Business Challenges in the UK: A Case Study of Thomas Cook

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Business and Academic Skills
“Identify some of the current challenges facing business in the UK. Analyse one UK
business and evaluate how the business has responded to these challenges”
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Table of Contents
Introduction................................................................................................................................3
Company Overview...................................................................................................................4
Identify some of the current challenges facing businesses in the UK........................................5
Analyse one UK-based business and evaluate how the business has responded to these
challenges...................................................................................................................................8
Conclusion..................................................................................................................................9
Bibliography.............................................................................................................................10
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Introduction
Modern day businesses face many challenges and obstacles in their day-to-day business
operations. The company needs to make quick and effective decisions on how to overcome
these challenges and prevent any disruption in their activities. The current economic
conditions of UK plagued by the menace of the Brexit are reeling under the pressure of the
slowing economy. The falling disposal income is the major issue in the country, which had
restricted the expenditure of the household on products and services not essential to them.
This may include travelling and holidaying. The report focuses on the impact of the same has
created on the business functioning of the company Thomas Cook in the economy of the
United Kingdom. The report addresses the rising competition in the travel and tour industry,
which has led to a fall in revenue for companies in the economy due to competition.
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Company Overview
Thomas Cook born on 22nd November 1808 to a strict Baptist family and became a Baptist
missionary in the year 1826. This was the stage of his life where he has to move around
villages and towns distributing pamphlets and holding meeting to spread awareness about
temperance. He arranged to take a group for temperance from Leicester Campbell Street
railway station to a teetotal rally in Loughborough, which was approximately 11 miles away.
This marked the beginning of an idea that with time transformed into an empire today
popularly as Thomas Cook and Sons. The ides further expanded when he took around 500
tourists who paid one shelling each to escort them to a return train journey. This gradually
expanded and he started taking excursion every summer to even countries outside the
country.
In the year 1872, he formed a partnership with his son to create the Thomas Cook and sons.
The company today is one of the most renowned and globally recognised travel and tour
providing company in the world. The company in the year posted a revenue of over £ 7394
million and hold over 186 own brand hotel and resorts globally (Thomascookgroup.com.
2019). The company also hold strategic tie ups with thousands of resorts all around the world
with different hotels and reports at various tourists’ destinations.
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Identify some of the current challenges facing businesses in the UK
The travel and tourism industry is a very volatile and uncertain industry as the market
demand can change considerably depending on the season. This industry is also affected
heavily by the preferences of customers, who might prefer a certain location over others at a
point of time, and then change the next season. Political conditions of a country can also
affect the tourism industry of a country, as favourable and stable political conditions will
invite more tourists in the country while unfavourable conditions will keep away tourists.
Many businesses in the UK are under the category of the travel and tourism industry. These
businesses almost face the same challenges that other businesses in other industries face.
Some of threes challenges are explained below.
Brexit
Brexit is currently one of the biggest political issues that all companies in the UK are facing
at this moment. This issue has proven to be controversial and politically significant enough to
be considered as a threat to all businesses. Many theorists however are uncertain of the
effects of Brexit. This issue is considered as a national issue as all businesses and even the
economy of the country is being affected by this. The import and export of goods and
services between UK and the rest of Europe have been affected as the rate of imports and
exports have risen considerably (Dhingra et al., 2016). This has increased the amount of
money UK businesses pay and the amount they receive on imports. Since this has cause a
hike in both the rates, both have lowered significantly. Lower imports are making it difficult
for businesses to gather resources that are bought from foreign European countries.
Businesses of those countries have also lowered the amount of materials they export to the
UK due to Brexit (Cumming and Zahra, 2016).
Travel and Tourism companies in the UK have been hit the most by the effect of Brexit.
Tourists and visitors coming to the UK have dropped significantly, especially from other
European countries. The same has also occurred from UK residents as they prefer to go to
non-European countries for tours. This has lowered of a significant portion of income for
these companies as the other European countries have many popular travel and tourist
hotspots, which were a bi source of income for these companies (Moloney, 2017).
Lower Average Disposable Income
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The UK is going through constantly increasing rates of inflation in the country. The current
rate of inflation in the UK is 3 percent, which affects the people of the country a lot. This
inflation has increased the prices of products and services that are being sold to British
citizens in the market. This has increased the cost of living for people living in the UK, a
serious drawback they are facing now. This has increased the expenditures of the people on
basic commodities and services, leaving them with lower disposable income. The prices of
the products and service sold in the UK continue to rise daily (Gough, 2018).
The travel and tourism industry depends on the people’s disposable income. People go on
vacations and tours only when they have a lot of disposable left with them to go for
vacations. The impact of rising inflation in the country has left the customers with lower
disposable income left with them. Therefore, most citizens of the UK cannot afford to go on
vacations and tours as their ability to do so have decreased considerably. Professionals and
businesspersons are the only source of income for such companies at this point of time, along
with tourists going to non-European countries. The high rate of inflation has also forced
companies to increase the prices of services, which also includes the travel and tourism
industry. Coupled with lower disposable income, the people now find going on vacations
very expensive. This has also affected the rate of vacations by frequent travellers, a loss for
these companies. According to a recent study, the current rate of average disposable income
in the country is 270 pounds every month. This is less than 10 pounds a day in a month
(Francis, 2019).
Competition
The business industries in the UK have become stagnant with thousands of companies
providing similar experiences to customers. There is very little distinction in the services
provided by companies, belong in the same market segment. For example, travel and tourism
companies provide similar services of providing hotels and managing tours of the customers.
This stagnation has reduced the general interest of the public on going to tours by
approaching these organisations (Forde and Slater, 2016). Therefore, the sales of the
companies and their revenue have decreased considerably in the last few years due to no
innovations in the travel and tourism. The people now want something new, and more
personalised experiences in their holiday trips from travel and tourism service providers.
Sharing Economies and Peer to Peer Travel
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Sharing economies in peer to peer travel refers to the new system and trends of residents of
other countries to provide rooms to tourists in their own residence. These people have tie-ups
with many new emerging businesses in the travel and tourism sector. Instead of staying in a
certified hotel, customers can now stay in the residence of another country’s citizen, for
almost half the cost that travel and tourism agencies charge for booking their hotels (Site
Visibility, 2019). This has impacted the business conducted by most travel and tourism
agencies, as a large market share are currently being gained by these new peer to peer service
providers.
Customers book tickets in off seasons
The tickets of plane rides and hotel bookings are lower during off-seasons. This is a pricing
strategy that is employed by most companies in the travel and tourism sector for a long time.
Customers have taken advantage of this to avail the discounts and lower rate of tickets. These
customers are not purchasing the tickets during the peak season. Therefore, the companies are
now incurring less revenue compared to what they used to before (Dudas et al., 2017). This
factor coupled with the other reasons creates an undesirable business environment for travel
and tourism companies.
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Analyse one UK-based business and evaluate how the business has responded to these
challenges.
The chosen organisation for this report is Thomas Cook, a UK based travel and tourism
agency that provides services like hotel bookings, tour packages, and offers to tourists that
allow them to book tickets at a discount. It is one of the most popular travel and tourism
agencies operating in the UK.
According to the management of the company, the effect of Brexit has left significant impact
on the company. The company has stated that they have made a loss of 1.5 billion pounds n
the first half of 2019 (BBC News, 2019). The issue of Brexit has lowered the willingness of
customers to travel to other European countries. The company have incurred lower market
shares due to a decrease in their business sales and profits. This has affected the morale of the
customers and the employees of the company, who have lost confidence in the leadership of
Thomas Cook.
In order to incur lower losses, the company has planned to sell their Thomas Cook Airline.
This is done in a bid to incur lower losses, as they have already incurred 1.25 billion pounds
of losses in the first half of 2019, which is expected to double by the end of this year. In case
the company still makes losses after this deal, it is expected that the company would be sold
or will be wound up. The company needs to make quick profits in order to face the increasing
competition. The sale of the airline will give the company a surge in their available capital,
which will allow the fir4m to take necessary decisions and operations.
The company has decided to alter the system of discounts during off-seasons, as they need to
make quick profits in order to stand up in the market to their competitors. This move might
prove to be controversial as the discounts given during lean seasons are now considered as
market practices. Customers might likely lose faith in the company for breaking tradition and
this will create a negative brand image of the company. This will lower the profits of the
company and create more losses, it this strategy becomes unsuccessful and is not accepted by
the customers.
The company in order to overcome the various challenges explained above, have announced
to continue on streamlining their expenditure base and manage their capacity to give the
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customers greater service flexibility and financial options, while focusing the group on
delivering improvements in performance (Proactiveinvestorsuk, 2019).
Conclusion
The dismal condition of the economy of the United Kingdom has constrained the expansion
of the travel and tourism industry in the country. The Thomas Cook faces lots of different
obstacle such as the high competition, low disposable income and the effects of Brexit. The
report discusses how the different factors have affected the overall functioning of the
company and created obstacle in the smooth functioning. The company also has witnessed a
slow growth and falling revenue due these factors. The report also discusses how the
company has modified its strategies and targeted their airline base as a loss and the reason to
sell it to incur an inflow of cash and make profits. The report discusses how the company
effectively segments the market to identify target customers and position itself as an
affordable tour provider in the economy.
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Bibliography
BBC News. 2019. Thomas Cook says Brexit hitting holiday plans. [online] Available at:
https://www.bbc.com/news/business-48292318 [Accessed 10 Jul. 2019].
Cumming, D.J. and Zahra, S.A., 2016. International business and entrepreneurship
implications of Brexit. British Journal of Management, 27(4), pp.687-692.
Dhingra, S., Ottaviano, G.I., Sampson, T. and Reenen, J.V., 2016. The consequences of
Brexit for UK trade and living standards.
Dudás, G., Boros, L. and Vida, G., 2017. Comparing the temporal changes of airfares on
online travel agency websites and metasearch engines. Turizam: međunarodni znanstveno-
stručni časopis, 65(2), pp.187-203.
Forde, C. and Slater, G., 2016. Labour market regulation and the ‘competition state’: an
analysis of the implementation of the Agency Working Regulations in the UK. Work,
employment and society, 30(4), pp.590-606.
Francis, G. 2019. Average Brit's disposable income revealed - find out how you compare.
[online] mirror. Available at: https://www.mirror.co.uk/money/average-brits-disposable-
income-revealed-14081720 [Accessed 10 Jul. 2019].
Gough, J., 2018. Using Price-Adjusted Income Data to Measure Regional Income Inequality
Across the UK. World Economics, 19(1), pp.47-58.
Moloney, N., 2017. Brexit and EU financial governance: business as usual or institutional
change?. European Law Review, 42(1), pp.112-128.
Proactiveinvestors UK. 2019. Thomas Cook confirms 'disappointing' full year earnings and
turnaround plan. [online] Available at:
https://www.proactiveinvestors.co.uk/companies/news/210191/thomas-cook-confirms-
disappointing-full-year-earnings-and-turnaround-plan-210191.html [Accessed 10 Jul. 2019].
SiteVisibility. 2019. The Top Challenges Facing the Travel & Tourism Industry In 2019.
[online] Available at: https://www.sitevisibility.co.uk/blog/2019/03/08/top-challenges-facing-
travel-industry-2019/ [Accessed 10 Jul. 2019].
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Thomascookgroup.com. 2019. [online] Available at:
https://www.thomascookgroup.com/investors/insight_external_assest/
Thomas_Cook_AR_2018_web.pdf [Accessed 10 Jul. 2019].
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