Unit 6 Contemporary Issues in Travel and Tourism Assignment
Diploma in Travel and Tourism
Unit Number and Title
Unit 6 Contemporary Issues in Travel and Tourism Solution
The Contemporary Issues in Travel and Tourism initiates with the discussion of the changes of the Business environment that have its impact on the tourism industry. SWOT and PESTEL analysis of IAG is discussed in the unit for better description. International airline group is the multinational airline holding group. It is a British-Spanish group that owns fifth position in the airline industry. Later part of the unit discusses about the case of Myla travel agency. This discussion throws light on the issues that drive changes to the company’s strategies and the consequences faced by the company if does not respond to the changes.
3.1 Analyse how International Airlines Group businesses could respond to change.
International airline group is the multinational airline holding group. It is a British-Spanish group that owns fifth position in the airline industry. It is considered as one of the best airline in the world. The business owns 500 aircraft and made almost 95 million people to let travel from one destination to another. The company has headquartered at London, UK and registered on Spain as well. (Iairgroup.com, 2016)
The company is doing very well in the business and this is because of the way it respond to the changes that are occurring in this dynamic environment. It is important and essential for every company or business to adopt those changes and bring modifications in their own policies that compliments that change. Restriction to change does not help the businesses in long run. Every business has different ways to respond to these changes. This can be better understood by studying the SWOT and PEST analysis of IAG:
SWOT analysis: It is the method that allows to study the strength, weakness, opportunities and threats of the business. Opportunities and threat are the external factors and strength and weakness are the internal factors that affect the business of the company. (Jack and Phipps, 2005)
- Large coverage: The Company owns 500 aircrafts that facilitates the company to cover around 250 destinations all over the world. This suggests that IAG has a large coverage area.
- Large customer base: AS discussed, IAG serves around 95 million customers every year. This is a large number and thus company covers a large customer base in comparison to other forms in the industry.
- Quality: Wide range of services has been available for the customers without compromising in the quality. The company served quality products to the passengers.
- Brand image: IAG is the business group that has its brand image in the market. This may be because of the huge business coverage and the quality products they offer. (Kelner, 2010)
- High CASK: The Company fails in reduction of its unit cost. It still has very high cost in terms of measurement of cost per available seat kilometer.
- Lower returns:The company get very low return on invested capital (ROIC).
- Merger: The Company has the opportunity to expand its business by further mergers of smaller airlines into it.
- Expansion to Asia specific: The business of the company is restricted to 5% in Asia Pacific region. This is the most beneficial opportunity for the company to start its business in the area. (Lerrthaitrakul and Panjakajornsak, 2014)
- Threat of competitors:Competition from LCC is always there for the company as a threat.
- High cost: High cost of raw materials in turn increase the operation cost for the company.
PEST analysis: PEST refers to analysis of political, economical, technological and social factors that affect the business of the organisation.
- Political factors: Aviation industry needs to follow some of the strict rue and regulation formed by the government. This industry is very susceptible to terrorist attacks and accidents. Therefore, some of the security measures have been introduced by the government in order to safeguard the passengers from this. The safety standards have been regulated and formulated by The International Aviation Organisation.
- Economic factors: As stated that IAG is the international airline business and thus get affected by fluctuation in the world economy. IAG get severely affected by the 2008 recession. (Otgaar, 2010)
- Social factors: Social factors that mainly affect the business are choices, demands and change in lifestyle of the people. Customers always prefer to opt for the brand that provides them with quality products in affordable prices. The change in their choices may differ according to their lifestyle and beliefs.
- Technological factors: Advancement in the technology forces the companies to update their processes accordingly. Facilities of online booking and introduction of mobile apps proved very beneficial for the aviation industry business as well as for the passengers.
3.2- Develop strategies on how International Airlines Group businesses such as British Airways, Iberia, Vueling and Aer Lingus could respond to change. You need to select and develop strategies for at least two businesses. Provide detailed explanation of your strategies.
International group of Airlines group includes British Airways, Iberia, Vueling and Aer Lingus. Although they are in same business group but manages to adopt different strategies to deal with the market. The two businesses that have been selected to analyze the response towards the charge are British airways and Vueling. (Park, Qu and Lee, 2011)
Marketing mix of British Airways:
- Product: product of British Airways involves traveling, food and luxury services to the people while they travel. The wide range of services and products are available to be served because the company focuses on serving several classes.
- Price: British airways serve the customers with every class and thus they have services for middle class, higher class and premium class people. The price of the services has been decided according to the value services served to the customers.
- Place: British Airways have their flights from different airports and owns their own warehouse for servicing of the aircrafts.
- Promotion: The main techniques that are used by British Airways to promote its brand by giving special offers, discounts and membership to the passengers.
Marketing mix of Vueling:
- Product: This airline serves the middle customers hence they have the products and services only for this class.
- Price: The pries of the services and products they offer is very nominal keeping in mind the purchasing power of their target customers that are middle class people.
- Place: The Company operated through any secondary airports.
- Promotion: The Company believes in attracting people or customers by using online methods such as social networking. (Tribe, 2009)
After analysis of the two companies, it has been identified that the following strategies can be used by the company in order to develop their brands and effective response to the change.
Product development: Product development strategy suggests that company can launch and introduce new products in the market to extend their brand. Both the brands can go for this method of development.
Market development: Vueling should use this business strategy in order to build the brand image as well as to develop the market. It has to take some of the initiatives that allow the company to cover large customer base and large market. (Jack and Phipps, 2005)
3.3 Justify strategies for how selected International Airlines businesses could respond to change. Your strategies in 3.2 needs to be clearly justified with supporting arguments
Market development and product development are the two strategies that can be used by the companies to respond to the market changes. After analyzing both the companies by using SWOT, PEST and marketing mix analysis, it has been observed that IAG is doing very well in response to the changes. The different airline companies in the group are responding differently to the changes.
British Airways uses the product development strategy to serve wide range of the customers with its products. The airline has a wide target market that involves middle class, higher class and premium class people. British Airways uses the strategy of product development to develop various products that are required by the customers of different class. It is essential for the company to use this as it needs to serve many customers with different preferences at the same time. (Kelner, 2010)
Vueling is the airline company that caters the customers of middle class. Therefore, the strategy that can be beneficial for this airline is the market development strategy. The company uses this strategy to capture more market areas of its target customers only. The promotional tools used by the company to develop the market were social media marketing, online marketing etc. The nominal pricing strategy is also the way to penetrate into the market as services at this price allow the companies to serve large number of customers from middle class range.
4.1 Analyse the impacts of issues and trends that drive change in the travel and tourism sector with reference to Myla Travel, Thomas Cook and The Travel Network Group.
Thomas Cook is one of the best tour operators of UK and Myla Travel is the travel agency company that has around 10 offices in UK. Thomas Cook wants to acquire the Myla travel agency in order to expand the business. The Network group wants Myla travels to join their group. Below is the management report that assists the directors of Myla travels to take better decision:
Myla Travels need to respond to the changes in the environment. The major idea that supports the company is the idea of merger with another company. This facilitates Myla to expand its business. (Lerrthaitrakul and Panjakajornsak, 2014)
Impact of trends on tourism:
- Lifestyle of customers: The Change in the lifestyle and choices of the customers has great impact on the tourism industry. The travel agencies need to anlayse those changes and have to modify their practices according to the change. Tourism is a customer oriented industry and thus the business in this sector has to match up the services with the changing demands of the customers. Myla travel also has to analyse these changes and need to make modifications required to serve the changing needs of the customers.
- Capital investment: Investment is the major factor that affects the business processes. To acquire more of the market area, Myla needs to invest huge amount of capita so that it can improve its processes to serve the customers.
- Technology: Technology is one of the most trendy factor the affect every business. Tourism is very much affected by change in the technology because the customers become techno savvy and wants to be facilitated online for all the purposes. Myla agency can come up with its own application that allows the customers to book tickets online. They can make use of the social networking sites to market its product with discounts and special offers. (Otgaar, 2010)
Methods that can be sued to expand business are:
- Mergers: Merger refers to dissolution of the two or more organisation into one. The company newly formed is the results of the combination of all the resources of the companies that has merged.
- Acquisitions:Acquisition is the method in which a big and powerful company acquires another small or sick company in order to increase the market share and coverage. The identity of the company that is acquired is totally dissolved after the acquisition.
- Consortia formation: Consortia are the group of many companies that support each other for betterment of all. (Park, Qu and Lee, 2011)
4.2 Discuss the likely consequences of businesses failing to respond to market change with reference to Myla Travel, Thomas Cook and The Travel Network Group.
Organisation manufactures the products and services to serve the market. Therefore they are to make the products and services according to the market choices. They alos need to change and modify theory services according to the trends prevailing in the market. Tourism is the industry that is customers oriented and thus requires responding to the changes happening in the environment as well as in the demands and choice of the customers. If business fails to respond to these changes, they need to suffer in following ways:
- Fall in profit: if the organisation such as Myla travels, Thomas Cook etc does not make changes in the product and services according to the customer’s choices than it leads to fall in their profit margin as sales of the product or service get reduced.
- Negative image: Image of the brand gets affected if the brand does not respond to the changes. People start neglecting the brands that does not serve the product of their choices. Businesses cannot be able to promote their product as they are not the preference of the market. (Kelner, 2010)
The above consequences suggest that it is very necessary for the Myla travels to expand its business by making any of the changes as it act as the positive response to the changes occurring in the market. Acquisition of the Myla travel agency by Thomas Cook left the company with dissolved identity but it may give rise to profits. Joining The Travel Network Group allows the company to get support from other companies to raise the standards.
It has been concluded that organizations need to make the changes according to the change in the environment and the requirements of the customers. IAG is the business group that involves the airline companies called British Airways, Iberia, Vueling and Aer Lingus. The group of companies is doing very well in responding the changes of the environment. The report shows the comparison of the two companies that is, British Airways and Vueling. SWOT analysis, PEST analysis and marketing mix analysis has been done to identify the difference between the strategies of the two companies.