Business Strategy of TUIBusiness Strategy of TUI

1. Critically evaluate your TUI’s business level generic strategies.

2. Describe and rationalize, in the light of the environmental context, a range of

strategic options available to TUI explaining appropriate directions and methods

associated with each

3. Critically evaluate one of the strategic options identified in 2 above clearly showing

its suitability, feasibility and acceptability for TUI

4. Identify and briefly explain the main issues which would impact on implementation

of the strategic option from 3 above

NOTE: SEE APPENDICES FOR DETAILED ANALYSIS

For Assignment or Dissertation Help, Please Contact:

Muhammad Sajid Saeed

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TABLE OF CONTENTSTABLE OF CONTENTS

1. 1. INTRODUCTIONINTRODUCTION------------------------------------------------------------------------------------- 02

2.2. STRATEGIC ANALYSIS STRATEGIC ANALYSIS ----------------------------------------------------------------------------- 02

2.1 2.1 TUI BUSINESS LEVEL GENERIC STRATEGIES TUI BUSINESS LEVEL GENERIC STRATEGIES --------------------------------------- 02

2.2 2.2 INDUSTRY ANALYSIS INDUSTRY ANALYSIS -------------------------------------------------------------------- 03

2.3 2.3 BUSINESS LEVEL ENVIRONMENTAL ANALYSIS BUSINESS LEVEL ENVIRONMENTAL ANALYSIS ------------------------------------ 04

2.4 2.4 SUMMARY OF STRATEGIC ISSUES SUMMARY OF STRATEGIC ISSUES --------------------------------------------------- 05

3.3. STRATEGIC EVALUATION STRATEGIC EVALUATION ------------------------------------------------------------------------ 05

3.1 3.1 STRATEGY FORMULATION STRATEGY FORMULATION ------------------------------------------------------------ 05

3.2 3.2 ANALYSIS OF STRATEGIC OPTIONS ANALYSIS OF STRATEGIC OPTIONS -------------------------------------------------- 06

4.4. STRATEGY IMPLEMENTATION STRATEGY IMPLEMENTATION ----------------------------------------------------------------- 06

5. 5. CONCLUSION CONCLUSION ---------------------------------------------------------------------------------------- 07

REFERENCES REFERENCES ----------------------------------------------------------------------------------------- 08

APPENDIX A: APPENDIX A:

FIGURE 1 –FIGURE 1 – TUI BUSINESS MODEL TUI BUSINESS MODEL ------------------------------------------------------------- 10

FIGURE 2 –FIGURE 2 – COMPARISON BETWEEN THOMAS COOK AND TUI FINANCE FIGURES COMPARISON BETWEEN THOMAS COOK AND TUI FINANCE FIGURES 11

APPENDIX B: APPENDIX B:

TABLE 1 –TABLE 1 – PORTER’S FIVE FORCES ANALYSIS OF TUI PORTER’S FIVE FORCES ANALYSIS OF TUI -------------------------------------- 12

TABLE 2 –TABLE 2 – PESTEL ANALYSIS OF TUI TRAVEL PLC PESTEL ANALYSIS OF TUI TRAVEL PLC ------------------------------------------- 13

TABLE 3 –TABLE 3 – SWOT ANALYSIS OF TUI TRAVEL PLC SWOT ANALYSIS OF TUI TRAVEL PLC -------------------------------------------- 14

TABLE 4 –TABLE 4 – KEY STRATEGIC ISSUES WITH TUI KEY STRATEGIC ISSUES WITH TUI ------------------------------------------------ 15

TABLE 5 –TABLE 5 – TOW MATRIX OF TUI TOW MATRIX OF TUI ---------------------------------------------------------------- 16

TABLE 6 –TABLE 6 – ANSOFF MATRIX FOR COMPARISON OF STRATEGIC OPTIONS ANSOFF MATRIX FOR COMPARISON OF STRATEGIC OPTIONS ------------ 17

TABLE 7 –TABLE 7 – FEASIBILITY, ACCEPTABILITY, AND SUITABILITY OF STRATEGIC OPTIONS FEASIBILITY, ACCEPTABILITY, AND SUITABILITY OF STRATEGIC OPTIONS 18

TABLE 8 –TABLE 8 – MAIN ISSUES IN IMPLEMENTING BROADER SERVICE OPTION MAIN ISSUES IN IMPLEMENTING BROADER SERVICE OPTION ------------ 19

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1. INTRODUCTION

Tour operators and travel agencies represent a large part of the tourism industry and they

also play a significant role within the service sector. TUI Travel PLC is one of the

World’s leading travel companies which was established in 2007 with the merger of two

companies: Tourism Division of TUI AG and First Choice Holidays. Currently, TUI is

running its operations in more than 180 countries with 30 million customers in 27 source

markets (TUI, 2012). In addition, TUI has nearly 53,000 employees and its headquarter is

located in the United Kingdom. The company is listed in London Stock Exchange with

over 200 brands related to the travel and tourism business (TUI, 2012). Figure 1 in

appendix A is showing the business model of TUI.

The purpose of this report is threefold and accordingly the report has been divided into

three sections. In the first section, Porter’s generic strategic analysis will be conducted to

critically evaluate the business level strategies of TUI. The second section will be based

on to describe and rationalise, in the light of the environmental context, a range of

strategic options available to TUI. TOW matrix and SWOT analysis will be used to

identify strategic options and ANSOFF matrix will be used to critically evaluate these

options. The selected options then will be critically evaluated on the basis of their

feasibility, acceptability, and suitability. The third section of the report will be consisted

of identifying and briefly explaining the main issues which would impact on

implementation of the selected strategies.

2. STRATEGIC ANALYSIS

2.1 TUI BUSINESS LEVEL GENERIC STRATEGIES

Porter’s generic strategies framework has great significance in critically evaluating any

company on the basis of cost leadership, differentiation, and focus (Lynch, 2003; Johnson

et al, 2008). From the past decade, TUI is struggling to gain competitive advantage in

terms of cost leadership but due to the major focus on product diversification, company is

making low profits over the years (Page and Connell, 2006). In a quick comparison of

TUI with Thomas Cook, it is evident in figure 2 (see appendix A) that Thomas Cook is

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performing very well in terms key finance figures. Therefore, it can be said that TUI is

not competing with the rivals in terms of cost leadership.

Basically, TUI adopts a differentiation strategy by adding numbers of products in its

portfolio that customers need on their holidays. TUI set particular targets in each area to

improve the level of differentiation by continuously reviewing the product/service

contents. One of the differentiation strategies where TUI has competitive advantage over

the rivals is mainstream sector which is the largest in the group on the basis of its scale

and scope. In this regards, TUI is offering Sensatori (suitable to couples) and First Choice

Holiday Villages (suitable to families) in the UK (TUI mainstream, 2012).

In comparison with Thomas Cook and other opponents, TUI obtains high margins due to

products offered in portfolio because customers can make earlier bookings online that

release the late market pressures (Goodway, 2012). In addition, high customer service

quality, accommodation, transportation, travel insurance, and low-cost offers are stimulating

the demand of TUI products Worldwide.

According to the new differentiation policy, TUI is focusing on new markets where there

is least amount of competition such as Asian markets including Russia and Ukraine (TUI

Group, 2012). In addition, TUI Travel has reinforced its market position by establishing

strategic collaboration with SunWing in Canada (TUI mainstream, 2012). In order to take

competitive advantage over Thomas Cook and other competitors in the tourism industry,

TUI has placed the order of Boeing 787 Dreamliner in mid 2010 which is expected to be

delivered soon (Wilson, 2010).

2.2 INDUSTRY ANALYSIS

Porter’s five forces framework can be used to conduct industry analysis of the travel sector of

the UK which is primarily based on five forces: threat of new entrants, threat of substitutes,

bargaining power of suppliers, bargaining power of customers, and rivalry among

competitors (Mintzberg et al, 1999; Johnson et al., 2008). The application of Porter’s five

forces framework on TUI will help to decide how TUI deals with threats and take advantage

from the opportunities in the external environment.

TUI currently has 155 aircrafts (Tender, 2011) and the new entrance of no-frill and low cost

airlines can adversely affect the operations of its business. In addition, the weak profitability

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of TUI (Garside, 2012) may hinder the organisation to compete with new entrants. The threat

of new entrants has middle level importance on the ordinary scale. Presently, TUI has

competitive edge over other companies (i.e. Thomas Cook and Airtours) in the industry on

the basis of low-cost, flexible offers, and largest distributors of global accommodation (TUI

annual report, 2011, p. 5). Therefore, it can be said that the threat of substitutes is low as 2 to

5 on the scale.

The impact of bargaining power of suppliers is high due to some major issues like increased

fuel prices, dependence on third party services and facility providers, and rise in the prices of

raw materials due to World’s financial crisis (TUI regulatory news, 2011). In addition, the

impact of bargaining power of customers is also high in terms of low-cost as customers often

go for low price and better offers. In addition, TUI should ensure compliance with regulations

from Civil Aviation Authority (CAA) and other regulatory institutions that protect the rights

of the customers (Civil Aviation Authority, 2011).

Finally, Thomas Cook and Airtours are the major rivals of TUI at this moment but they both

are tour operators and only sell scheduled seats with low prices. On the other hand, Ryanair is

also the main competitor of TUI on the basis of low fares and has shown continuous

improvement in its services in last few years. Other emerging competitors are Virgin Express,

Air Berlin, BMIbaby, and Buzz. TUI has competitive advantage over opponents due to its

quality service, accommodation, transportation, travel insurance, low-cost offers, and product

portfolio (TUI annual report, 2011).

The summary of the Porter’s five forces framework is presented in table 1 (see appendix B).

2.3 BUSINESS LEVEL ENVIRONMENTAL ANALYSIS

According to Johnson et al (2008), PESTEL and SWOT analysis are important to

examine any company’s business level environment. The full PESTEL analysis has been

conducted of TUI and presented in table 2 in appendix B. However, the major findings

from the analysis are that few external factors are adversely affecting the profitability of

the firm where UK tax system, increased fuel costs, exchange rates, economic crisis,

health and safety concerns, and changing needs and demands of the customers are

prominent factors.

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Similarly, SWOT analysis of TUI was conducted to analyse company’s internal strengths

and weaknesses as well as to identify potential opportunities and threats in the external

environment. It was found that increased fuel costs, online competition with low-cost

airlines, existing and emerging competitors, and focus on product diversification are the

major impacts that are affecting the firm’s profitability. The full SWOT analysis is

presented in table 3 in appendix B.

2.4 SUMMARY OF STRATEGIC ISSUES

There is no doubt that TUI is market leader in the tourism industry at this moment but on

the basis of business level strategic analysis in environmental context, it can be said that

TUI may face numbers of strategic issues in the near future. The summary of key findings

of the strategic issues along with their major impacts is presented in table 4 (see appendix

B).

3. STRATEGIC EVALUATION

3.1 STRATEGY FORMULATION

It is clearly evident from table 4 that key strategic issues are directly affecting the

profitability of TIU. In this section of the paper, the attempt will be made to formulate

and recommend a suitable strategy (or strategies) to TUI to overcome the ‘weak

profitability’ problem. According to Koontz and Weihrich (2006) and Johnson et al

(2008), TOW matrix is a conceptual framework that helps the organisation to formulate

an appropriate strategy by analysing its internal strengths and weaknesses and external

opportunities and threats. In table 5 (appendix B), TOW matrix is identifying range of

strategic options available to TUI in order to overcome key strategies issues.

Stone (2011) stated that ANSOFF matrix helps the organisations to decide their products

and market growth strategies on the basis of four growth strategies such as market

penetration, market development, product development, and diversification. There are

total 11 strategic options have been identified in table 5 for TUI to overcome the

weaknesses and defending the upcoming threats. Many of these strategic options are

already implemented by TUI such as differentiation strategy (see section 2.2.2), vertical

integration, product line expansion, improving environmental stance, improve

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people/processes/technology and introducing complementary services (see SWOT

analysis in table 3, appendix B). Therefore, these strategic options will be considered as

low priority in the ANSOFF matrix during preliminary comparison of strategic options.

Table 6 in appendix B is showing a comparison of identified strategies using ANSOFF

matrix.

3.2 ANALYSIS OF STRATEGIC OPTIONS

After the comparison of the strategic options available to TUI as shown in table 6, it was

found that two strategic options are imperative for the company in terms of increasing its

profitability. These options are (1) decrease the business operations cost by employing

appropriate cost control and cost estimation techniques such as Activity Based Costing,

and (2) broader service offerings in emerging markets like India and China. The selected

strategies for TUI to improve profitability can be critically reviewed in terms of

Feasibility, Acceptability, and Suitability (FAS) framework suggested by Johnson et al

(2008).

It is revealed in table 7 (appendix B) that both strategic options are feasible for TUI

because the company has the financial and other resources available to implement these

options but in case of entering in emerging markets, TUI may need heavy investments in

the beginning. Also, both strategic options are acceptable to the stakeholders because they

will have direct impact on the profitability of the firm. In terms of suitability, the overall

rationale of both strategic options is in the favour of the company because they will help

TUI to retain its market position.

4. STRATEGY IMPLEMENTATION

It is evident from the strategic analysis that TUI is a successful organisation in terms of

its strategy implementation and currently running its operations in 180 countries

successfully, but establishing a tourism base or arranging tourism activities in other

countries, which are different in many aspects such as culture, living standard, religion,

and language, is not easy. In this section of the report, the attempt has been made to

identify and briefly explain the main issues which would impact on the implementation of

the strategic options. Table 8 in appendix B is showing the key issues that may hinder the

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successful implementation of broader service offerings in Asian countries especially in

India and China where people are different in terms of culture, language, religion, and

income level.

5. CONCLUSION

The report was based on the critical evaluation of TUI business level generic strategies

and found that TUI has a competitive advantage over its competitors in terms of its focus

and differentiation strategies but on the other hand, the company is way behind from its

key competitor Thomas Cook in term of cost leadership (see section 2.2.1). Furthermore,

TUI was evaluated critically in the light of the environmental context to discover at what

extent the company is strategically fit and concluded that TUI is facing ‘weak

profitability’ problem over the years. To overcome this problem, a range of strategic

options were identified using TOW matrix and selected two most critical options

available to company (see table 5 and table 6 in appendix B). These options were than

critically evaluated by showing their feasibility, acceptability, and suitability for the

company (see table 7 in appendix B). It is recommended to TUI to implement cost control

and cost estimation methods preferably Activity Based costing and also to expand its

service offerings to emerging markets such as India and China.

The research is mainly based on secondary information and there was no primary method

was taken into consideration to complete this research. In addition, due to the restricted

access to the company’s information, the scope of this study is limited but it is believed

that if TUI will follow the general directions mentioned in this paper than the company

will be successful in retaining its leadership position in the tourism industry.

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REFERENCES

1. Civil Aviation Authority, (2011). CAA steps in to protect holidays 4 U customers, 03 August, 2011, [online]. Available from: http://www.caa.co.uk/application.aspx?catid=27&pagetype=65&appid=9&mode=detail&nid=2020 [Accessed: 08 May 2012]

2. Dun, (2010). Equity research and valuation. Tata McGraw-Hill Education

3. Garside, J., (2012). TUI losses grow after weak winter holiday sales, The Guardian, 8 May 2012

4. Goodway, N., (2012). TUI finds chill spring winds blowing in more bookings, The Independent, 09 May 2012

5. Johnson, G., Scholes, K. and Whittington, R. (2008). Exploring Corporate Strategy, 8th edition, Prentice Hall

6. Koontz, H. and Weihrich, H., (2006). Essentials of management. 7th edition, Tata McGraw-Hill Education

7. Lynch, R., (2003). Corporate strategy, 3rd edition, London: Financial Times / Prentice Hall

8. Mintzberg. H., Quinn, J. B., and Ghoshal, S. (1999). The strategy process, Pearson Education

9. Page, S. and Connell, J., (2006). Tourism: A modern synthesis, 2nd edition, Cengage Learning EMEA

10. Stone, P., (2001). Make marketing work for you: boost your profits with proven marketing techniques, How to Books Ltd

11. Tender, M., (2011). Modern aircraft on long-term lease to TUI Travel, AWAS media release, 21 October 2011

12. Thomson, and Martin, F., (2010). Strategic management, 6th edition, Cengage Learning

13. TUI Annual Report, (2011). Annual Report & Accounts for the year ended 30 September 2011, [online]. Available from:

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http://ara2011.tuitravelplc.com/uploads/annualreport/TUI_ara11.pdf [Accessed: 08 May 2012]

14. TUI Annual Report, (2008). Annual Report & Accounts for the year ended 30 September 2008, [online]. Available from: www.analist.nl/reports/TUI-2008.pdf [Accessed: 08 May 2012]

15. TUI Group, (2012). New markets, [online]. Available from: http://www.tui-group.com/en/innovation/new_markets [Accessed: 08 May 2012]

16. TUI Regulatory news, (2011). Annual report and notice of 2011 annual general meeting, [online]. Available from: http://www.tuitravelplc.com/regulatorynews_item.jsp?ric=TT.L.TK&ref=50921&n=&s=&t= [Accessed: 08 May 2012]

17. TUI mainstream, (2012). Mainstream, [online]. Available from: http://www.tuitravelplc.com/about-us/our-business/mainstream [Accessed: 08 May 2012]

18. TUI Travel, (2012). Welcome to TUI Travel PLC, [online]. Available from: http://www.tuitravelplc.com/ [Accessed: 07 May 2012]

19. Wang, K., (2011). People, Process, and Technology management framework, Createspace

20. Wilson, A., (2010). TUI aims to take Dreamliner 787s early to gain long-haul advantage, The Telegraph, 20 July 2010

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APPENDIX A

Figure 1 –TUI Business Model

Source: http://www.tuitravelplc.com/tmpl/a/g/business_model.png

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Figure 2 – Comparison between Thomas Cook and TUI finance figures

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APPENDIX B

Table 1 – Porter’s Five Forces analysis of TUI

FORCE IMPORTANCE SCALE

Threat of new entrance

No-frill or low-cost airlines Low profitability of TUI

MIDDLE 3 to 5

Threat of substitutes

Short and long haul flights Relative price and performance of substitutes The cost of switching to substitutes is not very high Competitive edge due to low-cost, flexible offers, mainstream, and largest

distributors of global accommodation

LOW 2 to 5

Bargaining power of suppliers

Increased fuel prices Dependence on third party service and facility providers Rise in the prices of raw materials World’s financial crisis High switching costs

HIGH 4 to 5

Bargaining power of customers

Low switching costs Customers often go substitutes in terms of low price and better offers Protection of rights of the customers by Civil Aviation Authority (CAA)

HIGH 4 to 5

Competitive rivalry between competitors

Major competitors are Thomas Cook, Air Tours, Ryanair Emerging competitors are Virgin Express, Air Berlin, BMIbaby, and Buzz Degree of differentiation on the basis of quality service, accommodation,

transportation, travel insurance, and low-cost offers

LOW 2 to 5

Source: Mintzberg (1999) and Johnson et al (2008)

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Table 2 – PESTEL analysis of TUI Travel PLC

FACTOR KEY FINDINGS

POLITICAL

o UK Tax system and policieso Insecurity due to Terrorist attackso Civil Aviation Authority (CAA) regulations to protect customers

rightso Package Travel Regulation act 1992 (www.legislation .gov.uk )

ECONOMIC

o Increasing fuel costso Exchange rateso Globalisationo The impact of UNWTO’s tourism 2020 vision

(http://www .unwto.org/facts/eng/vision.htm )o The impact of global economic crisiso Increasing unemployment rate in Europe

SOCIAL

o Changes in the consumer perception about brand and destinationso Changing needs and demands of the customerso Consumer perception about safety and environmento Increased trend of tourism educationo Life style changes

TECHNOLOGICALo GPS (Global Position System)o Computerised technologyo Internet, mobile, TV, Google Maps, Blogs,

ENVIRONMENTAL

o Health and safety concernso Issues of Carbon gas emission o Natural disasters in past few decadeso Air flight rationing

LEGALo Immigration issueo Trade lawso Laws for acquisition, mergers, and joint ventures

Source: Johnson et al (2008)

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Table 3 – SWOT analysis of TUI Travel PLC

LOCATIONSTRENGTHS WEAKNESSES

FAVOURABLE UNFAVOURABLE

INTERNAL

o Strong market position (market leader in tourism industry)

o Comprehensive services

o Strong performance of key segments

o High quality customer service

o Unique media marketing methods (i.e. TUI song: Let’s make people smile)

o Utilization of multi distribution channels such as internet to boost up sales

o Vertically integrated: operating in multi sectors such as airline, hotel, and travel agency

o Geographical diversity

o Specially in holiday expansion

o Weak profitability as compared to key competitor (i.e. Thomas Cook)

o Dependence on European operations

o Net loss of Euro142 million in 2008 (TUI annual report, 2008)

o Greater decrease in holiday packages due to the impact of financial crisis 2008

o Lack of flexibility in the operations due to extensive fixed assets (34%) (TUI annual report, 2008)

o Major focus on product diversification

EXTERNAL OPPORTUNITIES THREATS

o Strategic alliance, acquisition, and mergers with other businesses such as American Express and First Business Travel

o Expansion to emerging Asian markets such as India and China

o Growing hotels, cruise, and resorts

o Recovery from recession

o Glasgow Commonwealth games 2014

o Environmental and safety issues

o Exchange rates

o Online competition with low-cost and no-frill airlines

o Increased fuel costs

o Weak economic outlook for Eurozone and unemployment

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o Increased trend of tourism education o Competitors (i.e. Thomas Cook and Air Tours) with more flexible business models and strategies

Source: Thomson and Martin (2010)

Table 4 – Key strategic issues with TUI

ANALYTICAL TOOL KEY ISSUE MAJOR IMPACT

Porter’s Five Forceso Bargaining power of supplierso Bargaining power of customers

Weak profitability

Porter’s Generic Strategieso Cost leadership due to primary focus on product

diversificationWeak profitability

SWOT analysis

o Increasing fuel costso Existing and emerging competitorso Online competition with low-cost airlineso Major focus on product diversification

Weak profitability

PESTEL analysis

o UK Tax systemo Increased fuel costso Exchange rate impacto Economic global crisiso Health and safety concernso Laws for acquisition, mergers, and joint ventureso Changing needs, demands, and expectations of

customers

Weak profitability

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Table 5 – TOW matrix of TUI

External Factors

Internal Factors

EXTERNAL

OPPORTUNITIES THREATS

o Strategic alliance, acquisition, and mergers

o Expansion to emerging markets such as India and China

o Glasgow Commonwealth games 2014

o Increasing fuel priceso Online competitiono Low-cost and no-frills airlineso Exchange rateso Weak economic outlooko Environmental threats

INT

ER

NA

L ST

RE

NG

TH

S

o High quality customer serviceo Strong market positiono Unique media marketing methodso Vertically integratedo Online saleso Geographical diversity

SO Strategy: Maxi-Maxi ST Strategy: Maxi-Mini

1. Segment focus2. Broader service offerings3. Use differentiation strategy4. Vertical integration5. Expand product line6. Complementary services

1. Diversification to other transport market

2. Overhaul marketing plan

WE

AK

NE

SS

ES o Weak profitability

o Dependence on European operationso Greater losses in the pasto Major focus on product

diversification

WO Strategy: Mini-Maxi WT Strategy: Mini-Mini

1. Implement the improvement strategy such as People, Processes, and Technology (Wang, 2011)

1. Improve environmental stance

2. Decrease cost of the operations using Activity-Based Costing model

Source: Koontz and Weihrich (2006) and Johnson et al (2008)

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Table 6 – ANSOFF Matrix for comparison of strategic options

GROWTH STRATEGY STRATEGIC OPTION DESCRIPTIONPriority in terms of PROFITABILITY(High, Medium, Low)

ACCEPT FOR FURTHER

CONSIDERATION?

1. Market penetration

Improvement to People, Processes, and Technology

Already used Low No

Improve environmental stance

Already used Low No

Segment focus Targeting the business class customers Medium No

Decrease operation costsImplement cost control and cost estimation model (i.e. Activity Based Costing)

High Yes

Differentiation strategy Already used Low No

2. Product developmentComplementary services Already used Low No

Expand product line Already used Low No

3. Market developmentBroader service offerings

Expansion of service offering to emerging markets like India & China

High Yes

Overhaul marketing plan Already used Low No

4. Diversification

Diversification to other transport markets

Diversify in other transport market such as rail and bus services

Medium No

Vertical integration Already used Low No

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Table 7 – Feasibility, Acceptability, and Suitability of strategic options

Criteria Resources / outcomes Strategic option 1: Decrease operations costs Support Strategy?

FEASIBILITY Availability of resources

The reduction in cost always has deep impacts on the profitability.TUI has greater resources (i.e. funding, time, people, and information) to implement cost control and estimation models such as Activity Based Costing because no extensive cost is required in implementing cost models

YES

ACCEPTABILITY Potential strategic outcomes Lowering the cost of the operations is acceptable for the stakeholders because it will have direct impact on the productivity and profitability of TUI

YES

SUITABILITY Overall rationale of strategy

TUI is having weak profitability position as compared to its major competitor Thomas Cook. Therefore, the strategy is suitable for TUI because it will stimulate the strategic position of the company in terms of financial figures

YES

Criteria Resources / outcomes Strategic option 2: Broader service offerings Support Strategy?

FEASIBILITY Availability of resourcesTUI is already operating in 180 countries so targeting the emerging markets like China and India to gain competitive advantage as well as to increase the profitability should not be the problem for the company

YES

ACCEPTABILITY Potential strategic outcomes Entering in new emerging markets will open new doors of opportunities for the company which will be significant contributions to the profitability of the firm

YES

SUITABILITY Overall rationale of strategyThe strategy is perfectly suitable for the TUI because none of the competitors is currently operating in India and China at this moment

YES

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Table 8 – Main issues in implementing broader service option

ISSUES DESCRIPTION

Management related issueso People related issueso Employee management issueso Which segment to focus?

Operational issues

o Control over distribution channelso Market dominanceo Laws and regulationso Insecurity and health problemso Lack of quality hotels, cruise, and resortso Difficulty in media marketing due to lack of internet awareness

Cultural issueso Language barrierso Different needs and wants of the customerso Organisational cultural issues

Finance related issueso Credit risko Debt management issueso Resource and capability acquisition

Product related issues o Low or no preference to brand

Price related issueso Low incomes of the peopleo Exchange rate differences

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