Business Strategies of TUI Hotels and Resorts - Case Study Example

Running head: Business Strategy Name Course name Professors’ name Date Part A TUI AG TUI AG established in 1997 is a leading organization in the European tourism industry and provides leisure travel experience to millions of its customers. TUI Hotels and Resorts, TUI travel, and the cruise ship business are the major sectors in TUI business. After the sale of Hapag Lloyd AG in 2009, TUI specialized in pure tourism. Macro-environmental analysis of the tourism industry Macro-environment, industry, competitors and the company makes up the business environment. This essay utilizes PESTEL to analyze external environmental forces in TUI business industry. PESTEL is an acronym which refers to political, economic, socio cultural, technological, environmental and legal forces operating in a competitive environment. This analysis will help in understanding major drivers of change and external variables influencing an organization. Political Due to terrorist threats across the world, major nations have implemented tight security measure and subsequently formulated strict immigration policies. International nations have consequently banned some destinations after a terror attack and this has a direct effect on travel insurers who may refuse to cover tourist who went to those places. A prolonged act of terrorism changes the perception of tourism such that number of visitors to a place reduces substantially. Government tumble and political instability has adverse effects on tourism industry. Korean peninsulas are a clear example of the impact of political instability on tourism and general development in the region. In an effort to promote non-nuclear proliferation measures, economic sanctions were placed on Korea. This is a disincentive to tourism and overall prospect of tour industry in the Korean peninsulas and other surrounding nations given globalization features. Other political element affecting tourism is the taxation policy where some countries provide tax incentives and subsidies with an intention of promoting tourism in the country. Economical Rate of exchange is a critical factor especially in international trade and tourism. Research conducted by Gallego et al (2007) reveals that more fixed exchange rates have a positive impact on tourism industry. A vivid illustration is Euro which is decreasing the gap against sterling pound affects flow of tourism from United Kingdom to European Nations and ultimately tourism agents. Globalization is the recent trend in business which guarantees unlimited opportunities especially in tourism venture such as travel agencies, technologies, consulting, hotels and other sectors in the tourism industry (Munoz, 2005). Globalization means that companies round the world have minimum barriers to enter or exit new market. This increases competition and subsequently sustains dissemination of quality services. According to renowned writer Porter (1998), competition increases as barriers to entry decreases. On a higher note, aviation charges on oil prices is an economic component influencing tourism not only in Europe but also in other continents. In 2008 growth in travel and tourism economy slowed by 1%, reduced by 3 % in 2009 but is expected to expand by only 0.3% in 2010. Tourism assembly, WTTC, made a prediction that with globalization, opportunities will arise for tourism to grow exponentially. Current global financial crisis, also have both negative and positive effects on tourism industry. XL leisure group was closed down due to adverse effects of financial crisis. On the other hand, the collapse creates an opening to more market space for survivors. Furthermore, some major financial institutions that contribute to success in the industry were adversely affected by the slump. Post recession boom is being anticipated and could boost tourism sector taking into consideration that the sector is the main income earner. Socio-cultural Tourism agencies offer customized services such that individual needs of the customer are satisfied. Some tour and travel firms offer customized holiday packages and online booking facilities that meets customer’s expectations. First Choice Holidays based in United Kingdom used to provide traditional packages to its customers ranging from holiday divisions to lifestyle offers (Evans, 2003). To realize this objective of providing customized service, First Choice Holiday relied on travel stores, third party travel agents as well as internet reservations. Brand consciousness is part of socio-cultural issue where consumers believe in intangible assets given by the brand name. Customer loyalty to some brands is dependant on previous experiences or the brand image created through encounters with advertisement. Some companies like Boston Consultancy Group change its attitude towards safety and environment. Due to consciousness, customers are more attracted to companies propagating activities which are environmental friendly. Technological Advent of information communication technology has seen customers rely on internet and online sales for fast processing of information. In 2009, about 70% of UK households were able to access internet and this figure is increasing on a daily basis. Apart from making delivery of service easy and fast, internet cuts cost by reducing staff and intermediaries. Nonetheless it is a threat to companies because of low barriers to entry. In the recent past, a substitute such as television and games threatens tourism. With advancement in technology, people are less likely to move from one place to the other for the sole purpose of tourism (Burnes, 2000). Customers tend to utilize videos instead of physically visiting a place. Tourism agencies currently utilize advanced digital devices such as TV hotlines and telephone to maintain customer contact. Environmental In a study by Peattie (2000), government of UK proposed Air Flight rationing with an intention to reduce pollution. This will have adverse effect on tourism if governments decide to implement the proposal. Copenhagen talks focused on climatic changes brought about by carbon emission in the air. Apart from tax credits directed to perpetrating nations, some air travel companies include carbon footprints charges in their tickets. It therefore makes tourism expensive to the potential customer. Health problems are among the major environmental concerns in the tourism industry. Out break of H1 N1 virus prompted World Health Organization to institute a travel ban to affected areas. This is similar to natural disaster which restricts tourist from visiting a place. Legal Governments have moved a notch higher to recommend regulations on Aviation Safety. The regulations cover household, environmental, health, consumer related issues and aviation permits. Companies operating in tour and travel must be well versed with regulations existing in the industry especially in the present a global village (Peattie, 2000). Currently trade laws are guiding elements in the business world hence ought to be nurtured in an appropriate manner. Part B Industry Dynamics in the Hi-fi Sector Q2: SWOT Analysis This is a strategic planning method employed when evaluating Strengths, Weaknesses, Opportunities and Threats facing a business organization. It captures objectives of the business and internal with external factors that help in achievement of the objective. SWOT analysis offers useful information used to evaluate resources and capabilities in relation to the competitive environment (Mintzberg, 2003). Hi-fi industry is one of the powerful sectors in an economy due to its role of changing moods of the people while at the same time mark major events in daily live. It further shapes culture and bridges gap in time. At this stage, the subsequent paragraphs examines dynamics in HI-FI sector by specifically highlighting on strength, weakness, opportunities and threats in some leading electronic specialist. Strengths in Hi-fi sector Meridian Audio started in 1977 by Stuart and Boothroyd produces audio devices. The company’s products have proved to be sophisticated among audiophiles and home theatre. Meridian is known to be the first company to initiate compact disc format and has since then gained recognition in the field of digital speakers and sound system. The resource power in terms of fixed assets and human labour is strong and has earned the industry substantial success. An examination of market niche covered by Meridian among other specialist in Hi-fi industry indicates that audio and video products in Europe and North America envelop over 35 billion square. This market coverage is growing at an annual rate of 3-9 % and is expected to assume the sharpest growth with invention of new technologies stretching from home cinema systems, MP3 players and other electronic devices. As the market for older products such as turntables face a decline, it is compensated by new and advanced products. In this regard, marketing and distribution strategy utilised in the industry has ensured that products are availed the customers at the right time and place. Other strengths in the industry are associated with innovation, and integration if information communication technology in the manufacture of equipments. Weakness Electrical goods store has been offering a range of products from cheap and quality goods to more expensive brands such Sony and Panasonic. Manufactures such as Meridian, Linn and Naim have went into records by manufacturing systems with high cost value. This peak price is more likely to drive away potential consumers. Introduction of apple’s iPod or creative Zen players has increased portability of digital devices and subsequently substituted hi-fi systems used at homes. An advantage attached to ipod is that it can be used with personal computers and can handle a greater capacity of data. In the same vein, prices for the digital devices vary enormously but the disparity is not comparable with hi-fi system. Opportunities The hi-fi industry faces a stretch of opportunities ranging from technology to market coverage. Hi-fi specialist like Linn is more exposed to unusual way of marketing where customers are asked to conduct auditioning prior to deciding whether the system meets their specialized needs. This is one of the opportunities available for the specialist firm to grasp more market coverage. If the digital device does not meet the needs of potential buyer, Linn specialist are consequently motivated to produce better devices. Threats Competition is one of the challenges facing hi-fi specialists. Even though specialist in the industry has been in business for a long time, the music industry is changing rapidly. An example is a dropping percentage of music sold in CD format. Fast growing utilization of internet, online digital music stores and highly portable MP3 players is changing how music is stored and reproduced for sale. Emergence of new sophisticated players like Apple Inc in the industry is posing a great challenge to hi-fi specialist as they bring with them immense revolution. Q3: The Ansoff matrix This matrix presents alternatives available to a firm in terms of market and product choices. In some instances, Ansoff matrix is refereed to as market-product matrix and it explores in broad perspective options available to a firm which in this case is specialist in the Hi-Fi sector. The model captures four possible product/market combination including market penetration, product growth, market expansion and diversification (Hill, 2007). Market penetration This is where specialist firms enter new markets with the current product. The objective is to increase sale using the current customer base while at the same time take caution not to drift from the original product-market strategy. Hi-fi specialist may take up competitor customers by ensuring that products availed in the market are of good quality. Market communication tools such as advertisement are utilised to retain existing customers and subsequently reduce cost of entering new markets (Thompson, 2003). Product development Hi-fi firms have the option of developing new products with the help of technicians. Intensive research carried out in the area of specialization has the effect of opening up new avenues for a firm. Meridian and other specialist may have to reconsider developing portable gadgets that will compete with product like ipod from Apple Inc. The new product will shift the company into markets as a result reach customers who have not been served. Market development This strategy has the objective of moving the company to meet new customers using existing products. Products manufactured by Hi-fi specialist can be distributed to developing nations which are still coming into terms with new technology. Market development may also take the form of discovering new market segments or new company’s products (Hill, 2007). In Europe, the product can be directed to segments that have not experienced hi-fi gadgets. Diversification This is where a firm deviates from its area of specialization to indulge in other business areas. Diversification can take different forms of integration including backward, forward or even horizontal integration (Thompson, 2003). Apart from manufacturing activity, hi-fi specialist may take up the role of distributing the products. This comes under forward integration as the business extends its activities to outputs. Q4: Apple's music business activity Apple is the renowned supplier of personal computers convenient music players, and communication devices. Aside from designing, manufacturing and marketing a variety of computers and related accessories, Apple Inc develops music players along with their accessories. It distributes audio books, music videos, short films and videos. The channels of distribution include online stores, retail stores, direct sales force and third party wholesalers and retailers which then contribute to success in sales. From this analysis it is evident that the strategy employed by Apple Inc in its music business is integrated distribution channels. Critiques have suggested that Apple Inc should open Digital Rights Management system with an objective to minimize theft of music over the internet. Current strategy in the music business Apple Inc does not have the right to own or rather distribute music itself but has to obtain the licence from companies such Sony BMG, Universal, Warner and EMI. Apple Inc was then required to protect music from any illegal theft and that is why DRM emerged as a solution. In the same vein, Apple was granted the right to allow users play music on up to five computers but unlimited ipods. This motivated potential customers to purchase ipods that they can use to listen to unlimited number of songs. The strategy therefore is to use secret words to prevent unauthorised acquisition of music. To increase its sales level, Apple Inc may choose to licence its FairPlay DRM technology to both present and future competitors with a purpose of realising interoperability between various players in music distribution (Johnson, 2002). This initiative is bound to offer customers with wide selection of music. At the same time, Apple will benefit from licence fees charged on obtaining a permit. Nonetheless it has the risk of disclosing secrets thus disabling DRM protection. Another available avenue for Apple Inc is to abolish DRM which would then enable players utilize music purchased from any store. At the same time, distributors are able to sell music playable on any player. If DRM requirements are removed, more firms willing to invest in new stores and distribution channels will come up leading to more sales and disposable incomes. Appendices a. PESTEL analysis of tourism sector Political factor Terror attack Political instability and elections where new government is elected to rule Tax policies Economical factor Stability of exchange rates Globalization Unstable oil prices Recession Strategic vision Socio-cultural Changes in life style Brand awareness Attitude towards safety and environment legal Safety rule and regulations in the aviation industry World trade laws Environment Air flight rationing Tax credits and charges on carbon emissions Health problems Natural disaster b. SWOT Analysis of Hi-fi sector strengths weakness High quality goods and customer services Strong resource power i.e. labour and assets Wide market coverage Stiff competition for Apple Inc which is manufacturing advanced and more portable gadgets High prices of products from meridian, Linn, and Naim Opportunities Threats Taking advantage of new technology More customer auditioning helps deduce whether customer needs are met Existence of specialist to design products Intense research leads to invention and innovation Emergence of sophisticated players like Apple Inc Economic meltdown that reduces purchasing power of the customer Read More