Strategy Development Tools for Tourism Industry

This article discusses the PESTLE analysis, SWOT analysis, and Porter's Five Force analysis for the tourism industry. It explains how these tools can help in making strategic decisions by understanding the external factors affecting the industry. The article also highlights the strengths, weaknesses, opportunities, and threats of the tourism industry.

Running head: STRATEGY DEVELOPMENT TOOLS
STRATEGY DEVELOPMENT TOOLS
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1STRATEGY DEVELOPMENT TOOLS
PESTLE analysis:
PESTLE is an acronym for ‘Political, economic, social, technological, legal and
environmental’. It identifies all the different external factors which may affect the business.
By judging these factors, the managers can assess the risks that these factor identify then use
this knowledge to make perfect decisions.
Political Factors: this factor focuses all about the degree and extent to which the government
intervenes in the country’s economy.it can include political stability and instability of the
foreign markets, government policies, trade policies of the overseas market. Tax policies,
labor law, trade restrictions and most recently the trade laws (Tribe, 2016).
Economic Factors: this factor includes economic growth, interest rate, inflation, exchange
rate, disposable income and business of the country. By judging these factors, the firms can
assess the potential of the market and profitability in the business.
Social Factors: this factor is also known as socio-cultural elements as this particularly
focuses on the shared belief as well as approaches of the population. It comprises of
population growth, age distribution career attitudes and health awareness. These features are
of exact interest because they directly affect the marketers to understand the customers.
Technological Factors: in this current setting, the business largely depend on the
technological factors. This fast changing technological landscape is impacting the way the
organization market their products (Adu-Ampong, 2016). Technological factors greatly
influence marketing as well as management in three methods. It gives new ways of
production of goods and services, new methods of distributing produced goods and new ways
of communicating with the target markets.
Legal Factors: this includes equal opportunities, consumer rights, health and safety,
advertising standards, product safety as well as labelling of a market. In order to trade
successfully and ethically, the companies need to know every tricky area of their business.
Environmental Factors: it is a newly joined factor which has gained importance from the
last decade. These factors have become vital for assessment by the organizations because of
scarcity of raw materials, increasing carbon footprint and pollution targets. In this current
situation, more consumers are being driven to environmentally supported produces and
services.

2STRATEGY DEVELOPMENT TOOLS
In the tourism industry, political factors have far reaching effect. It can be changing
government regimes, terrorism and other political factors of a country in which the industry is
expanding. Economic factors were always remaining major elements in maintain high
demand of tourist globally. With stronger economy, the labor market continues to grow and
consumers are ready for spending (Barkauskas, Barkauskienė & Jasinskas, 2015). Due to
recent recession had reduced the number of tourists as the purchasing power had been
reduced. In the tourism industry of the world, the social factors like culture, ethnicity, history
and traditionalism have been influencing constantly. The consumer preferences are changing
in favor of private accommodations for which airlines and hotel brands are getting influenced
directly. In 21st century, technological factors have started to facilitate the industry greatly.
starting from communication, transfer of information and bookings of hotels and sites have
increased greatly. The legal factors in the tourism industry is very complicated. It is due to
the fact that both public and employee security remains chief concern of the industries. Any
type of legal risks can reduce market share and staff training has become more important for
legal hassles (Yang, 2017). Environmental sustainability remains key concern for this
industry. Ecological impact to waste management is important as people prefer visiting
cleaner places.
SWOT analysis:
It is a simple yet useful tool which helps to understand the strength and weaknesses of
the firms and identify opportunities and threats that the company may face in the market. The
technique of SWOT is commonly used by different business entities as well as the non-profit
organizations. This helps to strategic planning exercise. It is considered to be powerful
support to make decisions as this uncovers the possible opportunities for gaining success. The
threats are also highlighted which can be easily overcome to going competitive advantage.
Strength: identifying internal attributes as well as resources which support for a successful
result.
Weakness: identification of internal attributes as well as resources which may work against a
successful result.
Opportunities: the external factors that the organizations can use or exploit to its advantage.
Threats: the external factors affecting the success of the firms.

3STRATEGY DEVELOPMENT TOOLS
In the tourism industry, the location of the industry varies from country to country.
Attractive place along with comfortable weather condition can be strengths (Singh, Chauhan
& Singh, 2015). High bio-diversity and wider range of aquatic as well as terrestrial ecosystem
attracts more tourists. In addition to this, cultural and historical diversity in the place and
skilled labor are the strengths of tourism market of a place. Higher intervention of
government, inadequate infrastructure and inappropriate management of the tourist
destinations are among the weaknesses of tourism industry.
In terms of opportunities, this industry can create low cost accommodation for the
visitors, innovate new markets or tourism product and assign resources for introducing new
threads of tourism in a location for business. Having high competition from other nearby
locations and lack of diversification of a place can pose threat for the tourism industry
(Wong, Velasamy & Arshad, 2014). Underdeveloped infrastructure and environmental
degradation can be threat for the industry of a particular place.
PORTER’S FIVE FORCE analysis:
This is a tool that helps the organizations to analyze the competition in the market.
The chief elements of this model are- bargaining power of the suppliers, threat of substitutes,
bargain power of the buyers, threat of new entrants and the industry rivalry.
Threat of new entrants: profitable industries yield high returns attracts new firms. This is
why the new entrants reduce profitability of the existing firms. Unless the entry of new
entrants can be made tough, by the incumbents, abnormal profitability’s will fall to zero
(Ahmad, Walter & Sherman, 2016).
Threat of substitutes: the substitute products use a different technology for trying to solve
the same financial needs. Hence number of substitute products become available in the
markets. This availability of close substitutes can hamper the existing business.
Bargaining power of customers: the increase bargaining power can be threat for the
business of a firm.it also influence the customers’ sensitivity to the price changes. By
implementing loyalty programs, the organizations can reduce the bargaining power of the
customers. Their power increases when they have many alternatives (Roslan, Ramli & Choy,
2018).

4STRATEGY DEVELOPMENT TOOLS
Bargaining power of suppliers: it is defined as the market of inputs. Suppliers of labor,
services, constituents and raw materials are sources of power over the firm when have few
alternatives.
Industry rivalry: the concentration of the competitive rivalry can be major determinants of
competitiveness of the business. Proper understanding of industry rivals helps the firms to
market a product successfully.
In the tourism industry, the unique business environment affects all the competitors
(Hsieh & Lin, 2016). The bargaining power of the customers shows the strength in the
bargaining positions especially in the price that the customers have on the suppliers. The
suppliers in the tourism industry, including the employees influence the profitability and
attractiveness by increasing price or wage thus increase cost of the industry (Vanhove, 2017).
The threat of new entrants is based on the abilities to generate economies of scale along with
experience, opportunities for the service differentiation and access the distribution channel. In
tourism sector, there are low barriers in entry. In this particular industry, constant
development in technologies change the potential threat.

5STRATEGY DEVELOPMENT TOOLS
References:
Adu-Ampong, E.A. (2016). A metaphor analysis research agenda for tourism studies. Annals
of Tourism Research, 57, pp.248-250.
Ahmad, N., Walter, H., & Sherman, H. (2016). The home away from home: an analysis of
the lodging industry in 2015. American Journal of Entrepreneurship, 9(1), p.60.
Barkauskas, V., Barkauskienė, K., & Jasinskas, E. (2015). Analysis of macro environmental
factors influencing the development of rural tourism: Lithuanian case. Procedia-
Social and Behavioral Sciences, 213, pp.167-172.
Hsieh, L., & Lin, S.M. (2016). Exploring the market concentration and the market dominance
of international tourist hotels in Taiwan. Journal of Statistics and Management
Systems, 19(2), pp.285-301.
Roslan, Z., Ramli, Z., & Choy, E.A. (2018). The Potential of Heritage Tourism Development
in Jugra, Selangor, Malaysia, Using SWOT Analysis. In Selected Topics on
Archaeology, History and Culture in the Malay World (pp. 159-170). Springer,
Singapore.
Singh, S.P., Chauhan, M.K., & Singh, P. (2015). Using multicriteria futuristic fuzzy decision
hierarchy in SWOT analysis: an application in tourism industry. International
Journal of Operations Research and Information Systems (IJORIS), 6(4), pp.38-56.
Tribe, J. (2016). Strategy for tourism (No. Ed. 2). Goodfellow Publisher Limited.
Vanhove, N., 2017. The Economics of Tourism Destinations: Theory and Practice.
Routledge.
Wong, K.M., Velasamy, P., & Arshad, T.N.T. (2014). Medical tourism destination SWOT
analysis: A case study of Malaysia, Thailand, Singapore and India. In SHS Web of
Conferences(Vol. 12, p. 01037). EDP Sciences.
Yang, S.U.N. (2017). PEST Analysis of China-North Korea Border Tourism Development of
Jilin Province. DEStech Transactions on Social Science, Education and Human
Science, (icssm).