Strategic Management of the EU Tourism Industry - Case Study Example

Strategic Management Name: Course: Tutor: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 PESTLE Analysis 3 2.1 Political Analysis 3 2.2 Economic Analysis 4 2.3 Social Analysis 4 2.4 Technology Analysis 5 2.5 Environmental Analysis 5 2.6 Legal Analysis 6 3.0 Opportunities and Threats 6 4.0 Drivers for Change 7 5.0 Porters Five Forces Model 7 5.1 Buyers Bargain 8 5.2 Suppliers Bargain 8 5.3 Threat of Substitutes 9 5.4 Competitor Analysis 9 5.5 New Entrant Threat Analysis 10 6.0 Industry Attractiveness 10 7.0 Conclusion 11 References 12 1.0 Introduction The tourism industry is one among the gradually and steadily changing global industries. In this regard, global external environmental factor changes as well as changing specific market dynamics have increased the overall market changes in the tourism industry. One of the global developed and significant tourism industries is the EU tourism industry. This report offers an evaluation of the industry analysis through the application of various audit tools to develop a strategic conclusion on the attractiveness and future of the industry in the changing global contexts. 2.0 PESTLE Analysis In order to develop a strategic external environmental macro factors, the report applied the Political, economic, social, technological, environmental and legal (PESTEL) analysis approach to evaluate the respective changes in the market. 2.1 Political Analysis A political analysis on the system establishes a changing trend to increased political goodwill to movement n the region. The continued spread and growth of the EU among the member states has increased the overall movement and tourism in the region. In this regard, the union has increased the overall movement of people across the region. Therefore, as Hall, Smith and Marciszewska (2006, p.107) argued the increased political goodwill serves a boast to the tourism industry in the region with reduced flight movement barriers. This trend is expected to project into the future, thus increasing the prospective industry growth potential into the future. 2.2 Economic Analysis An economic outlook on the European nations since the end of the 2008 global financial crisis indicates a growing and developing economy. This is evidenced both at the EU regional level as well as on the individual nation’s level. Therefore, this has consequently increased the overall per capita and disposable incomes among the individual citizens allowing for increased tourism industry development in the region. In addition, the region has over the past half decade resolved on the use of the Euro. As such, as evidenced by the Economic logic (2012) article, the Euro has been adopted as a standard exchange currency thus allowing for reduced inflation rates. Consequently, this has facilitated reduced transaction costs between nations allowing for increased free and unrestricted movement across the region, a virtue boasting its overall tourism nature. 2.3 Social Analysis The European society is changing. On one hand, the provisions of the EU resolutions for increased free movement across the region increased aspects and instances of cultural integration in the region. As such, this has promoted the desire and need to move across the region. Additionally, the population structures in the region are changing. With the increased number of the ageing generation X and baby boomers, the new Y generation that is technology bound has revolutionized tourism (“Eurostat”, 2014). In this regard, while the older generation was inclined to leisure tourism, the Y generation has incorporated career travel as an additional aspect in the tourism industry, thus increasing the overall tourism aspects 2.4 Technology Analysis The technology industry across Europe and the globe at large has gradually changed over the years. As such, this has fundamentally changed the operations and functioning of other industries in the market, among them the tourism industry. On one hand, technology development in the region has allowed for increased coordination and relationships between the various industries stakeholders. As such, the virtue of online restaurants and flights booking and the reduction of travel time have in the recent past served as a justification for increased tourism industry development in the region. Moreover, a majority of the tourism destinations have relied on the use and application of the modern technology platform as their key marketing approaches in the region to boast their popularity. 2.5 Environmental Analysis The European tourism industry is among the global industries facing the environmental challenges. In this regard, the industry, and especially its relied use of aircrafts and air transport has been challenged by environmental conservation activists. In this case, the emitted carbon emissions have been attributed to increased global warming cases across the globe. As such, push and arguments have been developed on the adoption and use of renewable jet fuel that is carbon emission free. As such, the push for alternative transportation methods across Europe such as Coaches and train has emerged. Therefore, the increasing activism as well as the high costs of using the renewable jet fuel, the industry is expected to increases the use of the alternative travel means across the region. 2.6 Legal Analysis Legally, the European Union in a means to control and regulate tourism and movement across the region developed the EU aviation law. In this regard, the legal framework initiated by the EU parliament seeks to control and regulate movement in the region. In this perspective, the region seeks to regulate the licensing and use and conditions of aircrafts in the region. Therefore, this will increase confidence and security in the aviation industry, allowing for the eventual development and expansion of the industry operations into the future. 3.0 Opportunities and Threats With the changing global situations in the EU region, this report develops an analysis of both the opportunities and threats facing the tourism industry. On one hand, an opportunities analysis singles out globalization and technology developments as the key expansion opportunities for the industry into the future. In this regard, on one front, globalization will allow for increased movement and interactions. As such, it is expected that tourists from other regions will visit the region as well (Kandari and Chandra, 2011, p.75). On the other end, increased technology developments will allow for movement ease as well as the facilitation of virtue tourism industry sector growth, where tourists can tour regions virtually without actual physical movements. On the other hand, a threats analysis singles out one key dominant threat as the terrorism threat. In other areas such as India and Egypt, terrorist attacks negatively implicated on the respective nations tourism industry. Although the EU has developed mechanisms and systems to counter terrorism attracts and threats externally making it relatively safe in the world, there is the risk of internal terrorism. The EU and USA have in the past experienced the risk of domestic terrorism. Therefore, this is likely to reduce the overall tourism industry growth in the EU region. 4.0 Drivers for Change The European tourism industry is among the most growing economies across the globe. In this regard, the evaluation singles out social and economic factors as the key driving change factors. On one hand, the social structures in the society are changing. In this regard, the social aspects such as population structure changes and the growing population base of the Y generation influence the operations and approaches of the tourism industry. One among them is the changing landscape of tourism needs in the industry as initiated by changing motives in the market. On the other hand, economic changes have served as key driving factors in the market. On its part, the industry is experiencing gradual and consistent changes economically. One among them is increasing earnings in the market. As such, increased earnings and disposable incomes, have led to a motivation and demand for authentic and superior quality services in the tourism industry (“European Commission”, 2014). This has led to the evidenced emergence of high end restaurants, tourism and travel companies as well as other support services. In this case, based on the above analysis, it is apparent that the tourism industry changes have been largely influenced and motivated by a series of economic changes in the market. 5.0 Porters Five Forces Model Upon the evaluation of the external European region market environment, the report developed a strategic focus on establishing specific aspects in the tourism industry in the region. As such, in order to develop an informative and inclusive industry analysis, the evaluation applied the porters five force model. Through this model application, the valuation examined the various five aspects in the industry. 5.1 Buyers Bargain A buyer’s bargain analysis evaluates the nature and extent of influence and control that the buyers in an industry pose. In this regard, such influence and industry control is pegged and relies on the aspects of their number and financial inputs and contribution. In this regard, an evaluation of the European tourism industry establishes that the industry has low switching costs. As such, the tourists can change the services of the tour services providers at minimum risks and costs. Therefore, they have an absolute control on the providers as there is minimum loyalty in the industry. However, their bargain influence is limited as a majority of the consumers are individual households and thus contribute minimum financial influence on the organisations. 5.2 Suppliers Bargain The suppliers bargaining power is classified and based on the ability by suppliers in the market to control the demand and supply industry aspects. In this regard, such an influence is based on the ability b the suppliers to retain and control the industry consumers through altering the supply and products prices in the market. Based on this theoretical argument, an evaluation review of the European tours operators establishes that the relative industry control and bargain is minimal as there is a high number of suppliers as well as reduced switching costs by the consumers. However, upon the relation of this challenge, the industry suppliers have developed strategies to increase their overall bargaining power into the future. On one hand is the development of integrated systems that promote relationships and partnerships between the tour operations and other industry sectors such as the restaurants and hotels. In addition, the organisations have resulted to the provision and offering of the services as packages to increase their value propositions in the market. The application of these factors by the suppliers in the European tourism industry is bound to increase their overall bargaining power in the market into the future. 5.3 Threat of Substitutes The European tourism industry and the tourism operators in the market face minimal substitution threats. A substitute threat in an industry is the likelihood for the emergence of alternative products to substitute the existing industry markets. As such, the standardization of services offered by the tourism operators reduces the overall substitute threats. However, with technology developments into the future, it is expected that the substitution challenges will be evidenced. In this regard, the major challenge in the industry will be the emergence of virtual tourism in the market. As such, through the virtual tourism, the need for physical movements will emerge thus negatively impacting on the earning levels of the respective industry stakeholders such as the operators and the support sectors such as restaurants and hotels. 5.4 Competitor Analysis As already discussed in this report, the industry is characterized by low switching costs by the consumers. This implies that through increased switching by the consumers, the competition increases. As such, it is easy for the respective organisations to market their services and consequently tap into their peers’ consumer bases in the market. Therefore, this has increased the overall rivalry rates and instances between the respective competitors in the market. Therefore, organisations succeeding in the market are the ones with sufficient capital base to offer discounts as well as strategic marketing approaches to influence the consumer base. Therefore, to this end, the industry is characterized by the dominance of the large stakeholders such as TUI and Thomas Cook (“Thomas Cook”, 2014). 5.5 New Entrant Threat Analysis A major aspect to the future of any industry is the treat of new entrants. In this regard, the threat is especially escalated by the likelihood of increased productivity efficiency and success in the market. The industry is characterized by free entry and exit. As such, besides the legal framework requirements on operational standards, the tourism industry has no additional regulations. Therefore, this is likely to increase the industry competition levels and magnitudes into the future. 6.0 Industry Attractiveness Based on a strategic evaluation and audit of the industry analysis through the porters five force model, this report develops a list of the attractive aspects in the industry to investors. In this regard, the attractiveness aspects are the fundamental aspects that increase the industry attractiveness in the market. One of the industry attractiveness aspects is the changing relationships dynamics among the providers. In this regard, an evaluation of the suppliers bargaining improvement approaches in relationships development makes the industry attractive. In this regard, the established integrated relationships are bound to increase the industrial future growth through the respective stakeholders sharing of risks and losses in the market. Therefore, this strategic approach will increase the overall investors and suppliers bargaining powers influence and overall profitability levels, thus serving as a key attractiveness factor in the industry. In addition, the changing tourism influence and motives in the European society serves as an additional attractiveness edge. In this regard, the report establishes that the generation Y population additional travel motives besides leisure which include educational and career motivations. Through the expanded motives for tourism in the industry, the tour operators are bound to acquire increased consumer segments (Soukiazis and Proença, 2008, p.47). Majorly, the career motivated tourism segment serves the most attractive consumer segment in the industry is into the future. 7.0 Conclusion In summary, this report offers an evaluation of the European tourism industry. In this regard, the evaluation sought to establish the fundamental factors affecting the tourism operators in the industry both in the present and into the future. In this regard, an external environment analysis, reveals that the industry has supporting political and legal framework form the EU as well as changing technology that increases efficiency, changing societal lifestyles and improving economic conditions. Moreover, a threats analysis lists domestic terrorism as well as listing the opportunities in virtue tourism and society population structure changes. Further, through an industry analysis, the report h established that the key driving factors in the industry include the social and economic drivers. Further, the evaluation establishes that among other attractive industry edges are the changing tourism motives and industrial suppliers’ integrations trends. References Economic Logic, December 27, 2012, European Tourism and the Euro, [Online] Available at < http://economiclogic.blogspot.com/2012/12/european-tourism-and-euro.html> [Accessed November 14, 2014]. European Commission Eurostat, 2014, Tourism Statistics. [Online] Available at < http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/tourism_statistics> [Accessed November 14, 2014] European Commission, 2014, Consultation on the European Tourism of the Future, [Online] Available at < http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=7150> [Accessed November 14, 2014]. Hall, D. R., Smith, M. K., & Marciszewska, B., 2006, Tourism in the new Europe: The challenges and opportunities of EU enlargement, CABI Publishers, Wallingford, UK. Kandari, O. P., & Chandra, A., 2011, Tourism, biodiversity and sustainable development, Isha, Delhi. Soukiazis, E. & Proença, S. 2008, "Tourism as an alternative source of regional growth in Portugal: a panel data analysis at NUTS II and III levels", Portuguese Economic Journal, vol. 7, no. 1, pp. 43-61. Thomas Cook, 2014, About us, [Online] Available at < https://ww2.thomascook.com/ > [Accessed November 14, 2014] Read More