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In 2009, the international tourism industry generated more than 611 Billion Euros but it goes through a transformation cause to some externals factors.
Firstly, the development of internet has particularly modified the context, permitting a disintermediation between the tours operator’s suppliers and the finals customers. On the other hand, Internet has also allowed the development of “Pure players” specialized in discount prices on the tourism industry.
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Because of this situation, the major tour operators groups and travel agents are developing new strategies. Their mains purposes are to satisfy the customers demand and to respond to the emergence of electronic markets system.
Most of tours operators offer a wide range of holiday’s packages in a highly competitive market constantly in evolution.
The Package Holidays (or all inclusive travels) is defined as a single “package” including at least travel and accommodation and sometimes other services. In France, it’s very popular because the customers like the value it provides, the security offered and the large choices of destination.
Numerous group as TUI, Expedia, Go Travel, Club Medâ€¦ are present in the French market but Thomas Cook is a very good model in term of strategy, positioning and growth
Indeed, with 3 million annual customers in 2009 and a market share of 13%, Thomas cook France is a second major tour operator in France offering a large range of tourism and services through all over the world for all the budgets. Thanks to the acquisition of Jets tours and results in net progression, the group is now able to develop a strategy based on the innovation and on it network growth.
In 2012, Thomas Cook wants to reach 20% of market share on the tour operating market and is interesting to explore the strategic position of the groups to achieve its objectives.
Throughout this report, we are going to analyze the macro-environment of the group thanks to the Pestle Analysis and the five forces framework, as well as it strategic capability in order to understand it strategic fit and direction with Environment.
2 – Task A – The Macro- Environment
To maintain profitability, the tours operators have to analyze their business environment to achieve high sales volume and to reduce the costs of the packages by allowing to the customers a great valuable experience.
Nowadays, tourism is a dynamic industry, really vital for the international economy. Nevertheless, this industry is very dependent of the macro-environment mutations.
Indeed, some elements can influence the stability of the market as the geopolitics conflicts, effects of terrorism and environmental issues for example. All this can have impacts on the tours operators’ performance as well as in their strategic direction.
It’s necessary for the managers to use the Pestle Analysis for understanding their industry situation. Thanks to this useful tool the tours operators will be able to consider its external environment before to make wrong choices and to put in place their strategies.
2.1 PESTLE Analysis
Figure 1 Pestel Factor on the tourism industry
The political influence is certain. Since the 11 September attacks the global political situation has changed. These facts have had bad impacts on the tourism industry and on its different actors (travel agent, airline companies and tour operators). The precautions related to security, the struggle against the terrorism and the management of the crisis became major’s factors which resulted to modifications and reorganization in the touristic activities. The procedures to enter on the territories are harder, controls in the airports have been reinforced and all this affect tourist perceptions.
Cause to the deficit public, the French government will establish in 2012 a new Taxation policy on the internet subscription (source le Figaro). This decision can impact the purchasing power of the French people and influence their holiday’s destinations.
Nevertheless, some events promoted the activities touristic like the Schengen area expansion or the enlargement of the European Union (Cyprus in 2004 which is a great destination for the French people, Turkey in a near future).
All stakeholders are strongly influenced by the economic situation. Tourism is one of the most resilient industries in the world. “The international tourists arrivals are estimated to have declined worldwide by 4% in 2009 to 880 millions. In the same year, international tourism generated 611 â‚¬ billion in export earnings “according to the world tourism organization.
Cause to the global economic crisis and the problem of the H1N1 Flue, the short distance travel have been privileged face up to the purchasing power diminution. Indeed, in France, only 20% of the population traveled in a foreign country and 46% didn’t go on holidays cause to the diminution of their budget. The decreasing of the Euro and the unemployment augmentation can represent also a threat for the French customers.
Moreover, the pressure on the fuel prices by the speculation, the conflicts or by the OPEP countries can cause majors impacts in the Tour operator’s strategies because the oil prices is also an important factor in the package holidays industry.
Nowadays, we can see a rise in tourism by elderly and by the student. News customers’ expectations emerge and influence the tour operator’s offers.
With the development of cheapest holidays (particularly in Mediterranean countries), the travel abroad became banal and now, lot of people are looking for a consumption more responsible. The attitudes concerning safety and environment play from now on an important role in the customer’s decisions
Moreover, brand consciousness has a good impact on the people.
With the internet development, lot of actors offer competitive price and also at the last minute. This entire permit for the customers to choose and to compare
The impacts are considerable because the online reservation and sales permits to eliminate staff, intermediaries and in this way tour operators have to adopt their strategies in order to don’t lose their customers. Nevertheless, Internet is also a low barrier for potential entrants.
Internet has also permitted the emergence of platform like Trip Advisor. Just in few seconds the customers have the power to destroy the reputation of a company.
The sustainable tourism represents a good opportunity in the Tourism industry. We can see consumption more responsible and the augmentation of “ethical packages holidays”. For example, KUONI group realized a partnership with some organizations or associations to promote tourism more responsible.
However, Tourism can contribute to the degradation of the environment (CO2 emission cause to the aviation contribution, green house effects, pressure on the local resources and water for some countries…).
Natural disasters like the tsunami, Caribbean hurricane, Iceland disruptive volcano have major negatives effects. At long term, these events can cause many problems on destinations.
In France, the employment law concerning the working time (35 hour per week, 5 weeks of holidays) has permitted to the French people to travel more but on shorts distances which favored the development of “short stays”(Marrakech, Romaâ€¦).
2.2 Porter’s 5 Forces
2.2.1 Threat of new entrants is low – High barriers to entry due to a high concentration
– Global players and strategic alliances: Merger and acquisition reinforce the positioning of big groups and let little chance to new distributors (maybe niche marketâ€¦). They propose competitive prices and lot of destinations thanks to economies of scales and integration strategies.
– Brand recognition: play an important role as barrier to new entrants. In the French market, more than 35% of market share is controlled by Thomas Cook and TUI.
2.2.2 Threat of substitutes is high – Emergence of the information and communication technologies
– Internet product development  : Has permitted the online agency emergence which necessitate less investments so a repercussion on the final price
– The role of the tours operating is questioned. Now it’s possible to plan his trips without going through the traditional network.
2.2.3 The power of buyers – High due to large choices of substitutes
– The buyer power is high: Easier access to substitutes / Customers can compare the offers and “impose” their conditions to have a better value for money
– Customer reactions: Have the possibility to give her opinion on the company performances and services after their trips = Necessity for the tours operators to managing the customer relation and to attract and keep it.
2.2.4 The power of suppliers – High due to a disintermediation phenomenon
– Difficulties for companies having a low market share to have power on supplies
2.2.5 Competitive Rivalry- High due to pressure on the margins and differentiation opportunities
The French market of tour operating is fragmented and enough saturated. High fixed cost largely favors the top leaders and permits to realize concentration and integration strategies in order to pressure on the margins
The big group came from internet are stronger and reinforce their position with acquisition and merger to propose competitive prices
However, there are still opportunities for companies because:
Low differentiation between the tours operators: Excepted Club Med, Voyageurs du Monde or Marmara for example, the tours operators compete on a same segment(midrange and up market) without a really distinct identity
Even if, Thomas Cook and TUI have an important financial capabilities, the financial performances of the sector are average
2.3 Critical success factor
Now, we can identify the critical success factors to conclude the macro-environment analysis. This latter are important key points to consider in order gaining a competitive advantage:
The price is highly important even for the up market segment because the tourism industry know a strong pressure on the margins
Offer a service of quality to the customer in order to be differentiate of the competition and to attract and keep the customer
Control the costs in order to be competitive on the market
Consider the ICT (information and communications technologies) to extend the customer base and to face up at the evolution of the market
Partnerships and network
2.4 Opportunities and Threats
Sales augmentation thanks to internet
Online Agencies growth and development
Employment law favorable for travels
Disintermediation between the tours operator’s suppliers and the finals customers
Opportunities in niche and up market segment
Air traffic controls cause to terrorism
Easier access to substitutes
Increase of the oil barrel price
Customers are looking for a service personalized based on the quality
Purchasing power diminution / Global recession
Low differentiation between the tours operators
Natural disasters, green house effects
Table 1: Opportunities and Threats
3 – Task B
The external factors play a major role on the tourism industry and its actors. Now that the macro-environment analysis has been realized, the second parts will deal with the strategic capabilities of Thomas Cook France.
3.1 Thomas Cook France
Since 2000 the group is present on the French market and possesses a valuable brand image thanks to its first distribution network in France (660 agencies), a strong brand portfolio (Jet Tours, Club Jumboâ€¦) and values which place customers at the center of its preoccupations.
In this second part of the assignment, competitive advantage, resources and competencies will be analyze in order to understand how the group can surmount the threats and exploit the opportunities of the market.
3.2 Value Chain
3.2.1 Primary activities
The main activities generating added values for Thomas Cook is firstly the supply of packages followed by the composition of the offer and its arrangements according to their customers and orientation. Then, come an important key concerning the service based on sales experience and the manner to advice. To conclude, the after sales service in order to insure the customer satisfaction and his fidelization.
3.2.2 Support Activities
Support activities provide support and added value to the primary functions improving the effectiveness and efficiency of the latter. If tour operator want be competitive in the market, he has to acquire informatics systems and infrastructure. Moreover, as Thomas Cook is an intermediary between suppliers and the customer, the management of the human resources is highly important to insure a support in the primary activities. In this context, the network and partnerships are essentials in order to offer competitive touristic products and services and Thomas cook is well positioned on this point with more than 150 partnerships (Club Med, Traveltainmentâ€¦)
This value chain provides an overview of the functioning of a tour operator like Thomas Cook and will help the managers to understand which activities provide more value to be competitive.
Infrastructure and informatics systems
Human resources: formation, experience, destination
Development of partnerships and networks contacts
COMPOSITION OF THE PACKAGES HOLIDAYS
Figure 3 Thomas Cook France Value Chain
3.3 Resources and competences
3.3.1 Physical resources and capabilities
Even if Thomas Cook is a service provider, the tangibles goods that it possesses take on a strategic importance.
The most important factor for the group is the utilization of its most important physical resource: its 660 agencies on all the French territory. These agencies permit to develop a good quality in term of sales and advices but also permit to identify in “live” the demand evolution. Thomas Cook is the first tour operator which covers all the territory thanks to its distribution network. TUI Travel, the leader on the French market arrive in second position with almost 400 agencies. (â€¦â€¦â€¦â€¦â€¦..). The most important factor for tour operator capabilities is the utilization of the distribution framework. More than 60 % of the sales are carried out by the agencies network.
Moreover, Thomas cook possess a quite sophisticated IT infrastructure thanks to its partnership with TravelTainment. Thanks to a performing tool concerning the online reservation, the group proposes a high technological solution and became the first group in France to put in place such a partnership.
3.3.2 Human Resources and competencies
Thanks to 1700 employees at the attention of the customers, Thomas Cook France attach an importance to human resources management
The human resources policy of the group, emphases training and adaptation of teams to increase the professionalization and promote an operational decentralization. All the employees are positively aware of all the destinations.
Nevertheless, the low level of wage can be a threat for the group in term of competitiveness. Indeed, in 2010, 40% of the employees have participated at a strike to demand augmentation face to positive results.
One indicator for the human resources competency of Thomas Cook can be the Chairman knowledge, skills, experience and behavior used to improve performance of the group. Since 2006, the chairman of Thomas Cook, Denis Wathier, expert in E-commerce fulfils totally the group expectations in accordance with the market opportunities and threats (E-commerce evolutionâ€¦). He has refocused the strategy, developed the franchise network and internet sales and has permitted to recover profitability. He has a great valuable experience in tourism industry (see Table 3) and the frequency of chairman substitutions have been stop (source).
2004 – 2006
Group strategy Director
PIERRE & VACANCES TOURISME
Marketing and Communication Director
Marketing Director – France
Marketing and sales Manager
Figure 4 – Denis Waltier Experience, Thomas Cook France Chairman
3.4 Financial resources and competencies
Since 2007, Thomas Cook have positive results (Table4) because in 2006 the net income was – 6 300 000 â‚¬. Denis Waltier hopes for 2010 an operational profitability of 5 %. This profitability will be the result of a hard work concerning the staff control cost and package holidays costs.
THOMAS COOK France
71 900 000
+ 1534,09 %
Gross operating profit
+ 47,06 %
Table 2 – Financial results
THOMAS COOK France
Table 3 – Financial Ratio
Staff cost is a key performance in term of cost management. The difference is significant for 2007-2008. This entire permit to be more competitive on the market because there is a huge pressure on the margins.
3.5 Intangible resources and capabilities
The intangible resource of Thomas Cook is its brand recognition and experience. The group has a huge brand image in France but also all around the world. In 2001, after only one year of experience in the French Market, Thomas Cook has had 31% of notoriety and overtook competitors based on the market since more than 10 years. In this segment, the group has a significant potential in term of competitive advantage.
Moreover, the leadership position of Thomas Cook on the French market is explained by the values which animate its business: the quality of services and the customer satisfaction.
3.6 Overview about Threshold vs. Unique resources /Competencies
Capabilities for competitive
Figure 4 – Threshold vs. Unique Resources / Competencies
The principal competitive advantage of Thomas Cook France is its reputation and brand name which are two elements which permit them to be the second leadership on the French market. With more than 150 partnerships, 4 billions of customers and a strong presence in the international market, the brand Thomas Cook has a good reputation and notoriety.
3.7. Evaluation of a sustainable competitive advantage
The sustainable competitive advantage of Thomas Cook is its distribution network. With a multi-canal distribution strategy, the group is in advance on its competitors. Indeed, it has the best distribution capabilities in term of agencies and covers all the French territory. All this permit to gain market share and to have a great positioning in term of distribution. The group hopes to overtake TUI Travel in 2 years thanks to this advantage.
3.8 Summary of Strengths and weaknesses
Excelent brand image and notoriety
Human resources: Decrease of the wages
Competitive distribution network : 660 agencies
High Chairman substitutions (4 in five years)
Financial resources: Negative gross operating profit
Positioned on all the segments
Low cost with “Club Jumbo”
Up market with “Jet Tours”
The group is late on the internet distribution network
Intangible resources: Lack of identification on other Thomas Cook brands
Strong partnership and relation with suppliers
Net Income growth
Table 4 – Strengths and weaknesses
4. Task C
4.1 Strategic Direction
Thomas Cook France follows a strategy based on its growth network and on innovation. The principal objective for Thomas Cook France is to control the costs in order to be competitive.
Thomas Cook is conscious of the threats and opportunities on the market. Nowadays, the group wants to strengthen its positioning on the French market and developed new segments like its niche concept “voyage très privée” and “Au coeur du monde”.
Thanks to the Ansoff matrix, we can analyse the strategic direction :
Two main options
Market penetration: Thomas cook has to gain market share if the group wants to achieve its objectives for 2012: 20% of market share in 2012. The group proposes competitive products and services. It has a strong power vis-à-vis suppliers and thanks to its strong distribution network, he has in advance on these competitors. Now, the group has to increase their economies of scale
It has to have a clear positioning on the market
4.2. Strategic Fit
Eco tourism product development
For the moment Thomas Cook doesn’t take account of this opportunity in its strategy. It has strong partnership with non gouvernemental organizations like “planète urgence” but doesn’t propose ethical packages holidays.
Thomas Cook France have a strong brand image and its communication strategy is based on its knowledge and experience
Service personalized for the customers
The customer is in the center of its preoccupations. Their only objective is to give at the customer an unforgettable experience. For example Thomas Cook France is the only company who propose an assistance in French in their “village holidays”
Purchasing power diminution
Thanks to its new low-cost product “Le Club Jumbo”, the group can face up to the global recession and propose substitution product and services to maintain their sales volume
The group is late on this segment. The sales represent only 11% of the sales. The Chairman has decided to invest in this network and wait for the next years
Low differentiation between the tours operators
Even if the group is positioned on all the range, it has a lack of differentiation due to the numbers of its offers and its positioning strategy is not enough clear
Online Agencies growth and development
Appropriate strategy thanks to the development of an online platform “Vacances très privées.com”
Green house effects/ Global Warming
The sustainable development is a priority in the Thomas Cook strategy. Since 2007, the group put in place a strategy to reinforce their image : 1 package holiday bought = 1 tree planted in Indonesia
Opportunities in niche market
The group propose a new offer positioned on a niche segment: luxury package holidays at decreasing price scale
Table 5 – Strategic Fit of Thomas Cook
Critical succes factors
-Thomas Cook propose competitive prices thanks to its network and partnerships
-Strong relations with the suppliers which permit economies of scale and to be competitive
Servive of quality
Quality of the service is at the center of the preoccupations
Before the travel: Assistance 24/24 and 7/7 by phone or internet
During the travel : special assistance services
After the travel: Customer satisfaction study
Consider the ICT
Control of the costs
Table 6 – Thomas Cook France match with critical success factors
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