Disadvantages of Horizontal Integration: A Critical Analysis

The assignment content comprises articles and references from various fields, including production economics, hospitality studies, tourism education, and more. The references provide insights into topics such as international hospitality and tourism education, job satisfaction in the hospitality industry, and the experiences of parents with children in foodservice settings. Additionally, there are references on horizontal integration, a concept related to business strategy, which can have both advantages and disadvantages.

Hospitality Provision in Travel and
Tourism Sector
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Table of Contents
INTRODUCTION................................................................................................................................3
Task 1....................................................................................................................................................3
1.1 Explaining the role of hospitality industry within the travel and tourism sector and its
interrelationship ..............................................................................................................................3
Task 2....................................................................................................................................................5
2.1 Analyzing the implications of integration to the travel and tourism sector ..............................5
2.2 Discussing how integration affected the hospitality business ...................................................6
Task 3....................................................................................................................................................8
3.1 Developing a rationale for the chosen project ..........................................................................8
3.2 Developing a plan for a hospitality business including the operational requirements of
structure.........................................................................................................................................10
CONCLUSION..................................................................................................................................12
References..........................................................................................................................................13
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INTRODUCTION
In the present era, hospitality and travel & tourism sector is growing. Both sectors have
remarkable contribution in growth and development of nation. In this, for attracting tourists within
the country companies which are operating in hospitality industry are required to make
arrangements for the guests. Moreover, accommodation and stay facilities are one of the main
aspects which have high level of influence on satisfaction aspect of the customers. Thus, to promote
tourism companies of hospitality industry, they need to make comply with health and safety laws
which are introduced by government of UK.
The present report is based on Intercontinental which is one of the largest hotel chain or
group of UK. It offers luxurious accommodation facility to customers through 180 hotels and
resorts which are situated around 60 countries of the world. This report will discuss extent to which
hospitality and travel & tourism sectors are highly interrelated with each other. It will also shed
light on the ways through which companies can expand its operations and functions.
TASK 1
1.1 Explaining the role of hospitality industry within the travel and tourism sector and its
interrelationship
Hospitality industry plays a vital role in growth and development of Travel and Tourism
sector. Moreover, Travel and Tourism is not an individual sector; rather it includes various
industries such as airlines, hospitality, restaurants etc. Now, hospitality industry has gained more
importance because it offers lot of business to organizations which are operating in this sector
(Lashley, 2015). Moreover, in the present era, for making holidays or outing more memorable
people prefer to approach tour operator for making all possible and effectual arrangements. For
instance: TUI travel offers tour packages to the customers by including highly attractive
destinations. Products or services of TUI travel include air tickets, destination, hotel etc. In this, the
role of hospitality is highly significant which closely influence the satisfaction level of customers or
visitors.
Hospitality sector offers wide range of products and services to the visitors which make the
stay experience of them more enjoyable. Intercontinental hotel offers huge variety of products or
services to the customers such as bed and breakfast, cafe, dining facilities etc. Along with this, it
also provides gym, bar, pub, parlour, game zone, pool and other leisure facility to the guests. In this
way, quality and variety of services are one of the most essential factors which evolve high level of
satisfaction among customers (Lugosi and et.al., 2016). Moreover, at destination, hotel is the place
where visitor spends its huge amount of time. In this, the travel company can attract customers by
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offering the luxurious accommodation and dining facility to them. Hence, the success of Travel &
Tourism sector is highly affected by the hotel which they offer to travellers in tour packages. In this,
the role of hospitality sector is vital within Travel and Tourism sector. Moreover, hotel offers
accommodation facility to customers according to the budget of visitors such five start and seven
star. Needs, wants and preferences of the customers are highly different from each other. In this
situation, hotel unit satisfies need of guests by providing luxurious suits to them as per their budget.
Along with this, Intercontinental Hotel group (IHG) also serves food and offers dining
facility to the guests according to their taste. In addition to this, children are one of the main
elements which affect decision of the family. By taking into account this aspect, IHG has
established game zone within the hotel. Along with this, IHG also assists Travel and Tourism sector
in satisfying the living standard of visitors by offering pool, gym, spa, parlour, bar and art galleries
etc. Further, now people place more emphasis on hygiene aspects (Jones, 2016). In this, IHG offers
high quality room and maintenance, laundry services etc. This aspect clearly shows that hospitality
firms provide high level of assistance to Travel & Tourism sector in getting the desired outcome.
On the basis of all the above mentioned aspects, it can be stated that high level of positive
relationship exists between hospitality and Travel & Tourism sector. Moreover, theatres, shopping
malls, amusements and theme park etc. are the places which render high level of entertainment to
the tourists. At such places, people or visitors also make use food and beverages. In this way, Travel
& Tourism sector is highly linked with the hospitality sector to the significant level. Along with this,
now business organizations also plan their meetings at outside places for providing change to their
personnel (Wood, 2015). In this, company also make arrangements in relation to accommodation
and dining facilities. Thus, hospitality industry can also maximize its productivity and profitability
by making arrangements for seminars and conferences.
Along with this, Travel & Tourism industry also gives opportunity to IHG to increase their
customers by offering high quality services to them. Moreover, in the service industry, satisfaction
and loyalty aspect of customers are highly affected by quality of services offered to them. In this
regard, by making co-ordination with the tour agent business unit is able to serve large number of
customers. This aspect enables the organization to develop satisfaction among visitors by offering
them with high quality services. Further, by offering the fresh flowers, welcome drink and
complementary breakfast as well as by organizing party hotel can build distinct image in the mind
of visitors (Cooke and Hearn, 2015). Along with this, in order to retain customers for long span of
time business unit emphasizes on offering membership cards. Thus, such policy also helps
hospitality firm in increasing customer base. For instance: If IHG makes co-ordination with TUI
travel then it will get opportunity to serve large number of visitors. This in turn, may result into high
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productivity and profitability. Moreover, TUI travel is one of the leading companies which offer
attractive and quality tour packages to the customers. In this, the tour company helps in creating
market for hospitality firms. Thus, by considering all the above mentioned aspects, it can be stated
that both hospitality and Travel & tourism sectors are highly associated with each other (Sredanovic
and Lelleri, 2015). Hence, if the growth of Travel & Travel industry increases then it will place
positive impact on the growth and development of hospitality industry.
TASK 2
2.1 Analyzing the implications of integration to the travel and tourism sector
Integration occurs when individual elements are brought together. It can be considered as an
act of combining into an integral whole. It is a process which compile people of different circles
into an equal and unrestricted association within the company. In other words we can say that in-
corporation of two or more organization into single unit is known as integration. Here the
integration of IHG hotel with travel and tourism industry has been discussed. The hotel has
integrated with this industry to expand their business and enhance the supply chain. Integration can
be of two types, which are mentioned below-
·Vertical integration- Vertical integration is a competitive strategy by which a company takes
complete control over one and more stages in the business operation. Business organization expand
itself into the area of different services. By these type of integration, organization can enhance the
supply chain which will acquire a huge amount of profit (Richins and Hull, 2016). There are two
type of integration that are backward and forward integration. IHG has adopted these two type of
integration for control on its business activities. It has used backward integration to exert control
over the subsidiaries which is providing input in the process of production. On the other hand
forward integration is done to exert control over distribution centers and retailers.
The IHG control its inputs with the help of backward integration. It has integrated with
many travel agencies like TUI travel, in order to attain success and increase profit. Through making
arrangements with these travel agencies, promotional activities, marketing activities will also
increase which will grape the interest of tourist in this organization. Along with that it will also
develop healthy relations with the customer and other business organization. IHG has also been
engaged with many other intermediaries to increase the productivity. With the help of integration
the brand image has also been also increased and also it has expanded its business activities
(McPhail and et.al., 2015). This organization has also produced diversified range of services for the
customer so that it have gain competitive advantage.
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·Horizontal integration- This occurs when one organization integrates with another business as the
same stage of production and work. The company acquisition of similar or a competitive business it
may acquire, but it may also merge with or takeover. In this process, firm take over the liabilities
and assets share of other companies. The hotel IHG has made its portfolio strong and effective with
the assistance of horizontally. It is for the great benefit obtained by the hotel. Integration helps to
increase the efficiency, and lower down the cost and also for retained the customers. Hotel brought
the changes and modification in its services in the relation with the need of required customers. By
horizontal integration company can achieve a higher production than the competitors, at the lower
cost and it will be able to offer more product features to customer (Portnoy and et.al., 2015). IHG
has increase the sales revenue and market position of the hotel in the volatile marketplace. Once it
gets merged horizontally.
Implication of horizontal integration- Horizontal integration helps in hospitality for internal and
external expansion. Through these type of integration, productivity and quality of product and
services can be enhanced. It also has an effect on the branding and pricing policies of the IHG.
When it has integrated with the travel and tourism industry, it established the joint association to
compete with the larger organization in the market (Schimmelfennig, Leuffen and Rittberger, 2015).
It also has an impact on the globalization of the industry. It creates the competitive advantages
within the market. IHG places the positive impact on the TUI travel. It contributes towards
increasing their customer base by offering the attractive destination and adventures tour packages to
its customer.
Implication of vertical integration- The main impact of vertical integration is to eliminate or reduce
the cost of services in the organization. IHG has integrated with the TUI by which it can provide the
attractive destination and tour packages to its customer. It helps to eliminate the unnecessary cost of
tour and travel. This aspect helps to increasing their market share (Zschille, 2015). It permits the
cost reduction to improved coordination of production and services. All the above aspect mentioned
clearly affect that horizontal and vertical integration strategy for growth and profitability in the
organization.
2.2 Discussing how integration affected the hospitality business
There are mainly two integrations which take place in the hospitality business namely
horizontal and vertical integration. Under horizontal integration, business organization expands
their business operations and functions through internal expansion such as merger and acquisition
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(Glock and Kim, 2015). Thus, in this company acquires another firm which are operating in the
similar industry. For instance: IHG merged its business Grand Metropolitan Hotels which may be
termed as horizontal expansion. Whereas, vertical integration refers to those in which business unit
makes focus on acquiring and merging business operations with the distributor firm. For instance: If
IHG acquires Thomas Cook which is the travel agent then it is considered as a vertical integration.
Both these integrations closely influence the growth and success of IHG in the following manner:· Economies of scale: When hospitality company undertakes horizontal integration then they
get benefits of high economies of scale. Moreover, when firm produces products or services
at large level then it may result into financial benefits. For instance: When IHG expands its
business operations in hospitality industry then it will get financial benefits by ordering the
electronic equipments and other products at large level. This aspect will provide assistance
to the business unit in serving the customers at affordable prices.· Internationalized trade or expansion: Horizontal integration provides opportunity to the
business organization to serve the customers at overseas level. For instance: If IHG acquires
the hotel group of India then they become able to maximize their productivity and
profitability by offering the accommodation services to more customers (Schimmelfennig,
Leuffen and Rittberger, 2015). Thus, horizontal integration offers opportunity to enhance
their customer base by swerving the potential customers of India. In this way, such
integration offers opportunity to the business unit to build their global presence by entering
in the international market.· Enhancing market share: When business unit employs horizontal integration then it may
result into reduction in the number of independent firms. Thus, If IHG adopts merger and
acquisition activity for the purpose of expansion then it may result into the very less number
of firms who offer accommodation and stay facility to the guests. In this, business unit is
become able to take benefits by setting the high prices for the services. Usually, customers
are ready to give high prices for the quality services (What are disadvantages of horizontal
integration, 2016). Along with this, when few numbers of exist in the market then company
has also opportunity to enhance their market share by offering the high quality and unique
services to the customers.· Increased competitiveness: IHG can also enhance its competitiveness at marketplace by
making control on various sub-sectors through vertical integration. For instance: If IHG
mergers their business operations with travel agency such as TUI then it may result into less
dependency on supply chain. Moreover, growth and earning aspect of hospitality firms are
highly influenced by the bookings of travel agent. In this, by making investment in supply
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chain IHG can raise its bargaining power to the large extent.· Increased supply chain co-ordination: Vertical integration also facilitates better co-
ordination in the supply chain (Forward integration, 2016). Moreover, for the smooth
functioning of business operations and functions effectual management between the supply
chain is highly required. Thus, by employing such strategy IHG would become able to
achieve success in the competitive business arena.· Standardization of services: Integration also facilitates standardization in the products or
services at large level. If IHG expands their hotel business operations and functions in other
parts of world then it may result into high standardization. Moreover, in this, business unit
places high level of emphasis on offering the similar stay and accommodation facility to the
customers (Wu and et.al., 2015). It assists business unit in building the distinct image in the
mind of both existing and potential customers.
Thus, it can be stated that horizontal and vertical integration offers high level of financial
and non-financial benefits which will aid the growth of hospitality business.
TASK 3
3.1 Developing a rationale for the chosen project
IHG can expand its business operations and functions by starting tour agency ''Travel Time''.
Stage 1: Development· Concept: Entrepreneur is planning to introduce tour agency named as Travel Time. Reason
behind the choosing of such business is the continuous growth of Travel & Tourism sector.
This is one of the sectors which makes high contribution in the GDP of UK economy. Thus,
in this, by including natural and peaceful places in the packages business unit would become
able to attract people who likes camp firing etc. Along with this, business entity will also
include attractive destination in the tour packages which will give unique experience to the
customers.· Market Research: From market research entrepreneur has identified that travel and tourism
sector is keep growing. Along with this, business entity also has identified that now people
prefers to visit the attractive places of the world through tour agency. Entrepreneur has also
identified that intense competition takes place in the travel and tourism sector. In this, by
designing attractive tour packages at affordable prices business entity will achieve the
desired level of outcome or success.· Target Market: Travel Time will make focus on middle and higher income group people.
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Along with this, business entity will also make focus on young and middle age group.
Moreover, people of this age group prefers to visit the natural places of world.· Location: Entrepreneur will deliver its services through online site. Business entity will
develop its site in a unique by adding the pictures of attractive tourist's destination. This
aspect will help business unit in increasing the customer traffic on site.· Scale: Business entity will offer its travel services on a large scale. Thus, entrepreneur will
provide their services to the people who live in UK by including the number of destinations
around the globe.· Funding: In order to start this project entrepreneur will make use of his own personal
saving. Along with this, money will also be borrowed by business entity from bank. Along
with this, by issuing shares to the public IHG can start its new venture more effectively by
fulfilling their monetary requirements to the great extent.· Products and services: Travel time will offer attractive destinations to the visitors. Along
with this, it airlines, accommodation and other leisure facilities will be offered by travel
company to the people for making their holidays more memorable.· Licensing: Business entity will also take license for operating the travel and tourism firm in
the best possible manner.
Stage 2: Design
Travel and Tourism highly relies on the hospitality industry for offering the better travel
experience to the customers. In this, Travel Time will consider the following aspects while making
decision about the hotel and resorts.· Ambiance: Travel Time will make focus on offering the highly peaceful ambiance to the
customers. Moreover, customers prefer to stay in the hotel which offers more peace to
them.· Culture: Tour packages and say arrangements will be made by the entrepreneur by taking
into consideration the cultural needs and preferences of visitors.· Brand: Business entity will also offer luxurious accommodation facility to the customers
through IHG which is one of the leading company in the hospitality industry. Now,
customers prefer to stay in the hotel which is highly popular in terms of their brand name
and image. Thus, by making focus on brand while offering the services business entity can
attract the large number of customers.· Interior: This is one of the main aspects which have high level of influence on the
satisfaction aspect of the customers. Thus, Business entity will offer luxurious and fully
furnished suits to the visitors. Through this, entrepreneur would become able to offer unique
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experience to the people.· Exterior: In order to attract more customers Travel Time will make focus on making high
quality stay arrangements for the customers. Thus, business entity will place high level of
emphasis on hotel whose architecture is modern and unique.· Functional areas: In hotel, there will be different departments for the each area such as
front office, finance, marketing etc. In this, by approaching front office department
customers are able to get information and thereby resolve their queries to the great extent.
Through this, business entity can raise the satisfaction level of customers.· Customer flows: Business entity will serve middle and high income group people.
Moreover, luxurious accommodation facilities are costly as compared to other facilities.
Thus, by offering services to the upper and middle segment group business unit can fulfil its
goals.· Link to target market: Entrepreneur will offer accommodation facility to the people in five
and seven star hotels which is highly suited to the living standard of middle and higher
income group people. In this way, by offering the luxurious accommodation facility to the
customers Travel Time can build distinct image in the mind of customers.· Customers with individual needs: Travel Time will offer accommodation and stay facility
to the customers according to their needs and requirements. Moreover, hotel unit has
different kind of suits which vary according to the services and price level. Thus,
entrepreneur will offer suits to the visitors as per their demands and budget.· Along with this, entrepreneur will undertake research and development activity for offering
the suitable tour and accommodation facility to the people. Research will help business
entity in offering the standardized services to the customers according to their needs and
requirements.
Hence, by considering all such aspects business entity is able to offer high quality services
by satisfying their needs, wants and expectations.
3.2 Developing a plan for a hospitality business including the operational requirements of structure
In order to ensure smooth functioning and operations at operational level Travel Time needs
to undertake following aspects which help in managing the business performance more efficiently.
Staffing requirements according to the functional areas
For offering attractive tour packages and services to the customers HR manager of Travel
Time will make focus on the delegation of role and responsibilities among the staff member are:· Senior managers: For framing the effective tour packages there is the requirement of 3-4
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managers who has experience of 3-4 years in such industry. Further, managers also must
qualified with the University of London. Moreover, for designing of attractive tour packages
manager must have effectual analytical and innovation skills.· Customer care department: In order to evolve grater satisfaction among the customers Travel
Time will also hire 3 personnel for resolving their queries. For this personnel, personnel
must have customer handling, communication and quick problem solving ability etc.· Other staff members: Further, Travel Time also requires 2 staff members who will maker
maintenance of proper database in relation to booking and cancellation. Along with this, 2
members will also be appointed by the firm for managing contact with the supply chain.
Staffing issues related to seasonality
If during the holidays business unit fails to employ suitable personnel who have ability to
design the attractive tour packages then it may result into loss of productivity.
Cultural diversity and ways to deal with conflicts:
In order to deal with the culture with the cultural diversity business unit needs to place
emphasis on building the quality culture. It will assist business unit in making effective co-
ordination between the team members.
Recruitment policies and procedures:
Travel Time will employ effectual recruitment policy for placing the right candidate at right
place. Through this, business unit would become able to offer quality tour packages and services to
the customers.
Compliance with legislation:
Business entity will comply with the equality, discrimination act etc. while recruiting and
selecting the personnel for the job. Further, company will also comply with the Health and Safety
policies while designing tour packages for the customers.
Promotional activities
Tour packages will be promoted by Travel Time through social networking sites. By placing
advertisement on social networking sites entrepreneur is become able to attract large number of
customers. Further, business unit will also take assistance of traditional means of advertisements
such as television, magazines and newspaper. However, company will make more online promotion
rather than traditional.
Pricing
On initial level, Travel Time will employ penetration marketing strategy for attaining the
large market share. Primarily, company will make focus on offering the high quality services to the
customers at affordable prices. Through this, Travel Time will able to influence more customers and
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thereby enhance their customer base.
CONCLUSION
From the above report, it can be concluded that hospitality and Travel & Tourism company
is highly interlinked with each other. Thus, hospitality is the major sector which offers high level of
monetary and non-monetary benefits to the Travel & Tourism sector. Further, it can also be seen in
the report that productivity and profitability of the hotels & resorts are highly dependent on the
travel companies. In this, both the industries can attain success by developing effective co-
ordination between them. Besides this, it can be inferred that IHG can widened and strengthened
their global presence by taking into consideration the integration strategy. It will assist firm in
fulfilling their aims and objectives to the great extent. It can be revealed from the report that
through analysis of market is highly required before developing new business plan. By this,
entrepreneur is able to set highly realistic and competent strategic framework for the near future.
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REFERENCES
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