Strategic Position of TUI Group: Differentiation Strategy and Competitive Advantage

This article discusses the strategic position of TUI Group in the travel and tourism industry, focusing on its differentiation strategy and competitive advantage. It analyzes the company's strengths, weaknesses, and performance compared to its competitors.

Running head: TUI GROUP
TUI GROUP
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Introduction
TUI Group (Tourism Union International) is a travel and tourism industry. The company
is popularly known as the largest leisure, travel and tourism company all across the world. The
company owns travel agencies, airlines, ship cruise hotels and retail stores. The company owns
six European airlines; it is the largest holiday fleet in the Europe. The company has an ongoing
digital transformation which creates the infrastructure for destination services. The company was
founded in the year 1923. The company is the world’s leading leisure and travel company that
operates in more than 180 countries. It has around 30 million customers in around 27 key market
sources. TUI Group has 200 brands that are comprised on specialist travel agency and leading
mainstream brands (Aguiló, Alegre and Sard 2013). It provides its customers wide range of
differentiated and flexible travel experiences to its customers
Strategic position of TUI Group
TUI Group has a differentiation strategy as it focuses on increasing products in the
portfolio so that the customers meet their needs and requirements on their holidays. TUI Groups
targets to improve each area in order to increase its level of differentiation. The company
continuously reviews the products and services. One of the major competitive advantage of the
company in its differentiation strategy over its competitors is it’s maintain sector which is the
largest in the TUI Group considering its scope and size. Further the company offered Sensatory
and First Choice Holiday Villages in United Kingdom (Čavlek 2013). As compared to its
competitors like Thomas Cook, TUI obtains a higher margin majorly because of its products
offered in the portfolio. Moreover, the customers of the company book the service earlier and

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release the late market pressure. Additionally, the company offers high quality of customer
service, luxury accommodation, transportation, lost cost offers and its travel insurance, which
stimulates the demands for the products and services offered by TUI Group worldwide (Clerides,
Nearchou and Pashardes 2018).
Currently the company is increasing its focus on new markets especially in the Asian
markets including Ukraine, Russia where there is low amount of competition. The company has
gained its market position by strategically collaborating with Sun Wing in Canada. This enabled
the company to gain a competitive advantage against its competitors and Thomas Cook in the
tourism and travel industry (Pearce and Taniguchi 2018). Currently the company is having a
competitive edge over its competitors considering its low cost, flexible offers offered by the
company to its customers, and most importantly it has the largest distributors of global
accommodation. The company tactfully takes advantage of its market position to outdo its
competitors.
External environment analysis of TUI Group
Porter’s five force analysis:
Porter’s five force analysis is a management tool which helps to analyze and understand
the profitability of the organization.
Threats of new entrants
The new entrants in the industry brings in innovation and new ways of doing things which
pressurizes the organization as it has to implement lower pricing strategy, under the competitive
pressure the company has to reduce costs and it provides new value proposition to its potential

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customers. However the company can over the tension by innovating new services, by building
economies of scale the company can lower the fixed costs.
Bargaining power of suppliers
The travel and leisure company purchases its raw materials from numerous suppliers, the
suppliers are in a dominant position, they have high bargaining power and have the power to
decrease the profitability of the organization. They use the negotiating power to extract higher
prices from the organization.
Bargaining power of the Buyers
The buyers and consumers of Tui group are highly demanding, they demand for the best offering
as a minimal price possible from the organization. This pressurizes the organization to lower to
price of its offerings. This in long run reduces the profitability of the organization. The smaller
the customer base of the organization the higher is their bargaining power. Hence they seek for
more discounts and offers.
Threats of substitute products or services
The availability of substitute products and services offered by the competitors in the market
reduces the profitability of the organization. Tui Group can overcome the threat of substitute
products by being more service oriented, by understanding the needs and demands of the
customers. By increasing the switching cost for the customers the company can tackle the treat of
substitute products.
Rivalry among the existing competitors

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There is intense rivalry among the existing competitors in the industry, it drives down the prices
of the products and services offered by the company and it decreases the overall profitability of
the organization. Tui Group operates is a highly competitive environment; this competition can
affect the long term profitability.
Strengths and weakness of TUI Group
Strengths of TUI Group
The company has a large number of outlets in every state and it is supported by large
number of customer, as compared to its competitors. This gives the company a competitive
advantage. The company has a low cost structure, which enables it to produce at a lower cost and
provide low cost service to its customers, which is also a competitive advantage for the company
(Tepelus 2015). It has a strong relationship with its dealers which help the company to focus on
promoting the company’s products and services. Further, it has a strong financial position which
helps the company to meet the future capital expenditure. Having a large asset base helps the
company to have a better solvency. This is also one of the competitive advantages of the
company. The company has been able to efficiently utilize its resources and thereby reducing the
costs, it provides consistency in the quality of the product and it provides the ability to adjust its
production according to the demands and needs of the market. Furthermore, the company has a
diverse workforce (Šuleić, Dragin and Dragićević 2014). This is also one of the major
competitive advantages for the company. TUI group has many qualified and accredited
professionals that are working under the company this help the company to overcome the
competitive pressure in the market.

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Weakness of TUI Group
The company faces various cash flow problems, as there is lack of financial planning
concerning the cash flow in the company. This leads to circumstances where the company has to
implement unnecessary unplanned borrowings (Tepelus 2015). Further, the current structure of
the company and the culture has lead to failure of many mergers which is aimed for vertical
integration. The company lacks efficient market research within the market as the customer’s
needs and demand keeps evolving over the time. Moreover, the company has a lower budget
policy for its quality department as compared to its competitors (Sigala 2018). This leads to lack
of consistency and leads to possible of damage to its quality service across the outlets. Moreover,
the company have low market share for some products but have a higher market share for most
of its products and services. The company is highly reliable only on few products which are
vulnerable to the external threats. The morale of the workers is low, due to the company structure
and politics. Further, the performance appraisal has not been done in a systematic manner. This
leads to lower employee morale and lack of efficiency in its operations as compared to its
competitors (Robinson et al. 2016).
Company performance compared to its competitors
The strong distribution network of the company has helped the company to strengthen its
customer base. The direct distribution system along with the online distribution has enabled the
company to grow and expand its business operations. However, there has been a decline in the
performance of the company in the Northern Region which has led to decline in the overall
revenue of the company (Robinson et al. 2016). Northern region is an important segment of the

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company as it contributes majorly to the company’s overall revenue. There has been intense
competition in the market and due to weakening of exchange rates there has been a major decline
in the profitability of the business. Moreover, there has been a revenue decline due to increasing
competition and poor performance of the company (Pearce and Taniguchi 2018). There has been
increasing price pressure and lower demand in key places and regions which has lead in
decreasing revenue for the company. However, the strategic improvements of the company have
helped the company to improve its profitability. Certain strategies were implemented by the
company to enhance the company’s business operations and activities as compared to its
competitions (Sigala 2018).
Conclusion
Therefore from the above analysis it can be said that the TUI Group has a strong strategic
position which has enables the company to gain a competitive advantage. The differentiation
strategy of the company over its competitors helps to maintain its sector. The company offers
high quality customer service to maintain its strategic competitiveness. The assignment has
analyzed the external environment analysis. It has identified the external environment factors
that can affect the smooth functioning of the company and its operations. The strengths and
weakness of the company has been analyzed as compared to its competitors. it large number of
outlets, low cost structure, efficient utilization of resources, consistency in the quality of the
product are some of the major competitive advantage of the company. However, the company
has various weaknesses which the competitors can take advantage of. it lack of efficient financial
planning, cash flow problems, lack of consistency in the quality service, it high reliability on
fewer product with large market share, lack of employee morale, low efficiency in its service are

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some of the weakness faced by the compared in comparison with its competitors. The company
performance has been analyzed in comparison to its key competitors.

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References
Aguiló, E., Alegre, J. and Sard, M., 2013. Examining the market structure of the German and UK
tour operating industries through an analysis of package holiday prices. Tourism
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Čavlek, N., 2013. Travel and tourism intermediaries: their changing role. In Handbook of
Tourism Economics: Analysis, New Applications and Case Studies (pp. 191-206).
Clerides, S., Nearchou, P. and Pashardes, P., 2018. Intermediaries as quality assessors: Tour
operators in the travel industry. International Journal of Industrial Organization, 26(1), pp.372-
392.
Pearce, D.G. and Taniguchi, M., 2018. Channel performance in multichannel tourism
distribution systems. Journal of Travel Research, 46(3), pp.256-267.
Robinson, P., Fallon, P., Cameron, H. and Crotts, J.C. eds., 2016. Operations management in the
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Sigala, M., 2018. A supply chain management approach for investigating the role of tour
operators on sustainable tourism: the case of TUI. Journal of Cleaner Production, 16(15),
pp.1589-1599.
Šuleić, M., Dragin, A. and Dragićević, V., 2014. Business ethics of tour operators: The case
study of TUI. Turizam, 18(4), pp.154-165.
Tepelus, C.M., 2015. Aiming for sustainability in the tour operating business. Journal of Cleaner
Production, 13(2), pp.99-107.

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