Strategic Management Analysis The Thomson Travel Group PLC - Essay Example

Strategic Management Analysis Table of Contents Table of Contents 2 Company Profile 3 Market - Environment Analysis 4 Micro - Environment 4 SWOT Analysis 5 Macro – Environment 7 PEST analysis 8 Critical Success Factors 11 Company’s Strategic Analysis 13 Strategic Fit Analysis 17 References 18 Company Profile Figure 1. (British Retail, n.d.) The Thomson Travel Group PLC was founded in 1962 when Roy Thomson started out in the travel business. The journey of Thomson Holidays started with the acquisition of few travel companies and the Britannia Airways. In 1972 the company was recorded to acquire another company which was then the largest of UK travel chains, named Lunn Poly. After this acquisition the company’s travel agents were known as Thomson and the airline was renamed as Thomsonfly that travels over more than 80 holiday destinations (My Holiday Co. 2010). The company in 2002 changed its formal name from Thomson Holidays Limited to TUI UK, Ltd. Presently it is operating as Thomson Holidays, a brand of its parent company TUI Travel Plc. delivering their services to vacation travel retailers. It is primarily a UK based group serving both travel and tourism packages in the national as well as international markets. The group operates its air-line services in European region, Australasia, Asia, the Middle East, and America, employing nearly 18000 people at present. (Bloomberg L.P., 2010). Apart from airlines the group also owns a number of cruises named as Thomson Cruises, offering lower cost Europe tour through water. Additionally, the group also feature many holiday resorts to serve their customers a cheaper and comfortable holiday experiences. With a difference to the prospects of mere holiday packages, the group has also destined its path in publishing several magazines and brochures defining the types of packages offered and there pricing thereof giving its advertisement sector an effective touch. Some of the published magazines are, Thomson Destinations and Summer Sun, Thomson Destinations Florida among others (My Holiday Co. 2010). Market - Environment Analysis The first step for a strategic analysis of a company or group is the analysis and evaluation of opportunities that can be attained through the company’s strengths and threats that arise due to the company’s weaknesses depending both in the micro and macroeconomic environment of the company. As such, a micro environmental factors followed by the macro environmental conditions have a great impact on the company. Micro - Environment A company’s micro-environment is highly influenced by its market coverage, targeted market, and the products or services rendered. In case of Thomson Holidays working with TUI as its parent company serves a wide range of services and has its targeted market included in the tourism industry, one of the fastest going industries in global perspectives. The strategic competency of Thomson Holidays as such can be better evaluated by using the SWOT analytical tool. SWOT Analysis Strengths The foremost strength of the group is its horizontally diversified product range to meet the demands of its targeted market. For instance it offers luxury holidays for customers belonging to the upper income group. Packages included in this category are Premier Collection serving 4 & 5 stared holiday packages, A la Carte holidays including the special service of Thomson Cruises and Resorts, Sensatori, Platinum and couples holidays almost covering every range of a high class choice at a comparative cheaper rate. Another tailored package is the Adult Holidays concentreted on couples, delivering packages like Gold Holidays, 2wentys Holidays offering parties and lodging and the group also offers Tours and Twin Centres which include safari tours for their customers. It also has some of their tailored packages for families including their family resorts, and special packages for children, like tour to Disney at an affordable price. Notably the group has their season based different tour packages both in national and international hemispheres, like Caribbean, Africa, Indian Ocean, America, and almost covering every part of Europe (TUI UK., 2010). With a cleared detail of its product lining it can be stated that the group has its targeted market spread from the lower income level to the higher income level rendering products of all ranges. Simultaneously, it also has its vertical diversification enforced with airlines, cruises, resorts, and retail tour operators reducing the cost of packaging allowing the group to drop its prices comparatively. Weaknesses A major weakness that the group is undergoing at present is its weaker consumer response resulting in a slowdown of sales and annual profit thereof. Moreover its weak financial planning and internal un-stability increases the chance of fall in growth or losses for the group. As such, the group has decided to cut down approximately £117 million as an effect to fail in settling dissimilar accounting arrangement for retail operators and tour operators. Even the weak customer values reflected as the down fall of its share price by 11% in the current fiscal year (Glass, 2010). Opportunities Getting itself included in the tourism industry lays a wide range of opportunities in the hands of travel companies in this modern era. The industry as such provides a vast range of diversification opportunity and with the group strength, it can easily compel those. Moreover, its diversity in different phases of package designing both on horizontal and vertical limit enhances its future prospects with many more opportunities. Another prospect for the group is to be among the successful in the industry that it has its parent company to be TUI Travel Plc, one of the top registered companies in UK. The financial strength of the group and its reputation has also taken the Thomson Holidays a step further in earning a competitive edge (TUI Travel PLC, 2010). Threats Threat for such a group in this rapid growing industry can be its competitors, and the changes in its macro environment. Some of the competitors as such are the Kuoni Travel, and The Luxury Vacations Ltd. TUI UK being its parent company, Thomson Holidays is likely to get fluctuated by the ups and downs of TUI UK and be influenced by the strategies taken by the company. As such the Thomson Holidays is also facing a certain amount of threat regarding the fact. However some other factors to influence the opportunities and threats of Thomson Holidays also rely on the macro-economic conditions in which the group exists. Macro – Environment Although the tourism sector is already marked by economists and researchers all around the world to be one of the fastest growing industries with a global outlook, but still it comprises lots of issues, like the economic environment of the country in which the group is working, the competency of the global market, and many more. On this regard a PEST analysis should be appropriate. PEST analysis Political Influences The recent reform has been introduced in the tourism policy of UK hotel industry with new coalition. UK economy after its dark period of long recession had witnessed a continuous cut in the spending of the population. However with new norms regarding taxation policies and interest rates, the government is thereby on a pave to bring stability in the hotel industry of the economy. Presently the economy is undergoing a phase of restructuring to make over the affects brought by the global economic slowdown. And therefore the government policies need to be more accurate about the costs. Moreover as the economy is facing a slow growth and increasing rate of unemployment, the government should also focus on the employment generation schemes of the industry. Proper tax structures and capital allowances such as Hotel Building Allowance must also be taken into valid consideration through the encouragement of private investors. Keeping all these factors in mind, the political rules and regulations mentioned by the UK government can be better from the past years but is not enough to be said as perfect for the growth of tourism industry of the economy (Jamieson, 2010). To be included, by the start of the second half of the current fiscal many faults were witnessed in making the tourism sector of the economy one of the top destinations in the global market. According to David Cameron, the tourism minister of UK, tourism industry is among the most competitive in the world market and is of considerable importance in reconstruction and balancing the economy. However, the growth of UK tourism was recorded to slip down from the 6th to 11th position between 2008 and 2009 (Sweetland, 2010). All these reforms will certainly influence Thomson Holidays to attain an appropriate sustainability. Economical Influences Figure 2. (Office of National Statistics, 2010). The economic conditions of the economy, is certainly changing its pace from last two years with a downfall of the spending ratio of the native people visiting abroad, but the economy has also on contrary witnessed a slight growth in the overseas visitors. In order to state the economic variances for last year, the statistical figure shows a reduction in European Visitors by 1 percent, following with another 5 percent decrease in the ratio of North American visitors and 1 percent fall in the number of visitors from other parts of the globe. The total visits for holiday vacations were however showing a positive growth by 2% from 2009 (Office of National Statistics, 2010). All these facts and figures do influence the stability of Thomson Holidays, being one of the groups engaged in arranging holiday visits. The group as such needs to take some preliminary actions to enhance its competitive structure and attractiveness in order to serve the global market with a growing demand. Socio - Economic Influences With a reduction in the spending power of the people in the country, national visitors have also reduced holidaying considering the economic uncertainty. The reasons may be the strong impulse created by the unemployment figure of the economy making people more cautious about their earning and spending with a view point to maintain a certain amount of savings. This state of socio-economic environment certainly is greatly impulsive to the growth of global customer booking, which was estimated to fall by 8% according to the World Travel Market. Additionally, as included by some economists, all these trends in the socio-economic trends will make the path of hotel and travel companies in the international market a lot tricky (Smale, 2009). Technological Influences Because the impact of a proper business communication is intense in the field of tourism industry, the media and use of technology is also of great concern. Notably for the past two decades most of the holiday tours arranging companies were using technology for the enhancement of their services related to airlines and travel agents in booking and customer service. But presently companies are also considering the fact that online search engines can be well-utilized as another medium of global networking as well as travel retailing. While some economists conclude that mobile phone makers can also play a major role in taking the industry to a growing phase. As such the ever-embryonic technology becomes a vital issue in the tourism market and can be fruitful as the biggest customer drift (World Travel Market, 2010). Therefore, the group’s strategy to enforce the usage of media technology serving international and national customer base with updated online technology was a positive strategy to enhance the group’s efficiency. Critical Success Factors According to the political, economical, social, and technological representations of the present scenario it can be fairly stated that the factors do influence Thomson Group highly. Any fluctuations of these factors shall lead to the un-sustainability of the group in near future. However the factors seem to be quite in favour of the industry with new regulations and policies. But certainly the economic and socio-economic environment does not put to the growth of the group solemnly. Precisely, to state about the future perspective of the industry economists say that European countries all together can only earn a growth of 1.4% in 2011, which is slightly lower than 1.6% of 2010 (World Travel and Tourism Council, 2010). In addition to refer the strengths, weaknesses, threats, and opportunities the group should focus on its strength of diversified market lining to gain the opportunities lying in its external environment. Precisely some key success factors to be mentioned in this context is the sustainability of its parent company, the cost effective packaging system and its advertisement strategies. Company’s Strategic Analysis Functioning in the UK and international market, the subsidiary of TUI UK, Thomson Holidays have a specified group of strategies to be followed in order to maintain a remarkable presence in the tourism industry. On this context to analyse the strategies adapted by the group, Porter’s Five Forces Competency Model is considered. Figure 3. (Harvard Business Review, 2008). Bargaining Power of Suppliers With a fall in demand for holiday packages the group at present is witnessing a decrease in the bargaining power that it used to enjoy in its targeted market. Thomson Holidays in this regard have taken some strategic actions to face this challenge by attracting its potential customers. The group has been recently recorded to discount their fair rate up to £500 for extended haul holiday packages, despite of Airport Passenger Duty (APD) Tax increase by the UK government. Even the group has been offering some superior deals in booking tours through websites. In this regard, the group has also undertaken a partnership with Holidays 2011 offering superior airway packages all around Europe. Additionally, the company has also registered itself to be comparatively cost effective for customers. Certainly, this strategy can be useful in providing the group a fair competency, when the market is tending more on the side of saving rather than spending (Newswire, 2010). Bargaining Power of Buyers The market is undoubtedly bending towards the buyers affecting the cost structure and services provided by the group. And the strategies undertaken are theoretically quite efficient to change the mode of action from buyers to suppliers. However the rules and regulations act as constraints to the matter. If the group has decided to follows a cost effective packaging system, it becomes arguable that with the increased duty taxes and interest rates how long is it going to render this kind of service. The group as such should try to attract international tourists from the emerging markets so that to balance their sustainability through expansion. Threat of New Entrants Considering the nature of tourism industry, at present listed among the most influential and competitive, new entrants have a moderate chance to enter the market. But, however in the emerging markets as well as in the developed markets there are a huge number of small and big players participating in the industry. Therefore, the only solution to this issue is to build up an outlook to be highly challenging for any new entrant. The group with its new discount structure has moved a step further in developing a level of competency. Threat of Substitute Products The group has a wide range of products for holiday tours including their service in resorts, cruises and airlines, etc. But what the group is not focusing is on the other part of the coin. Along with vocational tours, the company can also diversify its course of action into the direction to operate corporate tours, which shall be beneficial to the group by reducing its threat regarding substitute products. Existing Competitors Figure 4. (Holiday Hypermarket, n.d.) The group faces a competitive rivalry presented by many other tour operators serving almost the same or even a little more attractive packages compared to that served by Thomas Holidays. For instance its biggest rival Kuoni Holidays has been voted to be among the best tour operators to provide long haul tours in Britain. On this context, the product lining and diversification also proves to be somewhat similar to that of Thomas Holidays. As such the group needs to revaluate its marketing strategies in order to achieve a competitive position in the market (Kudoshops Ltd., n.d.). Strategic Fit Analysis Conclusively, to state about its strategic fit, the group has many strengths as well as a number of drawbacks and weaknesses in its designed strategic intent. Firstly, the group has a powerful design of travel and tour operators to serve the targeted market with long-lasting experiences. To put into account, its services widely range from high cost luxury vacations, to low cost family outings. The group also compels in serving the customer base with airway facilities, cruises, and resorts which in turn prove to be a lot more cost effective than to hire all these elements. However, the group’s recent strategy with accord to the changing scenario of the political and economic environment, to discount its rates for airway services shall be risky to continue for long. In this case, the group has to depend on the reforms of UK tourism policies regarding investment and allowance. Whereby, to consider the fact about Thomson Holiday’s sustainability, it is highly influenced by the recent proposed changes in its parent company, TUI Travel Plc. For instance, the cost restructuring can hamper a lot to the productivity of the group. Keeping all these factors under consideration, it would not be wrong to comment that the adapted strategies of the group can do well but only for a short-term period. References Bloomberg L.P., 2010. TUI UK, Ltd. Business Week. [Online] Available at: http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=6564039 [Accessed November 23, 2010]. British Retail, No Date. Thomson Holidays. Travel. [Online] Available at: http://britishretail.co.uk/travel.shtml [Accessed November 29, 2010]. Glass, H., 2010. FTSE Close: Diageo, Unilever up; BP, Thomson down. This is money. [Online] Available at: http://www.thisismoney.co.uk/markets/article.html?in_article_id=516924&in_page_id=3 [Accessed November 23, 2010]. Harvard Business Review, 2008. The Five Competitive Forces That Shape Strategy. The Magazine. [Online] Available at: http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1 [Accessed November 24, 2010]. Holiday Hypermarket, No Date. UK Holiday Bookings Strong for Kuoni Travel. News. [Online] Available at: http://news.holidayhypermarket.co.uk/UK-Holiday-Bookings-Strong-For-Kuoni-Travel-5420450106.html&usg=AFQjCNHGE8uD9ikywUtRBvq2mSex3h9m1g [Accessed November 29, 2010]. Jamieson, L., 2010. Tourism Policy: Safe in Cameron’s Hands? Hotel News. [Online] Available at: http://www.hotel-industry.co.uk/2010/06/tourism-policy-safe-in-camerons-hands/ [Accessed November 24, 2010]. Kudoshops Ltd., No Date. Kuoni Holidays. Travel. [Online] Available at: http://www.kudoshops.com/kuoni-holidays-uk.html [Accessed November 24, 2010]. My Holiday Co., 2010. Thomson Holidays 2011 – Great Deals OUT NOW! Thomson Holidays. [Online] Available at: http://myholidayco.co.uk/thomson-holidays/ [Accessed November 23, 2010]. Newswire, 2010. Thomson Holidays 2011 Tours and Trips Deep Discounts Despite Airport Passenger Duty Tax Increase. Thomson holidays 2011. [Online] Available at: http://www.i-newswire.com/thomson-holidays-2011-tours-and/71461 [Accessed November 24, 2010]. Office of National Statistics, 2010. Travel and Tourism Short-term rise in visits. Statistics. [Online] Available at: http://www.statistics.gov.uk/cci/nugget.asp?id=352 [Accessed November 23, 2010]. Smale, W., 2009. Tourism sector eyes brighter 2010. BBC News. [Online] Available at: http://news.bbc.co.uk/2/hi/business/8350943.stm [Accessed November 23, 2010]. Sweetland, V., 2010. David Cameron on UK Tourism: Industry Reaction. Hotel Industry. [Online] Available at: http://www.hotel-industry.co.uk/2010/08/uk-tourism/ [Accessed November 24, 2010]. TUI UK, 2010. Package Holidays. Thomson. 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