Enjoy Life to the Fullest: Travel Agency - Case Study Example

Starting a Travel Agency in Singapore Contents Introduction 3 Competitive analysis 8 Marketentry strategy 9 Implementation strategy to market entry 11 Market growth strategies 12 Risks and challenges 12 Conclusion 13 14 References 14 Introduction This research is about designing a business idea included in a practical business plan that is about starting a travel agency in Singapore. It is based on the consideration that Singapore is enjoying fast tourist industry development now as well as in the near future. By way of entering the travel agency industry sector in Singapore, it is possible for great business successes to be reached on the part of the investors. There have already been a large number of travel agencies in Singapore and they are taking up a large portion of the market size in the country. However, it is possible for more successes to be reached in new entrants because the target segments of customers in the travel agency market in Singapore vary a lot. By focusing on some potential business opportunities witnessed in the Singaporean tourist market, business investors can expect to achieve pleasing business successes. Value proposition The name of the travel agency to be started is Enjoy life to the fullest. As is indicated in the words included in the name of the travel agency to be started in Singapore, the major values proposed for operating the businesses are facilitating in the process for people to enjoy their life as much as possible by going on interesting trips to the different tourist attractions in Singapore. Instead of passively following the arrangements made by the travel agency in the form of tour trips, the travel agency to be started will emphasize on the participation of the tourists in making an optimal tourist plan for achieving their expected tourist purposes in Singapore. Under the competitive business environment of the travel agency industry sector in the current times, inspiring the tourists to take part in the process of making the practical and detailed tourist plans would enable the customers to enjoy their trips to their selected tourist attractions on more occasions. The competitive advantages of the travel agency to be started in this business plan will be expected to be improved compared with the business rivals in the Singaporean tourist market.  In addition to that, the travel agency to be started in Singapore will also focus on providing more considerate services to cater for the needs of reaching smooth communication in the process of offering tourist services for the customers from different countries. Interpreters that can speed different languages used in different countries of the world will be employed as service staffs to help reach a smooth communication with the tourists from different places of the world. That will help the tourists easily reach their present tourist objectives in Singapore. It will also be taken as an important source of value proposed for the customers of the travel agency that is to be established in the promising as well as challenging business market in the tourist industry sector of Singapore.  Target market segment The major target market segments for the travel agency to be started can be classified into three categories. They are revealed in details as follows. Firstly, there is the segment of student tourists. Student tourists are likely to be prepared with a high level of curiosity and rich energy while going on tourist trips to a tourist destination. To meet their needs and improve their levels of satisfaction, travel agencies are faced with the task of enlarging their alternative options of tourist plans and enrich the recreational programs for catering the possible expectations of them. The number of student travelers visiting Singapore is estimated to be around 2.4 million, which can be evidenced from the report created by Singapore Tourism Board in the past three years.  Secondly, there is the segment of family tourists heading to Singapore for tourist trips. The fast development in the transportation industry in the world, especially in terms of air transportation, enables tourists to go on tourist trips to remote tourist destinations. The steady economic development in many regions of the world in recent decades proves a major reason for more and more families in different countries to afford to go on tourist trips to some interesting tourist destinations in foreign countries. Because of that, more and more family tourists are witnessed in the highly popular tourist market in Singapore now. At present, about 700,000 families from varying places of the world are found to be heading for Singapore for tourist purposes. That makes a major target segment for the travel agency to be started in Singapore.  Still another target market segment for this travel agency is the senior citizens in foreign countries. At present, many countries are found to be facing an aging trend in their population. Singapore is taken as an ideal tourist destination for a growing number of senior tourists from many other countries in recent years, such as the USA, Japan and the European Union. Targeting at such a market segment would mean great business opportunities for a travel agency to achieve pleasing business successes. In the past five years, the numbers of senior citizens visiting Singapore were found to be increasing at an average annual rate of 12.5% (Kim et al. 2012). In 2014, the number of senior tourists aged about 60, who head for Singapore, is estimated to be around 850,000 (Freeman, 2015). Targeting at such a market segment will help the travel agency to be started reaching more profits in the competitive tourist market in the country. Market Analysis In doing the market analysis of the travel agency industry in Singapore, it is a good idea to apply the PEST model, consisting in such factors as political, economic, socio-cultural and technological environments.  Political; The government of Singapore has long been trying to boost in the domestic tourist industry development by way of lowering or removing the barriers for foreign investors to invest in its domestic industries, especially in its tourist industry sector. As an important part of the tourist industry, the travel agency industry sector is found to be playing crucial important a role in affecting the overall tourist development in Singapore (Gough, 2007).  They are required to pay lower taxes and get involved in simpler process of getting government approval, from the relevant management authorities in the government in Singapore. Singapore is one of the politically stable countries, thus; risks of terror attacks that limit tourism are not common. This has made Singapore one of the best tourist destinations and the main entry in Asia. Economic; There is the trend of economic globalization that is having great impacts on the tourist development in various places of the world. As a very popular tourist destination in the current world, Singapore is becoming more and more famous among tourists from different corners of the world. Such a fact brings the travel agencies in Singapore with more excellent business expansion opportunities (Wood and Brotherton, 2008).  At present, peace and development are still taken as the most important themes in the social development processes of a majority of countries and regions in the world. Developing economy is taken as the key task of the governments in most countries. Under such a context, the international trade and international tourism are enjoying fast development. Global economic shutdown in the past decade has limited the amount of money tourists are willing to pay in their purchase for tourism activities. There has been a decline in inbound tourism with a decline of about 6% since 2009. These economic constraints have changed the general perspective of the Singaporeans who have become more price conscious than they were in the past. This has affected negatively the travel agencies. These constraints have also led to major airlines decreasing their expenses thus limiting ticket commissions to travel agencies thus diminishing the travel agencies’ earnings. Social- Cultural; The general demography of Singapore is composed of old people with more couples opting not to get children in order to enjoy their lives without any responsibilities. The living standards of the Singaporeans are relatively high with more than two thirds of the population having an average income whereas the others have a higher than average. The living conditions and lifestyles are generally an incentive for Enjoy life to the fullest travel agency since there is a ready market. Pasts researches on the participation of Singaporeans in travel agencies indicated that 61% of the citizens participated in tourism activities as groups of family members (Koh, 2002). This proves that our targeted market segment is readily available. Increase in tourism activities increased during school holidays and public holidays thus proving that students were more likely to participate in tourism with during school vacations thus making it important for our travel agencies to develop strategies that will help us tap the young tourists. The older generation is said to be richer and statistics portray that they engage in tourism activities more than the young do, thus it is best for the travel agency to formulate the best package for to ensure this target that is also loyal can form its basic customer. Singaporeans have become more price conscious in the past decade due to financial constraints. This makes them more abundant to spend more on tourism activities than was the case two decades ago. This constraint has however not changed their general need not to be by passed by any opportunity they think is worth the price (Enz, 2010). This makes it clear that to ensure success in travel agencies in Singapore the packages must be appealing to the Singaporeans for them to purchase. The Singaporeans are said to love free things, thus, it is wise to ensure additional services to ensure they purchase our packages. Technological Environment; The current world is changing mainly due to technological changes. The Internet is one of the technological changes that have facilitated globalization due to improvement in communication. Singapore is one of the most technologically advanced places in the world with about 50% of her citizens regularly using the internet. This embracement in internet has impacted the travel agencies negatively since online tour guide, air tickets and hotel bookings are mainly accessed via the internet. This diminishes the use of travel agencies since online sites are cheaper and provide quicker and more information to customers (Butler, 2001). This may seem a negative influence on travel agencies, but Enjoy life to the fullest travel agency finds it as an opportunity and a competitive advantage since most of the Singaporeans have not embraced e-commerce and most travel agencies use traditional travel strategies. This will give us an upper hand to ensure we use both the traditional and e-commerce. The use of the internet will ensure better and faster means to advertise our agency free and to many people. The essence Singaporeans value skilled and face-to-face communication will ensure better ways to convince the customers on the packages offered to ensure they are willing to pay (Gough, 2007). Competitive analysis Singapore has a rich history of tourism and travel agencies. This makes it a very competitive market in the travel industry. The well-established travel agencies are the direct competitors to enjoy life to the fullest travel agency. They hinder entry to the market directly since they engage in price wars to ensure they generate more profits as the profit margins have decreased in the past decade due to changes in technology and economic downturns. The packages they offer to show the nature of competition and thus making it hard for new travel agencies to join the market. The five best agencies in Singapore are namely; Chan Brothers Travel Agency, CTC Travels, SA tours, Hong Thai Travels and Dynasty Travel (Gale Research Company, 2008). Their customers know these travel agencies for their exceptional travel packages and reliability. The first four agencies in this list mostly use traditional travel methods, although they have active websites. This is because of the level of competition where they do not intend to show their prices and packages openly to limit other competitors from using them to better their prices and packages. Dynasty Travel is different as it has a well-developed website uses technology to communicate and keep in touch with their valued customers. Their packages, dates and special payments are portrayed in the website (Wood and Brotherton, 2008). This makes Dynasty Travel our direct competitors due to the improved use of technology and mobile application. Other indirect competitors are hotels and restaurants that in the past decade have embraced online bookings for their customers that is easier and cheaper. This has reduced the demand for travel agencies. The essence that most Singaporeans do not have credit cards is a major reason to hope for travel agencies. The competitive nature of travel agencies should help us in identifying the best market entry strategy that will ensure eventual growth and development for Enjoy life to the fullest travel agency. Competitive Advantage; The ease in beginning travel business in Singapore due to free market with few regulations and licensing. The availability of ready market is a boost ensuring that the new travel agency is set in a way that will guarantee success. The essence that most of the big agencies that have prevailed in price wars to limit free entry and exit in travel industry still use the traditional travel strategies, thus making it easy to join the industry by adopting online and traditional travel strategies. The growth of tourism in Singapore and the essence that the Singapore economy is growing rampantly due to tourism growth. The government strategies to improve tourism to enable growth of the local economy enables competitive advantage. The free flow aviation will ensure that this travel agency to start and grow at a constant and impressive rate. Market entry strategy Beginning a travel agency is one of the determinants of the level of success of the company. Inappropriate market entry will limit the growth of the company in the beginning stage. This failure will lead to the collapse of the travel agency. Bearing this in mind it is appropriate to use the following market entry strategies for our company. Strategic alliance; This is the fastest growing business strategies in global markets. It is simply an agreement between parties for mutual benefits. This alliance will ensure low costs in the initial stage where high capital may limit the early stage of the business, thus the reduced capital requirements will ensure the company has enough resources to cater for other important issues that may arise. The other benefits that may be realized in alliances is the ability of the alliance to ensure success in the common goal through the use of technological advancement, specialization and sharing of risks and losses. Risks and losses are high and may result in the end of the business at the initial stage (Gale Research Company, 2008). The engagement in alliances will ensure competitive advantages due to economies of scale; improve market penetration and ensuring diversification of products and services. The main disadvantage of alliances is the risks of creating future competitors in case of dissolution. Sharing of profits, reduces the profit margins of the company. Licensing; The process of licensing may take some time, thus one party the licensor may grant the other party (licensee) permission to use his license. This makes the licensee have ease when entering the market, thus ensuring an increase in profits and market enlargement by specialization and diversification (Roll, 2005). Franchising; This is a similar to licensing, but in this form, it is more specialized since there is the use of trademarks and use of assets. This ensures rapid expansions in various countries and maximization of profits due to the general reduction of operational expenses. It is also associated with quick start-up of the business and expansion since it gives room for training. The main disadvantage of this strategy is conflicts involved that limit profitability. These three strategies are the most effective for our travel agency to use when joining the travel industry in Singapore. The best of the three is entering the market by forming strategic alliances. Enjoy Life to the Fullest Travel Agency intends to enter the market via non-equity strategic alliance. This will provide the agency with established channels to communicate with potential customers, thus creating a competitive advantage over other competitors. This will increase profits even at the initial stage. Implementation strategy to market entry Enjoy Life to the Fullest Travel Agency is a sole proprietorship with the aim of offering exceptional packages to customers that prove value for their money. The mission of the company is to woo new customers while maintaining and honoring loyal customers to ensure expansion of the company. The desire to become the leading travel agency in the next seven years, thus it is necessary to form a strategic alliance with airlines, bus and train companies and popular companies that have common goals and objectives with us. These companies will facilitate convenient travels and accommodations for our clients. These alliances will reduce start-up capital expenses thus enabling us to employ competent staffs that are excellent in communication, knowledgeable in tourist destinations. These will guarantee more Singaporeans as they like face-to-face communication to ensure they are convinced to purchase packages that prove valuable for their money (Roll, 2005). This strategy will be helpful since the older generation still uses traditional travel system and spend more on these vacations. Pricing is one of the complex issues in the travel industry. Our company intends at ensuring that the pricing policy is competitive to ensure it is customer friendly and profitable. The focus at the initial stage is to operate travels around Singapore in the first two years before expanding to other countries around Asia. Other employees that will be required are marketing managers and accountants to help with promotion and finances. The alliances will be essential in reducing advertisement costs since the agency will use online websites, for instance Facebook and Twitter, the official website of the agency and other companies in the alliance. Market growth strategies The use of the non-equity alliance will help in ensuring the growth of the agency due ease of the in finding and maintaining customers. The reduction of costs of operations and the expertise in running and formulating desired packages. The first two quarters will be less profitable and even experience losses, but due to sharing of losses, the agency will be able to move on from the losses (Mclean, 2003). The final quarter of the first year will experience about 9% since it will have a significant number of customers and with the improved experience in the industry, it will be equipped to cope with the challenges and risks involved in a better way. The second year will be relatively better in the income generated. We expect an increase in gross profit margin from 9% to 20%. With extended packages and improving, the general desires of the clients to ensure loyalty the agency will lay strategic marketing strategy to ensure the agency is able to expand its market to neighboring countries. These entail carrying out researches in these targeted areas. The implementation of the expansion will be started in the third financial year and there will be more alliances with the countries of the expansion. The expansion will be strategic one country at a time while regulating the profits and losses and ensuring customers are satisfied with our services. Risks and challenges Singapore being one of the best tourist destinations and travel industry being very competitive there are various risks that may interfere with the initial stage and growth of the company. These risks are mainly financial, safety concerns and competitive nature of the travel industry. The global economic downturn in the past decade has made Singapore’s economy vulnerable to the continued fluctuations of the local currency undermining the profitability index. The use of monetary policies has reduced the fluctuations in the past, thus limiting the risks involved by economic instability (Henderson, 2008). Safety is no longer a risk, as Singapore is known for its friendly business environment with low chances of strikes or political insecurity. The most likely risk in Singapore is terror attacks, diseases and natural calamities. Competition is very high in the travel industry. Engagement in price wars is a major risk with the established companies being the price makers, whereas new and small companies being the price takers. The essence that our company is starting as an alliance will limit the risks. Firms in Singapore experience severe competition from companies from Bangkok, Tokyo and Hong Kong whose countries have lower costs of running and expanding their businesses (Wasserman and Mclean, 1973). This will play a great challenge in our expansion strategy in these countries. The best strategy to mitigate this risk is by forming alliances with member companies in this countries to ensure our firm enjoy similar financial benefits thus reduce the chances of huge losses. Conclusion It is evident that Singapore is one of the most valued tourist destinations in the world. There are high hopes of investors who intend to start travel agencies and companies. These expectations exceed the reality as this business plan warns. The essence, there is ready market and the reduction of beginning requirements as a move by the government to improve the tourism sector makes it seem as a suitable destination for investors in this industry. The various risks and challenges associated with this industry determine whether an investment is worth undertaking. Bearing this in mind our company will only mitigate the risks of joining non-equity alliances to ensure its survival in both the initial stages and expansion stage. Enjoy Life to the Fullest Travel Agency being a sole proprietorship will finance its operation with limited funds from the entrepreneur, which is not enough to fight off the risks and challenges, hence the need to join strategic alliances. This business plan portrays the real situation encountered while beginning and expanding the travel agency, which will help other investors to invest in this risky industry. References Butler, G. F. (2001). Handbook of airline strategy: public policy, regulatory issues, challenges, and solutions. New York, Aviation Week. Enz, C. A. (2010). The Cornell School of Hotel Administration handbook of applied hospitality strategy. Los Angeles, SAGE. Gale Research Company. (2008). Consultants & Consulting Organizations Directory. Gale / Cengage Learning Gough, J. A. (2007). Consultants and consulting organizations directory: a reference guide to more than 26,000 firms and individuals engaged in consultation for business, industry, and government. Detroit, Mich, Thomson/Gale. Henderson, D. R. (2008). The concise encyclopedia of economics. Indianapolis, Ind, Liberty Fund. Koh, A. T. (2002). Singapore economy in the 21st century: issues and strategies. Singapore [u.a.] ;London, McGraw-Hill. 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