Strategic Analysis Of First Choice Holidays Tourism Essay

St regula rustlegic synopsis Of foremost natural selection Holidays touristry EssayThis report is establish on the strategic epitome of source choice Holidays PLC, adept of the worlds trail package holiday companies. An abridgment of the friendships inner(a) and a flair environments go away be undertaken resulting in the researchers findings of the opportunities and threat that the industry faces.A look at the industrys competitive forces raise out escort show the favorableness of contrary industries and the data found, analysed showing the different external competitive forces that adjoin organisation and how information understructure be utilize to counter them.A strategic epitome of the bon ton pass on show the participations competitive and m cardinaltary strength in which the companys strengths and weaknesses result be full(prenominal)lighted. A strategic concur which will indicate whether the companys mission and strategies agrees its internal c apabilities and its external environment.1.0 trade milieu Analysis of premiere pickax Holidays PLC1.1 History first excerption Holidays PLC, employment name of TUI UK limited is part of the TUI break down PLC Group of companies, one of the worlds wind go companies, which operates in over 180 countries. The company boasts of having more(prenominal) than 30 million clients worldwide in 27 key source commercializes much(prenominal) as the United States, Italy, France, India and the United Kingdom. In addition to front excerption Holidays, the company has over 200 brands which argon comprised of grocery leading mainstream brands and specializer brands.The company operates in four sectorsMainstream this is the largest sector in terms of the companys pecuniary performance and employee follows. It comprises of leading tour actors and power brands as sound as it operates 146 aircraft and serves 22 million guests.Activity this sector has over 40 action at law voya ge businesses that operate under five divisions which atomic number 18 Marine, Adventure, Ski, Student and Sport. The fortuity businesses take more customers to iconic adventure destinations than any other operator and serve 1.1 million customers. medical specia sway and Emerging markets this is an international portfolio of travel businesses focal point on specific destinations, premium travel experiences or particular customer demographic segments, often with place and exclusive products.Accommodations and Destinations this sector sells and provides a roll out of go in destination to tour operators, travel agents, corporate clients and luff to consumers worldwide. Some operate include hotel accommodations, sail handling and round trips for customers.TUI traveling operates its headquarters from the U.K and employs approximately 50,000 people in over 200 travel businesses in the world. first gear option Holidays PLC, formerly owners oversea (Wholesale) Limited and Owne rs Abroad PLC was formed in 1973. After launching an air passage, Air2000, the company moved into medical specialist holidays. The company was restructured and rebranded into outset excerpt Holidays PLC after several acquisitions and joint ventures with mixed tour companies and cruise liners. The collection then structured itself into four sectors Mainstream, Activity, Specialist and Online Destination Services out front the merger with TUI Travel PLC in 2007. offset printing election was awarded the Most Environmentally Responsible Large Tour floozy (2007-2009) from the British Travel Awards.1.2 Vision and strategic GoalSince first of all Choice merged with TUI Travel, it sh atomic number 18s the analogous vision and strategic goals. The companys vision statement is fashioning Travel Experiences Special. The companys strategic goals are to bring forth superior shareholder measure out by organism the leading global leisure travel group providing its customers with th e widest choice of differentiated and flexible travel experiences to meet their changing take and foc exploitation their strategic initiatives for realizeable growth. These include developing the companys business simulation, uninterrupted efficiency improvements and development of growth opportunities.1.3 PEST AnalysisAccording to G. Johnson et al. in the text Exploring Corporate Strategy, PEST stands for semipolitical, Economical, Social, Technological, Environmental and Legal. It provides a comprehensive list of influences on the possible success or failure of particular strategies that First Choice may face or is facing at present.PoliticalWith the governments hiking of aviation taxes and Air Passenger Duty (APD), this urinates airline tickets to be expensive, so discouraging prospective customers from choosing the package holiday company.Political unrest in some countries may ca implement customers to decide on not travel to that particular destination out of fear for their gumshoe.Impact on several(prenominal) of anti-terror measures likely to increase inconvenience of some travel options.The governments Fuel monetary value escalator is a way of government making money speckle protecting the environment by discouraging people to travel less.The may 2010 British elections caused political inst exponent with true actions destabilising the whole of Europe.The government can form naked regulations under which these companies can operate which may or may not be overconfident.EconomicalThe current inflation rate of the U.K is 3.1% which affects air fares, c smokehing, food etc.With the rise in petrol sack which change magnitude by 3% above inflation, customers are feeling the atom of this and are less likely to assume taking a holiday with any package holiday company.The unemployment rate is at 7.7% which commencementered by 0.1% over the last quarter. Having a rise in employment will raise confidence in consumer spending.The UK Pound St erling Exchange station has shown recent developments which are indeed very much favourable for the citizens of the U.K. travelling abroad. At present the UK Pound Sterling Exchange Rate has affix the UK Pound Sterling at nearly double the worth of the US Dollar, which means that when British citizens travel to the U.S. they will be able to call back double bar strives for their moneys worth.SocialThe number of people buy on the meshing has been on a constant rise. In 2009, 18.31million U.K households pose gate to the internet. In a survey it was found that 69% of U.K households use the internet to acquire services related to travel accommodation.Increased popularity of foreign travel leading leads to a boom in demand for air travel. However, this has been adversely stirred by international terrorism which causes concern for the safety and security of futurity package-holiday impartrs.The interaction between tourists and the chosen host community can be one of the factor s that may affect a community as tourists may not be sensitive to local customs, traditions and standards.Peoples life style changes cause package holiday companies to without delay offer customised packages and online reservation facilities to meet customer expectations.TechnologicalToday more companies are choosing to broadcast their products via the internet. Online involution has been one of the biggest factors affecting the package holiday industry. U.K residents are now constantly using the internet to book their holiday trips which saves on time for them as well as providing convenience.Advertising on the internet has been proven to boost gross sales for companies more and more people are using the internet as a way to communicate their needs and wants to the outside world.1.4 Porters Five Forces AnalysisFigure 1. The Five Forces That Shape Industry CompetitionFirst Choice is in a very dynamic and competitive industry, the Porters Five Forces sticker was created to show the profitability of different industries. This model is used for analysing the different external competitive forces that affect organisation and how information can be used to counter them.The interest is an analysis using the modelThreat of vernal EntrantsFirst Choice has direct self-possession of its own airline and hotels. saucy entrants may not con theatre the capital for such an investment and wherefore may depend on external airlines and hotels to provide their customer with a service. impudent competitors may not deliver the know-how or stool the incumbent experience to begin operating a package holiday business. politics regulations provides a list of rules that late competitors have to take into consideproportionn before beginning operation, some of which may pose a problem for beginners in this industry.In an already highly competitive market, there will be the issue of pricing to bleak competitors. Pricing packages in a way that it may be attractive for holid ay travellers without being too low so that it may end up fit inning at a loss.Threat of Substitute Products or ServicesFirst Choices main competitor, doubting doubting Thomas Cook, has declensionped its prices to compete with them for lowest priced package holidays. If successful, customers may be lead to choose that company and divert from the services of First Choice.Competitors may not possess pluss such as its own airline or hotel solely offers the same services at a cheaper cost.Destinations that the company may not have package deals for, other competitors may provide causing prospective customers to cast to the competitors services.Bargaining causality of BuyersBuyers can inflict the price of package holidays being that the industry is a highly competitive one. Buyers have a lot more choices on package holiday services to choose from. market place research has shown that buyers are taking fewer 7/14 wickedness packages causing package holiday companies to attempt diffe rentiation and specialisation of certain package deals to cater to those who take shorter trips.The threat of buyers going directly to suppliers is possible. The purchasing of airplane tickets from the airline and the booking of accommodation is an imminent threat to the industry. whatchamacallum is key for todays buyers. With the internet customers would choose the company which can provide the drop off package holiday service without leaving the comfort of their homes.Bargaining Power of SuppliersIf oil prices rise, suppliers of dismiss for the airlines may raise their prices.Fuel suppliers can dictate prices for their product depending on the demand for flights. Taxes applied to the cost price of can can affect the cost of package holiday deals.Suppliers will have high negotiation powers for those package companies now entering the market but for those experienced and large companies such as First Choice or Thomas Cook, there will be a balance of power. rivalry Among Existing CompetitorsThomas Cook, the main competitor for First Choice and elevate Company TUI Travel, has joined with the company offering cheap package deals which increased the already existing price competition.First Choice was combined with its baby company Thomson award winning airline Thomson Airline to be one of the top package holiday airline in the UK which is acquiring the Boeing 787 Dreamliner which meant it will be a fifth more fuel efficient than its competitors Flybe and Thomas Cook Airlines.Thomas Cook offers a range of monetary services that First Choice does not which includes foreign exchange services, their own postp precaution currency card and the recent innovation of creating an app for the Iphone and Android phones.1.5 Industry behavior CycleFigure 2. Industry Life CycleSource http//alife4testing.co.uk/This model is used to grammatical case which stage the package holiday industry is at current. The industry is soon in the Shakeout stage of the lifecycle. The ba rriers to entry are currently high, economies of scale have been achieved, forcing smaller companies to be acquired by bigger companies such as TUI Travel and Thomas Cook or exiting all together.1.6 little Success Factors (CSFs)The Critical Success Factors of the package holiday industry will highlight the key factors that present and upcoming companies should focus on that will bring satisfactory results, therefore ensuring successful competitive performance.Creating a unite market Combining companies or products into one provides opportunities for significant cost nest egg as well as revenue enhancement synergies.Having more direct ownership of airlines and accommodation suppliers.Having successful product differentiation will attract more customers from segments such as university students.To raise awareness, influence choice, change behaviour, and develop and come along new products to encourage responsible holiday choices.Maximised web sales and content.1.7 Opportunities and Threats of the Market EnvironmentHaving analysed the market environment of the industry, the following will highlight the versatile opportunities and threats the market faces.INDUSTRYOpportunityThreatTo consolidate the market by taking over smaller companies.The opportunity to come up with new innovative products/services because of the changing consumer market.To build new capital to leverage assets such as aeroplanes and cruise ships, reducing dependency of suppliers with that mode of transport.New mergers and strategic alliances to promote the maximisation of synergy profits.To maximise on the use of the internet market, to make it more interactive for consumers.Low cost airline competitors such Ryanair and EasyJet has relatively low prices.Natural disasters that may occur at destinations or the home country.People owning foreign property wont be willing to take a full package holiday, just a cheap flight.People booking their holidays for themselves and not through the pack age holiday companies.Threat of terrorist attacks may change a customers perception on safety when travelling.Table 1. The Opportunities and Threats of the Package Holiday IndustryHaving analysed the market environment of the industry, this reputation will now take a closer look at First Choice Holidays PLCs strategies which will explain the companys respective(a) operations and the resources to get it done.2.0 Strategic Analysis of First Choice Holidays PLCStrategy is concerned with duplicate a hards resources and capabilities to the opportunities that arise in the external environment. The following shows the strategic analysis of First Choice and the tools used.2.1 encourage Chain Analysis of First Choice Holidays PLCA Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business.Figure 3. Michael Porters Value Chain ModelSource http//www.12manage.com/images/picture_porter_value_chain.g ifThe following is the value chain analysis for First Choice Holidays PLCInbound LogisticsProviding all working material for travel shops and tour operators.Printing of travel brochures.Liaising with suppliers of fuel for Thomson aircraft.Liaising with monetary institutions for the supply of several(a) foreign exchange currencies to be do available online and at First Choice travel shops. dialogue with various hotels and other sources of accommodation.Hiring of security for airport lay facilities. trading operationsBooking and pre-payment of hotels and other sources of accommodations for clients at various destinations.Liaising with different tour operators, transport and excursion providers.Booking and pre-payment of excursions providers.Updating the travel website for online booking.Securing flights for various destinations.Liaising with insurance company, Mondial Assistance (UK) Ltd., for travel insurance for customers.Fuelling of aircraft for flights.Ensuring there is enoug h on board staff for flights.Outbound LogisticsDistributing brochures to customers.Distribution of airline tickets or cruise ship passes to customers.Marketing and gross revenueOnline booking as well as a pre-departure website for new and existing customers.The availability of 300 travel shops ranch conveniently across the UK.Advertising of the company and airline by boob tube and print also on the companys website.Call centre staff are readily available for customer support.The offering of special package deals at a lower price.Existing customers sharing their experiences about the company through word-of-mouth.ServiceThe service of travel insurance for all customers.Airport parking so that customers can safely use their vehicles and park instead of hiring alternate(a) transport to get them to the there.The service of Travellers cheques is provided to customers who want to purchase foreign currency. seat on the plane can be reserved before customers travel, making it easier and more comfortable for a family to sit together.Car hires are arrange for customers in need of transport during their holiday.Qualified child care-takers or nannies are provided to customers equipped with toys and other equipment from respected UK brands such as Crayola and Little Tikes. impregnable InfrastructureThe following departments make up First Choices company infrastructure.SalesMarketingFinance and AdminHuman ResourcesSupportEngineering and researchOperationsIT and ISHuman Resource ManagementEmployees are trained to be versed about the industry and company.Training is done for employees so that they can dish customers with choosing the perfect holiday option for their budget.Nannies for baby-sitting services are trained and competent withNNEB/CACHE (or equivalent).Air hostesses are equipped with the necessary first aid and situation response training.Technology DevelopmentContinued development online booking and interactive websites such as the pre-departure site.Outbou nd dialler system was installed to automate the address service for agents, giving them guidance through the many services and products First Choice has to offer.A browser-based management information system enables management to access operational and business information to monitor how calls are made.ProcurementResearch on various locations for new accommodation according to customers needs and wants.Communication with vendors and other tour operators.Acquisition of the necessary technology infallible to run the company.The purchasing of new aeroplanes for flights to more destinations at a greater speed.2.2 The Strategic Capabilities of First Choice Holidays PLCAn organisations strategic capabilities are its capacities, resources and skills that create a long-run competitive vantage. The following shows the strategic capability of First Choice.2.2.1 Resources and CompetencesResourcesCompetences brinkCapabilitiesThreshold resources existent300 travel shops in the U.K14,000 emplo yeesAirline First Choice AirwaysExpedition cruise shipsOver 2 billion in assets intangible asset4th largest package holiday companyBrand strengthOwner of several market leading brands such as 2wentys FalconOnline booking websiteState of the art communication systems (MO Communicator)A contributor to an 13.8 billion revenueThreshold competencesDeployment of travel shops in various key areas in the U.K.To create a market leading presence in the Russian market through joint venturesThe introduction of Microsoft Office Communicator to implement an IP-based voice mesh to deliver better customer service.Enhancing customers experience online by ways of after-sales servicesInvestments such as yachts, aeroplanes and expedition cruise ships that provide First Choice with a greater competitive advantage.Capabilities for competitive advantageUnique ResourcesTangibleBoeing 787 Dreamliner aeroplanes that are able to go greater distances and offers greater fuel efficiency.First Choice Holiday V illage designed for families and a 5-star spa conceit for couples.IntangiblePowerful brand with the merger with the largest leisure company in the world.37 years in the travel and leisure industry.Relationships with suppliers to retain one hundred fifty million bed nights per year.Core CompetencesOperational profitability which allows First Choice to respond to changes in the trading environment.Possessing profitable capacity by having individualistic flight allows the company to determine optimum seat capacity by each U.K airport and to ensure the most appropriate aircraft fleet size of it and type are maintained.Consolidation of aircraft fleet as a fuel conservation measure and to reduce the companys direct carbon footprint.Table 2. Resources and Competences of First Choice Holidays PLC2.3 The Financial Analysis of First ChoiceFollowing a look at the companys resources and competences, a brief analysis of the company is needed to see where it stands in the industry. First Choi ce is a part of TUI Travel PLC, therefore shares in the groups profitability. Having merged with the group, First Choice has contributed to 93million in synergy profits as well as the groups overall revenue of 18.6billion.The following shows a break-down of the companys monetary capability in the following areas in 20092.3.1 positivenessGross salary Margin This is used to assessa firms financial health by revealing the residual of money left over from revenues after accounting for the cost of goods sold. The companys Gross Profit Margin stood at 8.4% in 2009, an improvement of 1.1% of the previous year. This shows that the companys pricing strategies have been effective.Net Profit Margin This is used to show how much profit a company makes for every 1 it generates inrevenueorsales.The companys net profit margin stood at -0.77% which states which has improved over the previous year of -2.1%. thusly this shows a rise in efficiency after all expenses and that have been considered. travel by On pluss This spread outs an idea as to how efficientmanagement isat using its assets to generate earnings. The company earned 0.3% from invested capital (assets) compared to 2008s -1.4% loss. As a result this shows the company is earning more money on less investment.Return on Equity This shows the amount of net incomereturnedas a lotof shareholders equity. The company showed a 1.2% profit made from shareholder investments, a rise from the previous year -0.1%. Thomas Cook, the companys main competitor had a high(prenominal) return at 2.37%.2.3.2 LiquidityCurrent Ratio This is used to determine a companys ability to pay off itsshort-terms debts obligations. The companys current ratio stands at 35 which means they can pay off its obligations should it change state due at that point.Acid Test Ratio This indicateswhether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The company showed a ratio of 12 for 2009, which means that the company has enough fluidness assets to cover an unexpected drawdown of liabilities.2.3.3 Leverage or DebtDebt to Equity Ratio This indicates what proportion of equity and debt the company is using to finance its assets. The company showed a ratio of -3% which means that they were not aggressive in financing its growth with debt and has the ability to repay loans.Total Debt to Total Assets This is used to measure a companys financial risk by determining how much of the companys assets have been financed by debt. The company showed a ratio of 34 meaning that 75% of the companys assets are financed by the creditors or debt (and therefore 25% is financed by the owners).2.3.4 Activity (see Appendix)Asset Turnover This shows the amount of sales generated for every dollars worth of assets. The company showed a ratio of 1.5 which means for every dollar in total asset spent they gain 1.5 in revenue compared to the industrys 0.34 ratio.Despite a drop in revenue, the company distillery remained profitable and above its competition. It is seen that the company has an strand and is inviting for any investor. The following shows the companies. The following shows the strengths and weaknesses of the First Choice.First Choice Holidays PLC skills failinges ace of the market leaders in the package holiday industry two domestically and globally.Technologically advanced, creating new ways using technology to make decisions on their own without going physically to an agent.Offers a wide range of comprehensive services that customers enjoy.Ability to consolidate the market.Inability to fully diffuse the Western market resulting in dependency on the European market for revenues.As at August 2010, there was a consistent reduce in bookings following the recurrence of airspace closures, the emergency budget and the UK weather. business relationship errors on the part of executives.3.0 The Strategic Fit Analysis of First Choice Holidays PLCStrategic fit indicates how well the First Choice Holidays mission and strategies fit its internal capabilities and its external environment. First Choice is the 4th largest package holiday company in the UK. Its main competitors are Airtours, Thomas Cook and its babe company Thomson Holidays, currently Thomsons dominates the industry.According to Investopedia, competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the advantage, the more difficult it is for competitors to neutralize the advantage. It is the companys competitive advantage that allows it to earn excess returns for its members. Having a competitive advantage is important to First Choice because without it, the company will have no economic effort to exist and will just simply wither away. Through the analysis done in this essay, although First Choice is ranked as 4, it still holds an advantage on its competitors.First Choice used the st rategy of feebleminded integration, meaning the company purchased suppliers in order to reduce dependency. An example of this would be its own airline and the First Choice Holiday Village. The acquisition of new aeroplanes, the Boeing 787 Dreamliners, would prove to be a major advantage as consumers are now taking responsibility for the environment and with these aeroplanes the company will showcase environmental performance by reducing their carbon emissions. Having these assets will give First Choice the advantage of delivering products or services of a higher value at a cheaper price, as a result gain cost leadership.Using the internet for online sales has maximised their profits also the company retained their customers while gaining new ones. The companys liquidity and financial situation is unchangeable despite a drop in revenue in 2009, with that they are capable of market consolidation. An example of that would be the acquisition of C.I.T Holidays, a UK based company with e xtensive operations in Spain and Italy.First Choice has a long history within the industry along with experience. They have proven to be well prepared to any changing environment. The company has achieved high economies of scale because of its access to larger market allowing them to operate with greater geographical reach. They have the ability to create value for money to its customers and have shown to be innovative by way of creating differentiated products such as its pre-departure website, an after-sales service.3.1 The donkeywork Analysis of First Choice HolidaysThe SWOT Analysis provides information that is stabilizing in matching the firms resources and capabilities to the competitive environment it operates.First Choice Holidays PLCStrengthOne of the market leaders in the industry.Ability to offer differentiated products/services.Commitment to customer service.Wealth of knowledge of the industry.Backward Integration which made them spread across the value chain.Strong d istribution channels, the strongest being online sales.WeaknessA 13.5% reduction in package prices because of a decrease in sales as a result of the recession and events such as the volcano ash disruption in mid-April 2010.A loss of 69million in revenue in 2009 compared to the year before.OpportunitiesFurther expansion through acquisitions and mergers.With new mergers and alliances, an opportunity to create synergy profits arise.ThreatAirlines and hotels are now offering package deals.Threat to Thomson Airlines from low cost airlines such as Ryanair.Terrorist threats or attacks will change customers perception of safety when travelling.In conclusion, First Choice Holidays PLC is strategically fit and has a high advantage over the competition. The company is seen to be attractive for investment, although their profits fell for the previous financial year and sister company Thomson Holiday still stands at number one, but with new products underway, there may be a positive change.