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Thomas Cook Strategic Analysis

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Thomas Cook Strategic Analysis

 Thomas Cook Strategic Analysis

Executive Summary

The travel and tourism segment is one of the more highly competitive industry sectors due to the huge number of international, regional and domestic companies that all have access to similar packages in terms of destination offers. Pricing, in most instances, represents the key concern of consumers and businesses with specialised adventure and environmental tourism along with tourism packages as growth segments. Whilst the last two areas (adventure and environmental tourism and tourism packages) are strengths of Thomas Cook, the company’s  limited revenue footprint that is concentrated on the UK, and continental Europe was discovered to be a weakness. It seems that the company has not been exposed to or marketing to a larger travel and tourism segment as the above two areas represent approximately 75 percent of revenues.

In looking at competitive factors, the company is of moderate size when compared to industry leaders such as Expedia, Travelocity, and American Express. Growth by acquisition was found to be the key method employed by these companies, along with German-based TUI that has taken over the domestic leadership position in the UK from Thomas Cook in just over a decade. In contrast, Thomas Cook has not pursued this strategy as well as a broader travel and tourism destination footprint which seems to be limiting its growth and industry positioning. With a brand name that offers a 175-year travel history, Thomas Cook has the reputation to pursue and accomplish more aggressive growth through acquisition and marketing awareness to compete with competitors and broaden its market positioning and increase revenues.

Introduction

The global tourism and travel market has been growing since 2010 at a rate of 4.5 percent since the recovery from the 2008 recession (Thomas Cook, 2016). One of the key segments in the industry represents an increased demand for international travel that accounts for approximately 30% of Thomas Cook’s revenues with the domestic UK and Ireland as the largest segment at 35% (Thomas Cook, 2016).

 

This report seeks to analyse the company’s business and revenue segments, industry sector and provide a competitive analysis of the company. It will also delve into its travel offer segments and competitive analysis using key tools such as PESTEL, Porter’s 5 Forces, a SWOT Analysis, Boston Matrix and Strategy Clock. These tools, which are contained in the Appendix, will be referred to herein to provide an understanding of key points. The above will form the basis to determine varied understandings regarding the company and industry sector. As the findings segment represents the key aspect of this report, it will serve to aid in drawing preliminary conclusions and if more information is needed.

 

The deductions section will synthesize what has been uncovered in the findings segment in order to arrive at what has been uncovered and the completeness of the findings research process. This also represented the opportunity to discuss areas that might warrant additional research or investigation. The findings and deductions will form the basis for summarisation in the conclusion which will discuss any potential research limitations.

 

This report will seek to offer varied suggestions for possible actions or considerations the company might undertake as directions or paths to enhance marketing reach and revenue generation. The analysis will look at the UK and European markets as well as trends and activities globally to provide an understanding of the strategies and direction of the overall industry.

 

The methodology will utilise secondary research represented by journals, newspaper articles, industry trade journals, and the Internet as sources. This wide variety of sources offers a means to gather a broad range of information and views to add balance and objectivity. Qualitative and quantitative methods will be used in combination to strengthen the research process by providing different perspectives (Bernard, 2011). Qualitative research aids in gaining an understanding of varied underlying reasons and motivations that have lead to or are a part of business decisions that have been made (Bernard, 2011). This helped to provide insight concerning varied industry strategies that were used to compare with what Thomas Cook has and is doing.

 

Quantitative research looks at and considers data and statistics as a means to assess what has and is occurring (Ostlund et al, 2011). It is also helpful in uncovering aspects that might lead to further research that can refer to data and statistics as well as areas of exploration (Ostlund et al, 2011). These two methods aided in approaching this analysis of the travel sector from contrasting yet mutually supportive viewpoints.

 

Findings

The UK travel agency segment has increasingly been taken over by online services that now account for slightly more than 50 percent of the its revenue. The UK’s online travel sector is one of Europe’s largest, and it is ahead of both Germany and France (IBIS World, 2016). Despite having a 175 year history that makes it the oldest operating travel agency, Thomas Cook is besieged by rivals in this fierce field to the point where it almost collapsed in 2010 (Martin, 2015), The UK travel agency leadership now resides with TUI, the German-based company, that acquired Thomsons and First Choice in its growth through acquisition strategy which aided it in becoming the UK’s largest agency (Canocchi, 2015).

 

In looking at the huge number of competitors and the ease of market entry provided by the Internet (please refer to the SWOT and Porter’s 5 Forces analyses), and an aggressive growth by acquisition is the strategy the industry has adopted to increase market share and revenues. The ease of entry in the sector means that the number of potential firms could increase dramatically in the future thus fueling heightened competition and more acquisitions of mainline and niche firms that deal in adventure and environmental tourism (Middleton et al, 2009). A key business defence and offence is to use growth that includes name recognition and exposure as a countermeasure (Middleton et al, 2009).

 

The company has the expertise, service, and products to match the largest travel agencies internationally, but lacks public name recognition in varied important international markets where homegrown travel companies dominate and thus ultimately threaten Thomas Cook as they grow larger and seek to expand into its European stronghold (Andreu et al, 2010). An assessment that used the Boston Matrix and strategy Clock pointed out the strengths of the company that provided background to support the above.



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