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Table of Contents
Macro factors affecting the competitive forces.
Porter s five force model
Analysis of TUI travels.
The macro-environment is the general economy in itself. It affects business operations, decision making, and strategies and has a dynamic effect on business. These factors include political, legal, and social forces. The firm's macro-environment factors are the elements that have been characterized through industry the firm is currently based at
Porter diamond model
The diamond model is used to determine the external competitive environment. This will help in the assessment of the business. The model highlights the government s action as a catalyst in improving the country’s position at the global level. This theory explains and able to understand the competitive edge by Michael Porter (Lexis Nexis, 2020). The porter analysis measures the environmental strength and its incidence on firms working and support industries.
Internationalization is based on drivers that influence companies to process on company s capabilities. The business expansion attracts the diversification and the company's bottom line strategy for using the market by operations by revenue stream on a customer-driven approach in business functioning that affects the business at a macro level. These factors are governed by the legal and economic factors proportionate to their function and central innovation for expansion by the company in the foreign market (Glowik, 2016).
Porter's five forces model identifies the competitive industry and its weakness and strengths. It analyses the corporate strategy and long term profitability by understanding the competition level.
The five force model is useful in understanding the factors for profitability and industry-related decisions for corporate strategy and profitability for expansion and relative measurement for competitive analysis (Perera, 2020).
Porter’s five forces are –
This refers to the number of competitors and the differentiating power in the same. A large number of competitors relates to less power for the company. The competition drive is decided through sales and profit. Competitor rivalry is the main driver with the presence of many competitors in the market, the share of the company offering undifferentiated products in the market.
The potential of new entrant affects the company position. The competitors entering the market with less time and money can significantly weaken the competitor's position. The strong barriers to entry are beneficial for an existing company in the market. A profitable market attracts new entrants and barriers to entry owing to economies of scale and government regulation will restrict the profitability of the enterprise and indicates the attractiveness of the industry.
The next factor is the cost of input and the number of suppliers to enable the cost to the company to switch to other suppliers. The fewer supplier the more concentrated is the power. Supplier power can drive input costs through power concentration. The other case can be the availability of many suppliers in the market, the supplier uses input cost as low to gain profit (Perera, 2020). The analysis of supplier power creates essential input for relative strength and size of the growth and the cost of switching costs to analyze the relativity.
The ability that customer has on price is one of the forces of porter model. The customers a company has and the output is dependent on the client base to negotiate the price. Buyer power is central to the individual for driving the price of the product. Few buyers in a business can dictate terms and the individual buyer becomes important for suppliers to assess the individual for market acquisition and profitability of the product.
The substitute is a good that can be used in place of product or service. A company with no close substitutes have more power in increasing price while close substitute weakness market share and profitability of the product by power share (Schmid, 2018). The presence of substitutes in the market creates the likelihood of a change in demand in response to the price increase of the product that reduces the attractiveness of the market.
International strategy for markets are essential for growth through structure of firm and its expansion plan.
There are three levels of international strategy - multi-domestic, global, transactional.
The analysis of TUI travels can strategize through the profitability of its operation in the travel and leisure industry to swiftly respond to the opportunity for sustainability and growth
New entrants in the travel industry through lower price and new value proportion poses threats to TUI. TUI has managed to build an effective barrier to safeguard its product. The product design and raw materials shift can be used to mention its market dominance.
Globalization is instrumental in the market and cost-efficient supply chain. The risk in expansion has risk of political instability that may result in disruption. The government and bureaucracy and legislation affect the workers and consumers in business operations. According to WTO the restrictive trade measures with an average of 22 measures increase uncertainty in the company for operations. Regionalization has less degree of policy integration among government as it strengthens globalization by the movement towards regional markets open for self-intent and groups. The convergence and mobility of consumers and distribution channels affect globalization. The recession has the potential for customer design making and radically results in a change of plan due to price fluctuations. PESTEL analysis helps in situational analysis for external forces that can affect business in the long run. These factors possess a challenge in business expansion. PESTEL aims to create opportunities and gather information for strategy modification and implementation in the long run for future development at the macro-level (Lexis Nexis, 2020).
The social diversity and background reflect the attitude and immigration provisions that affect the supply chain integration of the company. The monitoring of supervisory authorities and long-lasting competitive advantage is through benefit to the end-user. Reliable technology helps in reducing financial loss and in case time awareness for the quick response
Regulatory risk impacts business magnet and corporate action as the international regulatory landscape is challenging for new market entry for countries in intention expansion
TUIs strengths are its brand recognition and ability to maintain cost with divers and scale of operations through a wide verity of services and diverse workforce
TUI can tackle the changes in future-TUI can maintain competition through innovation and lowering the feed cost.The expenditure on research and quality will differ from other firms from entering the market for TUI to regain new markets.
There are rising threats as new firms entering the market. The tour operator is offering a package in a smaller quantity. This will dramatically reduce TUI s market share. The development of new products will be challenging. The global recession has reduced the expenditure on travel. It is necessary for partnership with airlines for travel and effective cost to save more and travel as the new campaign. Service integration through supplier position will ensure the service ecosystem that TUI has developed over the years. The new design and travel will have to undergo operational cuts to ensure the suitability and maximization of profit. The European market post-recession was moving the same as the American market with a rise in online bookings for tour plan and annual online operator CAGR will continue to increase over the years. The low-cost airline may impact the change in the profitability of the business. The risk level increases the complexity of the market and the cost of operations in the travel industry. The American business set up that is the takeover by the European market is a part of geographic dispersion as part of cultural and social exchange.
SWOT analysis through skilled workforce for customer relationship management by brand equity enables distribution network. The network overseas by strong portfolio of distribution network and potential stake is vital for tourism sector growth. The cost of operation and marketing strategy is relative to the logistics cost taken by the company and the internet boom that has taken over the market (Frynas, 2015).
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Lexis Nexis. (2020).The macro-environmental influences on your company. Retrieved from https://internationalsales.lexisnexis.com/glossary/compliance/pestel-risk-monitoring
Perera, R. (2020). Understanding of porter’s five force model. Sri Lanka: Nerdynaut publications
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