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The aim of this report will firstly analyse and identify any external influences within the organisations macro-environment using a PESTEL analysis. Secondly, to analyse the strategic capability of the company a SWOT analysis will be used. Thirdly, the culture/values of Travcom will be identified and perceived regarding the norm within a working business. Finally, an insight into Travcom's stakeholders will be looked at.
The structure of the following report will use a theoretical approach to explain relevant theory and theorist as well as then applying those methods/tools to HSBC to demonstrate an understanding of the conceptual methods analysing, critiquing and evaluating them.
TravCom is involved within the travel industry developing cost effective, leading edge accounting systems. Their services are used by over 3000 travel agencies across the world.
By using the PESTEL framework we can analyse the many different factors in a firm's macro environment that will affect the decisions of the organisation. PESTEL displays political, social, technological, legal and environmental factors. Using this method can help identify the market position.
To assess the industry and market environment, establishing what affects TravCom when entering the market. A simplistic approach assessing the business environment is split into two main sections that are macro and micro environment. PESTEL displays political, social, technological, legal and environmental factors. Another method of analysis is an approach developed by Michael E. Porter called the five forces analysis (Grant 2005). Porter's five forces model is a widely used model to assess the industry environment. This model is useful as it examines the relationship with five important areas.
Exhibit 1.1 - The Market Enviroment
Porter's five forces approach
TravCom will be looking at the political implications that will affect them as a travel company such as the proposed EU GDS deregulation laws and airline TMA's. This could lead to reduced profit margins due to the possible absorption of the new airline/GDS charges. The global travel industry has reported steady economic growth in their last five years which goes to confirm that the industry is moving forwards even after 9/11. No change in social factors seems to have any impact on TravCom whatsoever. The use of internet may have an adverse affect on the organisation as figures indicate that the use of travel agents for booking business travel is down from 31% to 28% in the last year. However, the continual use of TMC to capture non-core GDS reservations is still growing, so the impact of these findings may not be as severe as first indicated. TravCom need to investigate if corporate social responsibility is vital for a long term phase. Will future Government action force them to calculate their carbon footprint and if so, will they be able to audit this information? They may also need to look into measuring carbon emissions and creating reports on them from a client perspective.
Exhibit 1.2 - Porter's Five Forces Model
- Limited distribution models:
- G2 Switchworks
- No potential new potential entrants.
Competitors within the industry
- customers (small-medium sized firms as well as those larger than this).
Analysing Exhibit 1.2, this model allows us to see what potentially affects the industry environment that will affect TravCom. Firstly, examing the buyers (customers), there are currently no customers on any discount arrangement and neither is any client. No customer has asked for discount either, as of yet. Research shows that there is no real discounting initiative within the market, although this cannot be for sure. Future discount requests, if offered, will need to be structured correctly and made sure that an unhealthy amount of bottom line profit isn't extracted. With regards to suppliers, there is the possibility of being able to use the purchasing power of customers to get in contact with ancillary suppliers (for e.g. office supplies).
Examing potential entrants and substitute products, TravCom do not really face an issue with new entrants as they will have to use the same data structure that is currently being utilised by all other suppliers. New limited distribution models have also been introduced which are still in their infancy and not likely to be taken up by the segmented market within the next three years.
TravCom have various competitors that offer similar services as they do, but there are four major competitors that the company deals with (BOSS, Discovery, TRAMS, tMaster). Travcom deals with this by positioning their products at affordable prices in the market.
SWOT displays Strengths, weaknesses, opportunities and threats. As described by Johnson (1998), SWOT analysis summarises key issues of the business environment. Strategic capabilities of an organisation can be assessed to see how this can impact the strategic development.
Strong global presence. This offers significant economies of scale and helps to spread risk.
Has a strong existence in up-and-coming markets, putting it in an excellent position to take advantage of future growth in those economies.
Strong and experienced management team which in turn provides a well run business and ability to adapt to market changes rapidly.
TravCom are not promoting a full product range to all segments. Therefore they are missing out on valuable sales opportunities.
The company has a heavy reliance on TravCom CS systems for revenue. This can be perceived negatively as there is a need to hold and increase market share of TravCom CS whilst increasing sales in other TravCom products to reduce to reliance.
The organisations strong position presents the opportunity to outperform competitors during the economic downturn. This will allow them to build a reputation for being one of the safer banks for depositors, helping to increase resources for lending.
Identify new business partners allowing additional revenue stream and sales channels.
There is a continued growth in the global travel industry across all segments. TravCom should look to target other segments such as MICE.
The intervention of GDS BOS could target the customers of TravCom
The use of on-line corporate TMC's captures clients from traditional TMC's (i.e. TravCom clients)
Data may not arrive from normal channels and may require new capture processes due to fragmentation of the traditional booking process.
Exhibit 1.3 - Boston Matrix
Cash Cow - TravCom CS. This requires little investment as it has generated high profits for TravCom, which can be used to invest in other sectors of the company. Because the market has a low growth rate it will require little capital and the net effect is a positive cash flow.
Star - HMPR validation GIDS. These have competitive positions in high growth markets but will yield high cash returns.
Problem child (Question mark) - Quote works Integration. These have a low market share in a fast growing market.
Dog - no dogs have been identified within TravCom
The culture within any organisation usally follows a certain norm and trend. All businesses have a set of values that their employees must follow in order to run a successful organisation. It can be perceived that TravCom follow the following competencies: treating customers fairly, delivering quality results, following procedures and taking ownership and showing initiative. These are all values that employees must follow to ensure the business runs at an optimum level to reach maximum profits. As well as being able to follow these competencies, an employee must be persuasive, communicational, organisational and an overall confident individual.
To treat customers fairly, the employee must understand, respect and meet the needs of TravCom's diverse workforce and customers. They will also need to understand the need to challenge discriminatory, unequal or unfair behaviour and act within the principles of equality and inclusion. With regards to following procedures, TravCom probably have a set of respected strict company guidelines such as workplace safety and passionate customer care.
A stakeholder is an individual or an organisation which has an interest in a business and can be affected by the way it runs. They can own a share in the business, work within it or have a financial relationship with it.
Exhibit 1.4 - TravCom Stakeholders
- TravCom is helping the community by measuring carbon emissions and creating reports on them from a client perspective.
- Rates of pay
- Job security
- Galileo Global Distribution System
- HM revenue and customs
- Inland revenue
TRAVEL COMPUTER SYSTEMS (UK) LTD
- Travel agents
- Tour operators
- Home workers
- Cruise operators
TravCom's approach to gaining a competitive advantage in the market and then sustaining it is very successful. The use of their capabilities such as their knowledge and innovation stemming from technological advancements in their products has been successful. Their skill has allowed them to set the benchmark, leaving other companies to find it difficult to imitate specialist knowledge tied with the connections within Travcom and their culture.