HOS801 Strategies of Thomas Cook in Tourism and Hospitality Sector Assessment Answer
International College of Management, Sydney
Subject: HOS 801
|Subject Code: HOS801|
|Subject Name: Strategic Management in Tourism and Hospitality |
|Assignment Title: Thomas Cook|
|Word Count: 2,511 words.|
The selected topic is based on identification of strategic recommendations for Thomas Cook who is facing issues related to financial debts and is presently under receivership. While the Company has started ceasing its business operations, both the consumers and employees are getting affected across the globe. In this context, the company has been subjected to a rescue operation assisted by the Chinese organisation Fosun. Additionally, the company should prove for customised packages and online presence for regaining its lost trust. The analysis of external and internal environment illustrated the factors which the company needs to consider for attaining the competitive supremacy. While considering the improvement of pricing factor, the company should also emphasize towards corporate governance for regaining the public faith. The company needs to focus on large scale emergency planning, positive PR, regulation of process and utilisation of services for addressing consumer demands at regular intervals.
The following assignment will emphasize on the existing strategies of a chosen company in the Tourism and Hospitality Sector. In accordance to the present scenario, Thomas Cook, which happens to be one of the premier brands, was subjected to collapse, stranded several holidaymakers across the globe, and therefore, sparked the largest effort of peacetime refractriation in the history of Britain. The collapse of the company left nearly 6, 00, 000 tourists on the edge, which forced the governmental institutions and insurance organizations to take the initiative of coordinating a humungous rescue operation (Pylas, 2019). In an attempt to avoid bankruptcy, the company urged for 200 Million Euros. Apart from the consumers, several employees that the company selected across the globe are in verge of losing their jobs due to the financial woes experienced by the organization in present scenario.
Adding to its financial constraints, the company along with its several associations of UK entities have experienced the entering of compulsory liquidation and presently are under the controlling of the official receivership (Davies, 2019). Its business operations in UK have ceased its training procedures presently. Assistant service is being given by the Authority of Civil Aviation for supporting the consumers globally and in United Kingdom in regards to futuristic bookings (ABC News, 2019). While analysing the setbacks by the company, it could be stated that shifting habits of consumer travels, rising sites of online booking and sinking pound are the primary reason for the downfall of Thomas Cook in competitive market. While analysing the above scenario, strategic recommendation will be given for betterment of Thomas Cook business operations in the upcoming 12 months.
2.0 Brief History of Thomas Cook
Thomas Cook Group is an integrated travel related company that has its roots in England and was formed in June 2007 by merging Thomas Cook AG with My Travel Group. The group operated in the segments namely tour operators and airlines along with travel agencies in Europe. Thomas Cook was actually an English businessman who established the company Thomas Cook and Son in 1872. The company has 21,000 employees throughout the globe (Bloomberg, 2019). The group was listed in the London Stock Exchange. Previously the company had a wide range of services that includes Foreign Exchanges, Corporate and Leisure Travels, Insurance, Visa and Passport Services. However, owing to the incidents of receivership the company have the option of making a comeback as “online only agent of travel” (NewsComAu, 2019). The comeback could be effective due to stepping in of a Chinese organization Fosun who took the initiative of paying 20 million dollars for Thomas Cook. In this context, the Chinese company took active participation in purchasing the rights for using the name of Thomas Cook and its relative website for marketing the holidays. However, it is still not known when the company will be making its comeback in the online format.
3.0 Strategic Development of Thomas Cook
On an overall note, it is noticeable that the company takes the initiative of running several hotels, airlines, resorts and cruises for nearly 19 million consumers annually across 16 nations. Interestingly the company is presently under receivership for alleviating the challenges associated with its financial debts. In this context, the company ceased its business operations in Australia in early part of the year 2019. Owing to the stranding of six Lakh individuals globally, a rescue operation and strategic movement is essential for regaining its lost status in the competitive market, which is presently initiated by the Chinese company Fosun. The primary strategic movement that the company needs to make is to move online which the company have not stressed upon irrespective of announcing an alliance with the expedia in the year 2017. It mostly preferred operating physical stores with telephonic assistance. These days, the consumers are more technologically driven and therefore, they support the online platform more over physical stores. Furthermore, the company should focus on providing customized packages as packaged holidays are on a decline Nytimes.com, 2019). This is because consumers always want to choose tour elements as per their choice instead of going for a total package. As an initiative, the company should also cut off its operations from airline services, as it is an expensive deal. On an overall note, the company should focus on providing streamlined services to the target market as per their needs and wants.
4.0 Internal Environment Analysis of Thomas Cook (SWOT)
The internal environmental analysis will be referring to the penetrative reviewing of Thomas Cook’s organisational operations and internal functioning. The Framework of SWOT would assist in evaluating the potential areas of opportunities along with the risk factors the company needs to consider for attaining competitive edge.
Previously, Thomas Cook was denoted as an extremely affordable and reliable brand to most of the customers covering widespread destinations, having a large customer base catering to above 7 million customers throughout the globe and their global presence made them the most sought-after travel shop (Brignall, 2019). However, this has been a foregone conclusion for Thomas Cook owing to the fact the company is under receivership, which is subjected to compulsory liquidation (Timesnownews.com, 2019). On a present note, the only strength of the company is its brand identity, which has been globally known to the target market.
The major weakness of the company is the humongous financial debts experienced in the last few years. The banks of the tour operators are presently demanded 200 million Euros, suggesting the fact if the company fails to do so, the job of employees will be at stake and it will further result in stranding of the consumers. More dependency towards physical stores over online presence has also been a considerable challenge for the company resulting in further loss of consumer base (Nytimes.com, 2019). The company relies more towards total packaging tools instead of providing customized solutions. Over the years, the company has been subjected to criticism on several occasions resulting in loss of public faith.
It will be a great opportunity if Thomas Cook can penetrate the market by tapping international markets and improving digital presence throughout the globe. In this context, the company should be focussing only on coming back in the online platform for regaining its loss status in the competitive market.
Lower profitability & uncertainty in the airline business are a threat, which looms over the industry. Moreover, uncertainties and competitions mostly from low cost service providers leading to reduced market share are also raising concerns for Thomas Cook (Shengnan & Nedelea, 2019). Government regulations are dynamic in different countries it operates and therefore, it needs to be taken into consideration by Thomas Cook. Additionally it is still not known that the company who has tarnished their image due to receivership can ever make a comeback or not. Tour companies providing customized solutions are also a major threat for Thomas Cook until the necessary interventions are initiated.
5.0 External Environment Analysis of Thomas Cook (PESTLE)
The external environment analysis will emphasize on the macro factors, which may influence the business operations of Thomas Cook. Pestle Analysis will critically analyse the external factors impacting the company in the global context.
Political factors play a vital role in identifying several factors, which could help the company in gaining profitability on a long term in several nations across the globe. The company has its operations in 16 nations across the globe. However, owing to the act of receivership the company has ceased its operations in Australia and it could further take such initiatives if situation suggests.(Lemmen, 2018).The following factors needs to be taken into consideration by Thomas Cook before investing in a specific market. The factors are identification of the corruption level, risk associated with military invasions, favouring of trading partners, regulations of prices, rate of taxations, antitrust laws, mandatory worker benefits, regulations of work week in travel and leisure and protection of intellectual properties which the company needs to consider for gaining supremacy in the competitive market.
Several economic factors have an impact on the industry. These are savings, interest, foreign exchange, inflation rates. Market efficiency plays a pivotal role, as a stable economic system is an advantage for the organization to prosper (Dhiman & Kumar, 2019). Furthermore, Thomas Cook can conduct their business operations free in countries having open economy.
The culture of the society and ways of initiating things may influence the organisational culture within the competitive environment. Sharing of beliefs and population attitude plays a vital part in how the marketers of the company will be addressing the needs and wants of the consumers in a specific market. The culture, life style, age group and gender are some of the factors to be considered before targeting a market.
Different environment standards like weather, climate change, pollution, waste management, recycling can affect the profitability and growth of an organization (Garcia, Vázquez & Macías, 2015). In the modern era, the environmental regulations need to be strictly adhered and if it is not maintained the public image of the company could be affected in the competitive market.
Technology is a fast-moving industry and hence the competitors of Thomas Cook are ahead on many fronts like impact on cost and value chain structure (Scarles & Lester, 2016). The company should be updating their technological aspects in regards to consumer services, booking, cancellation and other processes.
Theft of organization’s data affects the competitive edge of an organization and hence Thomas Cook Group leadership should consider legal factors like copyright, data discrimination and protection before entering a new market.
6.0 Development of Strategies at Business, Corporate and Functional Level Business Level Strategies
6.1 Corporate Strategies
In corporate level of the business, the entire aim of the management is decided by the top executives and then it is sent to the SBUs. The customer can communicate to the travel experts with the help of some modern tools to confirm the description of the holiday packages. During the communication with that tools they will think that they were in a shop or over the phone with some travel experts. The company will make a mobile application for the customer so that they will be able book holidays. Besides, the company will create a tablet application so that the customer gets a spontaneous interaction with the travel experts. Sponsorship will be huge impact of the company. With the huge sponsorship the entire growth of the company will increase gradually (Wojdynski, Evans & Hoy, 2018). It is important to say that the financial profit is also depends on that such type of sponsorship.
6.2 Business Level Strategies
The proficiency of any organization should be based on customer satisfaction and it is executed through Business- level strategies. Cost Leadership, Differentiation and focus are three categories of the strategies.
Lower Cost Leadership Strategies
In this context, Thomas Cook observes their product price so that the price will be at lower cost and the business of the company will go at a peak point. However, there should be maintaining of the profit margin also, because without profit any business will no longer at any cost (Eva et al. 2018)
The company should offer its product to new client with the help of differentiation strategies. It enables the differentiation of quality and the speed of the service (Gonzalez- Rodriguez et al. 2018). This is the way to enhance the market share and Thomas Cook has benefited through this strategy.
Low Cost Focus Strategies
When the small firms compete with the vast firms the low-cost focus strategies are utilized to attract more customer and to enhance the market share (Zollo, Minoja & Coda, 2018). The strategies followed by Thomas Cook offer discounted offer so that more customers are able to take the product spontaneously and in the other side the profit margin of the company is maintained as expected.
6.3 Functional Strategies
To execute the corporate and business masterplan, functional level strategy is implemented. The strategy can be termed as tactical decisions for its ability to take decision of operational level process.
Innovation at market research
The initial stage for making the idea fruitfully is called the innovation at market research and development (Camilleri, 2018). With the help of some modern technologies and software, Thomas Cook observe the activities of other famous brands. Depending on that observation the company implements some innovative strategies on cultures, environment, locality, communication, attraction, security of some places.
Scheduling and Planning
From the initial stage to execute the plan the company maintains a proper plan and appropriate documentation. Time factor is a vital thing to accomplish the plan so that any work does not cross its specific time frame.
For better accommodations, food and safety of the customers contracting is a vital protocol that should be maintained by the company (Hilman & Kaliappen, 2015). Besides, good transportation is necessary for the travellers so that there will be good transport agencies to take after the tourist without any hamper.
7.0 Competitive edge and Sustainability approach
There are several businesses as well as structural reasons for the collapse of the company in the competitive market. Therefore, several consumers were holding back on booking holidays and with increasing number of competitors the task is becoming even more difficult. Therefore, the company had been struggling in recent times for gaining competitive edge. The future aspects of the brand in comparison to its rival brands are a bit unclear. For mitigating the challenge, the company had appointed the AlixPartners for managing the process of Liquidation (Vizard, 2019). Furthermore, the company will be trying to identify buyers for at least part of the organisation. For gaining consumer trust, the company should be focusing to develop an emotional connection with the consumers through provision of loyalty programs.
Previously, the company was criticised for its less emphasis on waste management and pollution due to airlines emissions. It automatically affected the public image of the company. Adding to the financial woes, loss of public confidence proved to be a major challenge for Thomas Cook. In this context, the company implemented a sustainable approach by lowering the emissions of fuels, reducing waste of foods and enhancing charitable activities (Keeley, 2019). The approach mainly aimed at lowering the environmental degradation and emphasize more towards financial and societal advantages. Furthermore, the company emphasizes on minimising the usage of water unnecessarily and limits wastage of food simultaneously through provision of sustainable services. They should contribute more towards welfare of communities in rural areas for refreshing their public image amongst the consumers.
8.0 Influence of mergers and acquisitions and Global Strategies
The merger of Thomas Cook with My Travel resulted in consolidation of industries due to availability of approximately 3000 employees within fifteen sources of markets (Spike & Blitz, 2019). The merger resulted in owning 52% of the capital which will be helpful in hastening the consolidation with the operating industry of the tourism sector. Additionally, Thomas Cook also formed a merger with Sterling Holiday resorts in India. The merger resulted in cash and dealing of stocks with a valuation of nearly 870 crore rupees having a profitable market value of nearly 3000 crore rupees (Reporter, 2019). The company was also effective in acquiring Elegant resorts comprising of 160 staffs and assets grossing around 22 million Euros. Irrespective of its merger and acquisitions, the financial debts of the company in recent past could not be managed. In this context, it could be stated that the company should be targeting the developing nations and heavily invest on Green Field Investment. The adaptability of Green Field Investments will not only be resulting in enhanced controlling of business operations but it will also assist in bypassing of the trading restrictions. Irrespective of high initial investments, the company can make financial gains effectively.
Due to enhancing globalisation in the last few years, Thomas Cook also took the initiative of crossing national borders for conducting business globally. Thomas cook conducts its business operations across several nations across the globe such as Australia, India etc. In this regards the company follows a transnational approach where the company aims at maximising the responsiveness of the local market but also acquires advantages from international integration of business. By adopting a transnational approach, the company takes active participation in creating economies of scale more upstreaming within the value chain (Pruthi, Basu & Wright, 2019). Likewise, it is flexible as well as locally adaptable in regards to down streaming activities likes sales processes and marketing. However, Standardization of products and services could also assist in regaining the lost status of the company in the competitive market.
9.0 Strategic Implementation and the essentiality of entrepreneurship and Leadership
9.1 Strategic Implementation
Accomplishment of Thomas Cook with Bridge
Thomas Cook improved search engine indexing through online quote forms and by phone. Many folds increase in audience was achieved during the process. Growth in traffic as well as real time lead generation can be generated for each agency.
Thomas Cook informs customers about the ways they can contribute and work with suppliers to reach the standard necessity for the company’s success. The social and environmental impacts are related to the places they serve in and the suppliers they cater besides providing them with all the information needed.
9.2 Importance of Leadership
Throughout its tenure Thomas Cook accepted challenges, but in the year 2011 their profitability came to a sudden end as they were bailed out with an emergency loan by groups of banks. In 2019 they reported a huge financial loss in the first half while also shouldering the debt from the bail intensifying the fiscal pressure (Reilly, 2019). Currency shifts and travel norms being changed made a more difficult market for the operator.
Changing Products to Meet Demand
Leaders should understand preference of customer and change products accordingly. Availability of low-cost airlines also played a major part in enhancing profitability of Thomas Cook.
Positive PR for Engaged Companies
Futures of Thomas Cook employees were extremely uncertain after the collapse. Smaller companies tried to reach out to those who had lost their job. Offers of new employment, spa treatments have poured in. Other Airline operators created advertisements for the former cabin crew as well. Leaders should offer career advice and emotional support for the unemployed personnel (Reilly, 2019).
Large-Scale Emergency Planning
Communication between departments played a key role favouring the stranded tourists. Collaboration between consultants also played a major part. Leaders should improve communication and collaboration to achieve large scale emergency planning.
The Importance of Regulation
Regulatory Bodies offers benefits to the customers and hence business owners are now engaging with them to get protection from financial losses (Reilly, 2019). The client base may be shifted in the favour of more trustworthy companies. Leaders should attach themselves with these regulatory bodies to attract more potential customers.
9.3 Importance of Entrepreneurship
A successful entrepreneur is not the one who starts new ventures every day. He must have the motivation and determination in him to succeed (Smith, Rees & Murray, 2016). Apart from that a successful entrepreneur should prioritize and should be able to make wise decisions besides planning for both the long- and short-term goals Following entrepreneurship decisions are considered by the Top management of Thomas Cook.
Discrimination of price
Domestic travel and tourism organization offers quality services to customers despite having limited financial support. However financially sound international travel companies like Thomas Cook should offer special discount to customers influencing sales.
Transportation services utilization
International travel organizations like Thomas Cook book the high-quality transportation services for aiding the consumer needs and demands.
10.0 Organisational Structure and Controlling
10.1 Organisational Structure
For improving the overall organisational structure, the company took active participation in lessening the management layers amongst the CEO and consumers, thus enhancing the controlling. However, the company should focus on optimisation surrounding the needs of business instead of focusing on past acquisitions. The company also adjusted their distribution channel for aligning with where the consumers are willing to meet (Thomascookgroup.com, 2019). However, the company needs to streamline the functions of the back office by integrating through a centralised approach. In this context, the company has moved the group offices to low cost premises. The company should be probing for delivery of omni-channel consumer experience for gaining competitive supremacy.
In regards to controlling, the company should emphasize on 360-degree feedback for monitoring the performance of their employees. Calculation of return on investment helps the company to calculate the profit and loss margins effectively. Application of the CRM software assists in tracking consumer behavioural intentions, which indeed help the company in taking controlled measures for satisfying consumer needs.
10.3 Corporate Governance
According to the corporate report the cost failure is the worst case after the collapse of the Thomas Cook. The employees as well as the holidaymakers are facing a lot of problem for this mishap. Although the company has several number of insurance schemes but the taxpayers are in front of the herculean loss (the Guardian, 2019). In the balance sheet there are a revenue loss of almost $3.1 bn. Due to mishap the company is facing a lot of financial problem that affect the entire growth of the company.
As discussed above the Thomas Cook Company may follow some measure steps to overcome such types of issues.
- The company should increase the diversity that helps to enhance the development of the company.
- The Nominating Committee should select expert board members with analytical knowledge. The board members should have the required balanced skills that the interaction and bonding with the other members will be concrete.
- Bonding with the senior most and the other employees of the company should be transparent and the communication should maintain with a stipulated time factor.
- To evaluate the potential hazards and implementing appropriate steps will be taken to solve the limitations.
- To scrutinize the contributions and limitations of the board members and implement strategic decisions for increasing the financial status of the organization.
While concluding, it could be stated that Thomas Cook is one of the recognised brands in the global market, yet it suffered financial loss owing to increasing competition, poor strategic decision and corporate governance issues. The company effective analysed the internal and external environment which would give them an opportunity for taking strategic decisions which could assist in regaining the lost status in the competitive market. Effective market research, pricing schemes, standardisation of products and services, lowering fuel emissions, alterations of organisational structure and effective controlling measures serves as strategic recommendation for the company in mere future.