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SWOT Analysis

Strength: The Company has long history, which will help Company build their brand firmly and easily. Thomas Cook Group is one of the worlds leading leisure travel groups, with sales of 9.8 billion and 23.6 million customers (Thomas Cook Group 2011). The Company operates under six geographic segments in 22 countries (Thomas Cook Group 2011). Obviously the Company already reached the economic scale The Company has reached the Greiners (1998) Phase 6 Growth through Alliances. The Company own accommodation and flight consolidator (Thomas Cook Group 2011). Weakness The Company has faced poor performance in parts of their business. (Thomas Cook Group 2011) Disruption in the MENA region will bring challenges to the Company. (Thomas Cook Group 2011) The profit margin is dropping by 25 percent (Thomas Cook Group 2011) Opportunity With the higher income and purchasing power, Chinese tourists become more active than before. UK unemployment fell 65,000 in the three months to the end of May. (The Source 2012) Tourism is second only to oil as the worlds leading export commodity, accounting for global earnings of more than $300 billion, or nearly 25 percent of total world GNP Threat Uncertain economic environment across Europe will lead to adversely impact. Customers preferences switch from package tour to independent travel mode which will carry lower margins. More customers tend to directly purchase products from the services provider, when plenty of information is available on the internet. Political instability will cause the business slow down and carry higher risk. Input costs (fuel) are higher (Thomas Cook Group 2011). Crang, Obrador-Pons & Travlou (2009) suggest that mass

tourists sensibilities are related to send, sea, sun. Therefore weather is very important to tourism industry. The weather issues that affect globally may cause recession of tourism industry.

PESTEL Analysis:
Political Tourism is second only to oil as the worlds leading export commodity, accounting for global earnings of more than $300 billion, or nearly 25 percent of total world GNP. Every government has the intention to boost the tourism industry. However prosperous tourism industry requires political stability. Maslows Hierarchy of Needs (1943) indicates that individual seek for safety needs before they eager for leisure travel, which implies tourists will go to more safety place instead of places with political instability. Moreover some political events can facilitate tourism industry for example the application of Schengen Visa. In addition government published bank holiday also give people more time for leisure travel. Recent years large number of Chinese tourists continuing travel abroad, which may be caused by rising incomes and interest in overseas travel (Korea Real Time 2012/09/27). The paper further point out recent geopolitical tension may cause Chinese tourist refuse to visit Japan, and Japanese tourists who had planned to visit Korea or China going elsewhere. Western country could be their second choice? Economic Although western world is suffering ailing economy, there is a good sign that unemployment in UK is falling. The Source reported throughout 2012 the U.K labour market has proven to be surprisingly resilient (2012/10/9). In spite of the ailing economy, more people is getting job and have more money to spend on leisure. London just hosted the Olympic Game. The Olympic effect brings couple of good influences to the host community, which may stimulate tourism industry as well. Social Most of local people will not use travel agents for domestic travel. They always try buying the tickets from the service providers, trains companies, bus companies and hotel chains. The foreigners, overseas students and foreign workers prefer travel agent, whenever they want to escape from their daily routine. Conversely, international tourists highly depend on travel agents. Especially when they travel to a strange environment, they tend to travel through package tour. Travel agents help to create an

environmental bubble (Cohen 1979) which is an environment that similar to tourist home community. Technological The most important technology in modern society is the World Wide Web. Internet is a convenient distribution channel for companies promoting their products. From customers point of view, Internet allows them to compare the prices between few choices of companies. In other world Internet has lead travel agents to face more intensive competition. Another negative example about technology is telecommunication service. Businessman can save time and money through using teleconference instead of face to face. They even negotiate business through e-mail without meeting. Its good for businessman but not so good for travel agents. Environmental Safety issue not only result from political instability but also the natural disaster. Although sustainable product may be more costly, it help companies build their brand and fulfil their social responsibility. Not every customer care about the environment issue but others may appreciate the sustainable plan. Legal There are numbers of legal obligation that the travel agents need to follow. Thomas Cook Group plc is a transnational corporation (TNC), which have to put more efforts in the legal sections. As the process of globalisation move forward, legal globalisation (e.g. international law) makes TNCs life easier and safer.

Porters five forces


Porters five forces is an analytical tool for testing the competitive environment (Luthans & Davis 1993). This conceptual framework implies that there are five key index of competition which will also be used to examine that attractiveness of the market (Hooley, Piercy & Nicoulaud, 2008). The five elements are identified as below: (three horizontal competitions and two vertical competitions) The threat of new entrants The threat of substitute products The threat of competitive rivals The bargaining power of suppliers The bargaining power of customers A change in any of these factors requires a business unit to reassess the marketplace. However Faulkner and Campbell pointed out some

of the limitation with the model. The framework bases on static view of industry structure. Its a good tool to analyse the external environment but it lack indicator of internal environment (Faulkner & Campbell, 2003). The threat of new entrants Travel industry usually requires low skilled employees and large amount resources. Regarding travel agents financial barrier are low for new entrants, especially after internet was invented. As indicated in the Company's annual report 2011 that online growth is predicted to be faster than offline growth. Internet can serve large amount of customer in short period of time at relatively low cost. On the other hand, normally new entrants suffer form their limited number of suppliers result in limited choices of destinations. New entrants will take more risk because they usually over depend on their key suppliers for example particular coach company or airline. Thus the profit margin relatively is lower than branded company. Therefore changes in macro economy will influent those new entrants first, which are great challenges. The treat of substitute products Substitute products choices of the travel industry are plentiful. Tourists can go for self-driving tour instead of using travel agent. In a sense maps, GPS equipments and travel guide books are substitute products. Alternatively direct suppliers (the airlines, hotels and cruise companies) can sell directly to the customer. According to the Companys annual report 2011, the sales of direct suppliers are twice to the sales of travel intermediaries. It occupied a very big portion of the leisure travel market. The substitute products for business travellers are video conferencing, teleconferencing. With more advance device, business travellers have less need to travel and engage travel agents. The threat of competitive rivals The Company claims that UK business decline significantly in 2011 (Thomas Cook Group plc Annual Report & Accounts 2011). The profit margin fall 25 percent from 4.1% to 3.1%, the tourism industry remains its high competitive, which not only result from number of new entrants come in but also attribute to decrease in customer purchasing power. The Company foresees that the uncertain economic environment, continued disruption in the (Mideast and North America) MENA region and higher input costs, particularly fuel (Thomas Cook Group plc Annual Report & Accounts 2011, pp.3) will contribute to a higher competitive environment. The bargaining power of suppliers The suppliers for a travel agent mainly refer to hotels,

transportations, attractions mega events and so on. The sources of suppliers are various. For the big company like Thomas Cook have great power in price negotiation with suppliers. Actually the Company owns some of the hotels and aircrafts, which will further lower the cost of the operation. Its how the fourth Growth Strategy works: capture growth and value through M&A and partnerships. The Company touches their suppliers business or seeks long term cooperation so that the cost of the supplier will be lower than SMEs and new entrants. A best example will be Airline provide over-ride commissions to travel agents based on the quantity of the sale that the agent bring in (Shaw, 2007). The bargaining power of customers Nowadays customers tend to be more informative than ever before. Everything is labelled with prices and its all transparent. Some of the customers check the prices through all channels especially from websites like Groupon which will offer customer better price usually. Thomas Cook has to create more value-add services into their package in order to maintain those loyalty customers and develop potential customers. Urrys (2002) post-tourist shows todays tourist tends to be individualised, demanding and preferring more customised services. If the Company wants customer pay higher price, they have to come up with some unique tour packages to delight their customer.