Economic and Financial Analysis of Thomas Cook's Failure: 216MANEL

This report provides a comprehensive analysis of the economic factors that led to the failure of Thomas Cook, a prominent travel company in the UK. The study examines both microeconomic and macroeconomic forces, including the company's internal strengths and weaknesses, as well as external factors such as Brexit and increased competition. Utilizing models such as SWOT and PESTLE analyses, the report assesses the impact of political, economic, social, technological, environmental, and legal factors on Thomas Cook's operations. The report highlights the company's inability to adapt to technological advancements, the burden of debt, and strategic decisions like the merger with My Travel Group as contributing factors. It concludes by recommending strategic adaptations the company could have undertaken to avoid collapse and providing a detailed overview of the company's history, market position, and the economic climate in which it operated. The analysis serves as a case study, offering insights into business management and the impact of economic environments on organizational success.

Running head: ANALYSIS ON FAILURE OF THOMAS COOK
Programme Title
Module Code and Title
Analysis on Failure of Thomas Cook
Student Details

1ANALYSIS ON FAILURE OF THOMAS COOK
Executive Summary
This report has discussed about the macro and microeconomic factors that led to the failure of
Thomas Cook in the UK. The report focused on the main causes such as inability to adapt to the
new technological changes that occurred in the country especially in the concerned industry.
Other than that continuous loss and debt burden, external factors like Brexit and competition
from rivals aggravated the condition of Thomas Cook. Therefore, with induced effect and series
of disastrous situation ceased the failure of Thomas Cook. However, it has been recommended
that if the company had not took the decision such as merger with My Travel Group and staying
traditional then it might have survived.

2ANALYSIS ON FAILURE OF THOMAS COOK
Table of Contents
Economic Impact on Business Organizations.................................................................................3
Impact of micro and macroeconomic factors on Thomas Cook......................................................5
Background..................................................................................................................................5
Microeconomic analysis..............................................................................................................5
Macroeconomic analysis.............................................................................................................6
Recommendation.............................................................................................................................8
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................10

3ANALYSIS ON FAILURE OF THOMAS COOK
Introduction
The impact of economics on business is significantly strong because the economic factors
are the factors surrounding which a business make strategies. The economic factors can be
categorized as macro and microeconomic factors. The microeconomic factors include firm cost
structure, market demand fluctuation due to consumer preference, rivalry and competition and
market structure. The report thus analyses the macro and microeconomic factors that lead to the
failure of Thomas Cook a travel service providing organization based in the United Kingdom. In
order to analyse the macro and microeconomic factors the models of SWOT, PESTLE and
Porter’s five forces shall be used in report (Islam and Mamun 2017). These models are selected
because they help to understand the economic scenario under which a firm operates and what are
the advantages and disadvantages faced by the business organization. Therefore, by studying the
factors the report recommends what the firm could have done to avoid the failure.
Economic Impact on Business Organizations
Both the macroeconomic and microeconomic factors impact the business organizations
and thus it is necessary to analyse these factors. To analyse the macroeconomic factors using
PESTLE model (Perera 2017). The macroeconomic factors are political, economic, social,
technological, environment and legal. Every business organizations operate in some country and
the above macroeconomic factors of the country impacts the operation of an organization. The
political factors include the structure of the government, the stability of the existing political
regime, policies of the country both domestic and international, anti-trust laws, intensity of
corruption and tariff policies (Woo and Choi 2018). These factors influences business
organizations externally in most of the cases and before making starting operation in a country it
is necessary to assess the above said factors. The economic factors are of much importance since

4ANALYSIS ON FAILURE OF THOMAS COOK
they reflect the growth trend of a country. The factors include GDP, unemployment, inflation,
balance of trade and exchange rate. It is better to operate in a country, which has good level for
all the said economic factors (Khan and Chhapra 2016). A good economic condition helps a
business organization to grow but a poor one demolishes too. In addition to that, social factors
that affect business organizations are age of population, education level, economic status, habits
and personal preferences. A business organization should makes its strategy based on the factors
to maximize sales and penetrate market. Technology is another factor that plays crucial role as it
affects the productivity and service of a business organization. A business organization is also
affected by environment factors because it influences productivity, sales and there are corporate
social responsibility (CSR) policies that the business organizations need to adhere to (Graafland
and Smid 2019). Finally, a business organization should be aware of the existing laws in the
country of operation. It is important because violation of any law can lead to penalty and in
extreme cases might cause lock down of the organization.
The microeconomic factors can analysed by SWOT model. Strengths of an organization
includes the cost structure, presence of scale economies and brand name. Weakness could cause
for factor prices, size of the organization, inefficiency in resource allocation and technological
backwardness (Monteiro, Salvador and Soares 2017). Opportunity for an organization is the
prospect related to the product it develops, demand for the product, innovation occurred in the
industry and less number of competitors. Finally, thereat for an organization are substitutes,
increased competition and law abolishes use of the product.

5ANALYSIS ON FAILURE OF THOMAS COOK
Impact of micro and macroeconomic factors on Thomas Cook
Background
Thomas Cook was one of the oldest Travel and Holiday Company in the world, which
was founded by an English businessperson named Thomas Cook in 1841 in the United Kingdom.
Therefore, the company is in business for about 178 years (Laws 2020). Thomas Cook is a
multinational company that provides various kind of services that includes and holiday resorts
and hotels, holiday packages, cruise lines and airlines. However, it had been facing various
problems especially with profits. It faced severe rivalry from its competitors among which most
were low cost and technologically advanced companies. Thus, with debt burden and high losses
forced the company to cease its operation in the UK in September 2019.
Microeconomic analysis
Strength
 The company was around 200 years
old and thus it carries a brand name
and has large economies of scale.
 It has experience of serving more than
7 million customers and thus it is
efficient in customer handling issues
(Polat and Arslan 2019).
 The company operates in many
countries and thus it has experience in
operating in foreign lands.
Weakness
 The company is making loss for many
years.
 Customer satisfaction is considerably
poor and is declining with time.
 Not keeping up with the changing
technology.
 Increase in long term debts putting
pressure on the cost structure of the
company.

6ANALYSIS ON FAILURE OF THOMAS COOK
Opportunity
 Increasing market for tourism sector.
 More number of people are travelling
by airplanes.
 Improved technology made it possible
to reach customers easily.
 With emergence of digital banking
and payments system, ticket and
holiday package booking has become
much easier.
Threat
 Increase in competition due to entry of
new firms in the industry.
 The cost structure of new firms is
better and efficient than that of
Thomas Cook.
 Price offered by rivals are lower than
Thomas Cook.
 Competitors are technologically
advanced and penetrated in the market
by using mobile apps.
 People are more relying on online
platforms for ticket and travel
booking.
Macroeconomic analysis
The macroeconomic factors are politics, economics, society, technology, environment
and legal. The analysis is done using PESTLE model.
Political
The political condition of the UK is not running smooth since the advent of Brexit. Due
to Brexit, the relationship of the country has deteriorated over the years (Gamble 2018). Owing

7ANALYSIS ON FAILURE OF THOMAS COOK
to this, the business confidence has declined in the country. The tourism sector is suffering as
less number of people are visiting the country. Hence, it affected the business of Thomas Cook.
Economic
The UK is a developed country and thus it is good for business but the recent data on
GDP show that the economic growth of the country is struggling indicating that the investment
in the country might not be good (Johnes 2019). The inflation rate is falling and trending below
2% whereas the unemployment of the country is low which is good but it is below natural rate of
unemployment (Blanchard 2018). Thus, it can be inferred that economic condition of the country
is suffering and would affect adversely Thomas Cook.
Social
The population of the country is increasing and thus market is increasing in size. The
youth unemployment of the country is declining and along with that, the wage rate trend is
increasing. Therefore, it indicates that the market of the country may prospect in future and thus
it is a good sign for Thomas Cook
Technological
The UK is among one of the development countries, thus the research and development
sector is strong and any new developed technology reach the country fast, and thus business
organizations there ha scope to development prospect as technology support improves
productivity.

8ANALYSIS ON FAILURE OF THOMAS COOK
Environment
Like other countries in the world the UK is suffering from climate change problem and
thus to control and mitigate the problem the government has passed laws that restricts use of
vehicles that runs on old technology and thus it is a problem of the airlines services provided by
Thomas Cook.
Legal
In the UK to assure fair competition in the economy, the government has passed
competition law and every organization operating in the country has abide by it (Cook and Liu
2016). Other than that, there are laws in order to protect interests of employees and consumers.
Hence, the business operation of Thomas Cook should not violate these laws in order avoid
penalty or ban.
Recommendation
In UK, Thomas Cook failed to continue its operation and closed down in September
2019. The reasons that led the company to such and end were continuous huge loss, debt burden,
severe competition from low cost companies and technological backwardness of Thomas Cook.
Therefore, it can recommended that Thomas Cook should have adapted to technological changes
that have occurred in the industry (Dhiman and Kumar 2019). It should not have merged with
My Travel Group in 2007 that is the main reason of increased debt burden of the company.
Finally, Thomas Cook should have focused on online market of airline ticket and holiday
package booking so that it could have sustained the market.

9ANALYSIS ON FAILURE OF THOMAS COOK
Conclusion
The above analysis of macro and microeconomic factors that caused the close down of
Thomas Cook in the UK in 2019 led to the conclusion that even though the company was nearly
200 years old it failed to sustain due to its wrong strategic decision and economic and political
condition of the country. Brexit has put significant amount of political and economic pressure on
the country that led to the falling business for the concerned company. Entry of new companies
and extreme level of competition from them and in addition inability of Thomas Cook to adapt to
the changing industry technology led to the failure of the company. However, if the company
could have avoided the internal strategic decisions it took it might have survived.

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Reference
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Cook, T.R. and Liu, A.H., 2016. Using linguistic networks to explain strength of intellectual
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Dhiman, M.C. and Kumar, R.B., 2019. Building Foundations for Understanding the International
Travel Agency and Tour Operation. In Handbook of Research on International Travel Agency
and Tour Operation Management (pp. 1-13). IGI Global.
Gamble, A., 2018. Taking back control: the political implications of Brexit. Journal of European
public policy, 25(8), pp.1215-1232.
Graafland, J. and Smid, H., 2019. Decoupling among CSR policies, programs, and impacts: An
empirical study. Business & Society, 58(2), pp.231-267.
Islam, F.R. and Mamun, K.A., 2017. Possibilities and challenges of implementing renewable
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economic growth of Pakistan. Market Forces, 11(1).

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