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Transcript of Tui Strategy
TUI: achieving and maintaining leadership
in the European tourism industry
Table of Contents
1. Introduction.............................................................................................................................3
2. Historical strategic development of TUI................................................................................3
2.1. Multinational structure matrix.......................................................................................................4
2.2. Strategic Clock..............................................................................................................................5
3. The underlying forces in the macro environment that drive the competitive forces in the
tourism industry..........................................................................................................................5
3.1. PESTEL analysis...........................................................................................................................5
3.2. Porter’s diamond...........................................................................................................................7
4. Porter’s five forces analysis of the tourism industry..............................................................7
4. 1. Competitive rivalry:.....................................................................................................................7
4. 2. The threat of substitutes...............................................................................................................8
4. 3. The Bargaining power of buyers:.................................................................................................9
4. 4. The Bargaining power of suppliers..............................................................................................9
4. 5. The threat of new entrants............................................................................................................9
5. TUI’s business model...........................................................................................................10
6. TUI’s strategies: challenges and choices..............................................................................12
7. References.............................................................................................................................13
8. Appendixes...........................................................................................................................14
2/21
1. Introduction
“The Service Sector is one of the three main industrial categories of a developed economy”.1
As services are defined in conventional economic literature as "intangible goods", it is rather
difficult to place, analyze and market service related companies.
Travel agencies and tour operators represent a large part of the tourism sector and play the
major role within the service industry. TUI is a service provider with diverse types of
ownerships involving most of the supply chain products regarding the tourism sector.
The report will investigate the strategic and historical development of TUI, the evaluation of
the macro environment for the tourism industry as a whole and the competitive analysis of
TUI and the industry. In addition, TUI’s business process has been evaluated and strategic
challenges indentified, concluding with suggestions for future strategies.
2. Historical strategic development of TUI
When Preussag, now TUI Group, started it was a company whose key activities were coal and
oil2. Due to the coal mines in Germany closing, the company made some adaptions and
entered the tourism business which was a completely new industry for Preussag. The group’s
first step into the industry was through acquiring Hapag-Lloyd AG in 1997, which was a
global player in transport and tourism. This strategy was one that the TUI Group followed in
the coming years. TUI Group has been growing in the past 10 years, mainly by acquiring
existing companies, and in that way increasing market shares.
According to the Ansoff growth matrix, acquisitions are used as market penetration strategy3.
The acquisitions have some advantages representing a big strength to the company, which
makes it possible for TUI Group to grow fast. However, it is necessary for TUI Group to be
highly aware of how they do that, to make sure that it doesn’t create too many challenges.
1 Tertiary sector of the economy, Wikipedia.org, http://en.wikipedia.org/wiki/Tertiary_sector_of_industry (22 March 2010)
2 TUI – Journey through time, http://www.tui-group.com/en/company/heritage (retrieved 22 March 2010)
3 Johnson G., K. Scholes & R. Whittington: Exploring Corporate Strategy - Text and Cases, 8th Edition, FT Prentice Hall, 2008, p.258
3/21
TUI Group is the name of the overall company, but when acquiring companies, they become
brands that are a part of TUI Group and they still keep the name they had before the
acquisition, an example of that would be the Swedish Fritidsresor or British Thomson.
TUI Group has also done some joint ventures, for instance, with the cruise ship company
Royal Caribbean. In this joint venture, TUI Group and Royal Caribbean joined forces on
certain cruises (routes/ships) in spring 2009. The reason for doing a joint venture in the cruise
industry is connected with the high risks in the business (investments in expensive ships).
Besides acquisitions and joint ventures TUI has also made a few mergers. Mergers along with
acquisitions and joint ventures are market penetration techniques, because they deal with
existing markets and existing customers.
Even though market penetration has been TUI Group’s main growth factor, there has also
been some organic growth. TUI has entered several markets and made establishments within
the industry without buying other already-existing companies. Examples of this processes that
have been happening since 2003 are TUI China, TUI Austria Holding AG4, where TUI Group
didn’t acquire another competitor, but established a new company. According to the Ansoff
growth matrix, that would be market development, where existing products are introduced to
new markets.
When TUI in 2004 opened its low-cost travel agency in Hamburg in Germany, they offered a
new product to a new customer segment. According to the Ansoff growth matrix that would
be associated with diversification (new product entering a new market).
TUI expanded their market by launching a virtual operator (toureruopa.com), where they
would sell tours online through travel agencies, television and call centres. This strategy
displays market development as TUI offers known products for new customers.
Throughout history of TUI Group the company has been focusing on market penetration, and
it has been the main method of their growth.
4 TUI – Journey through time, http://www.tui-group.com/en/company/heritage (retrieved 22 March 2010)
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2.1. Multinational structure matrix
TUI Group would fit in the category of transnational corporations when applying the
Multinational Structure Matrix5. The company has a very well established overall global
coordination. For example, they manage all of their brands in four business sectors depending
on what the brand’s focus is. In addition to that, the cooperation between the brands in TUI
Group’s different regions seems high. An example of this is the brand TEMA6 that is present
in TUI Nordic. Finland, Sweden, Norway and Denmark all have the same website for TEMA,
and when choosing what destinations and trips to go on, there are also the same options. TUI
Group’s local independence and responsiveness is high due to the fact that their acquired
brands had already been present in the market and had the knowledge and the experience with
their local customers.
2.2. Strategic Clock
Based on the strategy clock model of Cliff Bowman7, it is clear to observe that TUI has
chosen to follow different strategies for different brands worldwide (see Appendix 1). For
instance, the brand TEMA in Denmark applies focus differentiation (the niche market where
travellers are interested in cultural experiences and nature), while another brand, Star Tour,
uses the differentiation strategy (they have high perceived services at medium/high prices).
3. The underlying forces in the macro environment that drive the
competitive forces in the tourism industry
3.1. PESTEL analysis
In order to analyse the underlying forces in the macro environment the PESTEL model can be
used with the focus on tourism industry.
Political factors : Few years ago the growing feeling of insecurity was enhanced by terrorist
attacks, which targeted tourist destinations8. However, people are getting used to the new
security measures and return to the destinations that were affected by terrorism9. The EU
enlargement made new countries more attractive for the European tourists. Moreover,
5 Johnson G., K. Scholes & R. Whittington: Exploring Corporate Strategy - Text and Cases, 8th Edition, FT Prentice Hall 2008, p. 258
6 http://www.temarejser.dk/
7 Johnson G., K. Scholes & R. Whittington: Exploring Corporate Strategy - Text and Cases, 8th Edition, FT Prentice Hall 2008, p. 225
8 Tourism Trends for Europe, European Travel Commission, Sep 2006, p. 5
9 Travel and Tourism – Germany, Euromonitor International, Aug 2009, p. 8
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governments of many countries are promoting tourism by advertising and tourism fairs in
order to develop and/or maintain economic growth.10
Economic factors : The current economic crisis has had the major influence on tourism
industry. As a consequence of the crisis, manufacturing decreased, which lead to world
unemployment reaching 7,4% of the workforce in 200911. Unemployment causes consumer
spending to reduce and an overall expenditure on travel and tourism to lower. As a result,
budget constraints make price one of the primary factors in choosing one company over
another. On the other hand, due to loss of work some people use their unemployment as an
opportunity to travel.12
Social factors : The major driving factor of growing consumption in cultural tourism in Europe
is likely to be increasing education levels. As a result, new consumers will come from areas
where education and personal wealth are improving, such as Central and Eastern Europe and
Asia13. Leisure time is becoming more pressured for the wealthy customers, meaning that
people will tend to take shorter but more frequent trips. In the future there will be more single
people and holidays will need to cater for single people and offer better services for them.
Moreover, by the year 2020 people who are over 50 will outnumber younger generations:
they will be wealthy, active and well travelled.14
Technological factors : Apart from the Internet, which has become a universal communication
and marketing tool, mobile phones and digital TV has also experiences technological
advances. It became cheap and easy to contact relatives and friends while travelling.
Consumers have a better ability to compare prices and the products and obtain richer product
information (with the help of GDS – Global Distribution Systems, Google Maps, blogs, etc).
Consumers are also using the Internet to search for events and activities after their arrival at
the destination. The Internet has also led to a rapid increase in self-packaging of holidays.15
GPS (Global Position Systems) and other new technologies allows to track the movement of
tourists in the destination in real time, observe the effects of promotional activities and detect
emerging consumption trends.16
10 Travel and Tourism – Germany, Euromonitor International, Aug, 2009, p. 3
11 Travel and Tourism Forecast Update: One Year On, Euromonitor International, Nov 2009
12 World Travel Market Trends, Euromonitor International, Dec 2009, Page 9
13 Tourism Trends for Europe, European Travel Commission, Sep 2006, p. 5
14 The Thomson Future Holiday Forum, Thomson, http://www.ahp-monitor.pt/?data=download_file.obj&fid=111 (retrieved 23 March 2010)
15 Tour Operator, Wikipedia.org. http://en.wikipedia.org/wiki/Tour_operator (retrieved 23 March 2010)
16 Tourism Trends for Europe, European Travel Commission, Sep 2006, p. 7
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Environmental factors : Safety concerns in connection with natural disasters will affect travel
demand17. Environmental awareness is increasing and influences the way people travel and
choose tourism companies. Airlines are pressured to be green (introducing programme such
as the purchase of carbon credits or investing in more fuel-efficient aircraft).18 Hotels are
introducing eco-programmes to reduce their impact on environment (i.e. Scandic hotels19).
Legal factors : The subjects of security, health and immigration become top priority for many
countries. Therefore, government will increase controls on travel. Security measures be
standardised around the world and their cost will increase airfares.
3.2. Porter’s diamond.
TUI AG is the most dominant tour operator in the European market (21% market share 20). For
that reason, this region will be investigated closely with the help of Porter’s diamond model.
Factor conditions: Europe is a popular destination for tourists because of the variety of
countries, cultures and nature. Everything is close, yet so different from each other. There is
also a huge historical and cultural legacy in Europe. Well-developed infrastructure, stable
political environment, the vast choice of hotels, restaurants, and sightseeing companies make
Europe attractive for many tourists.
Demand conditions: Europeans are seeking advice from other consumers through the Internet
and “skilled consumers” tend to know more about niche products than many travel
professionals. Tourists are also searching for different experiences and “safe danger”
(adventure travel and thrill experiences). There is also an increase in the demand for spiritual
experiences, which gives the boost to health and spa products.21 However, the current
economic recession makes some tourist stay close to home and choose cheap tour packages.
Related and supporting industries: Fashion, film, art and events industry are important
complementary factors for tourism. Numerous fashion shows, festivals, and cultural events in
Europe help tour operators to enhance their packages and find an interesting seasonal angle on
destinations.
Firm strategy, structure and rivalry: The major strategy of tour operators is to be constantly on
top of new trends and demands of the market. In order to be competitive in tourism industry, a
tour operator should offer a variety of products for competitive prices. TUI manages to hold
17 Tourism Trends for Europe, European Travel Commission, Sep 2006, p. 5
18 Global Travel & Tourism: A Fast-changing Landscape, Euromonitor International, Nov 2008, p. 38
19 Sustainability and the environment, Scandic, http://www.scandichotels.com/About-Us/Responsible-living/ (retrieved 23 March 2010)
20 Appendix 2
21 Tourism Trends for Europe, European Travel Commission, Sep 2006, p. 6
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the leader position because of its constant development of new products and efficient
management control of the company.
4. Porter’s five forces analysis of the tourism industry
4. 1. Competitive rivalry:
Indus try competitors : In Europe TUI has the biggest market share (21%22). The closest
competitor (Thomas Cook) has 13% of the market share. In general, there are not so many
competitors on the market. The existing ones are smaller than TUI23, meaning that TUI Group
is very strong and this is a significant advantage for them.
Industry growth (rate) : In general the growth in tourism has been increasing steadily during
the past 60 years24. The growth within the tourism industry kept the competition down and
generated larger revenues for travel retail companies. However, the recent economic recession
slowed down the growth and led to greater rivalry.
High fixed costs : The tourism industry in general has high fixed costs, because they require
high investments. For TUI’s an example of that would be their planes.
Exit barriers : For vertically integrated tour operators exit barriers are high. Exiting the market
is time consuming and complicated for such companies, because they have high investments
in assets. For instance, it is likely that TUI has already booked hotel rooms in advanced. If
they plan to exit one year in advance, it is simpler to work out the way out of the market.
Degree of differentiation : TUI is trying to differentiate itself by offering more specific
products, through their 4 sectors (Mainstream, Specialist & Emerging Markets, Activity and
Accommodation & Destinations)25 in order to be more focused on what the essential products
are. The degree of differentiation for tour operators in general is rather high.
4. 2. The threat of substitutes
Relative price and performance of substitutes: There are several ideas that would be
considered substituting in this case. In general there are a lot of things that a family could do
instead of going on a trip (what TUI call “Mainstream”). This could be going to the family’s
summerhouse instead of going on a trip, going camping, etc. TUI also has brands that focus
on planning vacations for young people and students. Substitutes for them could be going to a
music festival instead, doing volunteer work etc. In general there are a lot of substitutes that
22 See appendix 2
23 See appendix 2
24 Page, S. & J. Connel, Tourism – A modern synthesis, South-Western Cengage Learning, 2009
25 TUI Group – at a glance, Group Presentation, Feb 2010, p. 9
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the target group could choose to go on, instead of TUI products. However, the relative
performance of these alternatives depends only on what the substitute is, but also on what the
customers are like.
Switching costs: The cost of switching to substitutes is not very high in TUI’s case, but of
course it depends on what the alternative is. The options mentioned above are all most likely
to be cheaper than buying TUI’s products, but another alternative (for example for young
people going on an interrail) would be a lot more expensive, and would increase the overall
costs for the customer.
Buyer’s propensity/willingness to substitute: It depends on who the buyers are, and how
interested they are in doing something else during their vacation rather than taking one of
TUI’s trips.
4. 3. The Bargaining power of buyers:
Low switching costs: There are very low switching costs; since choosing another company or
a substitute is very simple and cheap (the buyer might even save money by switching).
Substitute products: Like mentioned above, there are products that could be substituted to
TUI’s products, however the relative performance of that is likely to be smaller, and if not
then more expensive.
Products are standardized : When using TUI there are a lot of different options of products to
buy, and the customer can get almost the exact type of vacation he/she wants.
4. 4. The Bargaining power of suppliers.
Concentrated suppliers : There are major hotel chains and airline companies’ alliances, which
can influence the travel market. However, there are also numerous small, independent hotels
and low-cost airlines that provide a wide choice for tour operators.
High switching cost : A tour operator can switch to a low-cost supplier with low or no cost.
Supplier competition threat : Since airlines got the direct access to customers through e-
commerce, they got more power over the tour operators and managed to negotiate tough
contracts26. Hotels, cruise companies and car rentals are in the same situation. They do not
depend solely on tour operators anymore. On the other hand, suppliers in unknown or yet
undiscovered destinations are still dependent on travel retail companies and do not hold the
same power.
26 Gerry Johnson, Kevan Scholes & Richard Whittington: Exploring Corporate Strategy - Text and Cases, 8th Edition, FT Prentice Hall
2008, p. 63
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4. 5. The threat of new entrants.
Scale and experience : Tour operators are using economies of scale – they buy large amounts
of components in advance in order to assemble their travel packages. It might be very
expensive for new entrants to match major tour operators’ volumes. Experience might be
another factor that is required in travel retail industry in order to manage the company
efficiently and come up with successful strategies.
Access to supply or distribution channels : Major tour operators are vertically integrated
companies, meaning that they own some of their suppliers. Other supplier might already have
long-term contracts and established relations with the main travel retail companies. Therefore,
it might be hard for new entrants to set up a vast supplier base. On the other hand, new
entrants can easily establish distribution channels through e-commerce, which gives a new
company the opportunity to get a direct access to customers and cut back on the costs.
Expected retaliation : As travel retail is a highly competitive industry with many players on the
market, it might discourage new companies from entering the industry. Major competitors are
well prepared and ready to launch a price war or a marketing blitz.
Differentiation : It is hard for a new company in the tourism industry to provide a service with
a higher perceived value then competitors. New entrant would need to come up with a totally
new strategy to market its services and develop a strong brand in order to deferential itself.
5. TUI’s business model
In order to explain the course of actions TUI has chosen in relation to creating, delivering and
capturing value27, it is necessary to examine TUI’s business model and its core business
aspects. As described in one of their reports28, their current model generates the value
proposition from a wide variety of product choices, which are created from components
(flights, hotel beds, car hire, transfers, excursions) and specialist input. Services are then
transformed into flexibility for the customers, meaning that TUI offers its customers a
diversity of holiday packages, which can cater to various tastes. The communication with
customers is carried through several channels (online, retail, call centre), which allows
reaching each customer in the relevant way (see Appendix 3).
5. 1. The SMS - Service Management System29
27 One of the methods to explore the business model is to apply a value chain (see Appendix 7)
28 TUI Group – at a glance, TUI AG Group Presentation, Feb 2010
29 Normann, Richard, Service Management: Strategy and Leadership in Service Business, 3rd Edition, p. 146
10/21
For the purpose of describing and evaluating the business model that TUI applies, it has been
chosen to display a Service Management System diagram. (See Appendix 4).
The Service Concept: For TUI it is important to align all functions of the company and focus
on customers’ needs in order to understand the company’s profit margin and generate new
values. The Service Concept can be divided into two groups: core and peripheral. TUI’s core
service has been display as been the travel experience and the peripheral services as the
service warranties, the quality of the experience, the customer care and the means their
product are delivered to travellers.
The Market Segment: TUI’s overall target group are young people, families and empty
nesters. Their target group is understood to be relatively wealthy travellers who are part of a
regular holiday basis that allow them to experience new cultures and traditions as well as new
trends for perceptive lifestyles.30
The Delivery System: TUI delivery system is responsible for providing a unique and
innovative service. Their delivery system elements consist of four features: personnel, client,
technology and physical support. These components participate together to produce and
contribute in the service performance.
Image: Image plays a big role within the tourism industry. TUI aims to achieve a first-class
image, in order to attract and maintain their travellers and overcome the barriers brought up
by the diverse financial recessions along the years.
TUI it has been set to generate a high-quality image. The company has an attractive and
functional homepage on the Internet; therefore it is a great prospect for people to book trips
online. TUI has become trendier due to their successful advertising strategies, as TV,
brochures, newspapers, agencies and etc. Another important factor for TUI’s image is having
the proper attire at work and a standardized way of welcoming their travellers.
The Culture and Philosophy: When the culture in the company is functioning well and
employees are considerate to each other, it creates a pleasant working atmosphere. Personnel
are a part of the product in the travel sector. Therefore, TUI spends a lot of time and effort on
training their employees, customer care assistance and selection process to them provide their
customers with first class service.
5. 2. The Integration of TUI31
30 Global Travel and Tourism – A fast-changing Landscape, Euromonitor International, Nov 2008, p. 11
31 See Appendix 5
11/21
Large tour operators like TUI are typically vertically and horizontally integrated (related
diversification32). The vertical integration provides the possibility for a tour operator to source
its supplies not only from third parties, but also from the tourism-related businesses that it has
developed within the company.33 TUI owns an airline company, shares in hotels and cruise
lines, and travel agencies. Such strategy guarantees better management of costs and helps to
keep profits, which would otherwise go to third parties. “TUI’s fully-integrated tourism
business model provides operating advantages which enable the Company to optimize the
load factor of its airlines and the occupancy rates of its hotels.”34 Horizontal integration means
expanding the company through mergers or development of by-products. TUI is using
horizontal integration strategy by acquisitions, mergers and joint ventures. In short, a
vertically and horizontally integrated tour operator is better prepared to adjust to changes
within the industry, to perform efficiently and to maintain leader’s position.
6. TUI’s strategies: challenges and choices
As seen from the SWOT analysis of TUI (See Appendix 6), possible strategic challenges of
TUI might be connected with the ongoing economic recession and thus lower consumer
demand, late booking patterns and smaller travel budgets. TUI management should find a
strategy to adjust to the new industry landscape and minimize its dependency on economic
fluctuations.
Some of the key strategic objectives and challenges for TUI in the future are:
Maintaining competitive offerings through lower prices and more exclusive deals.
Eliminating duplicate costs and focusing on its under-performing businesses (synergies
and cost-cutting in order to maintain profit levels)
Finding the right approach for competing with online travel agencies, which can offer
cheaper dynamic packages
Finding ways to cope with rising fuel prices and banking crisis (TUIfly has recorded huge
losses and has to look for ways to reduce its operation costs)
Strategic directions of TUI in the future
Niche markets: One strategy that TUI could adopt is a more focused strategy on specific
niche markets. A niche market that TUI could choose to focus on in the future is adventurous
tourism. Currently TUI already has offers for adventure-travellers. However, travellers
become more experienced and crave for new excitements, as what used to be thrilling no
32 Johnson Gerry, K. Scholes & R. Whittington: Exploring Corporate Strategy - Text and Cases, 8th Edition, FT Prentice Hall, 2008, p. 265
33 Transat – Our vertical integration strategy, http://www.transat.com/en/media/backgrounders.aspx (retrieved 23 March 2010)
34 New Shares,TUI AG, Aug 2005, p. 3, http://www.tui-group.com/uuid/f57cdd1fd6b681de038f005247fed662 (retrieved 24 March 2010)
12/21
longer fulfils the “thirst for adventure”. TUI already has some brands that focus on adventure
travel, but the focus could be enhanced and they could, for example, offer specific adventure
packages for backpackers. Usually backpackers are on a very tight budget, but they still want
to experience the thrill of adventure travelling. Therefore, an option for TUI could be to
develop low-cost adventure trips.
Emerging markets: Another future strategy for TUI could be the development of upcoming
markets. For example, India represents a great opportunity due to its fast growing economy,
large population, rising Indian incomes and strong domestic sector. TUI could focus on
supplying new destinations for the Indian market.
New markets: Entering new markets (such as Australia) could provide the necessary growth.
Raising brand awareness: Due to increased competition in travel retail, it is necessary for
TUI to have a strong brand image to build customer loyalty and long-term growth.
Social networking: TUI should make the most of social networking. Facebook, Twitter,
blogs, etc. represent a great opportunity to get more personalized interaction with customers.
7. References
Global Travel & Tourism: A Fast-changing Landscape, Euromonitor International,
Nov 2008
Johnson G., Kevan Scholes & Richard Whittington: Exploring Corporate Strategy -
Text and Cases, 8th Edition, FT Prentice Hall, 2008
New Shares, TUI AG, Aug 2005, p. 3,
http://www.tui-group.com/uuid/f57cdd1fd6b681de038f005247fed662 (24
March 2010)
Normann, R., Service Management: Strategy and Leadership in Service Business,
3rd Edition
Page, S. & J. Connel, Tourism – A modern synthesis, South-Western Cengage
Learning, 2009
Sustainability and the environment, Scandic, http://www.scandichotels.com/About-
Us/Responsible-living/ (retrieved 23 March 2010)
Tertiary sector of the economy, Wikipedia.org,
http://en.wikipedia.org/wiki/Tertiary_sector_of_industry (retrieved 22 March 2010)
The Thomson Future Holiday Forum, Thomson, http://www.ahp-monitor.pt/?
data=download_file.obj&fid=111 (retrieved 23 March 2010)
13/21
Tourism Trends for Europe, European Travel Commission, Sep 2006
Tour Operator, Wikipedia.org. http://en.wikipedia.org/wiki/Tour_operator (retrieved
23 March 2010)
Transat – Our vertical integration strategy,
http://www.transat.com/en/media/backgrounders.aspx (retrieved 23 March
2010)
Travel and Tourism – Germany, Euromonitor International, Aug 2009
Travel and Tourism Forecast Update: One Year On, Euromonitor International, Nov
2009
TUI Group – at a glance, Group Presentation, Feb 2010
TUI – Journey through time, http://www.tui-group.com/en/company/heritage
(retrieved 22 March 2010)
World Travel Market Trends, Euromonitor International, Dec 2009
8. Appendixes
Appendix 1. Some TUI’s brands placed on Strategy Clock.
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TUIfly: TUIfly is a low-cost carrier and offers both charter and low-cost flights. Source
market is Germany. http://www.tuifly.com/
SpringBreakDiscounts.com: provides students and travel agents with reliable travel packages
at affordable prices. Source market is North America. http://www.springbreakdiscounts.com/
Signature Vacations: Signature Vacations offers innovative and popularly priced package
holidays. Source market is Canada. http://www.signaturevacations.com/
Star Tour: Star Tour Denmark offers package tours to the Mediterranean and destinations
worldwide. Tour operator and retail business. Source market is Denmark.
http://www.startour.dk/
TEMA: TEMA is a Nordic company that focuses on quality rather than quantity. Source
market is Denmark, Sweden, Norway and Finland. http://www.temarejser.dk/
Appendix 2. Tour operator market share in Europe.
Sources: FTDetschland, annual reports, FVW
15/21
Copied from the case of Eric Viardot: “TUI: achieving and maintaining leadership in the
European tourism industry” (Exploring Corporate Strategy, p. 623)
Appendix 3. TUI’s business model.
Source: TUI Group – at a glance, Group Presentation, Feb 2010
16/21
Appendix 4. Service Management system – SMS model
This appendix displays explanatory parts of the models, which were relatively long to be
placed within the assignment.
The Service Management Model (SMS) consists of five single elements, that when linked
together can assist companies to have a better control of the internal environment and monitor
how the organization functions in a whole.
The Service Concept is a service company’s offer to the customers. The travel
agencies in general, have as centre of attention their customer’s needs before
developing a new product or carrying on with re-launching an old one.
The Service Concept can be divided into two groups: core and peripheral.
The Market Segment can be used as a tool for service companies to identify their
target group.
Conclusion of TUI model Analysis
The SMS analysis of TUI helps to discover the company’s market segment and other important
factors that are extremely relevant when suggesting the new tendencies of the market and the
demands that changes can brought up within in the tourism industry. It also facilitates to
comprehend the company’s delivery system and to learn about their target group. This analyse
will be related with the suggestions to be placed on the new strategies for the company
17/21
Travel agencies
TUI CIS
TUI China
TUI Mostravel Russia
Online Accommodation Retailing
TUI AG
TUI Hotels and ResortsTUI Airlines
TUI Western Europe Tour operators
TUI Central Europe Tour operators
TUI Northern Europe Tour operators
Cruise lines
Backw
ard Integration
Horizontal
IntegrationForw
ardIntegration
Appendix 5. Related diversification options for TUI
Appendix 6.
SWOT analysis of TUI
Source: TUI AG in Travel and Tourism, Euromonitor International,
Jan 2010
18/21
Appendix 7. The value chain for the service industry
A customer’s perception about a whole package of benefits, being tangible or intangible, is
what satisfies the needs of the customer right, effectively and efficiently. “Customers are not
and will never be buying products but values”.35
In most cases, TUI’s travelers will seek out a completely different customer experience
altogether. However, there is remarkable value to understand why they think this way.
Developing a profile of the most and least profitable customers can be the way of reaching
full customer’s awareness. TUI needs close links with their customers so that they can deliver
the right value for them. Therefore, value needs to be connected (marketers and customers
together).
As the business world has now changed and has become more sophisticated especially within
the service industry, it doesn’t have the real operation of inbound or outbound logistics. The
operations in the manufacturing sector are far different to those in the service industry.
Within the service industry, production and usage of the service occur simultaneously. The
supporting activities might be similar in most cases, yet the way of managing the supporting
activities might be different consequently there is a need for considering various elements as
for example the expanded marketing mix for the service industry.36
35 http://www.docstoc.com/docs/3638198/Value-Chain-for-Services-A-new-dimension-of-Porter-s
36 http://www.learnmarketing.net/servicemarketingmix.htm
19/21
Due to the nature of services and their providers, there has been a need to have a different
version of the value chain. It should be yet clear that a generic value chain can be useful but
not in all cases as it has its limitations.
The value chain for services has been introduced by a few researchers37 as having five
primary attributes and four supporting attributes. These characteristics are used consciously
since other components of the value chain for services might not be activities but attributes.
Illustration. Value Chain for the service industry
37 Professor Elisante Ole Gabriel – Lecturer and Head of Entrepreneurship Centre – Faculty of Commerce
20/21