Strategic Management

Contents
1) INTRODUCTION...................................................................................................2
2) ENVIRONMENTAL ANALYSIS OF THE TOURISM INDUSTRY....................................2
2.1) PESTEL ANALYSIS:........................................................................................2
2.1.1) POLITICAL:..............................................................................................2
2.1.2) ECONOMICAL:..........................................................................................3
2.1.3) SOCIOCULTURAL:....................................................................................3
2.1.4) TECHNOLOGICAL:....................................................................................4
2.1.5) ENVIRONMENTAL:...................................................................................4
2.1.6) LEGAL:....................................................................................................4
2.2) PORTER’S FIVE FORCES ANALYSIS.................................................................4
2.2.1) POTENTIAL ENTRANTS:............................................................................4
2.2.2) SUBSTITUTES:..........................................................................................5
2.2.3) SUPPLIERS:..............................................................................................5
2.2.4) BUYERS:..................................................................................................5
2.2.5) COMPETITIVE RIVALRY:...........................................................................5
3) MAINTAINING LEADERSHIP.................................................................................5
4) FUTURE IMPLICATIONS FOR TUI:.........................................................................6
5) USES AND LIMITATIONS OF TOOLS USED:............................................................7
5.1) PESTEL..........................................................................................................7
5.2) PORTER’S FIVE FORCES..................................................................................7
5.3) SWOT ANALYSIS............................................................................................8
5.4) ANSOFF MATRIX............................................................................................8
6) CONCLUSION......................................................................................................9
7) REFERENCE......................................................................................................10
8) APPENDICES.....................................................................................................13
8) APPENDICES

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1) INTRODUCTION
TUI AG established in 1997, is the undisputed leader in the European tourism
industry. They operate in over 180 countries worldwide serving more than 30 million
customers offering a wide range of leisure travel experiences. They also operate around 240
hotels of which majority is in the 4- or 5- star category. TUI travel (tour operating, online
sales, high street outlets, airlines and incoming agencies), TUI Hotels & Resorts and the
cruise ship business comprises the three sectors of TUI (TUI website). After the selling of
Hapag Lloyd AG (was the container shipping company of TUI) in March 2009, TUI has
become a pure tourism oriented company.

The business environment of a company consist of the macro environment, industry

(or sectors), competitors and the company themselves. Various analytical tools such as
PESTEL, Porter’s five forces, SWOT and ANSOFF matrix are used for the analysis. The
external environmental analysis is carried out using PESTEL and Porter’s five forces. SWOT
along with the help of value chain is used to analyse the industry and to investigate on how
TUI achieved and maintained its leadership in the European tourism industry. Future
implications for TUI is drawn using ANSOFF matrix, and also taking into account of the key
drivers identified from PESTEL. Moreover, the uses and limitations of the analytical tools
are also discussed in the report.

2) ENVIRONMENTAL ANALYSIS OF THE TOURISM INDUSTRY

2.1) PESTEL ANALYSIS:

The PESTEL framework categorises the environmental factors into political,
economical, socio cultural, technological, environmental and legal. PESTEL helps
understand the key drivers of change and external influences on the organisation (Johnson et
al., 2005). PESTEL analysis is shown in Appendix 4.

2.1.1) POLITICAL:
Terrorist attacks result in tight security reasons and strict immigration laws (Hirsch,
2009)(Weissinger, 2003). If the Foreign and Commonwealth Office (FCO) put some
destination off-limits after these terrorist incidents, travel insurers would refuse to cover
tourists if we went there (Urquhart, 2006). Tourism suffers when prolonged tourist attacks
affect tourist perceptions (Sónmez, 1998).

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Government toppling and political instability could adversely affect the tourism
industry of that country. Political instability not only affects the tourism of that particular
country but also that of the neighbouring countries as well (Sónmez, 1998). This is same in
the case of terrorism.

Taxation policies on tourism by different countries also have a major impact on the
tourism industry. Governments often provide subsidies and tax exemptions in their countries
to promote tourism of that particular country (MENAFN, 2009)(ndTax, 2009).

2.1.2) ECONOMICAL:
Exchange Rates play a crucial role in international tourism and trade. Gallego et al.
(2007) statistically discusses the impact of exchange rate regimes on tourism and concludes
that more fixity in the exchange rate arrangements generates a positive impact on tourism.
Considering the scenario of Euro is decreasing the gap with Pound Sterling may affect the
outbound tourism from UK to other European Union Nations and this could definitely affect
the tourism agents.

Globalisation provides the world business with unlimited opportunities and it

certainly boosted up the tourism ventures such as travel agencies, travel research and
consulting, technologies, hotels and resorts and so on (Munoz, 2005). Companies have lower
barriers to enter new markets and take over other companies. Agreeing with this as an
opportunity, Wahab & Cooper (2001) points to the threat to tourism from globalisation such
as increased competition, maintaining quality of service etc. Competition will be tough when
the barrier to entry become low (Porter, 1980). The dependancy of aviation charges on Oil
Prices also is an important factor in the tourism industry.

Even though tourism industry is going through a difficult period now; travel and
tourism economy GDP growth slowed to 1% in 2008, contracted by 3% in 2009 and is
expected to expand only by 0.3% in 2010; the World Travel and Tourism Council (WTTC)
predicts tourism industry to resume its leading, dynamic role in global growth (WTTC,
2009). UNWTO’s Tourism 2020 Vision forecasts that international arrivals are expected to
reach nearly 1.6 billion by the year 2020 (Appendix 1). This implies more opportunities and
more competition in the tourism industry in the coming years.

Similarly, the current Recession can positively and negatively impact tourism
industry. Economic crisis is the major threat which results in collapse of some major players
in the industry, for example the closing down of ‘XL Leisure Group’ (Directgov, 2008). But
this is an opportunity for the survivors as they get more market space and more consumers to
absorb in. Moreover, a post-recesion boom could be expected and taking into consideration

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that tourism contributes 10.6% of world GDP (refer case study),they always get their stake
from the disposable income.

2.1.3) SOCIOCULTURAL:
Life Style has got a major part in priorities of the customers. Tourism agencies offer
customised holiday packages (selecting packaged tours and individual travel components)
and online booking facilities to meet customer expectations (refer case study).

Brand Consciousness is another socio cultural factor. Consumers believe in the

company’s intangible guarantee projected by the brand name. Brand loyalty can be a result
of past experiences or the brand image already perceived (could be advertisements or
impulse).

Changing attitudes towards safety and environment can also play a vital role in
customer decisions. Appendix 2 shows a survey result conducted by The Boston
Consultancy Group on ‘going green’ attitude of customers and it shows a significant
percentage of consumers are environment conscious and are more leaned to companies
having a better environmental policy.

2.1.4) TECHNOLOGICAL:
Customers relying on internet and online sales are increasing day by day. Statistics
show a mere 70% of UK households had access to internet in 2009 (Office for National
Statistics, 2009) and is increasing compared to previous years (Appendix 3). Even though
online sales make it easier for customers and cut costs by reducing staff and intermediaries, it
also possesses a threat to companies. Internet has a low barrier for entry (Porter, 2001) and
newcomers can easily pop into the competition.

Substitutes such as television and games are also a threat to tourism. Advanced
technologies could decrease the frequency of social (physical) mobility of people (Use of
video conferencing for instance). Tourism agencies use other technological devices such as
TV hotlines and telephone (call centres) facilities for maintaining their customer
relationships.

2.1.5) ENVIRONMENTAL:
Air flight rationing is proposed by UK government as a method to reduce pollution
(Drury, 2009). Tourism industry will suffer if governments decide to go on with this.
Moreover, government of UK is campaigning for greener holiday locations (Directgov,
2009). Increased emission of CO2 is a major threat of climatic conditions in earth and
aviation is a major contributor of CO2. The government report goes on to describe the CO2

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emission in rail travel is only one-third of air travel. Even air flight companies are including
carbon footprint charges in their tickets.

Health Problems is a major concern for tourism industry and tourists. Even though
WHO is not recommending travel restrictions related to the outbreak of the influenza A
(H1N1) virus (World Health Organization, 2009), they raised a worldwide pandemic alert
and a number of recommendations for travellers to the flu affected areas (CDC, 2009).
Similarly, Natural Disasters are also a major concern for tourism industry.

2.1.6) LEGAL:
Governments recommend a wide range of regulations on Aviation Safety and
Regulations (Department of Travel, 2009). This covers domestic, environmental, health
and consumer issues and aviation permits, and all these come under legal factor. Also,
companies need to be aware of the legal issues of different countries if they are acquiring or
merging with other companies. Trade Laws plays a crucial part in current world businesses.

2.2) PORTER’S FIVE FORCES ANALYSIS

Five force framework (illustrated in Appendix 5) helps identifies the sources of
competition in the industry (Johnson et al., 2005). Five forces which are not independent of
each other, draws a connection between competitive forces and the key drivers in the macro-
environment.

2.2.1) POTENTIAL ENTRANTS:

High Capital Requirement creates a high barrier of entry for newcomers. And more
than 70 % of market share is controlled by the top 10 leaders (Appendix 6) and this reduces
the price retaliation and keeps the economies of scale high. Brand Recognition also acts
as a barrier to new entrants. Hence, the threat of new entrants is low.

2.2.2) SUBSTITUTES:
Even though TV, games or other social activities can act as substitutes, they will
never be same as travelling. Moreover, there is a low differentiation of products and together
there is low threat of substitutes.

2.2.3) SUPPLIERS:
Suppliers have high negotiation powers against the companies having a low share in
the market. But in a market where the top 4 market leaders covering more than 50% of
market and possessing a threat of backward integration, there will be a power balance.
This implies only a moderate bargaining power for the suppliers.

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2.2.4) BUYERS:
There is a low switching cost to buyers with the emergence of internet and online
sales. But the low differentiation of products and lesser number of substitutes limits the
bargaining power of buyers to low.

2.2.5) COMPETITIVE RIVALRY:

There is a moderate competitive rivalry in the industry. High fixed cost largely
favours the incumbents. And there is a significant 8% difference in market share between the
top two market leaders (TUI 21% and Thomas Cook 13% - Appendix 6). These huge
variations of market shares of incumbents lessen the competition in the industry.

3) MAINTAINING LEADERSHIP
A company can maintain its leadership in the market only by establishing a difference
that it can preserve (Porter, 2006) and by keeping its structure attractive (Porter, 1987). TUI
is the leading company in the concentrated market of tour operators in Europe with a
staggering 21% of the market share (Appendix 6). TUI operate in over 180 countries
worldwide serving more than 30 million customers offering a wide range of leisure travel
experiences. They also operate around 240 hotels of which majority is in the 4- or 5- star
category.

A SWOT analysis of TUI is illustrtaed in Appendix 7. The strengths of TUI

which helped them to attain and maintain their leadership in the tourism industry is listed in
the same. Backward Vertical Integration of TUI helped them to spread out through the
value chain (Appendix 8). This made them deliver a higher value when compared to their
competitors at a cheaper price. Being their own suppliers (Airlines, Hotels etc) helped them
to attain cost leadership. Their investments on direct distribution channels act as a key
driver reducing the distribution cost and increasing the margin. Their multi-channel
distribution focusing on online sales made them capable of retaining their customers and
gaining new customers. Stable and management friendly share holders (refer case study)
supported them to incorporate better customer service along with thier excellent operating
service, and thus extend their presence in the value chain. Moreover, TUI have better
liquidity and financial situation following the sale of Hapag-Lloyd. The acquisiton of
companies varying from tourism, airlines, hotels, cruises etc all over the world help them
attain differentiation. They claim their differentiated products are integral part of their
customer retention, brand building and uniqueness and thus gained them the competitive
advantage in the market (Annual Report, 2008).

TUI always seek to create value for their customers, investors and employees. TUI
understands the fundamentals of sustainable economic success is the right balance between

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economic goals and social and ecological needs (TUI website). Resources and capabilities
are the base of strategy, direction and profitability (Grant, 1991). They kept their capacity
management (combination of flexible lease profiles and uncommited bed stock resources) on
alert to respond according to the changes in the trading environment. Moreover, they are well
prepared to adapt to a changing environment using their unique breadth and depth of
experience along with innovative enterpreuneurs (Annual Report, 2008). And TUI’s
acquisition (resources) policy aid them to gain a competitve edge over their market rivals.
This made them acheive a high economy of scale which is difficult for their competitors to
attain. In addition to all this, there is a factor of causal ambiguity(Barney, 1991) as irms in
the same industry will be curious about its competitors and will be trying to adapt and learn
from each other. Thus, TUI acheived competitive advantage by implementing their value
creating aspects (differentiated products, cost leadership, acquisition of companies – Porter’s
Generic Strategy) and was not simultaneously being implemented by any of their potential
competitors (Barney, 1991).

4) FUTURE IMPLICATIONS FOR TUI

The macro environmental and micro environmental analysis of TUI is done in the
previous sections of this report. ANSOFF matrix (Appendix 9) is used to show the
developmental directions for TUI. They had already penetrated to the European markets and
is one of the leading market holders of tourism industry all over the world. Depending on the
findings (key drivers) on the previous analyses along with ANSOFF matrix the future
implications of TUI is listed below:

• The air flight boom just before recession was fuelled by short-haul travels (Mintel
Reports, 2009). Low cost airlines gained from it, but the recession changed the
picture completely. Customers find cheaper options in rail, buses and ferries; even
though these transport options take more time, they provide a different experience.
90% of TUI’s travel options are through airlines (TUI website). This could be an
opportunity for TUI to extend its differentiation by providing land transportation and
thus milk the emerging trend of short-haul travels.
• Even though potential entrants need a high capital to barge into tourism industry,
internet alters the whole context. It provides a low barrier for entry to new comers.
Moreover companies like lastminute.com and expedia.co.uk made their mark in the
online tourism industry. A Mintel survey report shows travel as the main spend
category through online (Mintel Survey, 2008). TUI need to take necessary measures
to ensure their strong presence in online services and again, this could help them to
differentiate further.

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• Fuel Price fluctuations is having a major impact on world business. TUI can
negotiate prices (hedging) for a specific period of time with the oil companies to
stabilise the variations. But they have to understand that this could be a risk as it may
sometime prove to be a loss
• TUI has to take in to account of the environmental factors that could have a serious
impact on the business from the near future. Carbon emission problems and carbon
footprint charges had already made their presence in airline fares. Moreover, they
could expect a rationing of holiday air flights proposed by UK government. These all
implies to the important of ‘going green’. As more and more customers are preferring
companies who are aware of environment.
• TUI is the marketing leader in the tourism industry in Europe. So this give them an
opportunity to expand their market shares in Asian (concentrating on India and
China) and Russian markets; while maintaining their market share in Europe.
Moreover they can expect a post-recession boom similar to what happened in early
90’s to capitalise on and strengthen their position in European markets.

5) USES AND LIMITATIONS OF TOOLS USED

There are several analytical tools used in the report. Most of them are subjective as
there is no specific ways to carry out these analyses. The uses and limitations of these tools
are discussed below:-

5.1) PESTEL
Uses

• To analyse the macro environment of the industry

• To anticipate the future threats
• To identify the key factors affecting the strategy

Limitations

• Does not provide any solutions

• Difficult to identify the level of uncertainty
• Practically difficult to analyse the limitless macro environment completely
• Is not descriptive

5.2) PORTER’S FIVE FORCES

Uses

• To identify drivers of competitive behaviour

• To analyse the profitability and competitiveness of the industry

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• To determine the attractiveness of the industry

• To analyse the dynamics of industry

Limitations

• Need to be constantly reviewed as the environment is constantly saving

• Analysing the industry as a whole; is not considering segments
• Does not consider the complementary products
• Ignores major factors such as human resource, culture and management skills
• Industrial environment is only a small factor of profitability

5.3) SWOT ANALYSIS

Uses

• Both internal and external aspects of business is taken into account

• To understand what attributes to be focused on
• To help in the purpose of decision making
• To identify the relevant information addressing the key issues

Limitations

• As it presents the situation in a manageable format, SWOT analysis is prone to

skipping some of the important factors
• Even though it identifies the strength, there is no suggestion of how to utilise it for an
advantage
• Analysis is subjective

5.4) ANSOFF MATRIX

Uses

• To enable the organisation to explore the strategic corporate growth

• To evaluate the options and choose the best situation

Limitations

• Focus only on market share and market growth and is not considering other factors
• Is an over-simplified 2 x 2 matrix to analyse the strategic analysis of the organisation.

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6) CONCLUSION
As credit crunch is expected to be reaching an end, TUI needs to capitalise on the
disposable income of customers. This report analyse the macro environment of the tourism
industry using PESTEL and Porter’s five forces and managed to find out some key drivers of
change. Then, the report further investigates on how TUI achieved its sustainable
competitive advantage by identifying the strengths from SWOT analysis and by analysing
how they extended their reach in value chain (also referring to cost leadership and
differentiation). ANSOFF matrix is used to draw future directions to TUI. As the number of
short-haul travels is increasing these days, TUI will gain from concentrating a bit more on
supporting this (can enter in road transportation facilities). Alike other leaders in tourism
industry, TUI will also have to tackle their consolidated fixed assets. Moreover, the uses and
limitations of the analytical tools are also listed. The level of success achieved by TUI holds
some important lessons and some much needed inspiration to a business world; that could
use a little of both right now.

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7) REFERENCE
Annual Report. (2008). TUI Annual Report. TUI AG.

Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of

Management , 17 (1), 99-120.

BCG. (2009, January). Capturing the Green Advantage for Consumer Companies. Retrieved
November 2, 2009, from The Boston Consultancy Group:
http://www.bcg.com/documents/file15407.pdf

CDC. (2009, October 15). 2009 H1N1 Flu: Global Situation. Retrieved November 3, 2009,
from Centers for Disease Control and Prevention:
http://wwwnc.cdc.gov/travel/content/outbreak-notice/novel-h1n1-flu-global-situation.aspx

Department of Travel. (2009). Aviation Safety. Retrieved November 3, 2009, from

http://www.dft.gov.uk/pgr/aviation/safety/aviationsafetygovernmentresp2983

Directgov. (2008, September 12). Collapse of XL Leisure Group. Retrieved November 2,

2009, from Newsroom - Directgov:
http://www.direct.gov.uk/en/Nl1/Newsroom/DG_171740

Directgov. (2009). Holidays: Greener Choice. Retrieved November 3, 2009, from

Environment and Greener Living - Directgov:
http://www.direct.gov.uk/en/Environmentandgreenerliving/Greenertravel/Airtravelandgreene
rholidays/DG_064430

Drury, I. (2009, February 6). Ration Holiday Flights to Cut Pollution, says Brown's Adviser.
Retrieved October 16, 2009, from MailOnline: http://www.dailymail.co.uk/news/article-
1137204/Ration-holiday-flights-cut-pollution-says-Browns-adviser.html

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Gallego et al. (2007). On the impact of exchange rate regimes on tourism. Asociación
Española de Economía y Finanzas Internacionales , 1-16.

Grant, R. (1991). The Resource-Based Theory of Competitive Advantage: Implications for

Strategy Formation. California Management Review , 114-135.

Hirsch, A. (2009, June 10). A reverse for the 'secrecy creep'. Retrieved November 1, 2009,
from guardian.co.uk: http://www.guardian.co.uk//uk/2009/jun/11/lawyers-secrecy-creep

Johnson et al. (2005). Exploring Corporate Strategy (7th ed.). Essex: Pearson Education
Limited.

MENAFN. (2009, October 20). Oman - Tax exemptions for tourism sector restricted to
hotels, tourist villages. Retrieved November 1, 2009, from MENAFN - Times of Oman:
http://www.menafn.com/qn_news_story_s.asp?StoryId=1093278003

Mintel Reports. (2009, July). Retrieved November 7, 2009, from MINTEL OXYGEN:
http://academic.mintel.com/sinatra/oxygen_academic//display/&id=395452

Mintel Survey. (2008, March). Retrieved November 7, 2009, from MINTEL OXYGEN:
http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=2803
75/display/id=329632

Munoz, J. (2005). Executive Insights on Globalization. International Journal of

Contemporary Hospitality Management , 17 (4), 365-371.

ndTax. (2009). An economy on the move. Retrieved November 1, 2009, from North Dakota
State Government: http://www.nd.gov/tax/taxincentives/income/

Office for National Statistics. (2009). National Statistics Online. Retrieved November 2,
2009, from http://www.statistics.gov.uk/cci/nugget.asp?id=8

Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance.

Free Press , 33-61.

Porter, M. E. (1980). How Competitive Forces Shape Strategy. The McKinsey Quarterly ,
34-50.

Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review , 63-79.

Porter, M. (1987). From Competitive Advantage to Corporate Strategy. Harvard Business

Review , 43-59.

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Porter, M. (2006, November-December). What is Strategy? Harvard Business Review , 61-

78.

Sónmez, S. (1998). Tourism, Terrorism and Political Instability. Annals of Tourism Research
, 25 (2), 416-456.

TUI website. (n.d.). Retrieved November 6, 2009, from http://www.tui-group.com

TUI Case Study

UNWTO. (2005). Tourism 2020 vision. Retrieved October 31, 2009, from World Tourism
Organisation: http://www.unwto.org/facts/eng/vision.htm

Urquhart, C. (2006, October 19). Travel. Retrieved October 30, 2009, from The expert guide
to safe travel: http://www.timesonline.co.uk/tol/travel/article603399.ece

Wahab, S., & Cooper, C. (2001). Tourism in the Age of Globalisation. London: Routledge.

Weissinger, G. (2003, November 7). Retrieved November 1, 2009, from Immigration

Information: http://www.immigration-usa.com/george_weissinger.html

World Health Organization. (2009, May 7). Global Alert and Response. Retrieved November
3, 2009, from
http://www.who.int/csr/disease/swineflu/frequently_asked_questions/travel/en/index.html

WTTC. (2009). Tourism Impact Data and Tourism Impact. Retrieved November 1, 2009,
from World Travel and Tourism Council:
http://www.wttc.org/eng/Tourism_Research/Tourism_Economic_Research/

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8) APPENDICES

Appendix 1:

UNWTO tourism 2020 vision

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Adapted from UNWTO (2005)

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Appendix 2

Adapted from BCG (2009)

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Appendix 3

Adapted from Office for National Statistics (2009)

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Appendix 4:

PESTEL ANALYSIS OF TOURISM INDUSTRY

*. Key factors are shown in bold letters

• Terrorist attacks
• Government topples and Political instability
POLITICAL • Taxation policies
• Exchange rates
• Globalisation
• Oil prices
ECONOMICAL • UNWTO’s tourism 2020 vision
• Recession
• Life style changes
• Brand Consciousness
SOCIOCULTURAL • Attitudes towards safety and environment
• Internet and online sales – Virtual tourism
• Substitutes

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TECHNOLOGICAL

LEGAL • Aviation safety and regulations

• Regulations for acquiring and merging
• Trade laws
• Air flight rationing
• Carbon emission issues
ENVIRONMENTAL • Health problems
• Natural disasters

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Appendix 5

PORTER’S FIVE FORCE ANALYSIS OF TOURISM INDUSTRY

Potential Entrants Buyers

Low threat of entrants Low bargaining power

• High capital requirements reduces threat of entry • Few substitutes and low differentiation of
• Top 10 market leaders cover 70% of the industry products
(Appendix 6), so expected price retaliation reduces • This makes them in a weaker negotiation
and economies of scale is high position, even though they have low – medium
• Brand Recognition switching cost

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Appendix 6

Refer case study

Moderate Competitive Rivalry

• Global industry growth rate is

4.1% (UNWTO, 2005)
• High fixed cost largely favours the
incumbents
• Variation of sizes of incumbents

Suppliers Substitutes

Moderate bargaining power Low threat of substitutes

• Low switching cost for incumbents • Technologies (TV and games) could act as
• 50% of market share is with top 4 players substitutes, but can’t replace travel
(Appendix 6) • Low differentiation of products limits the
• Threat of backward integration (Incumbents substitutes.
like TUI and Thomas Cook have their own
hotels, airlines cruises etc.)

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Appendix 7

SWOT ANALYSIS OF TUI

Strengths Weakness
• Vertical Integration; made them spread • Company registered a net loss of EUR142
throughout the value chain. million in 2008 (Annual Report, 2008)
• Market leader in the tourism industry. • Major reduction in the volume of holiday
• Strong multi-channel distribution focusing packages because of recession and
on online sales. financial uncertainties.
• Better liquidity and financial situations • Fixed assets cover 34% of total assets
following the sale of Hapag-Lloyd. (Annual Report, 2008)
• Delivering high quality customer services.
• Stable and management-friendly
shareholders.

Opportunities Threats
• Expansion in developing markets such as • Changing consumer behaviour in this
India and China. global economic recession can influence
• Business expansion through further company’s strategy.
acquisition and mergers. • The tendency of customers to switch on
to rail and bus for short-haul travels could
be a backlash to TUI’s reliance on air
travel.
• Threat of losing consumers who opt low-
cost packages because of company’s
focus on 4-star hotels.

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Appendix 8

VALUE CHAIN

Adapted from Porter (1985)

TUI spread throughout the value chain by vertical integration, and this made them deliver
better value at cheaper price.

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Appendix 9

ANSOFF MATRIX

ANSOFF
MATRIX
EXISTING PRODUCTS NEW PRODUCTS

MARKET PENETRATION PRODUCT DEVELOPMENT

• Leading market share • Specific location oriented

• Strong presence in packages
European market
EXISTING MARKETS

• Low cost packages

DIVERSIFICATION

MARKET DEVELOPMENT

• Concentrating on
Russia, India and China
NEW MARKETS • Could make their
presence in road

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transportation

Adapted from Ansoff (1988) as cited in Johnson et al. (2005)

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