TUI - Analysis and Implications

Strategic Management

Contents1) INTRODUCTION.............................................................................................................................2

2) ENVIRONMENTAL ANALYSIS OF THE TOURISM INDUSTRY..............................................2

2.1) PESTEL ANALYSIS:................................................................................................................2

2.1.1) POLITICAL:.......................................................................................................................2

2.1.2) ECONOMICAL:.................................................................................................................3

2.1.3) SOCIOCULTURAL:...........................................................................................................3

2.1.4) TECHNOLOGICAL:..........................................................................................................4

2.1.5) ENVIRONMENTAL:.........................................................................................................4

2.1.6) LEGAL:...............................................................................................................................4

2.2) PORTER’S FIVE FORCES ANALYSIS...................................................................................4

2.2.1) POTENTIAL ENTRANTS:................................................................................................4

2.2.2) SUBSTITUTES:..................................................................................................................5

2.2.3) SUPPLIERS:.......................................................................................................................5

2.2.4) BUYERS:............................................................................................................................5

2.2.5) COMPETITIVE RIVALRY:...............................................................................................5

3) MAINTAINING LEADERSHIP......................................................................................................5

4) FUTURE IMPLICATIONS FOR TUI:.............................................................................................6

5) USES AND LIMITATIONS OF TOOLS USED:.............................................................................7

5.1) PESTEL.....................................................................................................................................7

5.2) PORTER’S FIVE FORCES.......................................................................................................7

5.3) SWOT ANALYSIS....................................................................................................................8

5.4) ANSOFF MATRIX....................................................................................................................8

6) CONCLUSION.................................................................................................................................9

7) REFERENCE..................................................................................................................................10

8) APPENDICES................................................................................................................................13

Liverpool Business School


1) INTRODUCTIONTUI AG established in 1997, is the undisputed leader in the European tourism

industry. They operate in over 180 countries worldwide serving more than 30 million customers offering a wide range of leisure travel experiences. They also operate around 240 hotels of which majority is in the 4- or 5- star category. TUI travel (tour operating, online sales, high street outlets, airlines and incoming agencies), TUI Hotels & Resorts and the cruise ship business comprises the three sectors of TUI (TUI website). After the selling of Hapag Lloyd AG (was the container shipping company of TUI) in March 2009, TUI has become a pure tourism oriented company.

The business environment of a company consist of the macro environment, industry (or sectors), competitors and the company themselves. Various analytical tools such as PESTEL, Porter’s five forces, SWOT and ANSOFF matrix are used for the analysis. The external environmental analysis is carried out using PESTEL and Porter’s five forces. SWOT along with the help of value chain is used to analyse the industry and to investigate on how TUI achieved and maintained its leadership in the European tourism industry. Future implications for TUI is drawn using ANSOFF matrix, and also taking into account of the key drivers identified from PESTEL. Moreover, the uses and limitations of the analytical tools are also discussed in the report.

2) ENVIRONMENTAL ANALYSIS OF THE TOURISM INDUSTRY

2.1) PESTEL ANALYSIS:The PESTEL framework categorises the environmental factors into political,

economical, socio cultural, technological, environmental and legal. PESTEL helps understand the key drivers of change and external influences on the organisation (Johnson et al., 2005). PESTEL analysis is shown in Appendix 4.

2.1.1) POLITICAL:Terrorist attacks result in tight security reasons and strict immigration laws (Hirsch,

2009) (Weissinger, 2003). If the Foreign and Commonwealth Office (FCO) put some destination off-limits after these terrorist incidents, travel insurers would refuse to cover tourists if we went there (Urquhart, 2006). Tourism suffers when prolonged tourist attacks affect tourist perceptions (Sónmez, 1998).

Government toppling and political instability could adversely affect the tourism industry of that country. Political instability not only affects the tourism of that particular country but also that of the neighbouring countries as well (Sónmez, 1998). This is same in the case of terrorism.

Taxation policies on tourism by different countries also have a major impact on the tourism industry. Governments often provide subsidies and tax exemptions in their countries to promote tourism of that particular country (MENAFN, 2009) (ndTax, 2009).



2.1.2) ECONOMICAL:Exchange Rates play a crucial role in international tourism and trade. Gallego et al.

(2007) statistically discusses the impact of exchange rate regimes on tourism and concludes that more fixity in the exchange rate arrangements generates a positive impact on tourism. Considering the scenario of Euro is decreasing the gap with Pound Sterling may affect the outbound tourism from UK to other European Union Nations and this could definitely affect the tourism agents.

Globalisation provides the world business with unlimited opportunities and it certainly boosted up the tourism ventures such as travel agencies, travel research and consulting, technologies, hotels and resorts and so on (Munoz, 2005). Companies have lower barriers to enter new markets and take over other companies. Agreeing with this as an opportunity, Wahab & Cooper (2001) points to the threat to tourism from globalisation such as increased competition, maintaining quality of service etc. Competition will be tough when the barrier to entry become low (Porter, 1980). The dependancy of aviation charges on Oil Prices also is an important factor in the tourism industry.

Even though tourism industry is going through a difficult period now; travel and tourism economy GDP growth slowed to 1% in 2008, contracted by 3% in 2009 and is expected to expand only by 0.3% in 2010; the World Travel and Tourism Council (WTTC) predicts tourism industry to resume its leading, dynamic role in global growth (WTTC,2009). UNWTO’s Tourism 2020 Vision forecasts that international arrivals are expected to reach nearly 1.6 billion by the year 2020 (Appendix 1). This implies more opportunities and more competition in the tourism industry in the coming years.

Similarly, the current Recession can positively and negatively impact tourism industry. Economic crisis is the major threat which results in collapse of some major players in the industry, for example the closing down of ‘XL Leisure Group’ (Directgov, 2008). But this is an opportunity for the survivors as they get more market space and more consumers to absorb in. Moreover, a post-recesion boom could be expected and taking into consideration that tourism contributes 10.6% of world GDP (refer case study),they always get their stake from the disposable income.

2.1.3) SOCIOCULTURAL:Life Style has got a major part in priorities of the customers. Tourism agencies offer

customised holiday packages (selecting packaged tours and individual travel components) and online booking facilities to meet customer expectations (refer case study).

Brand Consciousness is another socio cultural factor. Consumers believe in the company’s intangible guarantee projected by the brand name. Brand loyalty can be a result of past experiences or the brand image already perceived (could be advertisements or impulse).

Changing attitudes towards safety and environment can also play a vital role in customer decisions. Appendix 2 shows a survey result conducted by The Boston Consultancy Group on ‘going green’ attitude of customers and it shows a significant percentage of



consumers are environment conscious and are more leaned to companies having a better environmental policy.

2.1.4) TECHNOLOGICAL:Customers relying on internet and online sales are increasing day by day. Statistics

show a mere 70% of UK households had access to internet in 2009 (Office for NationalStatistics, 2009) and is increasing compared to previous years (Appendix 3). Even though online sales make it easier for customers and cut costs by reducing staff and intermediaries, it also possesses a threat to companies. Internet has a low barrier for entry (Porter, 2001) and newcomers can easily pop into the competition.

Substitutes such as television and games are also a threat to tourism. Advanced technologies could decrease the frequency of social (physical) mobility of people (Use of video conferencing for instance). Tourism agencies use other technological devices such as TV hotlines and telephone (call centres) facilities for maintaining their customer relationships.

2.1.5) ENVIRONMENTAL:Air flight rationing is proposed by UK government as a method to reduce pollution

(Drury, 2009). Tourism industry will suffer if governments decide to go on with this. Moreover, government of UK is campaigning for greener holiday locations (Directgov,2009). Increased emission of CO2 is a major threat of climatic conditions in earth and aviation is a major contributor of CO2. The government report goes on to describe the CO2 emission in rail travel is only one-third of air travel. Even air flight companies are including carbon footprint charges in their tickets.

Health Problems is a major concern for tourism industry and tourists. Even though WHO is not recommending travel restrictions related to the outbreak of the influenza A (H1N1) virus (World Health Organization, 2009), they raised a worldwide pandemic alert and a number of recommendations for travellers to the flu affected areas (CDC, 2009). Similarly, Natural Disasters are also a major concern for tourism industry.

2.1.6) LEGAL:Governments recommend a wide range of regulations on Aviation Safety and

Regulations (Department of Travel, 2009). This covers domestic, environmental, health and consumer issues and aviation permits, and all these come under legal factor. Also, companies need to be aware of the legal issues of different countries if they are acquiring or merging with other companies. Trade Laws plays a crucial part in current world businesses.

2.2) PORTER’S FIVE FORCES ANALYSISFive force framework (illustrated in Appendix 5) helps identifies the sources of

competition in the industry (Johnson et al., 2005). Five forces which are not independent of each other, draws a connection between competitive forces and the key drivers in the macro-environment.



2.2.1) POTENTIAL ENTRANTS:High Capital Requirement creates a high barrier of entry for newcomers. And more

than 70 % of market share is controlled by the top 10 leaders (Appendix 6) and this reduces the price retaliation and keeps the economies of scale high. Brand Recognition also acts as a barrier to new entrants. Hence, the threat of new entrants is low.

2.2.2) SUBSTITUTES:Even though TV, games or other social activities can act as substitutes, they will

never be same as travelling. Moreover, there is a low differentiation of products and together there is low threat of substitutes.

2.2.3) SUPPLIERS:Suppliers have high negotiation powers against the companies having a low share in

the market. But in a market where the top 4 market leaders covering more than 50% of market and possessing a threat of backward integration, there will be a power balance. This implies only a moderate bargaining power for the suppliers.

2.2.4) BUYERS:There is a low switching cost to buyers with the emergence of internet and online

sales. But the low differentiation of products and lesser number of substitutes limits the bargaining power of buyers to low.

2.2.5) COMPETITIVE RIVALRY:There is a moderate competitive rivalry in the industry. High fixed cost largely

favours the incumbents. And there is a significant 8% difference in market share between the top two market leaders (TUI 21% and Thomas Cook 13% - Appendix 6). These huge variations of market shares of incumbents lessen the competition in the industry.

3) MAINTAINING LEADERSHIPA company can maintain its leadership in the market only by establishing a difference

that it can preserve (Porter, 2006) and by keeping its structure attractive (Porter, 1987). TUI is the leading company in the concentrated market of tour operators in Europe with a staggering 21% of the market share (Appendix 6). TUI operate in over 180 countries worldwide serving more than 30 million customers offering a wide range of leisure travel experiences. They also operate around 240 hotels of which majority is in the 4- or 5- star category.

A SWOT analysis of TUI is illustrtaed in Appendix 7. The strengths of TUI which helped them to attain and maintain their leadership in the tourism industry is listed in the same. Backward Vertical Integration of TUI helped them to spread out through the value chain (Appendix 8). This made them deliver a higher value when compared to their competitors at a cheaper price. Being their own suppliers (Airlines, Hotels etc) helped them to attain cost leadership. Their investments on direct distribution channels act as a key driver reducing the distribution cost and increasing the margin. Their multi-channel distribution focusing on online sales made them capable of retaining their customers and gaining new



customers. Stable and management friendly share holders (refer case study) supported them to incorporate better customer service along with thier excellent operating service, and thus extend their presence in the value chain. Moreover, TUI have better liquidity and financial situation following the sale of Hapag-Lloyd. The acquisiton of companies varying from tourism, airlines, hotels, cruises etc all over the world help them attain differentiation. They claim their differentiated products are integral part of their customer retention, brand building and uniqueness and thus gained them the competitive advantage in the market (Annual Report, 2008).

TUI always seek to create value for their customers, investors and employees. TUI understands the fundamentals of sustainable economic success is the right balance between economic goals and social and ecological needs (TUI website). Resources and capabilities are the base of strategy, direction and profitability (Grant, 1991). They kept their capacity management (combination of flexible lease profiles and uncommited bed stock resources) on alert to respond according to the changes in the trading environment. Moreover, they are well prepared to adapt to a changing environment using their unique breadth and depth of experience along with innovative enterpreuneurs (Annual Report, 2008). And TUI’s acquisition (resources) policy aid them to gain a competitve edge over their market rivals. This made them acheive a high economy of scale which is difficult for their competitors to attain. In addition to all this, there is a factor of causal ambiguity (Barney, 1991) as irms in the same industry will be curious about its competitors and will be trying to adapt and learn from each other. Thus, TUI acheived competitive advantage by implementing their value creating aspects (differentiated products, cost leadership, acquisition of companies – Porter’s Generic Strategy) and was not simultaneously being implemented by any of their potential competitors (Barney, 1991).

4) FUTURE IMPLICATIONS FOR TUIThe macro environmental and micro environmental analysis of TUI is done in the

previous sections of this report. ANSOFF matrix (Appendix 9) is used to show the developmental directions for TUI. They had already penetrated to the European markets and is one of the leading market holders of tourism industry all over the world. Depending on the findings (key drivers) on the previous analyses along with ANSOFF matrix the future implications of TUI is listed below:

The air flight boom just before recession was fuelled by short-haul travels (MintelReports, 2009). Low cost airlines gained from it, but the recession changed the picture completely. Customers find cheaper options in rail, buses and ferries; even though these transport options take more time, they provide a different experience. 90% of TUI’s travel options are through airlines (TUI website). This could be an opportunity for TUI to extend its differentiation by providing land transportation and thus milk the emerging trend of short-haul travels.

Even though potential entrants need a high capital to barge into tourism industry, internet alters the whole context. It provides a low barrier for entry to new comers. Moreover companies like lastminute.com and expedia.co.uk made their mark in the



online tourism industry. A Mintel survey report shows travel as the main spend category through online (Mintel Survey, 2008). TUI need to take necessary measures to ensure their strong presence in online services and again, this could help them to differentiate further.

Fuel Price fluctuations is having a major impact on world business. TUI can negotiate prices (hedging) for a specific period of time with the oil companies to stabilise the variations. But they have to understand that this could be a risk as it may sometime prove to be a loss

TUI has to take in to account of the environmental factors that could have a serious impact on the business from the near future. Carbon emission problems and carbon footprint charges had already made their presence in airline fares. Moreover, they could expect a rationing of holiday air flights proposed by UK government. These all implies to the important of ‘going green’. As more and more customers are preferring companies who are aware of environment.

TUI is the marketing leader in the tourism industry in Europe. So this give them an opportunity to expand their market shares in Asian (concentrating on India and China) and Russian markets; while maintaining their market share in Europe. Moreover they can expect a post-recession boom similar to what happened in early 90’s to capitalise on and strengthen their position in European markets.

5) USES AND LIMITATIONS OF TOOLS USEDThere are several analytical tools used in the report. Most of them are subjective as

there is no specific ways to carry out these analyses. The uses and limitations of these tools are discussed below:-

5.1) PESTELUses

To analyse the macro environment of the industry To anticipate the future threats To identify the key factors affecting the strategy

Limitations

Does not provide any solutions Difficult to identify the level of uncertainty Practically difficult to analyse the limitless macro environment completely Is not descriptive

5.2) PORTER’S FIVE FORCES Uses

To identify drivers of competitive behaviour To analyse the profitability and competitiveness of the industry To determine the attractiveness of the industry



To analyse the dynamics of industry

Limitations

Need to be constantly reviewed as the environment is constantly saving Analysing the industry as a whole; is not considering segments Does not consider the complementary products Ignores major factors such as human resource, culture and management skills Industrial environment is only a small factor of profitability

5.3) SWOT ANALYSISUses

Both internal and external aspects of business is taken into account To understand what attributes to be focused on To help in the purpose of decision making To identify the relevant information addressing the key issues

Limitations

As it presents the situation in a manageable format, SWOT analysis is prone to skipping some of the important factors

Even though it identifies the strength, there is no suggestion of how to utilise it for an advantage

Analysis is subjective

5.4) ANSOFF MATRIXUses

To enable the organisation to explore the strategic corporate growth To evaluate the options and choose the best situation

Limitations

Focus only on market share and market growth and is not considering other factors Is an over-simplified 2 x 2 matrix to analyse the strategic analysis of the organisation.



6) CONCLUSIONAs credit crunch is expected to be reaching an end, TUI needs to capitalise on the

disposable income of customers. This report analyse the macro environment of the tourism industry using PESTEL and Porter’s five forces and managed to find out some key drivers of change. Then, the report further investigates on how TUI achieved its sustainable competitive advantage by identifying the strengths from SWOT analysis and by analysing how they extended their reach in value chain (also referring to cost leadership and differentiation). ANSOFF matrix is used to draw future directions to TUI. As the number of short-haul travels is increasing these days, TUI will gain from concentrating a bit more on supporting this (can enter in road transportation facilities). Alike other leaders in tourism industry, TUI will also have to tackle their consolidated fixed assets. Moreover, the uses and limitations of the analytical tools are also listed. The level of success achieved by TUI holds some important lessons and some much needed inspiration to a business world; that could use a little of both right now.



7) REFERENCE1. Annual Report. (2008). TUI Annual Report. TUI AG.

2. Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management , 17 (1), 99-120.

3. BCG. (2009, January). Capturing the Green Advantage for Consumer Companies. Retrieved November 2, 2009, from The Boston Consultancy Group: http://www.bcg.com/documents/file15407.pdf

4. CDC. (2009, October 15). 2009 H1N1 Flu: Global Situation. Retrieved November 3, 2009, from Centers for Disease Control and Prevention: http://wwwnc.cdc.gov/travel/content/outbreak-notice/novel-h1n1-flu-global-situation.aspx

5. Department of Travel. (2009). Aviation Safety. Retrieved November 3, 2009, from http://www.dft.gov.uk/pgr/aviation/safety/aviationsafetygovernmentresp2983

6. Directgov. (2008, September 12). Collapse of XL Leisure Group. Retrieved November 2, 2009, from Newsroom - Directgov: http://www.direct.gov.uk/en/Nl1/Newsroom/DG_171740

7. Directgov. (2009). Holidays: Greener Choice. Retrieved November 3, 2009, from Environment and Greener Living - Directgov: http://www.direct.gov.uk/en/Environmentandgreenerliving/Greenertravel/Airtravelandgreenerholidays/DG_064430

8. Drury, I. (2009, February 6). Ration Holiday Flights to Cut Pollution, says Brown's Adviser. Retrieved October 16, 2009, from MailOnline: http://www.dailymail.co.uk/news/article-1137204/Ration-holiday-flights-cut-pollution-says-Browns-adviser.html

9. Gallego et al. (2007). On the impact of exchange rate regimes on tourism. Asociación Española de Economía y Finanzas Internacionales , 1-16.

10. Grant, R. (1991). The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formation. California Management Review , 114-135.

11. Hirsch, A. (2009, June 10). A reverse for the 'secrecy creep'. Retrieved November 1, 2009, from guardian.co.uk: http://www.guardian.co.uk//uk/2009/jun/11/lawyers-secrecy-creep

12. Johnson et al. (2005). Exploring Corporate Strategy (7th ed.). Essex: Pearson Education Limited.

13. MENAFN. (2009, October 20). Oman - Tax exemptions for tourism sector restricted to hotels, tourist villages. Retrieved November 1, 2009, from MENAFN - Times of Oman: http://www.menafn.com/qn_news_story_s.asp?StoryId=1093278003



14. Mintel Reports. (2009, July). Retrieved November 7, 2009, from MINTEL OXYGEN: http://academic.mintel.com/sinatra/oxygen_academic//display/&id=395452

15. Mintel Survey. (2008, March). Retrieved November 7, 2009, from MINTEL OXYGEN: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=280375/display/id=329632

16. Munoz, J. (2005). Executive Insights on Globalization. International Journal of Contemporary Hospitality Management , 17 (4), 365-371.

17. ndTax. (2009). An economy on the move. Retrieved November 1, 2009, from North Dakota State Government: http://www.nd.gov/tax/taxincentives/income/

18. Office for National Statistics. (2009). National Statistics Online. Retrieved November 2, 2009, from http://www.statistics.gov.uk/cci/nugget.asp?id=8

19. Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press , 33-61.

20. Porter, M. E. (1980). How Competitive Forces Shape Strategy. The McKinsey Quarterly , 34-50.

21. Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review , 63-79.

22. Porter, M. (1987). From Competitive Advantage to Corporate Strategy. Harvard Business Review , 43-59.

23. Porter, M. (2006, November-December). What is Strategy? Harvard Business Review , 61-78.

24. Sónmez, S. (1998). Tourism, Terrorism and Political Instability. Annals of Tourism Research , 25 (2), 416-456.

25. TUI website. (n.d.). Retrieved November 6, 2009, from http://www.tui-group.com

26. TUI Case Study

27. UNWTO. (2005). Tourism 2020 vision. Retrieved October 31, 2009, from World Tourism Organisation: http://www.unwto.org/facts/eng/vision.htm

28. Urquhart, C. (2006, October 19). Travel. Retrieved October 30, 2009, from The expert guide to safe travel: http://www.timesonline.co.uk/tol/travel/article603399.ece

29. Wahab, S., & Cooper, C. (2001). Tourism in the Age of Globalisation. London: Routledge.

30. Weissinger, G. (2003, November 7). Retrieved November 1, 2009, from Immigration Information: http://www.immigration-usa.com/george_weissinger.html



31. World Health Organization. (2009, May 7). Global Alert and Response. Retrieved November 3, 2009, from http://www.who.int/csr/disease/swineflu/frequently_asked_questions/travel/en/index.html

32. WTTC. (2009). Tourism Impact Data and Tourism Impact. Retrieved November 1, 2009, from World Travel and Tourism Council: http://www.wttc.org/eng/Tourism_Research/Tourism_Economic_Research/

8) APPENDICES

Appendix 1:



UNWTO tourism 2020 vision

Adapted from UNWTO (2005)

Appendix 2



Adapted from BCG (2009)

Appendix 3



Adapted from Office for National Statistics (2009)

Appendix 4:



PESTEL ANALYSIS OF TOURISM INDUSTRY

*. Key factors are shown in bold letters

POLITICAL Terrorist attacks Government topples and Political instability Taxation policies

ECONOMICAL

Exchange rates Globalisation Oil prices UNWTO’s tourism 2020 vision Recession

SOCIOCULTURAL Life style changes Brand Consciousness Attitudes towards safety and environment

TECHNOLOGICAL Internet and online sales – Virtual tourism Substitutes

LEGAL Aviation safety and regulations Regulations for acquiring and merging Trade laws

ENVIRONMENTAL

Air flight rationing Carbon emission issues Health problems Natural disasters



Appendix 5

PORTER’S FIVE FORCE ANALYSIS OF TOURISM INDUSTRY


Potential Entrants

Low threat of entrants

High capital requirements reduces threat of entry Top 10 market leaders cover 70% of the industry

(Appendix 6), so expected price retaliation reduces and economies of scale is high

Brand Recognition

Buyers

Low bargaining power

Few substitutes and low differentiation of products

This makes them in a weaker negotiation position, even though they have low – medium switching cost

Suppliers

Moderate bargaining power

Low switching cost for incumbents 50% of market share is with top 4 players

(Appendix 6) Threat of backward integration (Incumbents

like TUI and Thomas Cook have their own hotels, airlines cruises etc.)

Moderate Competitive Rivalry

Global industry growth rate is 4.1% (UNWTO, 2005)

High fixed cost largely favours the incumbents

Variation of sizes of incumbents

Substitutes

Low threat of substitutes

Technologies (TV and games) could act as substitutes, but can’t replace travel

Low differentiation of products limits the substitutes.


Appendix 6

TUI; 21%

Thomas Cook; 13%

My Travel; 8%

Rewe Touristik; 8%First Choice; 6%Kuoni; 4%

Grupo Iberostar; 4%

Club Med; 4%

Alltours; 2%Hotelplan; 2%

Others; 29%

Tour Operator Market Share in Europe

TUIThomas CookMy TravelRewe TouristikFirst ChoiceKuoniGrupo IberostarClub MedAlltoursHotelplanOthers

Refer case study



Appendix 7

SWOT ANALYSIS OF TUI

Strengths Weakness

Vertical Integration; made them spread throughout the value chain.

Market leader in the tourism industry. Strong multi-channel distribution focusing

on online sales. Better liquidity and financial situations

following the sale of Hapag-Lloyd. Delivering high quality customer services. Stable and management-friendly

shareholders.

Company registered a net loss of EUR142 million in 2008 (Annual Report, 2008)

Major reduction in the volume of holiday packages because of recession and financial uncertainties.

Fixed assets cover 34% of total assets (Annual Report, 2008)

Opportunities Threats

Expansion in developing markets such as India and China.

Business expansion through further acquisition and mergers.

Changing consumer behaviour in this global economic recession can influence company’s strategy.

The tendency of customers to switch on to rail and bus for short-haul travels could be a backlash to TUI’s reliance on air travel.

Threat of losing consumers who opt low-cost packages because of company’s focus on 4-star hotels.



Appendix 8

VALUE CHAIN

TUI spread throughout the value chain by vertical integration, and this made them deliver better value at cheaper price.


Adapted from Porter (1985)


Appendix 9

ANSOFF MATRIX

ANSOFF MATRIX EXISTING PRODUCTS NEW PRODUCTS

EXISTING MARKETS

MARKET PENETRATION

Leading market share Strong presence in

European market

PRODUCT DEVELOPMENT

Specific location oriented packages

Low cost packages

NEW MARKETS

MARKET DEVELOPMENT

Concentrating on Russia, India and China

Could make their presence in road transportation

DIVERSIFICATION

Adapted from Ansoff (1988) as cited in Johnson et al. (2005)


TUI - Analysis and Implications

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