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