Contents 1) INTRODUCTION...................................................................................................2 2) ENVIRONMENTAL ANALYSIS OF THE TOURISM INDUSTRY....................................2 2.1) PESTEL ANALYSIS:.......................

.................................................................2 2.1.1) POLITICAL:..............................................................................................2 2.1.2) ECONOMICAL:..........................................................................................3 2.1.3) SOCIOCULTURAL:....................................................................................3 2.1.4) TECHNOLOGICAL:....................................................................................4 2.1.5) ENVIRONMENTAL:...................................................................................4 2.1.6) LEGAL:....................................................................................................4 2.2) PORTER’S FIVE FORCES ANALYSIS.................................................................4 2.2.1) POTENTIAL ENTRANTS:............................................................................4 2.2.2) SUBSTITUTES:..........................................................................................5 2.2.3) SUPPLIERS:..............................................................................................5 2.2.4) BUYERS:..................................................................................................5 2.2.5) COMPETITIVE RIVALRY:...........................................................................5 3) MAINTAINING LEADERSHIP.................................................................................5 4) FUTURE IMPLICATIONS FOR TUI:.........................................................................6 5) USES AND LIMITATIONS OF TOOLS USED:............................................................7 5.1) PESTEL..........................................................................................................7 5.2) PORTER’S FIVE FORCES..................................................................................7 5.3) SWOT ANALYSIS............................................................................................8 5.4) ANSOFF MATRIX............................................................................................8 6) CONCLUSION......................................................................................................9 7) REFERENCE......................................................................................................10 8) APPENDICES.....................................................................................................13 8) APPENDICES 1) INTRODUCTION TUI AG established in 1997, is the undisputed leader in the European tourism industry. They operate in over 180 countries worldwide serving more than 30 million customers offering a wide range of leisure travel experiences. They also operate around 240 hotels of which majority is in the 4- or 5- star category. TUI travel (tour operating, online sales, high street outlets, airlines and incoming agencies), TUI Hotels & Resorts and the cruise ship business comprises the three sectors of TUI (TUI website). After the selling of Hapag Lloyd AG (was the container shipping company of TUI) in March 2009, TUI has become a pure tourism oriented company. The business environment of a company consist of the macro environment, industry (or sectors), competitors and the company themselves. Various analytical tools such as PESTEL, Porter’s five forces, SWOT and ANSOFF matrix are used for the analysis. The external environmental analysis is carried out using PESTEL and Porter’s five forces. SWOT along with the help of value chain is used to analyse the industry and to investigate on how TUI achieved and maintained its leadership in the European tourism industry. Future implications for TUI is drawn using ANSOFF matrix, and also taking into account of the key drivers identified from PESTEL. Moreover, the uses and limitations of the analytical tools are also discussed in the report. 2) ENVIRONMENTAL ANALYSIS OF THE TOURISM INDUSTRY 2.1) PESTEL ANALYSIS: The PESTEL framework categorises the environmental factors into political, economical, socio cultural, technological, environmental and legal. PESTEL helps understand the key drivers of

6% of world GDP (refer case study). the World Travel and Tourism Council (WTTC) predicts tourism industry to resume its leading. 2. The dependancy of aviation charges on Oil Prices also is an important factor in the tourism industry. Companies have lower barriers to enter new markets and take over other companies.1. 2009). travel research and consulting. 2. Considering the scenario of Euro is decreasing the gap with Pound Sterling may affect the outbound tourism from UK to other European Union Nations and this could definitely affect the tourism agents. 2009)(ndTax. Gallego et al. Economic crisis is the major threat which results in collapse of some major players in the industry. . Tourism suffers when prolonged tourist attacks affect tourist perceptions (Sónmez.1. Even though tourism industry is going through a difficult period now. 2003). Globalisation provides the world business with unlimited opportunities and it certainly boosted up the tourism ventures such as travel agencies. (2007) statistically discusses the impact of exchange rate regimes on tourism and concludes that more fixity in the exchange rate arrangements generates a positive impact on tourism. travel insurers would refuse to cover tourists if we went there (Urquhart. hotels and resorts and so on (Munoz. 2008). Wahab & Cooper (2001) points to the threat to tourism from globalisation such as increased competition.2) ECONOMICAL: Exchange Rates play a crucial role in international tourism and trade. 2005). 2009). Competition will be tough when the barrier to entry become low (Porter. This implies more opportunities and more competition in the tourism industry in the coming years.6 billion by the year 2020 (Appendix 1). for example the closing down of ‘XL Leisure Group’ (Directgov.3% in 2010. contracted by 3% in 2009 and is expected to expand only by 0. Moreover.1) POLITICAL: Terrorist attacks result in tight security reasons and strict immigration laws (Hirsch. Consumers believe in the company’s intangible guarantee projected by the brand name. 2. travel and tourism economy GDP growth slowed to 1% in 2008. 2006). This is same in the case of terrorism. dynamic role in global growth (WTTC. If the Foreign and Commonwealth Office (FCO) put some destination offlimits after these terrorist incidents. Brand Consciousness is another socio cultural factor. 1998) Government toppling and political instability could adversely affect the tourism industry of that country. PESTEL analysis is shown in Appendix 4. maintaining quality of service etc. UNWTO’s Tourism 2020 Vision forecasts that international arrivals are expected to reach nearly 1. the currentRecession can positively and negatively impact tourism industry. Political instability not only affects the tourism of that particular country but also that of the neighbouring countries as well (Sónmez. Governments often provide subsidies and tax exemptions in their countries to promote tourism of that particular country (MENAFN. Tourism agencies offer customised holiday packages (selecting packaged tours and individual travel components) and online booking facilities to meet customer expectations (refer case study).they always get their stake from the disposable income. Brand loyalty can be a result of past experiences or the brand image already perceived (could be advertisements or impulse).1. Similarly. Taxation policies on tourism by different countries also have a major impact on the tourism industry.change and external influences on the organisation (Johnson et al. technologies. But this is an opportunity for the survivors as they get more market space and more consumers to absorb in. a post-recesion boom could be expected and taking into consideration that tourism contributes 10. Agreeing with this as an opportunity. 2005). 1980).3) SOCIOCULTURAL: Life Style has got a major part in priorities of the customers.. 1998). 2009) (Weissinger.

1) POTENTIAL ENTRANTS: High Capital Requirement creates a high barrier of entry for newcomers. 2009). it also possesses a threat to companies. 2009).2) PORTER’S FIVE FORCES ANALYSIS Five force framework (illustrated in Appendix 5) helps identifies the sources of competition in the industry (Johnson et al.3) SUPPLIERS: . Five forces which are not independent of each other. 2009) and is increasing compared to previous years (Appendix 3). there is a low differentiation of products and together there islow threat of substitutes.1. Similarly. health and consumer issues and aviation permits. draws a connection between competitive forces and the key drivers in the macroenvironment. 2009). 2009).. Even though WHO is not recommending travel restrictions related to the outbreak of the influenza A (H1N1) virus (World Health Organization. Advanced technologies could decrease the frequency of social (physical) mobility of people (Use of video conferencing for instance). 2005). games or other social activities can act as substitutes. 2.1.2. Brand Recognition also acts as a barrier to new entrants. Increased emission of CO2 is a major threat of climatic conditions in earth and aviation is a major contributor of CO2. Health Problems is a major concern for tourism industry and tourists.1. Even air flight companies are including carbon footprint charges in their tickets. Moreover. 2009).6) LEGAL: Governments recommend a wide range of regulations on Aviation Safety and Regulations (Department of Travel. Substitutes such as television and games are also a threat to tourism. 2. companies need to be aware of the legal issues of different countries if they are acquiring or merging with other companies. 2.2. 2.5) ENVIRONMENTAL: Air flight rationing is proposed by UK government as a method to reduce pollution (Drury. 2. Appendix 2 shows a survey result conducted by The Boston Consultancy Group on ‘going green’ attitude of customers and it shows a significant percentage of consumers are environment conscious and are more leaned to companies having a better environmental policy. 2001) and newcomers can easily pop into the competition.2) SUBSTITUTES: Even though TV. and all these come under legal factor. they will never be same as travelling.2. This covers domestic. Even though online sales make it easier for customers and cut costs by reducing staff and intermediaries. Also. they raised a worldwide pandemic alert and a number of recommendations for travellers to the flu affected areas (CDC. The government report goes on to describe the CO2 emission in rail travel is only one-third of air travel. 2. the threat of new entrants islow . Trade Laws plays a crucial part in current world businesses. Hence. Natural Disasters are also a major concern for tourism industry. Moreover. And more than 70 % of market share is controlled by the top 10 leaders (Appendix 6) and thisred u ces the price retaliation and keeps the economies of scale high.4) TECHNOLOGICAL: Customers relying on internet and online sales are increasing day by day. 2. Internet has a low barrier for entry (Porter. government of UK is campaigning for greener holiday locations (Directgov. Tourism industry will suffer if governments decide to go on with this. Tourism agencies use other technological devices such as TV hotlines and telephone (call centres) facilities for maintaining their customer relationships. Statistics show a mere 70% of UK households had access to internet in 2009 (Office for National Statistics. environmental.Changing attitudes towards safety and environment can also play a vital role in customer decisions.

2. Moreover. The acquisiton of companies varying from tourism. direction and profitability (Grant.4) BUYERS: There is a low switching cost to buyers with the emergence of internet and online sales. cost leadership. They kept their capacity management (combination of flexible lease profiles and uncommited bed stock resources) on alert to respond according to the changes in the trading environment. 2. Being their own suppliers (Airlines. This made them acheive a high economy of scale which is difficult for their competitors to attain.Suppliers have high negotiation powers against the companies having a low share in the market. And TUI’s acquisition (resources) policy aid them to gain a competitve edge over their market rivals. Backward Vertical Integration of TUI helped them to spread out through the value chain (Appendix 8). brand building and uniqueness and thus gained them the competitive advantage in the market (Annual Report.Appendix 6). And there is a significant 8% difference in market share between the top two market leaders (TUI 21% and Thomas Cook 13% . But the low differentiation of products and lesser number of substitutes limits the bargaining power of buyers to low. 1991). there is a factor of causal ambiguity(Barney. 3) MAINTAINING LEADERSHIP A company can maintain its leadership in the market only by establishing a difference that it can preserve (Porter. 2006) and by keeping its structure attractive (Porter. These huge variations of market shares of incumbents lessen the competition in the industry. Thus. 2008). acquisition of . Hotels etc) helped them to attain cost leadership. Theirmulti-channel distribution focusing on online sales made them capable of retaining their customers and gaining new customers. TUI is the leading company in the concentrated market of tour operators in Europe with a staggering 21% of the market share (Appendix 6). 1991) as irms in the same industry will be curious about its competitors and will be trying to adapt and learn from each other.or 5. Stable and management friendly share holders (refer case study) supported them to incorporate better customer service along with thier excellent operating service. 1987). and thus extend their presence in the value chain. This made them deliver a higher value when compared to their competitors at a cheaper price. High fixed cost largely favours the incumbents.5) COMPETITIVE RIVALRY: There is a moderate competitive rivalry in the industry. TUI always seek to create value for their customers.2. The strengths of TUI which helped them to attain and maintain their leadership in the tourism industry is listed in the same. TUI have better liquidity and financial situation following the sale of Hapag-Lloyd. there will be a power balance. This implies only a moderate bargaining power for the suppliers. A SWOT analysis of TUI is illustrtaed in Appendix 7. TUI understands the fundamentals of sustainable economic success is the right balance between economic goals and social and ecological needs (TUI website). airlines. Moreover. They claim their differentiated products are integral part of their customer retention. Their investments on direct distribution channels act as a key driver reducing the distribution cost and increasing the margin. But in a market where the top 4 market leaders covering more than 50% of market and possessing a threat of backward integration. TUI operate in over 180 countries worldwide serving more than 30 million customers offering a wide range of leisure travel experiences. they are well prepared to adapt to a changing environment using their unique breadth and depth of experience along with innovative enterpreuneurs (Annual Report.star category. 2008). cruises etc all over the world help them attaindiffere ntiation. They also operate around 240 hotels of which majority is in the 4. hotels. Resources and capabilities are the base of strategy. investors and employees. TUI acheived competitive advantage by implementing their value creating aspects (differentiated products.2. In addition to all this.

The uses and limitations of these tools are discussed below: 5. Low cost airlines gained from it. TUI can negotiate prices (hedging) for a specific period of time with the oil companies to stabilise the variations. Fuel Price fluctuations is having a major impact on world business. 90% of TUI’s travel options are through airlines (TUI website). 4) FUTURE IMPLICATIONS FOR TUI The macro environmental and micro environmental analysis of TUI is done in the previous sections of this report. These all implies to the important of ‘going green’. buses and ferries. • TUI is the marketing leader in the tourism industry in Europe. It provides a low barrier for entry to new comers. As more and more customers are preferring companies who are aware of environment. They had already penetrated to the European markets and is one of the leading market holders of tourism industry all over the world.2) PORTER’S FIVE FORCES Uses . Carbon emission problems and carbon footprint charges had already made their presence in airline fares. internet alters the whole context. Moreover. Moreover companies like lastminute. Moreover they can expect a post-recession boom similar to what happened in early 90’s to capitalise on and strengthen their position in European markets. TUI need to take necessary measures to ensure their strong presence in online services and again.com and expedia. Depending on the findings (key drivers) on the previous analyses along with ANSOFF matrix the future implications of TUI is listed below: • The air flight boom just before recession was fuelled by short-haul travels (Mintel Reports. ANSOFF matrix (Appendix 9) is used to show the developmental directions for TUI. 5) USES AND LIMITATIONS OF TOOLS USED There are several analytical tools used in the report. this could help them to differentiate further. 1991). they provide a different experience. even though these transport options take more time.companies – Porter’s Generic Strategy) and was not simultaneously being implemented by any of their potential competitors (Barney.1) PESTEL Uses • To analyse the macro environment of the industry • To anticipate the future threats • To identify the key factors affecting the strategy Limitations • Does not provide any solutions • Difficult to identify the level of uncertainty • Practically difficult to analyse the limitless macro environment completely • Is not descriptive 5. while maintaining their market share in Europe. A Mintel survey report shows travel as the main spend category through online (Mintel Survey. This could be an opportunity for TUI to extend its differentiation by providing land transportation and thus milk the emerging trend of short-haul travels. but the recession changed the picture completely. 2009). So this give them an opportunity to expand their market shares in Asian (concentrating on India and China) and Russian markets. But they have to understand that this could be a risk as it may sometime prove to be a loss • TUI has to take in to account of the environmental factors that could have a serious impact on the business from the near future. 2008).uk made their mark in the online tourism industry. Most of them are subjective as there is no specific ways to carry out these analyses.co. they could expect a rationing of holiday air flights proposed by UK government. Customers find cheaper options in rail. • Even though potential entrants need a high capital to barge into tourism industry.

As the number of short-haul travels is increasing these days.4) ANSOFF MATRIX Uses • To enable the organisation to explore the strategic corporate growth • To evaluate the options and choose the best situation Limitations • Focus only on market share and market growth and is not considering other factors • Is an over-simplified 2 x 2 matrix to analyse the strategic analysis of the organisation. Moreover.• To identify drivers of competitive behaviour • To analyse the profitability and competitiveness of the industry To determine the attractiveness of the industry • To analyse the dynamics of industry Limitations • Need to be constantly reviewed as the environment is constantly saving • Analysing the industry as a whole. Then. 6) CONCLUSION As credit crunch is expected to be reaching an end. SWOT analysis is prone to skipping some of the important factors • Even though it identifies the strength. . is not considering segments • Does not consider the complementary products • Ignores major factors such as human resource. TUI will also have to tackle their consolidated fixed assets. the report further investigates on how TUI achieved its sustainable competitive advantage by identifying the strengths from SWOT analysis and by analysing how they extended their reach in value chain (also referring to cost leadership and differentiation). the uses and limitations of the analytical tools are also listed. This report analyse the macro environment of the tourism industry using PESTEL and Porter’s five forces and managed to find out some key drivers of change. culture and management skills • Industrial environment is only a small factor of profitability 5. TUI needs to capitalise on the disposable income of customers. there is no suggestion of how to utilise it for an advantage • Analysis is subjective 5. The level of success achieved by TUI holds some important lessons and some much needed inspiration to a business world. ANSOFF matrix is used to draw future directions to TUI. that could use a little of both right now. TUI will gain from concentrating a bit more on supporting this (can enter in road transportation facilities). Alike other leaders in tourism industry.3) SWOT ANALYSIS Uses • Both internal and external aspects of business is taken into account • To understand what attributes to be focused on • To help in the purpose of decision making • To identify the relevant information addressing the key issues Limitations • As it presents the situation in a manageable format.

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