The Travel Corporation - Strategic Capabilities, Strengths and Weakness, Value Chain, Competencies - Case Study Example

STRATEGIC MANAGEMENT Name: Professor: Course: Institution: Date of Submission: The European Tour Operators Europe is one of the leading tourist destinations in the world, a phenomenon that has seen the tourism industry play an instrumental role in the European economy. It is estimated that the tourism sector accounts for more than 10% of the EU GDP either directly or indirectly. The sector has over the years become a source employment for over 9 million citizens serving in close to 2million tourism related businesses (European Commission 2014). As such, the tourism industry plays a critical role in promotion of natural and cultural heritage while at the same time contributing to regional development. Owing to the role of the tourism sector in the EU economy, the industry continues to experience tremendous growth characterized by entry of multinational stakeholders in the service industry with consequent increase in competition. One of the major stakeholders in the tourism industry includes the tour operators responsible for promotion of the Europe tourism sites and provision of movement services among other services. Progressive expansion of the tours operators business has stimulated stiff competition within the European tour operators. In this case, players in this industry are compelled to implement strategic management strategies in order to survive in the highly competitive market. As such, this paper explores the position of The Travel Corporation (Trav Corp) as the one of the tours company operating within the European Tours operators sector of the tourism industry. The paper will discuss the company’s strategic capabilities, strengths and weakness, value chain, competencies and one strategic direction for the tours company. Overview of the Travel Corporation The Travel Corporation also known as TravCorp is one of the leading leisure companies operating within the EU tourism industry with over 60 years of experience in the European tour operators sector. Owing to its unmatched experience in the market, the corporation has managed to introduce unique and highly marketable travel brands in the European tourism market. The corporation runs about 25 major international travel and tourism companies offering a wide range of services including hotels services, and tour operators among other leisure related services (Contiki 2011). Some of the well recognized brands operating under the Travel Corporation business umbrella name include Trafalgar, ATTkings, Insight Vacations, Contiki, new horizons holidays, Creative holidays, Uniworld Boutique River Cruices and Busabout, Haggis Adventures & Shamrocker Adventures (The Travel Corporation 2014b). As a global business venture in the tourism sector, TravCorp has been able to diversify its products through creation of the various brands in order to meet the highly dynamic needs presented by the tourism sector. The various companies operating under TravCorp specialize in offering specific brands of the of the corporation including boutique river cruise ship, luxury hotels, and other leisure interests such as adventure. An interesting aspect of TravCorp is that it represents one of the most success family-owned companies within the European tourism sector and one that has been in operation for at least nine decades (The Travel Corporation 2014). The company’s success can be attributed to its guiding values that emphasize on provision of the highest possible standards of integrity in its products. Through, business expansion strategy into the global markets, TravCorp currently operates in about 60 countries across the globe. The corporation’s management team has managed to develop a superior competitive edge in the European Tours market through strategic positioning of its brands as well as ensuring a distinct differentiation of such brands within its market share (Contiki 2011). As such, the various brands currently operated as independent companies but under the corporation’s name have emerged as highly competitive brands in their respective market shares thus boosting the entire corporation’s image and competitiveness in the European tours market. As a family-owned corporation, the company leverages on its financial independence to embrace long-term vision and strategy in the marketing of its brands as guided by its values that emphasize on the fine details needed to succeed in the service industry. The corporation’s presence in 60 countries and its effective management and promotion of cultural diversity in its workforce holds an even greater opportunity for it to remain on top of its competitors even in the future (Contiki 2011). Resources Following the existence of the Corporation for about 60 years, it has managed to amass significant resources that facilitate its efforts and strategies to remain on top of their game in the tourism industry. TravCorp through its effective management team has invested in diversified areas of the European economy as well as in other economies. Diversification of its investments and business ventures has enable the corporation cushion itself against adverse economic changes such as the recent financial crisis that saw several businesses close down. Cullinan Holdings Ltd Tourism and Leisure currently listed on the Johannesburg Stock Exchange represents part of its most successful investment outside the European market. TravCorp remains the majority shareholder in the Cullinan Holding Ltd, a phenomenon that has seen the corporation diversify its source of revenue. Other investments include Planet Africa and Gateway have enable the corporation venture into the Asian market as part of its revenue source diversification as well as global expansion strategy (Contiki 2011). The corporation also has stakes in the retail travel industry as represented by Thompsons Leisure and Pantravel operating in South Africa. The corporation also derived revenue from the transportation sector through highly recognized brands such as the Thompsons Touring & Safaris and Hylton Ross Tours. Other services that generate revenue for the corporation include scuba diving services, boat building, and provision of equipments relevant to its scope of venture. TravCorp attributes its success to his effective and efficient human resources comprising of more than 4,000 employees (Contiki 2011). The company has established over 35 physical offices in different parts of the world where it has its operation (Contiki 2011). The corporation’s fully-owned brands form the greatest source of revenue needed to facilitate its operation. As a privately corporation, it enjoys significant financial independence that contributes significantly in effective implementation of its short and long-term brand strategies and investment plans. Strengths and Weaknesses One of the key strengths for TravCorp revolves around its long existence in the European tourism that gives the company a competitive edge over new entrants in the market. TravCorp has been in operation for several decades, a phenomenon that has enabled the owners to establish strong and well recognized brands not only in the European markets but also other parts of the world such as Africa (Contiki 2011). In addition, the company derives immense strength in its ability to diversify its products and services through creation of unique fully-owned brands targeted at different sectors of the market. As such, the company is able to meet the needs and desires of all its clients regardless of their age-gap. Through its long-term brand strategy and strategic positioning in the market, TravCorp has been also to establish sub-companies under the main corporation to provide specific needs independent of others. This strategy enables the company to pay particular attentions to details as outlined in its values that achieving its commitment to ensuring provision of high integrity goods and services. Moreover, the corporation has a good investment strategy that enabled it to invest in various areas of the tourism sector as well as the transportation sector thus diversifying its source of revenues and risks. Diversification of the revenues and risks through investment in different sectors empowers the corporation to withstand the adverse economic and market changes that sometimes undermine the success or survival of several businesses (Buhalis & Costa 2006). Another key strength of the company is its financial independence as a privately owned corporation. This has been critical in the company’s ability to establish long-term brand strategies as well as positioning of such brands in different market segments (Contiki 2011). In addition, TravCorp has a strong organizational culture with values that emphasize on getting the minor details in their services and products right thus endeavoring to offer its clients quality for their money. Through its strong organizational culture, the company has been able promote cultural diversity in its workforce especially due to its presence in the global markets. This allows the company to provide culturally sensitive services, an attribute that is an ingredient for success in the services sector, particularly in the global arena. Weaknesses A major weakness facing the corporation revolves around its organizational structure in which the ownership of the corporations plays a vital role in influencing business decisions. As such, the management faces challenges in exercising its flexibility in implementation of strategic business ideas that could mean more success for the organizations. The ownership emphasizes on paying attention to the details, a phenomenon that limits its ability to take advantage of emerging opportunities that require swift or short-term decisions (Fox 2010). Although, differentiation of its brands has played a significant role in its success in the European tours market, this strategy often presents contradiction in its application because the corporation needs to run each brand as independent business while at the same time emphasize on remaining together as a corporation (Fox 2010). Despite the role played its brand differentiation strategy, it presents a major weakness in the corporation’s ability operate as a corporation since each brand now operates as an independent business. Although its business expansion strategy has been success, the size of the corporation owing to its brand differentiation strategy remains a major weakness especially in decision making because each brand needs to operate independently (Fox 2010). The corporation also faces the challenge of managing competition among its brands in which unhealthy competition pose a great risks to its profitability and management of clients’ expectations. Lastly, the corporation continues to experience high turnover rates and inability to retain its workers. This can be attributed to lack of an effective human resource management strategy to manage the expectations of its internal customers. Value Chain The case study of TravCorp presents one of the successfully application of value chain analysis in which the corporation has been able to generate maximum value from its scope of business activities. The corporation’s brand differentiation strategy has been instrumental in generating value in the corporation’s business ventures as it seeks to run each brand as an independent business. This strategy enables the corporation to take advantage of emerging opportunities within the tourism sector by ensuring strategic positioning of its various brands in the both the existing and emerging markets. The company’s key brands are established based on specific leisure needs identified among specific customers within the tourism sector. For instance, the company has identified touring as a major area of focus and established different agencies including Trafalgar, Insight Vacations, and AATKings among others to provide escorted tours in different parts of the world. The corporation has also identified the need for independent travels provided under the independent travel brand offered by Creative holidays, Brendan Vacations, African Travel, Inc and new horizons among others. Other value chains operated by TravCorp include transport, provided through travel agencies such as AATKings and ATLAS. Another important value chain the tours company is River Cruising value chain provided by the corporations affiliate company known as UniWorld. TravCorp has also identified the hotel business as part of its value chains and established the boutique hotels brand to generate value from the market hotels market segment. Lastly, the corporations has invested immensely in other sectors but related to the tourism sector such as the Cullinan Holdings Ltd, which contribute significantly to its resource and revenue base. Core Competencies The corporations core competencies include its strong financial base as wells as financial independence that enable it embrace long-term brand strategies and position. The corporation also thrives in its strong value system that guides all its operations with emphasis on paying attention to the details. The corporation further manages an effective multi-cultural workforce that contributes to its success in serving customers from different cultural backgrounds. Lastly, the company’s effective brand differentiation strategy plays a critical role in its success within the European tourism industry. Strategic Direction for TravCorp Owing to the organization of TravCorp particularly the running of its different brands as fully-owned companies, there is need for the corporation to embrace cooperative competition as one of the key strategies in its operations. Cooperative competition among the various independent brands established by the corporations provides an opportunity to build competitive advantages that can help it successfully compete in one or more markets (Ireland, Hoskisson & Hitt 2008). The corporation should encourage the development of a cooperative strategy in the management of its different subsidiaries dealing with different brands as a way of achieving superior competitive advantage. Although the corporation seems to work under two contradicting philosophies that of independent operation of brands and pulling together as a corporation, cooperative competition provides the opportunity to actualize the intentions of the two philosophies in running a successful business (Fox 2010). This would ensure that no brand is under pressure to perform based on the performance of other brands thus enabling the corporation to remain strong as a single business entity. References Buhalis, D & Costa, C 2006, Tourism business frontiers: consumers, products and industry. Routledge, London. Christie, I et al. 2014, Tourism in Africa; Harnessing tourism for growth and improved livelihoods. World Bank Publications. Contiki. 2011, The Travel Corporation story. Viewed January 15, 2015 European Commission. 2014, ‘Enterprise and industry: EU policy-background’, European Commission, viewed January 15, 2015 < http://ec.europa.eu/enterprise/sectors/tourism/background/index_en.htm> Fox, J 2010, ‘Cooperative competition’, Travel Agent, Viewed January 15, 2015 Ireland, R, Hoskisson, R & Hitt, M 2008, Understanding business strategy: Concepts and Cases. Cengage Learning, Stamford. The Travel Corporation. 2014a. Home, Viewed January 15, 2015 < https://thetravelcorporation.com/> The Travel Corporation. 2014b, ‘Our brands’, The Travel Corporation, Viewed January 15, 2015 < http://www.bfound.net/MainNavPage4.aspx?CoId=169&rq=8> Appendix TRAVCORP SWOT Matrix Factors Enhancers Inhibitors Strength financial independence long-term brand strategy and strategic positioning in the market Existence in the market for several decades Well differentiated and recognized brands Effective business expansion strategy Weaknesses -Limitations of family owned businesses in decision making -Contradictory philosophy of operation - High turnover rates and poor employee retention strategy Opportunities Untapped market segment in different parts of the world Experience in the market Growing appeal for the European tourism sites across the globe Threats -Unhealthy Brand competition -Conflict of interests among the various companies operating under TravCorp -Stiff competition from new entrants in the market. Read More