1)What is the problem?

Political,Economical
and technological
problems

MAIN COMPETITION:
Touristik Union
ONLINE TRAVEL
International
AGENCY

Traditional tour
Operator model
Tourism
Industrial
competition Political,Economical
and technological
problems

Traditional tour
THOMAS COOK
Operator model

MAIN COMPETITION:
ONLINE TRAVEL
AGENCY

As the Root cause Analysis states the problems faced by tourism industry and the competition
between the Tourism industry operators. Firstly to describe the problems faced by this
industries politically are: After the terrorist attacks the government imposed strict immigration
laws and restriction of tourists entering the places of attacks which took place before and due
to this the travel insurers started refusing insurance for those tourists entering those attacked
areas. Economic crisis is the another major problem to this industry which results in collapse of
some major players in the industry and the exchange between the euro and pound started
falling which affected the outward tourism and its tourism operators in europe.
Technology is increasing day by day among the users and consumers which resulted in low
barrier of entrants to the the toruism industry, which brought in competition for both the major
tourism operator of Europe(tui & Thoms cook),as the online tour operators gave better and
cheaper customisable packages for the consumers world wide and the Major european
operators did not provide any customised packages & packages online and as they relied more
on the traditional tour operating model and they lacked behind busines models Another main
problem was the online market penetration was almost three times bigger than in Europe with
32 per cent penetration rate against 11 per cent in Europe. The majority of the online bookings
were dominated by some major online travel agencies (OLTAs) such as Expedia, Travelocity and
Priceline.com. Over the past decade, these online operators had taken market share from
traditional tour operators with a compound annual growth rate (CAGR) of more than 50 per
cent, while tour operators were going downhill with a CAGR of −5.3 per cent. Due to this factor
the traditional tourist operators in Europe got drastically affected as there was decline in
business from customers outside Europe as well.
2)Why does this problem exists?

To identify and analyze the reasons for the existence of these problems Porter’s five force
analysis will be used to describe:
 Threats of New Entrants: The threats for the new entrants of the online travel or tour
agency is high because it requires very less investment and less employees to operate,
in which it would causes a problem for the Traditional tour operators. But for the new
entrants for the traditional tour operators into the market is low because the
investment is high and already there are leaders in the market who holds the major part
of the market.
 Threats of Substitutes: This threat is comparatively low because people nowadays
prefer travelling across new places and there are no substitutes for tourism. Moreover
there is low differentiation of products and collectively there are lower threats to
substitutes.
 Bargaining power of suppliers: Suppliers have high bargaining powers with the
companies who are new to the Market or hold small shares in the market. There is only
moderate bargaining powers to the suppliers. Threat of backward integration
(Incumbents like TUI and Thomas Cook have their own hotels, airlines cruises etc.)
 Bargaining power of Buyers: There is a low switching cost to buyers with the
emergence of internet and online sales by Online Travel agencies. As, Tourism is a big
industry in Europe people prefer traveling by themselves and through travel agencies.
 Competitive Rivalry: The rivalry among the top competitors is not high as they
contribute almost equally to the market little differences in the percentage which is
8%{TUI-21% & Thomas Cook 13%}. High fixed cost which largely favors the incumbents
and variation of sizes of incumbents.
Thus I would like to conclude by defining that the changing consumer behavior in this
global economic recession can influence the company’s strategy and the tendencies of
customers to switch to cheaper mode of transports like train or bus for shorter distance
could cause a backlash to TUI’s reliance on Air travel. Major reduction in the volume of
holiday packages because of recession and financial uncertainties is also a reason.
And there is a increasing competition from the online travel agencies

3)What should the company do about it?

In order to know or analyze about what’s going in the company and to get answers for
HOW,WHY,WHEN and WHAT? The SWOT analysis would be used to define them:

 Strengths:
 Tourism industry in Europe has undergone a bigger investments in both public and
private sectors
 Vertical integration made them spread thought the value chain.
 Delivering high quality services
 Greater and better leader in the tourism industry
 Weakness:
 Major Diminution in the volume of holiday package because of rescission and
financial crisis.
 Language also can be a bigger barrier, because every European country almost
have different languages.
 Low technology usage practiced

 Opportunities:
 Demand for the improvement or increase in the nature of tourism because people
or consumers or tourist they started to prefer visiting countries or cities with rich
in nature and Heritage.
 Business Expansion through further accretion
 Due to higher competition people get an Opportunity to expand their segment
 The industry has an effective level of availability of national funds.

 Threats:
 The economy downfall of other countries will slow the growth of the tourism in
the European Countries.
 Changing consumer behavior in this global economic recession can influence the
company’s strategy
 Terrorist Attacks might also cause a major threats to tourist travelling to the
attacked areas.
 People started to travel only developed Countries and underdeveloped countries
are left behind.
 The tendencies of customers to switch to cheaper mode of transports like train
or bus for shorter distance could cause a backlash to TUI’s reliance on Air travel
 Tourism industry is facing competition from neighboring countries

SWOT ANALYSIS TO TOWS ANALYSIS-

 Strength’s: Weakness:
W1:Major Diminution in the
S1. Tourism industry in volume of holiday package because
Europe has undergone a of rescission and financial crisis.
bigger investments in W2:Language also can be a bigger
both public and private barrier, because every European
sectors country almost have different
S2:Vertical integration languages.
TOWS Analysis made them spread W3:Low technology usage
thought the value chain. practiced
S3:Delivering high quality
services
S4:Greater and better
leader in the tourism
industry

Opportunities:
O1: Demand for the improvement or  S1 TO O1  W1 TO O1
increase in the nature of tourism because  S3 TO O2  W3 TO O3
people or consumers or tourist they started  S4 TO O3
to prefer visiting countries or cities with rich
in nature and Heritage.
O2:Business Expansion through further
accretion
O3:Due to higher competition people get
an Opportunity to expand their segment
Threats:
T1: The economy downfall of other  S1 TO T1  W1 TO T1
countries will slow the growth of the  S2 TO T2  W3 TO T3
tourism in the European Countries.  S3 TO T4
T2:Changing consumer behavior in this  S4 TO T3
global economic recession can influence
the company’s strategy
T3:The tendencies of customers to switch
to cheaper mode of transports like train or
bus for shorter distance could cause a
backlash to TUI’s reliance on Air travel
T4:People started to travel only developed
Countries and underdeveloped countries
are left behind.
After seeing through the SWOT -TOWS analysis in order to confront the situation the Tour
operators has to introduce the road Mode of transportation to because 90% of the transportation
offered by Traditional tour operators are through Airline and nowadays the consumers are
starting to prefer the Road mode of transport for Shorter Distances. They have to take in to
account of the environmental factors that could have a serious impact on the business from the
near future. As they are the marketing leader in the tourism industry in Europe, this gives them
an opportunity to expand their market shares in Asian and Russian markets; while maintaining
their market share in Europe. Moreover they can expect a post-recession boom similar to what
happened in early 90’s to capitalize on and strengthen their position in European markets.
And they should start concentrating on the online markets as well in order to keep a good pace
with Online markets and investing more on technology and diversification of company which
will give them a double digit growth in nearing future.

4)How should the company implement the Solution?

people, process, and technology (PPT) Framework - the methodology in which the balance of
people, process, and technology drives action and implementation: People perform a specific
type of work for an organization using processes (and often, technology) to streamline and
improve these processes. This framework can help to achieve harmony within an organization
and is is also used when deciding whether to purchase or implement new technologies. This
framework would be used to implement the Solution..
People: USER NEEDS-
 There should be a Perfect internal team which Consists of Executives, Operational Managers
,Business analysts and Information users.
 Right now 100% Revenues are coming from brick and mortar stores of the industry and in
3years our vision is to get 50% revenues from online business, which is much Profitable for
the Industry.
 Process: INDUSTRY GOALS-
 Inspiration- There has to be a system for Engaging travel bloggers and influencers to write
about the tourist places regularly and there has to be a process setup which should be
monitored on regular basis online. The vision, Mission, KRI’S, KPI’S Must be clear.
 Interest: when people or customers approach and show us their interests about particular
thing there has to be a team or process Setup, which actually convey their needs and
Purchase and involves sales online. The MDM and Data collection to be made.
 Purchase: Everything must be Turned to digital and online in which there should be a
streamline Setup and the flow of output should be seamless
Technology: IT CAPABLITIES-
 ERP’S,CRM’S, Hardware’s and IT infrastructure to be Formed.
 Mobile apps & Online portals should be introduced to the people or consumers as the
majority of population is using Smart phones and Internets.
 Call center operating system should be constructed in order to provide a perfect customer
service through internet or calls. A blogging website should be introduced in order to post
new blogs and posts. A tool which conveys info about the customers to CRM’S.
 Payments must be Digitalized and Drill thru dashboards to be made to predict problems