In this paper, I will analyse the development of the UK package holiday industry between 1974 and 2015. This entails an analysis of the industry structure in both years seen from a Porter’s 5 forces view, a detailed explanation of macro environmental causes of this development as well as an illustration at Thomas Cook.
The major changes in the industry structure are significant increases in buyer- and supplier power, in threat from substitutes as well as in rivalry within the industry. This is majorly triggered by changes in the macro and meso environment:
(1) The advent of the Internet and digital revolution opened up new distribution and information channels, shifting the power towards buyers and suppliers, as well as new possibilities in sophisticated data collection and analysis.
(2) Growing intercultural experience of Britons triggered a shift in preferences towards individualised travelling.
(3) A rising awareness of issues concerning society’s wellbeing has started to become a concern in travel and will become more important in the future.
(4) A number of deregulations have acted as catalysts for the globalisation of the package holiday industry.
(5) Rising macro environmental worries, political unrest and natural catastrophes have led to the recovery of the industry after years of decline due to the blossoming of independently organised holidays.
(6) The emergence of budget carriers has enabled customers to organise their own holiday at a lower price.
These environmental changes have caused Thomas Cook to change in 4 main areas since 1974: (1) they have become part of the Thomas Cook Group, (2) they pursue a digital innovation leadership and development of multi channel distribution, (3) they differentiate their products by high flexibility and quality guarantee through concept and partner hotels, (4) they offer superior service by being in close dialogue with its customers and staying in touch in the post-holiday period to learn from customers’ critique.
Table of Contents
1. Introduction
2. 5 Forces analysis 1974
2.1 Rivalry among existing competitors
2.2 Power of buyers
2.3 Power of suppliers
2.4 Threat of new entrants
2.5 Threat of substitutes
3. 5 Forces analysis 2015
3.1 Rivalry among existing competitors
3.2 Power of buyers
3.3 Power of suppliers
3.4 Threat of new entrants
3.5 Threat of substitutes
4. The major environmental changes - partial PESTLE analysis
4.1 Technological factors
4.1.1 Online distribution
4.1.2 Information and communication channel
4.1.3 Big data
4.2 Socio cultural factors
4.2.1 Intercultural experience
4.2.2 Shared value
4.3 Political factors
4.3.1 Deregulation
4.3.2 Environmental risks
4.4 Meso environment
5. Case study: Thomas Cook
5.1 Company and asset structure
5.2 Digitalisation strategy
5.3 Holiday package strategy
5.4 Service strategy
6. Conclusion
Research Objectives and Core Themes
This paper examines the evolution of the UK package holiday industry between 1974 and 2015. The central research question explores how structural changes, driven by macro-environmental shifts and digital transformation, have redefined competitive dynamics for major industry players like Thomas Cook.
- Application of Porter's Five Forces framework to compare industry structures across different decades.
- Analysis of the impact of the Internet and digital revolution on consumer behavior and distribution channels.
- Evaluation of macro-environmental influences including deregulation, socio-cultural shifts, and economic trends.
- Investigation into the adaptation strategies of Thomas Cook within the modern travel landscape.
Extract from the Book
Power of suppliers
The power of suppliers has become considerably high.
The major reason is that the online channel enables them to bypass the package holiday industry by selling directly to customers (Jones, 2008). This way they can save the travel agents’ commissions and offer a far cheaper price (Conolly et al., 1998). Furthermore, most countries have a travel industry nowadays, enabling suppliers to cater other countries’ travel industries. The proportion of revenue generated through UK package holiday companies and hence their dependence on the industry have decreased significantly.
Suppliers are more concentrated as there are major international organisations. According to Hospitality Net (2013), the top 6 hotel groups account for more than 50% of group hotel bookings. There are no good substitutes for these superior brands and failing to collaborate with them could put tour operators in disadvantage to its competitors. Furthermore, they have the resources to credibly threaten a forward integration. British Airways and Easy Jet have already launched their own package holiday online portal.
Chapter Summaries
1. Introduction: Provides a historical overview of the package holiday industry's origins and its significance for the UK market.
2. 5 Forces analysis 1974: Analyzes the industry structure in 1974 using Porter’s framework, highlighting high rivalry and low buyer power.
3. 5 Forces analysis 2015: Contrasts the 1974 structure with the 2015 landscape, demonstrating shifts toward higher buyer power and intense competition.
4. The major environmental changes - partial PESTLE analysis: Evaluates technological, socio-cultural, and political factors that have reshaped the travel environment.
5. Case study: Thomas Cook: Illustrates the strategic response of Thomas Cook in areas such as digital innovation and service customization.
6. Conclusion: Summarizes the transformation of critical success factors and the necessity for continuous adaptation in a turbulent environment.
Keywords
Package Holiday, Thomas Cook, Porter’s Five Forces, Digital Revolution, Consumer Behavior, Industry Structure, Online Distribution, Travel Industry, Market Strategy, Big Data, Dynamic Packaging, Competitive Advantage, Customer Relationship, Service Innovation, Tourism.
Frequently Asked Questions
What is the fundamental focus of this research paper?
The paper provides a comprehensive analysis of how the UK package holiday industry has evolved over four decades, specifically comparing the market conditions of 1974 with those of 2015.
Which thematic fields are central to this study?
The core themes include competitive strategy, digital transformation, environmental scanning (PESTLE), and organizational adaptation within the tourism sector.
What is the primary objective of this assessment?
The primary goal is to identify how macro-environmental changes and the digital shift have forced a transformation in the power dynamics between industry players, suppliers, and buyers.
Which scientific methodology is applied in this analysis?
The author utilizes Porter’s Five Forces model to assess industry competitiveness and integrates this with a partial PESTLE analysis to understand environmental influences on the sector.
What topics are discussed in the main body of the paper?
The main body covers the 1974 and 2015 industry landscapes, technological factors (like big data and online distribution), socio-cultural changes, and a detailed case study of Thomas Cook.
Which keywords best characterize the work?
Key terms include Package Holiday, Competitive Advantage, Digital Revolution, Consumer Behavior, and Strategic Adaptation.
How has the emergence of budget carriers impacted the industry structure?
Budget carriers enabled customers to bypass traditional tour operators, thereby increasing the threat of substitutes and driving the need for industry players to lower prices and enhance service flexibility.
What specific strategy does Thomas Cook use to maintain competitiveness?
Thomas Cook employs a "high tech, high touch" approach, focusing on digital multi-channel distribution and personalized service experiences through concept and partnership hotels.
What role does big data play in the modern package holiday industry?
Big data is essential for understanding customer needs, fostering innovation, and driving personalization, allowing firms to become more responsive in a competitive market.
Why did the author choose to compare 1974 and 2015 specifically?
The year 1974 represents a period of high industry rivalry and economic challenges, providing a sharp contrast to the digitalized, hyper-competitive, and buyer-centric market of 2015.
- Quote paper
- Nicklas Westphal (Author), 2016, Analysis of the UK Package Holiday Industry and its Environment, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/367958
