FDY3002- Exploring the Business Environment: A Case Study on TravelTales

FDY3002- Exploring the Business Environment

Case Study

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Executive Summary

The case study has shed light on the various challenges hampering business operations and performance of TravelTales. Due to the lack of managerial capabilities of the owner, the business lacks a proper vision and direction impacting employee retention. Additionally, external challenges like changes in customer preferences, high competition and more create barriers for the company. Moreover, without proper functions like HRM, finance, operations and more, the company is struggling to operate efficiently. In this scenario, a range of recommendations have been proposed in the report. This includes investing in advanced technologies, designing and implementing digital marketing strategies, focusing on sustainable practices and more.

Introduction

Internal business environment refers to several internal elements or factors within the control of a business which impact the decisions and operations of the company (Kamble, 2024). This can include aspects like value system, vision and mission of the company, corporate culture, employees and more. The external environment constitutes factors beyond the jurisdiction of a company influencing its operations and activities. Understanding the business environment is important as this helps anticipate changes inside and outside of the business. According to Bachtiar et al. (2023) external environment is a crucial contextual factor in terms of strategic management perspective as this significantly impacts company performance. This also provides insights into the needs and wants of customers helping businesses to communicate with them effectively. Additionally, this helps identify valuable resources, threats and opportunities and therefore, plan and orchestrate activities and strategies to enhance overall performance. Hence, the case study report will aim to analyse the current problem faced by TravelTales regarding its internal and external environment. Based on the analysis, justified recommendations will be provided to the company. TravelTales is a travel agency offering personalised offerings to its customers (Taken from the case study).

Problem Identification

Current external business environment issues

• High competition is one of the major issues in the external world that can impact TravelTales significantly. As of 2024, there are approximately 4484 travel agencies in the UK (IBIS World, 2024). Although the number has declined at a rate of 1.7% between 2019 and 2024, the total sum of travel agencies is substantially high causing high competition for the company.

• Changing customer preferences can be another major issue for TravelTales. Despite customers seeking unique and personalised experiences in the UK, sustainable and eco-friendly travel practices have gained priority among customers (Statista, 2024). Customers have become more environmentally friendly and hence, are inclined to engage with travel operators which demonstrates commitment to sustainable and eco-friendly practices. Thus, TravelTales can face significant challenges in attracting more customers for its unique and personalised experiences.

• TravelTales offers premium tour packages to domestic and international destinations at high prices (Refer to the case study). However, customer confidence in the UK decreased from -13 points in August 2024 to -20 points in September 2024 (Trading Economics, 2024). A decreasing consumer confidence rate signifies distrust of consumers on the economy of their country and hence, this can influence customers to spend less on expensive tours and travel. This will negatively impact the business of TravelTales leading to impacting its financial performance further.

Current internal business environment issues

• Lack of managerial experience and knowledge is one of the major internal challenges that TravelTales is facing currently. Although the owner of the company has significant experience as a travel agent, due to a lack of managerial capabilities, the business decisions made have been inefficient. Heubeck (2023) stated that dynamic managerial capabilities theory suggests the need for managerial capabilities in managing individual-level dynamics to drive firm-level heterogeneity. However, there is no direction and vision of the company, making employees feel frustrated and bored.

• Apart from this, the company also suffers from its limited brand awareness. As the company relied on word-of-mouth promotions and advertised in local newspapers, it did not help in creating a strong brand presence for TravelTales. Without proper brand awareness, attracting customers to its offerings and such became challenging for the company leading to fewer bookings. This further led to plummeting sales and revenues which affected its financial performance and can also affect sustaining the business in the future.

Issues in key business functions of TravelTales

• Finance- Poor financial performance and management resulted in declining revenue (Refer to Appendix). With slowed cash flow, the overhead costs of the company amplified prompting the owner to pay the salaries of employees from their personal savings.

• Operations- The reliance on basic software packages made operations slow and burdensome. New and advanced technologies such as analytics, AI, and more are helping tour and travel businesses to enhance day-to-day operations to improve customer experience. However, the process of managing bookings manually made it challenging and time-consuming for employees creating errors and such.

• Marketing- The major problem in the marketing function is the lack of proper marketing strategies in TravelTales. Individual rapport and word-of-mouth publicity are the two promotional activities that the company focused on which bore no fruitful results (Extracted from the case study). Despite spending significant time on holding meetings for personal rapports and more, the conversion rate is only 1 out of 10 meetings. Although the owner used social media marketing through his personal social media accounts, the outcome was not satisfactory.

• People- The company is facing severe challenges in regards to its management of employees. A lack of managerial experience and hurriedness caused TravelTales to hire people who have little to no experience, skills and knowledge of the tour and travel industry (Refer to the case study). Additionally, the owner also failed to provide a comprehensive view of the company’s vision, responsibilities expected from employees and such. This led employees to feel demotivated and frustrated.

Ethical issues associated with TravelTales

Business ethics is defined as moral principles and guidelines which guide a company in conducting its business (CFI, 2024). It helps businesses differentiate rights from wrongs helping them to ethically operate in the market. Adhering to business ethics is important as this ensures that businesses are operating in line with regulations and laws, thus, protecting them from legal liabilities. Furthermore, this helps in developing a strong and positive reputation for a business appealing to customers. However, as found in the case study, being a sole trader, the owner found it quite challenging to fulfil all the legal responsibilities. Businesses are levied to obtain legal licenses and permits to operate legally and ethically in a country, however, Amar failed to renew his licenses due to excessive administrative pressure from his sole trader business. This can lead to the company facing legal consequences as it violates the regulation set by the UK government which can result in its license being revoked.

Proposed Solutions

Introducing sustainable and personalised tours- As identified in the above section, changing customer preference for eco-friendly and sustainable tour practices can affect the company. To mitigate this external challenge, the company can prioritise minimising its environmental impact by using eco-friendly transportation and encouraging travellers to embrace sustainable practices like reducing waste and more. TravelTales can also partner with eco-friendly hotels, accommodations, and more to appeal to environmentally-conscious customers and reduce their carbon footprint.  It can also justify its premium pricing and thus, create trust among customers to spend money on sustainable and personalised tour packages. Apart from this, it has been found that domestic tour operators have remained at the top of the market (IBIS World, 2024). Many companies offer various accommodations, transportation options, activities and more in their packages. Hence, the company can also offer such products and services along with other personalised services like unique itineraries tailored to individual preferences for its domestic tour packages to attract customers. This can be a way of differentiating the company from its competitors and stand out in the market.

Investment in management and business functions- There is a necessity for TravelTales to improve its management to mitigate the inefficiency in its decision-making and operations. To achieve this, the company can hire an experienced manager who can handle various administrative decisions and provide direction to employees. Combining the experience of the owner of numerous years with an expert manager can help manage the company more efficiently and develop strategies that can help it become a leading tour operator.

Utilising Technologies- The tour and travel industry has been shaped by the integration of various advanced technologies. In this regard, investing in modern technologies can help streamline processes, improve efficiency and enhance customer experience. Along with this, the company is also recommended to upgrade its IT infrastructure by investing in advanced software and tools to enhance operational efficiency and reduce errors. Rashideh (2020) implied that blockchain technology helps in developing secured digital records and ensures effective data storage which can be useful in mitigating TravelTale’s issue of booking errors and such. Additionally, the company can also prioritise implementing booking systems and exploring AI usages and other technologies to minimise the burden of the manual system of TravelTales.

Establishing proper HRM function- In line with the lack of HR function in TravelTales, it is recommended that the company establishes a proper HRM function to deal with employee-related stuff. In this context, the Harvard model of HRM suggests that HRM is responsible for all managerial decisions affecting the nature of relationships between employees and organisations (Armstrong and Taylor, 2023). It further addresses five components namely stakeholder interest, situational factors, HRM policies and policy choices, HR outcomes and long-term consequences which help HR professionals to identify and address the needs of the organisation. In the case of TravelTales, HR should focus on developing policies for employees and managing staff efficiently. Additionally, they should also prioritise hiring the right employees for the company with knowledge and experience in the tour and travel industry. This will ensure that the company can offer efficient services through experienced employees.

Developing effective digital marketing strategies- Another recommendation for TravelTales is to develop marketing strategies for itself to increase awareness of the company and promote itself to customers. Digital marketing is cost-effective and can easily reach a larger base audience and considering the financial crunch of TravelTales, this marketing will be efficient. Using official social media accounts instead of the personal accounts of the owner can help attract more customers. As of 2024, 56.2 million Britons actively use social media in the UK, hence, using social media marketing can be helpful in connecting with larger audiences (Statista, 2024). Additionally, search engine optimisation, email marketing, content marketing and more can be useful as well. In this context, the company can also leverage the AIDA model which helps in building noteworthy and positive relationships with customers through promotions (Pramita and Manafe, 2022). Comprising four stages such as attention, interest, desire, and action, the model can guide businesses to develop effective digital marketing strategies and measurements to prevent any undesired consequences.

Adherence to regulations- In regard to making the business an ethical one, TravelTales is required to adhere to the rules and regulations of the country in which it operates including obtaining the necessary permits and licenses associated with running a business. Kumar (2023) has mentioned that a license can ensure that a business abides by industry regulations and safeguards which gains the interest of service providers and customers. It also instils confidence in consumers regarding the tour operator. Furthermore, as TravelTales is aiming to grab the opportunity provided by the excursion operator, it will be necessary for the company to adhere to the rules and regulations of the international countries where TravelTales will offer its tours and packages. In addition to this, the company can also develop a code of conduct outlining the values of the company and expectations from employees. Through this, the company can guide ethical decision-making along with promoting ethical behaviour among employees.

Conclusion

Thus, the report can be concluded by stating that TravelTales is facing severe challenges due to internal and external business environments. While high competition, changing customer preferences, and decreasing consumer confidence are some major external challenges, internal issues like poor management, unclear strategies and decisions of the owner, ethical issues due to negligence in renewal of licenses and more affect the company. It is suggested that TravelTales prioritise setting proper functions like management, HR and more along with developing efficient digital marketing strategies for better performance. Along with this, it has been proposed that TravelTales focus on sustainable and environmentally friendly practices along with its personalised services to differentiate itself from competitors and cater to changing customer needs. Additionally, adhering to regulations and setting a code of ethics to become an ethical business will also be necessary for the company. Utilisation of advanced technologies like AI, blockchain and more to enhance operational efficiency.

Reference List

Armstrong, M. and Taylor, S., (2023). Armstrong's handbook of human resource management practice: A guide to the theory and practice of people management. Kogan Page Publishers.

Bachtiar, F., Atmoko, A.D. and Bachtiar, D.I., (2023). ENVIRONMENTAL IMPACT ANALYSIS OF EXTERNAL AND INTERNAL BUSINESSES AGAINST THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES. International Journal of Economics, Business and Accounting Research (IJEBAR), 7 (1), pp. 164-172.

CFI, (2024). Business Ethics [online]. Canada: Corporate Finance Institute. Available from: https://corporatefinanceinstitute.com/resources/esg/business-ethics/ [Accessed 04 October 2024].

Heubeck, T., (2023). Managerial capabilities as facilitators of digital transformation? Dynamic managerial capabilities as antecedents to digital business model transformation and firm performance. Digital Business, 3 (1).

IBIS World, (2024). Tour Operators in the UK - Market Research Report (2014-2029) [online]. Australia: IBIS World. Available from: https://www.ibisworld.com/united-kingdom/market-research-reports/tour-operators-industry/ [Accessed 04 October 2024].

IBIS World, (2024). Travel Agencies in the UK - Market Research Report (2014-2029) [online]. Australia: IBIS World. Available from: https://www.ibisworld.com/united-kingdom/market-research-reports/travel-agencies-industry/#Faqs [Accessed 04 October 2024].

Kamble, S., (2024). Business Environment – Definition, Components, & Features [online]. Feedough. Available from: https://www.feedough.com/business-environment-definition-components/ [Accessed 04 October 2024].

Kumar, R., (2023). Importance & Process of Obtaining a Tour Operator License [online]. Medium. Available from: https://medium.com/@rohitrboacademy/importance-process-of-obtaining-a-tour-operator-license-baeca6ed8d5e [Accessed 04 October 2024].

Pramita, K. and Manafe, L.A., (2022). Personal selling implementation and AIDA model; Attention, interest, desire, action. (International Journal of Entrepreneurship and Business Development), 5 (3), pp. 487-494.

Rashideh, W., (2020). Blockchain technology framework: Current and future perspectives for the tourism industry. Tourism Management, 80.

Statista, (2024). Active social media users in the United Kingdom (UK) 2024 [online]. Germany: Statista Research Department. Available from: https://www.statista.com/statistics/507405/uk-active-social-media-and-mobile-social-media-users/#:~:text=That%20translated%20to%20a%20social,the%20population%20of%20the%20UK. [Accessed 04 October 2024].

Statista, (2024). Travel & Tourism - United Kingdom [online]. Germany: Statista Research Department. Available from: https://www.statista.com/outlook/mmo/travel-tourism/united-kingdom [Accessed 04 October 2024].

Trading Economics, (2024). United Kingdom Consumer Confidence [online]. USA: Trading Economics. Available from: https://tradingeconomics.com/united-kingdom/consumer-confidence#:~:text=Consumer%20Confidence%20in%20the%20United,points%20in%20September%20of%202022. [Accessed 04 October 2024].

Appendix

Figure 1: Monthly revenue of TravelTales

(Source: Taken from the case study)