market has been an application of strategic tools and techniques in order to achieve the organizational objectives of profit maximization, increased customer base and cost efficiency. According to the information presented by Page and Connell (2006: p129) the vast scope of the European travel market is such that 53% of the population residing in the continent were reportedly away on holiday with most holiday goers belonging to the western region of the continent which essentially represents the differences in incomes and savings of individuals residing in various parts of Europe. As per the guidelines set by strategic management, major tour operators in Europe have benefitted from various modes of integration in order to obtain a larger share of the overall market. Page and Connell (2006: p130) identify that due to the adoption of such practices of horizontal and vertical integration the landscape of the travel market in Europe is dominated by certain key players in the industry of which TUI AG and Thomas Cook AG are standout contenders on the list. As highlighted earlier, aspects of strategic management are pivotal to an organization’s success and this statement is also applicable within the context of major European tour operators. The tools, techniques and procedures that are involved in the assessment of a company’s internal analysis are used to define its value creating process and uncover its strategic capabilities. The implementation of these techniques consequently defines the optimal distribution of resources in an organization so that the achievement of economic advantages may guide the business towards prosperity and success (Bensoussan and Fleisher 2012). The purpose of this paper is to effectively utilize the tools of internal analysis which are, Value Chain Analysis and Balanced Scorecard with regards to the European tour operators TUI AG and Thomas Cook AG respectively. Accordingly, the concluding section of the paper examines the key aspects of the internal analysis to provide suitable suggestions and recommendations in the light of the discussion. 2. Value Chain Analysis According to Bensoussan and Fleisher (2012) the procedure which follows the implementation of a Value Chain Analysis can be described as a series of activities that are undertaken to guide products from the stage of inception till they are delivered to the final customers. Henceforth, the division of the Value Chain Analysis is based on the categories of primary activities and support activities which must be initiated for the achievement of various organizational objectives. This section of the paper focuses on the Value Chain Analysis for TUI AG on the basis of the aforementioned categories. The primary activities of the business can be examined on the basis of several categories that are classified as inbound logistics, operations, outbound logistics, marketing and sales and service. The inbound logistics of TUI AG include: aircrafts, hotels, cruise ships and cruise liners. Accordingly, the operations of the business can be defined under the categories of tourism, travel and hospitality services. Outbound logistics of TUI AG are highly extensive which reflects the vast scope of its global operations, infrastructures comprising of the outbound facilities are travel agencies, airlines, retail stores, high street outlets, incoming agencies, tour operations, online sale points, travel shops, car rental services and car parking services. From the perspective of marketing and sales it can be noted that the organization is a B2C. Moreover, TUI AG also conducts assessment of global travel markets to exploit growth opportunities. These assessments lead to the development of Package holidays on normal and discounted rates in accordance with customer needs. Additionally, the organization’s regular participation in travel exhibitions and events also acts as a marketing effort. TUI AG is known to actively participate in public relations through sponsorship; an example of this is that since 2002, the company has been sponsoring Hannover in the Bundesliga. Customers always expect their travel experience to be a memorable one which is why the provision of appropriate services is one of TUI’s top priorities. Services offered by the organization include; Travel refund policy, efficient network of customer services and offering service as per customer needs after conducting an identification of target markets and the unique needs of customers. Secondary activities of the company are classified under the categories of procurement, human resource management, technology development and infrastructure. Effective procurement strategies that are implemented at TUI AG include; Identification of specific source markets, prompt payments to suppliers, establishment of local and overseas procurement teams, effective management of supplier relations and establishing strategic alliances with renowned hotel chains. Consequently, TUI also abides by the TUI Travel PLC Supplier Code to ensure that desired standards of delivery are adhered to at all times. The company greatly values its strategic alliance with Boeing which has been a valuable source of revenue in recent times. With respect to Human Resource Management practices, TUI is understood to be a follower of diverse management practices. The organization readily ensures that employee engagement practices are adopted widely throughout the organization and effective communication strategies are implemented to encourage maximum employee input and feedback. This is achieved through employee opinion surveys. The recent launch of the ‘Global Responsible Leadership Programme’ is a reflection of TUI AG’s commitment towards promoting best human resource practices. With respect to technology development within the organization, TUI AG has integrated technological initiatives in the tourism industry to utilize recent advancements for the purposes of achieving sustainability. The company is reducing its carbon emissions in various operations through the incorporation of innovative technologies. TUI AG’s infrastructure encompasses the global ownership of hotel chains, aircrafts and cruise liners with a worldwide network of distributors. Furthermore, the company’s online presence is also very strong with internet-based such as laterooms.com and a range of online travel agents boosting of providing TUI services. The organization’s belief in maintain sustainable relationships with its suppliers has been the key to its infrastructural expansion. 3. Balanced Scorecard This section of the paper focuses on the strategic management tool of the Balanced Scorecard which has been termed as one of the most critical contributors towards the success of an organization owing to the challenges of today’s dynamic business environment. Niven (2002: p2) praises the Balanced Scorecard’s ability in providing a clear roadmap to organizations by maximizing their potential and reducing obstacles in order to execute business strategy in the best possible way. As a method of assessing an organization’s internal performance, position and resources the balanced scorecard for Thomas Cook AG examines four distinct aspects of the company that are classified as financial, customer, innovation and internal business processes. FINANCIAL: Thomas Cook AG's key financial objective is to enhance its sales volume in the tourism and travel market; however, the achievement of this target has been hindered by poor financial performance that has been displayed by the company in recent times. The latest initiative which has been taken by the company to recover from its disappointing state has come in the form of a refinancing package which was announced in 2012. CUSTOMER: Thomas Cook AG aims to provide its customers with a complete tourism and travel experience that is able to fulfill their needs, wants and requirements. The initiative that have been taken by the company in order to meet its customer objectives is the establishment of customer service units to promptly resolve any issues that may arise. The company strives to achieve its target of offering the best possible hospitality experience to its global audience. The extent of the measures that were undertaken by Thomas Cook AG in the wake of the volcanic ash cloud disaster which stranded thousands of vacationers was widely appreciated by customers. INTERNAL BUSINESS PROCESSES Thomas Cook AG aims to strictly comply with the guidelines of control and risk management that have been outlined as per its measures of Corporate Governance. Internal assessments that are conducted within the organization highlight the risks, impact and mitigation of several aspects relating to the operations of the company. These risks are classified as operational, strategic and financial. Risks facing other aspects of business activity are also examined. The major risks that Thomas Cook AG currently faces are largely associated with the company’s financial position. These observations stem from foreign currency fluctuations, the global economic situation and fuel prices that increase the cost of travel and operational costs of the organization, the former is responsible for adversely affecting the demand for travel and tourism. INNOVATION Technological advancement in the travel and tourism industry is largely based on product innovation, development and sustainability which have the potential to enhance Thomas Cook AG’s financial performance by the provision of differentiated products that are marked by affordability and cost effectiveness. Similarly, e-commerce is a field which has seen a recent surge in popularity due to its convenience and accessibility which is also a positive sign for Thomas Cook AG. Thomas Cook AG has modernized and optimized its booking procedures by transitioning to a technology platform. Consequently, the organization is also aiming to upgrade a vast percentage of its processes such as hotel inventory management procedures. Technology platform enhancement has been planned as an initiative which will be able to benefit the progress of Thomas Cook AG’s online travel agency thereby, maximizing the customer base that can be accessed through the medium of the internet. 4. Conclusion and Recommendations As noted by Page and Connell (2006: p129) the complexity of the European travel market is marked by the presence of major tour operators such as TUI AG, Thomas Cook AG and First Choice amongst several other competitors. This notion implies that the travel industry of Europe is believed to be one of the most lucrative and profitable markets across the globe. In order to survive the uncertainty of the world economy which greatly impacts the demand for travel and tourism, businesses must prepare and optimize their resources in an efficient manner to avoid grave financial losses. The preceding assessments of TUI AG and Thomas Cook AG’s internal scenario indicate that even though both the companies have recently been hit with fluctuations in demand and an inconsistent financial performance, the strong internal measures of the businesses have assisted the organizations in maintaining their position in the European market. Despite of this positive observation the analysis was able to reveal that technological advancements and innovations in the industry need to be enhanced if the concept of sustainability is to be fully integrated within business operations. This observation not only encompasses aspects that are associated with e-commerce, online ticketing and booking but also focuses on the initiation of procedures that can advance inventory management processes and the companies’ delivery network. References Bensoussan, B. E., & Fleisher, C. S. (2012). Analysis Without Paralysis: 12 Tools to Make Better Strategic Decisions. FT Press. Niven, P. R. (2002). Balanced scorecard step-by-step: maximizing performance and maintaining results. Wiley. com. Page, S. J., & Connell, J. (2006). Tourism: a modern synthesis. CengageBrain. com. Read More