CHAPTER 3: OPERATING ENVIRONMENT

Chain of distribution

External operating environment

Environment assessment models

Intergation of chain of distribution

Macro environment

Micro environment

Beyond control of the company

Has significant impact on company's operation.

TO must appreciate and foresee the potential changes to adapt business

Environment which business operate and interact with (suppliers, customers, competitors...)

PESTEL (use to analyze macro environment)

Poter's five force (use to analyze micro environment)

Political

Complementary for SWOT model.

Environmental

Sociocultural

Technological

Economic

Exchange rate, inflation, price of oil and fuel, factors that impact indirectly on conpany's operation

Demographic, population statistic, lifestyle, education... Impact on consumers behavior and demand.

New technology changes structure of tourism industry,has huge impact on the way business operate. E.g GDS, CRS, OTAs are all new concept that was born to adapt with the development of the industry.

Legislation and regulation, economic policy of government. Political stability of a country have strong impact on tourist demand

Climate changes, natural resources and pollution.

Legal

Policies, législation that apply to the company by the government

SWOT models

Analyze weakness, opportunities, strength and threats of the company

Industry rivalry

Suppliers bargaining power

Buyer's bargaining power

Threat of new entrances

Threat of substitutes

Competition between companies in the same business sector.

Depends on differentiation of the product. More unique the product, more bargaining power

Depend on the volume and frequency of purchase of buyer. Higher buyers bargaining power means cheaper price.

Raise the level of competitiveness since more competitors enter the market

Many product and service can be bring out to the market with little changes. These diversity choice of product for customer is a threat for the product of the company.

Porter's generic strategies (determine strategic direction the company take)

Cost leader ship

Focus

Reduce cost by applying economic of scale

Target in a particular niche market

Focus on product differntiation

Ansoff matrix (assess opportunity for growth)

Product development

Market development

Market penetration

Diversification

Wholesalers are companies that buy products in large quantities from vendors then sell them to consumer. Wholesalers consist of TO, broker and consolidator

Retailer are the one who sell package created by wholesaler.

Tour package/service product is distributed through intermediaries which are wholesalers and retailer

2 level of distribution

Level 1: direct distribute to customer

Level 2: involves an intermediary (TA) to sell to customer

Vertical integration

Diagonal integration

Horizontal integration

Advantages

Gain economy of scale

Increase market share

Reduce competition

Gain competitive advantages through controlling service quality

Enable expansion

Gain reputation by developing brand image

Disadvantages of integration

Restrict consumer choice

Make consumer unaware of the ownership of the brand

reduce income of TA

Some TO expose to more risk