Players in the Tourism Industry - Assignment Example

Strategic Case Analysis Introduction Tourism refers to the activities that involve people travelling and/or seeking accommodation in places outside their home, city, country and continent for a period not exceeding one year in search of leisure, for business or other activities. This is a competitive industry and customer satisfaction is its driving force in this industry. Companies, therefore, need to be able to change to match the changing customer needs, preferences and desires. The sectors in this industry include accommodation, recreation and entertainment, transportation, food and beverage services, and travel services. According to the European Commission, & Statistical Office of the European Communities (2007), in recent years, tourism has become the largest and most progressive industry with international revenues generated in tourism in 2011 reaching about 1.030 billion dollars. The market share of new destinations-former transitional, underdeveloped and developing countries have been on the rise. Their market share has increased from 30 percent in the 80’s to 47 percent in 2011 and was estimated to reach 57% by the end of 2013 (p 23). In many countries, tourism is the preferred option for economic and social development and it is, therefore, included in their political and developmental strategies. An example is Kenya, where tourism is the core of the economy after agriculture. Tourism is an unpredictable industry influence by a number of factors. Events like economic recession, natural disasters, terrorism acts, weather conditions and government policies significantly affect this industry. These determine where and how people spend their holidays. For example, an increase in the frequency of terror attacks and bombing may cause governments to issue travel advisories and alerts to its people not to visit the affected areas. This industry relies on advertisement and promotional tactics employed by the travel companies, governments and airlines. For example, in the UK, the Tourist Information Center (TIC) located all over the country serves the purpose of promoting and marketing tourism to local and international tourists. The key players in this industry in the UK include travel agents and tour operators like Thomas Cook and low cost airlines like Jet2, Easy Jet, Monarch and Ryaniar. Strategic Management Companies identify and implement a strategic plan by matching its capabilities with the demands of its environment in this process. It analyzes the initiatives and measures undertaken by top management in a company regarding resources and performance in the external environment. This process involves specifying a company’s vision, mission and overall objectives; developing policies and making plans to achieve these objectives; and allocating resources to the implementation of these plans and policies. In developing a strategy, the following steps are involved. The first step is the assessment of the competitors in the industry and assessment of the market. This is done to determine why and what makes the competitor(s) more attractive to its customers. This information can be used to provide the way forward for the Company. The second step is setting of goals and strategies based on the company’s competitive position. These goals are both short and long term and may include strategies to reach new potential customers or develop new products. The third step is the implementation of these strategies. The objectives set in step 2 are achieved. This step involves the re-organization, resourcing, and administering management procedures. Implementation involves organizational change that may include creating new departments, merging existing departments and expanding geographically. This change may require a significant shift in a company’s budget, which may affect human resources as well as the company’s expenditure. These changes need to be assessed regularly, that is, quarterly or annually to determine whether the company is succeeding or not. When the strategies are failing, there is need to replace them with new ones to meet the new needs. For example, when there is a new technological advancement, new competitor in the market, new economic environment and changes in the political, social and financial environment, the existing strategies might need to be adjusted to cope with these changes. In a company, internal environment is one, which has direct impact on it and can be controlled, for example, the staff, structures and marketing strategies. The external environment affects a company indirectly and may be uncontrollable. External environment is divided into micro and macro environments. Microenvironment consists of customers, suppliers, the market, the public and the financiers. The macro environment is made up of economic situation, social, political, legal and technological environments. It is more difficult to control the macro environment compared to the microenvironment. Barney & Hesterly (2006) explains that, when pursuing competitive advantage, the best practice for companies is the use of a combination of external and internal analyses in the formulation of strategies. In order to understand the internal and external environments of a company, there is need for its management to conduct analyses regarding its internal and external inputs. The analysis of a company’s Strength, Weakness, Opportunities and Threats (SWOT Analysis) helps summarize the internal and external analysis and in doing so, helps predict its future. In understanding the relationship between the internal and external factors, a company can formulate a strategy through which its strength can utilize the opportunities while offsetting the threats and correcting the weaknesses. The opportunities and threats in the external market are established through trend and competitor environment. The internal analysis of a company gives a clear picture of its competences. Therefore, in developing a strategy, it is important to assess the opportunities and threats in the external environment and leverage these against the company’s strength and weaknesses. The implementation of a strategy involves monitoring of the results, assessing the achievements, evaluating the efficiency and efficacy of strategic processes and making adjustments to the process. Case Study Business An Easyjet airline is a British airline and the largest low cost carrier in Europe second only to Ryanair Airlines. The company was founded in 1995 by Sir Stelios Haji-loannou. This airline is part of the Easy group, which consists of easyHotel, easyBus and easyCar. The airline serves major airports and key markets in Europe. The company’s vision is “To be the best low fares airline in the world”. The airline boasts of its convenience in service due to the high frequency of flights (Air Transport Research Society, 2008). The internal environment in Easyjet airline consists of the decision-makers and their characteristics. That Sir Stellos is the founder and majority shareholder. The management in the company changes every 4 years. Other internal inputs include the staff and the infrastructure. The external environment includes the competition, the aviation board that regulates the airline industry, the oil industry, government regulations, market demand, and natural disasters and epidemics. Strategic Management Easyjet strategies include the use online and telephone booking. The company uses internet business model, which involves advertising online. Product branding is aggressive with brightly colored slogans and website painted on the planes. The airline is unique in that it offers one-way tickets quite unlike other airlines whose policy is that customers only purchase return tickets. The company uses good value pricing in that the airline provides neither snacks nor refreshments on-board and there is no business class seats. In this strategy, the focus is on providing the right combination of quality and price (Okumus, Altinay, & Chathoth, 2010 p.67). The airline further uses optional product pricing whereby, food and beverages as well as special or priority boarding passes are priced separately. The price of a ticket varies according to the demand and date of booking. One pays lower prices for early bookings. With the low cost approach being unreliable, the company chose to provide complementary services. These include offering a bundled service to increase customer convenience. That is, additional services are charged separately and customers have options to choose. The airline has an environmental conservation policy. This policy ensures that there is use of efficient use of aircraft and short haul system. Efficiency is also ensured on the ground with the decreased use of equipments and strategies employed to keep waste to a minimal. According to Zanoni (2012), the company’s vision, mission, aims and objectives are useful for guiding its strategic direction (p.36). The company vision, “to be the best low fares airline in the world” could be best achieved through the low cost offering cost strategy whereby the airline excludes luxury services like priority seating for example business class seats and goods like refreshments and snacks from the cost list. It is important for the company to understand stakeholders’ needs and expectations to develop and implement a successful strategy. This can be achieved from doing a stakeholder’s analysis. Through an analysis of the company’s internal resources and core competences, and how best to use them to gain competitive advantage, decision makers can strategize on how best to lead the industry. These internal resources include physical, human and financial factors available in the company (Zanoni 2012, p.14). SWOT analysis is used in the strategic management of Easyjet airline. The strengths of the company include the fact that the airline flies to all primary airports in the UK. The airline offers low cost flights. This is made possible by the elimination of refreshments during flights. The airline uses a reverse pricing system whereby; the earlier one books a flight, the cheaper the ticket. Bookings are made easy through the availability of 24 hours a day internet booking. The company is phasing out phone booking to increase efficiency. The company has a fast return time for aircrafts, as planes are ready to take off within 30 minutes of landing. This is efficient for the customers as well as for the company as there is an increase in the frequency of flights increasing the company turnover. The company was featured on airline TV series increasing its popularity. The branding of the airline is highly distinctive with bright orange colours and catchy slogans for example, “Come on, let’s fly” as well as the company website painted on the plane (Rothaermel, 2013 p.47). In terms of weaknesses, the airline has high-density seating - higher numbers of passengers per unit space, which makes the experience uncomfortable especially during long distance flights. It is difficult to change bookings and the airline requires one to top up the difference in price accordingly. The company competitive strategy is dependent on pricing which is lower than most. This is not a very good strategy because all that competitors have to do to draw customers away from the company is just giving lower prices (Rothaermel, 2013 p 50). According to Morton (2005), there exists opportunities to venture into other markets outside of Europe for example Middle East and China (p. 36). These could provide a competitive advantage for Easyjet. The company could save on costs by implementing strategies that bring about financial turnarounds. For example, the company could phase out telephone bookings, which require telephone operators who need to be paid. According to Rothaermel (2013), it is easy to copy the company’s brand names bringing confusion to customers and damaging the brand name. There is stiff competition with Ryanair airline, which is Europe’s largest low-cost airline in terms of its market share in the region. Ryanair also flies to secondary airports. Another competition is Air Berlin, which is the second airline in Germany and offers free snacks and beverages. Air Berlin also flies out of Europe. The availability of alternative transport system, the Eurotrain whose speed and price is comparable to air travel in short distances. These are the threats facing the airline (80). There is therefore need for the company strategists to monitor the competitive environment to ensure they identify the opportunities and act on them accordingly. There is need for decision makers in Easyjet to use Porter’s five forces model to analyse the competitive environment. According to PEREIRA (2013), this model uses five factors, that is, entry of new competitors, bargaining power of buyers, and that of the suppliers, and existing competitors’ rivalry. These analyses give the managers and strategists that foundation and guide on which to base their action. It also enables them to identify a position in the tourism and aviation industry where the company can best protect itself against these forces while at the same time influencing them in its favor (p.43). Conclusion Players including travel agents, tour operators and low cost airlines drive the tourism industry. In Europe, Easyjet is the second lowest price airline in terms of flight cost. The airline uses cost reduction strategy to gain competitive advantage in this market and in its industry (Grimm, Lee& Smith, 2006 p.56). The airline has a safety management system, which serves to reassure customers of their safety at all times. The vision of the airline emphasizes on it striving to be the best low cost airline in Europe. This is what guides the company to achieving its objectives. According to Pease, Rowe, & Cooper (2007), the implementations of developmental strategies with information technology in mind serve to put the company in the forefront in the tourism and aviation industries (p. 59). References AIR TRANSPORT RESEARCH SOCIETY. (2008). 2008 ATRS World Conference. [Vancouver, BC, Canada], Air Transport Research Society. Barney, J. B., & Hesterly, W. S. (2006). Strategic management and competitive advantage: concepts and cases. Upper Saddle River, NJ, Pearson/Prentice Hall. EUROPEAN COMMISSION, & STATISTICAL OFFICE OF THE EUROPEAN COMMUNITIES. (2007). Tourism statistics. [Luxembourg], Office for Official Publications of the European Communities. Grimm, C. M., Lee, H., & Smith, K. G. (2006). Strategy as action competitive dynamics and competitive advantage. New York, Oxford University Press. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A N=143305. Gamble, J., & Thompson, A. A. (2013). Essentials of strategic management: the quest for competitive advantage. New York, NY, McGraw-Hill/Irwin. Morton, J. K. (2005). European airlines. Hinckley, Midland. Okumus, F., Altinay, L., & Chathoth, P. (2010). Strategic management for hospitality and tourism. Amsterdam, Butterworth-Heinemann. http://site.ebrary.com/id/10464281. Papatheodorou, A. (2006). 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The International Institute for Science, Technology and Education (IISTE). http://www.iiste.org/Journals/index.php/EJBM/article/view/4713. Thompson, A. A., & Thompson, A. A. (2012). Crafting and executing strategy: the quest for competitive advantage : concepts and cases. New York, McGraw-Hill/Irwin. Zanoni, A. (2012). Strategic analysis: processes and tools. New York, Routledge. Read More