Hospitality Business Strategy

This document discusses the impact of macro environment on a given hospitality organisation and its strategies. It also analyses the internal environment and capabilities of the organisation using appropriate frameworks. Furthermore, it evaluates the competitive forces in the market sector using Porter's Five Forces model. Finally, it interprets and devises strategic planning for the future growth of the hospitality organisation.

Hospitality Business Strategy

Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
P1 Applying appropriate frameworks, analyse the impact and influence of the macro
environment on a given hospitality organisation and its strategies.............................................1
P2 Analyse the internal environment and capabilities of a given hospitality organisation using
appropriate frameworks...............................................................................................................3
P3 Applying Porter’s Five Forces model, evaluate the competitive forces of a given market
sector for a hospitality organisation.............................................................................................5
PART B...........................................................................................................................................7
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given hospitality organisation.............................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy can be termed as the combination of different practices and approaches
used by the management of an organisation to accomplish the long-term and short-term
organisational goals and objectives (Blackburn, Hart and Wainwright, 2013). TUI Group is one
of the largest Anglo-German travel and tourism organisation with the headquarters of the
company located at Hannover, Germany. The company was found in 1923 and has expanded its
operations to many countries all over the world since its incorporation. In the following project
report, an attempt has been made to analyse the internal and external environment of the
company to form a basis for strategic management planning and at the end produce and develop
a strategic management plan for the company for future growth and business development.
PART A
P1 Applying appropriate frameworks, analyse the impact and influence of the macro
environment on a given hospitality organisation and its strategies.
PESTLE Analysis of TUI Group:
Pestle analysis is a strategic tool of management which is used by business managers to make
better decisions related to operational activities after considering and evaluating the impact of
factors which lie outside the organisation and influence its operations such as political factors,
tax rates, trends in consumption etcetera. It is one of the most vital strategic tools which helps the
management in early identification of threats or opportunities and formulate better strategy for
future with respect to macro environment of business (Ho, 2014). The management of TUI
Group constantly makes effort to determine the key changes in its business environment which
are likely to impact its operations. Pestle analysis of TUI Group is being done as follows to
analyse the impact and influence of the macro environment on its strategies:
Political Factors affecting TUI Group:
Political factors such as political stability or instability have a major influence on the
operations in the tourism industry. TUI Group operates in many countries all over the world and
the recent increase in terrorism activities in some parts of the world has restricted the tourism in
those countries which is a major concern for the management of TUI Group. Political risk
influence the decision of visitors and the management of TUI Group should increase and expand
its operations in countries which are politically stable and provide a safe environment to the
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tourists. Business development in these countries can help the company to have a huge growth
prospect in future.
Economic Factors affecting TUI Group:
Economic factors such as tax rates, level of income and import-export duty also has an
influence on the decision-making by the management of TUI Group. Over the past few years, a
significant and consistent rise in the level of income has contributed to an exponential growth in
the tourism industry. Tourism industry has become one of the highly contributing industry for
any country and encouragement from government is an opportunity for the management of TUI
Group to expand and diversify its operations (Abbott, 2015). With the rise in disposable income
of people, people are now willing to spend a significant amount of portion on personal lifestyle
which has presented a huge opportunity for the managers of TUI Group to form policy and make
strategy which can help the company in targeting this additional spectrum of customers and
capture a huge market share.
Social Factors affecting TUI Group:
Significant changes in the lifestyle of the consumer and a desire to have different
experiences and adventures has certainly raised the demand of tourism activities. It has been one
of the major reason of an exponential growth in the industry. Tourism industry also provides
employment to a huge number of people all over the world. With consumers having an urge to
enjoy high standard of living and visit different parts of the world, the management of TUI
Group has an opportunity to formulate plans and tourism packages which seems attractive to this
new customer segment which is also price sensitive and wants to have a new experience. It can
help the company to maximise its revenue and market share using various tools of sales
promotion.
Technological Factors affecting TUI Group:
It can be argued that this decade has witnessed one of the biggest waves of technological
changes which has changed the dynamics of every industry. Information and communications
technology has been one of the major factor which has contributed to the growth of tourism
industry by simplifying the booking and other administrative processes. With the effective use
and implementation of latest technological innovation, management of TUI Group have an
opportunity to target more customers worldwide and create brand awareness. The company
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should formulate strategy to showcase their services at a platform to the target audience in a
much effective manner and directly engage with the potential customers (Ali, 2015).
Legal Factors affecting TUI Group:
Rules and regulations and legal complexities present a threat for the management of TUI
Group and primarily every organisation in tourism industry. As an organisation which provides
and integrates various services related to tourism, TUI Group is subject to compliance under
many guidelines and provisions issued by government. Moreover, the operations of the company
are extended to different countries all over the world and each country has its own set of rules
and regulations which further increases the threat for the company. Hence, the management of
the company should form a team of people responsible for scanning the legal horizon and
providing protection against any legal threat or complication in future.
Environmental Factors affecting TUI Group:
Increasing environmental concern and activism has influenced the factors related to
environmental protection and ecological imbalance to come upfront in the past few years which
has put the onus on companies and organisations like TUI Group to reduce the amount of carbon
footprint and emission of greenhouse gases (Holden, 2016). Tourism industry has received
criticism on account of contributing to a major rise in the environmental degradation and climate
change. The managers of TUI Group has already taken major steps to follow the guidelines for
mitigation of adverse impacts on environment and has a vision to improve its sustainability
standing. This presents a huge opportunity for the company to formulate policy for
environmental protection and take an early lead which will also help the company to improve its
market image and goodwill.
P2 Analyse the internal environment and capabilities of a given hospitality organisation using
appropriate frameworks.
SWOT Analysis of TUI Group:
SWOT analysis is a tool which is used by management to identify and determine the
strength, weakness, opportunities and threats to the company and take better decisions (Gürel
and Tat 2017). SWOT Analysis of TUI Group is being done as follows to analyse the internal
environment and capability of the organisation:
Strengths: TUI Group has a large fleet of aircrafts and charter planes which are flying to
many countries all over the globe and is one of the biggest strength of the company. More than
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30 million people have been a customer of the company which also demonstrates its dominance
in the industry. Due to its large operations, economies of scale helps the company to increase the
profitability which is above industry average. Financial resources and high tech-innovation also
provides strength to the company. High level of customer satisfaction and a strong and effective
distribution network is also one of the biggest strength of the company.
Weakness: TUI Group has not been able to manage effectively the challenge and
competition by the new firms and companies in the industry which has lead to a loss of market
share. Low and limited investment in research and development is also one of the major
weakness which should be removed by the management of the company. Due to a low accuracy
in forecasting of demand, the inventory has been high which has increased the operational costs
to some extent. There also exists a gap between the customer expectation and what is being
provided which is also a considerable weakness.
Opportunities: Free trade policy adopted by government of different countries has also
provided an opportunity for the managers of TUI Group to expand to different countries and
diversify its business operations. Increasing environmental concern is also a major opportunity
for the company to increase its favourability since it has already taken some measure steps to
improve sustainability in its operations (Phadermrod, Crowder and Wills, 2019). Online sales
platform has also been a major opportunity for the company to maximise its revenue and profits.
Threats: One of the major threats for the management of TUI Group is the increasing
extent and level of competition in the tourism industry due to its high attractiveness. An existing
gap in the product placement by the company might also prove to be a significant threat because
it allows other firms and competitors to fill that gap and obtain a market share. A lack of
continuous innovation and development in the products is also one of the most significant threat
which needs immediate attention and action of the management of TUI Group.
VRIO Analysis of TUI Group:
VRIO Analysis refers to a framework which aims to evaluate the resources held by any
organisation as the most important source of competitive edge. It evaluates the resources in terms
of their value, rarity, imitable and organisation and determine its strength to provide a
competitive advantage to the company (Knott, 2015). VRIO analysis of TUI Group is being done
to determine the internal capability of the organisation as follows:
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Valuable: TUI Group has many resources which are valuable and extremely crucial for
the company and its operations. A strong base of financial resources held by the company is
extremely valuable which also helps in investing into new business opportunities and solving
organisational problems. Technological resources held by the company are of high value to the
company. A team of highly skilled and motivated employees is another important and valuable
resource which is enjoyed by TUI Group.
Rare: Large pool of financial resources which is held by the company is a rare resource.
Other firms and competitors in the tourism industry rarely have such strong financial resources.
Employees of the company are also highly trained and skilled which provides the advantage to
the company in terms of high quality of customer service. However, every company these days
in investing into technology which makes the technological resources held by the company a
common resource.
Imitable: Financial resources of the TUI Group are formed as a result of long history of
operations and profitability and it is extremely difficult for any new company in the industry to
develop and form such a strong base of financial resources (Nieminen, 2018). Every company
undertakes employee training and development which makes human resources of the company
an imitable resource.
Organisation: It has been observed that the financial, technological and human resources
of the company are well-integrated and organised in an effective manner which gives the
opportunity to the company to invest these resources into new business areas and fight the
industry competition and obtain a competitive edge.
From the above VRIO analysis of TUI Group, it can be determined that the company has
a strong base of financial resources and many other resources which are valuable, rare and
properly organised and gives the strength to the company for obtaining a competitive edge in the
industry by effective allocation of these resources.
P3 Applying Porter’s Five Forces model, evaluate the competitive forces of a given market
sector for a hospitality organisation.
Porter’s Five Forces Model for TUI Group:
Porter’s five force model is one of the most vital tool of strategic management which helps
in analysis and determination of the competitive position of an organisation in its industry. It is
based on identifying the strength of five different industrial forces which usually determine the
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competitive position and the profitability of an organisation (Dobbs, 2014). Application of
Porter’s five force model for determining the competitive position of TUI Group in tourism
industry is as follows:
Bargaining power of buyers: Bargaining power of buyers is a strong face in the tourism
industry. During the past few years, the tourism industry has witnessed an exponential growth
and due to its attractiveness, the extent of competition in the industry has increased rapidly. As a
result of this, the number of firms providing services to the customers is high and the switching
costs are particularly low which puts the buyers in a dominant position and increases their
bargaining powers. Hence, the management of TUI Group are under no position to increase the
prices as even the slightest of change in price will have a very significant impact on its demand
due to high price sensitivity of the customers.
Bargaining power of suppliers: Bargaining power of suppliers is a weak force the
management of TUI Group in context of tourism and hospitality industry. The operations of the
company are dependent on only a small number of suppliers and the company has various
alternatives to choose from with particularly low switching costs. Hence, the management of
TUI Group is in a dominant position in its relationship with suppliers and has the opportunity to
get the best products and services of high quality at very competitive prices which increases its
profitability and reduces the cost of operations.
Threat of new entrants: There have been a significant growth in the number of firms and
companies operating in the tourism and hospitality industry in the past few years which presents
a threat for the company since these companies are able to provide stiff competition to the TUI
Group at local level (Moreno-Izquierdo, Ramón-Rodríguez and Perles-Ribes, 2016). However,
economies of scale is very difficult to achieve in the tourism industry and TUI Group has wide
scale operations in many countries all over the world which mitigates the threat from new
entrants but the management still needs to formulate policies to fight the competition from these
new firms at local level.
Threat of substitutes: Threat of substitutes is a weak to moderate force for TUI Group and
the hospitality industry. Although, there are many products and services available within the
industry but each product or service is highly differentiated which mitigates any form of threat as
a result of high number of substitutes for the company and provides a competitive edge to the
management of TUI Group.
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Competitive rivalry: Extent and level of competition in the industry in which TUI Group
operates is very intense and there are a lot of firms who are even operating at a large scale much
in comparison with the operations of TUI Group and pose significant threat to the company
(Curta and Duse, 2014). Companies and organisations such as IHG Group, Hilton, Marriott
etcetera provide a very stiff competition to the operations of the company and hence, use of sales
promotion techniques and price-wars is essential for the management of TUI Group to maintain
and enhance its competitive position in the industry.
On the basis of above analyse of Porter’s five forces for TUI Group, it can be observed that
high bargaining power of customers and a high extent of competition in the industry creates a
threat for the company and the management needs to make constant policies for mitigating any
such threat. However, threat of substitutes and bargaining power of suppliers is a low force for
the company which provides a competitive edge and advantage to the managers of TUI Group.
PART B
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning for
a given hospitality organisation
Ansoff Growth Matrix:
Ansoff Growth Matrix is also one of the vital tools of strategic management which provides
directions to the managers which can be used for expanding the business organisation and its
growth and it also analyses the risk associated with each direction for the company (Schawel and
Billing, 2012). It provides four different strategic growth directions which are; Market
penetration which refers to using tools of sales promotion and growth for increasing the sales of
existing products in existing markets, Market development which refers to increasing sales of
existing products in a new market, Product development which refers to launching a new product
within the existing markets for business growth and Diversification which refers to launching
new products in new markets for future business growth and expansion. The risk associated with
each strategy increases as we move further in the matrix.
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(Source: https://corporatefinanceinstitute.com/resources/knowledge/strategy/ansoff-matrix/)
On the basis of Ansoff Growth Matrix, the management of TUI Group has four different
strategic directions for future business growth and expansion. It has been advised and
recommended to the management on the basis of above internal and external environmental
analysis that market penetration and product development is the most effective strategy for the
future growth and expansion of the organisation. TUI Group is already operating in many
countries around the world and has invested significant amount of resources in these business
territories. Hence, with the help of market penetration, the company can use tools of sales
promotion and attract more customers and maximise its revenue. Risk is also limited in the
market penetration strategy and amount of investment is also limited (Han, Dong and Dresner,
2013). Other strategic direction of growth is product development, environmental and
competitive analysis of the business operations of TUI Group demonstrates a need to offer
product which can fill the existing gaps and help the company in maximising the revenue and
profits. Hence, market penetration and product development are the future growth strategies
which are advised to the management of TUI Group on the basis of environmental analysis and
Ansoff Growth Matrix.
Strategic Management Plan:
Strategic management plan for future growth and expansion of TUI Group which outlines
the strategy, objectives and tactics for the management of the company is being presented as
follows:
Strategy:
The strategy which is recommended to the management of TUI Group is cost-leadership
strategy and differentiation strategy. With the help of cost-leadership strategy, the company can
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reduce the costs of its products and services and obtain a leadership position in the industry by
offering additional discounts and offers to the customers and using sales promotional tools for
market penetration. With the help of differentiation strategy, the management will focus on
launching more innovative products with high-differentiation to fill the existing gaps between the
demands of customers and what is being provided. Through effective cost-leadership and
differentiation strategy, the management of the company can establish a platform for effective
growth and expansion of the company in the future (Banker, Mashruwala and Tripathy, 2014).
Objectives:
The SMART objective for the above strategy and growth plan for TUI Group is as follows:
 Increasing the sales and revenue of the company by 12% in the coming 18 months with
the help of product differentiation and use of sales promotional tools in all regions of the
world.
Tactics:
The tactics which can be helpful for the management in implementation of the growth
strategy are being mentioned as follows:
 Offering additional discounts and incentives to the customers.
 Designing tourism packages and holiday destination coverage plans to attract customers.
 Implementation of loyalty program to increase repetitive sales and retaining customers.
 Investment into research and development programs for product and service
differentiation.
 Creating a strong and dominant brand awareness using social media platforms and
customising the company website as per the needs.
CONCLUSION
On the basis of above report, it can be concluded that external factors such as political
stability and rise in level of disposable income has a major impact on the managerial decision
making of TUI Group and it can also be observed that the company has many strengths and
highly valuable resources which can be used to derive a sustainable competitive edge by the
management of TUI Group. It can also be determined that the competitive position of TUI Group
in the hospitality industry is strong but requires sustainable and constant management efforts. At
last, it has been recommended to the managers of TUI Group to follow the growth direction of
market penetration and product development and refer to the cost-leadership and differentiation
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strategy for providing a platform for huge and exponential future growth and expansion of the
organisation.
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REFERENCES
Books and Journals
Abbott, R.J., 2015. Pestle Analysis for Students.
Ali, M.A.B., 2015. Travel and tourism management. PHI Learning Pvt. Ltd..
Banker, R.D., Mashruwala, R. and Tripathy, A., 2014. Does a differentiation strategy lead to
more sustainable financial performance than a cost leadership strategy?. Management
Decision.
Blackburn, R.A., Hart, M. and Wainwright, T., 2013. Small business performance: business,
strategy and owner‐manager characteristics. Journal of small business and enterprise
development.
CURTA, N.C. and DUŞE, D.M., 2014. A NEW PERSPECTIVE ABOUT TOURISM
INDUSTRY. Quality-Access to Success. 15.
Dobbs, M.E., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review.
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International
Social Research. 10(51).
Han, C., Dong, Y. and Dresner, M., 2013. Emerging market penetration, inventory supply, and
financial performance. Production and Operations management. 22(2). pp.335-347.
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European
academic research. 2(5). pp.6478-6492.
Holden, A., 2016. Environment and tourism. Routledge.
Knott, P.J., 2015. Does VRIO help managers evaluate a firm’s resources?. Management
Decision.
Moreno-Izquierdo, L., Ramón-Rodríguez, A.B. and Perles-Ribes, J.F., 2016. Pricing strategies of
the European low-cost carriers explained using Porter's Five Forces Model. Tourism
Economics. 22(2). pp.293-310.
Nieminen, A., 2018. Sustainability in TUI Experience Centre.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Schawel, C. and Billing, F., 2012. Ansoff-Matrix. In Top 100 Management Tools (pp. 22-24).
Gabler Verlag, Wiesbaden.
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