MAN302: Strategic Business Management - Flight Centre's Offshore Jobs

This report provides a comprehensive analysis of Flight Centre's strategic decision to offshore organizational activities, leading to domestic layoffs and international market expansion. It evaluates external factors like the dynamic global market and changing political environments in Australia, which influence Flight Centre's strategy. The report also examines internal issues such as rising labor costs and organizational culture that contribute to the decision to offshore jobs. Key stakeholders, including customers, employees, and investors, are identified, and the potential impacts of offshore activities on these stakeholders are discussed. Furthermore, the competitive advantages gained through cost leadership strategies, along with associated risks, cost savings, and revenue increases, are assessed. The report concludes that while offshoring can lead to positive business outcomes by reducing operational costs and indirectly promoting brand image, it also presents challenges related to changing trade policies, taxation, and economic fluctuations in host nations.

Running head: STRATEGIC BUSINESS MANAGEMENT
STRATEGIC BUSINESS MANAGEMENT
Name of the Student
Name of the University
Author Note

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Table of Content
Introduction................................................................................................................................3
1. Evaluating the external issues that are affecting Flight Centre and driving the business to
employ strategy resulting in moving jobs offshore....................................................................3
2. Analysing the internal issues that make the organization consider jobs offshore as a part of
its strategy..................................................................................................................................4
3. Identifying the stakeholders in this company.........................................................................5
4. Competitive advantages for Flight Centre in moving in either expanding offshore or
moving some job offshore..........................................................................................................6
5. Listing and assessing the issues of the above strategy including risks, cost savings and
revenue increase.........................................................................................................................6
Conclusions................................................................................................................................7
References..................................................................................................................................8

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Topic- Strategic Management -Flight Centre
Introduction
This report provides an analysis of strategic approaches of Flight Centre which is an
Australian listed public firm provides a large variety of services including flight, holiday and
vacations, hotels, car rental, cruise, rail and insurance. The purpose of this report is to analyse
Flight Centre’ strategy which has resulted in moving some of its organizational activities
offshore with the lay-off of some domestic. It also aims to analyses how this strategy led to
expansion of business into other international market. The report provides a detailed
evaluation of external issues affecting the business and driving it to employ a strategy
resulting in moving job offshore. In addition, the report also provides an in-depth analysis of
company’s internal issues that make it considers the offshore of jobs as the part of the
strategy.
1. Evaluating the external issues that are affecting Flight Centre and
driving the business to employ strategy resulting in moving jobs offshore
It is certain that external business environment has been dynamic in nature both
domestic Australia market as well as in global market as well. Particularly, changing
political environment in Australia often leads to changes in trade regulation which compels
travel agency service providers to shift their focus on other market where labour price is
under the line. MacGregor, Doyle and McEachern (2015) commented that constant
fluctuation in the economy have pushed the firm to cut out operational expense by offshoring
the activities and other services. However, Kanemoto et al. (2014) mentioned that even
though there is steady fluctuation in the economy Australia is world’s second largest
economy with the nominal GDP estimated to be around AUS$1.1 trillion in 2017 and this had
led to highest range of per capita GDP in the world.

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Nevertheless, this has created another challenge for Australian travel and tourism
organizers like Flight Centre. Due to increasing per capita income, demands of regional
labour is rapidly increasing; so the organization is left with no option but to invest more in
the Human Resource. On the other side, number of suppliers such as aviation companies,
hospitality organizations in the sector are also increasing because the country has an
enormous natural resource with the base of agriculture and minerals (Boniface, Cooper and
Cooper 2016). Thus, existing suppliers’ relationship with the organization is fragile.
Consequently, Flight Centre’s market share is shrinking because small and medium size
suppler agencies including café, small size hotels have cheaper options to satisfy their end
customers in such resourceful market. Therefore, Flight Centre had to cut its operational cost
by offshoring operational activities which has enabled the business to charge suppliers the
industry average price and high receive high quantity of end-products.
2. Analysing the internal issues that make the organization consider jobs
offshore as a part of its strategy
As discussed above due to high per capita income in the nation labours demand is
increasing; so the major challenge that Flight Centre faces is that growing demands of its
developed human resources. Regional workforce is way more expensive that it was a decade
back. It has been identified that Flight Centre observed a loss of AU$10 million as its
suppliers’ earning dropped by 42.6% and same store sell dropped by 8.5% in spite of the
store refurbishment, changes in the menu as well as marketing campaign (Sharifpour, Walters
and Ritchie 2014). Consequently, Flight Centre observed a financial instability. On the other
side, Tarrant et al. (2014) mentioned that organization’s culture is a significant issue as Flight
Centre continued with its autocratic culture despite being a large travel agency but the
internal culture consist of values, attitudes as well as priorities that employee live by. So, it is
worth mentioning that a cut throat culture where every individual tends to compete with one

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another often creates a different environment. So, organization did not pay needed attention
to its workforce. On the other side, Henderson, Cheney and Weaver (2015) mentioned Flight
Centre needs to change its business design because the market is highly competitive with the
increasing number competitors and Flight Centre is still going with its existing design. In
today’s retail landscape customers have polarized into those who seek comfort as well as
those who seek constant newness. However, all customers tend to share the expectation and
they expect speed, quality and value for the money.
3. Identifying the stakeholders in this company
The major stakeholders of Flight Centre is that are its customers, employees and the
investors who enable the business to operate in a domestic and global environment. The
major customers and suppliers of Flight Centre are hotel and aviation organizations of UK,
US, Asian nations while the top investors of the company includes HSBC, JP Morgan,
Citicorp Nominee, etc (Mason 2015).
Discussing how the shift of offshore activities will affect stakeholders
Offshore of operational activities might significantly affect its employees as the job
role of the existing employees will change. For example, if the organization offshores its
manufacturing items to create the end product, existing workers who used to perform their
duties in the technology based activities lose their job positions. The business might apply a
further lay-off as parts of its activities are offshored, while the investors and shareholders will
remain profitable as the margin of investment remains but the profit may increase as the cost
of operation is low (Brooker ans Joppe 2014). Consequently, the investors will gain more
profits as the business adopts offshore trend. On the other hand, customers may find its
product more easily as availability of the high would he comparatively. This happens because
there is no barrier in producing the end products to the market.

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4. Competitive advantages for Flight Centre in moving in either expanding
offshore or moving some job offshore
According to Porter’s cost leadership strategy, the organization can increase and gain
more profits by minimizing the cost but this approach enables the company to charge the
industry average price (Mihalic and Buhalis 2013). This helps the company to gain
competitive advantages because here the business is able to maximize the market share by
charging low price but it is still able to make a reasonable profit one each margin as it has
reduced cost. Thus, Flight Centre is able to reduce the cost of its operation as it can offshore
its labour force. For example, it operates in an Asian nation, it hires the regional labour as the
tourist guide to help its customers. Hence, hiring of regional labours charges low price. So,
the cost of human resources can be minimized. On the other side, the organization also gains
competitive advantages by outsourcing its technology based activities (Leonidou et al. 2013).
Flight Centre provides a wide variety of services and promotion and organization of those
activities are done through the digital platforms. Nonetheless, the firm minimises the cost of
promotional and service organizational activities by getting the tasks done in a cheap nations
where demands of technology based activities are less.
5. Listing and assessing the issues of the above strategy including risks, cost
savings and revenue increase
Although Flight Centre has developed a competitive edge by offshoring its
operational activities but it has to deal with certain risks with respect to cost and revenue. For
example, Ellram, Tate and Petersen (2013) mentioned that when a foreign brand hires the
labour force of another nation, it has to comply with labour and Union policy. So, if trade
union and labour policy changes in the host nation the organization cannot withdraw its terms
of employment. In addition to this, trade policies and taxation are dynamic in nature, which

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means it can change with the change of any political or economic environment of the nation.
Under such condition, the business is bound to comply with the new policies which might
bring in financial damages to business. Thus, the revenue margin might not as similar it is
expectedly in the domestic nation.
Conclusions
In Conclusion, it is worth mentioning that offshoring operational activities often leads
to positive business outcome as the business is able to cut the cost of its operation and create
the balance in productivity due to the terms of offshoring in the host nation. In addition to
this, when a business is able to offshore its operational activities to other market or nation,
indirectly, the business is developing its brand image in that particular market without fully
entering the business. This might further help to business to operate the business completely
in that market. Nonetheless, it also to deal with some specified market risk such as certain
changes in trade policy and taxation, fluctuation in the economy in the host nation.

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References
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travel and tourism. Routledge.
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liminal insights. Journal of Travel Research, 53(4), 500-508.
Ellram, L.M., Tate, W.L. and Petersen, K.J., 2013. Offshoring and reshoring: an update on
the manufacturing location decision. Journal of Supply Chain Management, 49(2),
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organizational identity in strategic communication and organizational issues management
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Kanemoto, K., Moran, D., Lenzen, M. and Geschke, A., 2014. International trade undermines
national emission reduction targets: New evidence from air pollution. Global Environmental
Change, 24, pp.52-59.
Leonidou, L.C., Leonidou, C.N., Fotiadis, T.A. and Zeriti, A., 2013. Resources and
capabilities as drivers of hotel environmental marketing strategy: Implications for
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MacGregor, S., Doyle, T. and McEachern, D., 2015. Environment and politics. Routledge.
Manalo, J., Perera, D. and Rees, D.M., 2015. Exchange rate movements and the Australian
economy. Economic Modelling, 47, pp.53-62..
Mason, P. 2015. Tourism impacts, planning and management. Routledge.
McNair, B., 2017. An introduction to political communication. Routledge.

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Mihalic, T. and Buhalis, D., 2013. ICT as a new competitive advantage factor-Case of small
transitional hotel sector. Economic and Business Review for Central and South-Eastern
Europe, 15(1), p.33.
Sharifpour, M., Walters, G., & Ritchie, B. W. (2014). Risk perception, prior knowledge, and
willingness to travel: Investigating the Australian tourist market’s risk perceptions towards
the Middle East. Journal of Vacation Marketing, 20(2), 111-123.
Tarrant, M. A., Lyons, K., Stoner, L., Kyle, G. T., Wearing, S., and Poudyal, N. 2014.
Global citizenry, educational travel and sustainable tourism: Evidence from Australia and
New Zealand. Journal of Sustainable Tourism, 22(3), 403-420.