UMP Research notes
- Introduction
Thomas Cook (TC) group plc is a UK global travel company established in 1841 with a vision to “broaden the mind of others and break down the partition walls of prejudice.” Now the company is second largest in Europe after TUI AG with wide choice of brands aims to satisfy customers’ needs for city breaks, cruise, cheap holidays, flights and hotels. (1)
- Strategic position of TC
2.1 Balanced scorecard
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| – Turnover: 9.01 bn
– Profitability: Year on year 15.33% , Net income 225% from 4m to 13m.( ) – Balance sheet value: Debt to Total capital ratio of 83.78%, lower than previous year’s 323.93 – Share price: Recently 11% up due to internal corporate restructuring movement. (moneycontrol.com) – Debt level: 2015-1.44 billion 2016-1.92billion 2017-1.45 billion Total dept/total equity-5.15 Total dept/total capital-0.8378 – Investor ratios: EV/EBTDIA=12 Is over average for the industry. (Unhealthy) – Liquidity ratios: |
– Loyalty: by offering added-value services, selling add-ons and specialising more YTC aims to defend itself from online competitors
– Loved and trusted brand. – Industry-leadng concepts to which customers are loyal.( Reaction on complaints : Tackle fake complaints, (3) Reaction on review websites (bias) 23 million customers in 2017
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– Efficiency:
– Green agenda:-Reductions in waste/green agenda – Protect and conserve the Planets national resources Airlines: – Reduce onboard waste. -12% increase in fuel efficiency, compared to 2008 Hotels: -All Concept group accommodation suppliers to implement a local sourcing policy for food and beverage. – Offices and retail Reduce electricity consumption by 60%. 50% electricity to come from renewable sources. Reduce paper usage by 60%. – All paper purchase to come from sustainable sources – Effectiveness of IT system– – People, planet, sustainable business – Measures of efficiency Committed to making holidays more sustainable – Investment in training – Employee well-being – The ambition is to engage and support employees and communities where they work and live – Employee engagement and development. – Mike Hoban-marketing director has awarded Personnel Today award for employee engagement(9) was singled out for its “powerful brand” and “for driving excellent customer experience through a holistic strategy”.) |
– 2018 growth plan |
Financial performance (4) Share price (5y.) (4)
Forecast: As of Apr 30, 2018, the consensus forecast amongst 17 polled investment analysts covering Thomas Cook Group plc advises that the company will outperform the market. This has been the consensus forecast since the sentiment of investment analysts improved on Apr 30, 2018. The previous consensus forecast advised investors to hold their position in Thomas Cook Group plc.(6)
Latest ratios (7)
Jet2 holidays has overtaken to be the second largest Atold holder. In the week following Monarch’s failure Jet2 added more than 650K extra seats while TC added 230K. (10)
Reference list
- https://www.thomascookgroup.com/
- Stefanie Berg November 15, 2017
- The Telegraph12/07/2017
- http://www.cityam.com/280246/thomas-cook-grows-revenue-and-bookings-unveils-cheery
- http://www.travelweekly.co.uk/articles/289439/jet2holidays-now-second-biggest-uk-operator-ahead-of-thomas-cook
Thomas Cook Group
Question1. Fully analyze the current strategic position held by Thomas Cook Company.
Bearing the name of its founder, Thomas Cook is a travel company established, in 1843. It focuses on both local and international tourism; the Holiday group targets over one billion travelers every year in the United Kingdom and abroad. Its offices are based in London, England. The development of a strong brand image comes from a commitment to its core values, which include customer satisfaction and environmental sustainability. Notably, the emerging concern on global climate change to cut down carbon emissions lies in the heart of the organization. It seeks to establish positive social and economic benefits brought by travel (Armstrong, 2015). However, the industry faces critical challenges, and possible solutions have been implemented for customers to enjoy the best tour experience. In the study, the strategic position of Thomas Cook is reviewed to provide insights on the possible challenges it is likely to confront over the next five years and evaluate how such bottlenecks can be addressed within and beyond the organization.
Thomas Cook faces stiff competition from the TUI Travel Company based in Germany. Nevertheless, customer retention being one of the core focuses has ensured the company remains successful due to the implementation of competitive strategies, such as the low-cost focus. The tactic lies in the ability to target a specific group in the market and offer comfortable discounts. The approach is used mainly by small, medium enterprises (SMEs) to compete against giant companies. As revealed in a recent report, Thomas Cook- Online market is estimated to have grown by over thirty percent (Tomczak, 2018). High market share in the entire European continent is attributable to the said success because of a full year supply of revenue.
The backbone of the differentiation focus strategy is customization. Instead of lowering prices for a specified service, Individual needs of customers are met by individualization. In a bid to analyze the strategic position of the current business environment, the Porter model was employed. From the analysis, environmental factors encompassing Thomas Cook’s business model include industrial competition, supplier power, buyer power and the threat of substitutes. For the organization to guarantee relevancy in the present competitive environment, excellent managerial skills will be imperative (Tomczak, 2018, 45).
In compliance with the existing laws of the European Union and following directives by the agencies mandated with addressing security threats, Thomas Cook has implemented a range of measures that have enabled it to maintain a competitive edge over rivals. For instance, it provides clients with security travel advisory from the government to contain the current threat of terrorism. With the increasing global risk of attacks, training of employees has been on the forefront. In the 2016 Thomas Cook sustainability report, the company noted its role in improving customer satisfaction and safety. Through the promotion of Human rights, the organization safeguards child rights by making sure the United Nations guiding principles on business align with that of child protection.
Horizontal integration has eliminated most of its competitors, with only TUI Travel as its primary rival. Recent studies show that the company’s current market share is over thirty percent, which shows a commendable level of trust in its clients on its products thanks the company’s focus on customer satisfaction. Its adherence to the strict air travel rules and regulations by the United Kingdom has retained most of its clients owing to the current global threat of terrorism.
A significant advantage has been noted due to the reputation of Thomas Cook’s relationship with supplies, which has resulted in discounted prices for the organization’s products. As literature opines, companies with a weak brand image are subject to buy expensive products, resulting in a lower profit margin (Morgan, 2009). Tourist hotels, as well as guides, offer the best example of how the company has usurped supplier power. Merging of companies too has brought a fresh perspective on generation and implementation of ideas in the market.
Corporate Culture
Thomas Cook values its human capital and always ensures the development of a culture that has the capacity to safeguard a healthy business competition. On that regard, the efficiency of any organization relies on the ability of the human resource to operate on a level where talents and gifts are tapped and geared towards the attainment of a common goal. The Talent Plan in Thomas Cook Company identifies hardworking employees based on performance and prospect. Equally, rewards include promotions and increment of their remunerations. Concerning Maslow’s theory of motivation, such approaches contribute to a quality, committed workforce (Mullins, 2012).
The Company exhibits an innovative strategy to wade through the challenge of capacity control by venturing in tourism education. The institution is charged with the responsibility of character and capacity development. Further, travel guide materials are provided to clients with destinations throughout the United Kingdom. Towards producing quality research, skills are nurtured all across the board to exploit the existing gap in the travel industry.
Information Technology
Information technology has been employed to offer quality services to all clients by guaranteeing the flow of information from customers to managers. Timely decisions and communication to the affected party are guaranteed. Also, reasonable payment schedules have fostered a healthy relationship with suppliers and consumers (Wilson, 2012). To improve its global presence, E-commerce based on social media marketing dominates that of its competitors, which gives it a competitive edge over its key rivals.
Question2. Identify possible solutions a proposed challenge
Threats
Challenges in the tourism travel are unavoidable. Firstly, world airlines are estimated to add 2.5 percent of all carbon dioxide pollution. Aircraft are becoming more fuel efficient; however, with stiff competition airline companies have lowered airfare allowing more passengers to travel. The new Paris agreement requires travel companies to buy Carbon quotas which if they exceed those limits to purchase new allowances. A recent study by Tyndall Center for Climate Change Research concluded the need to lower air emissions by 90 percent by 2050. The recommendations included drastic measures to cut air travel. It directly affects the tourism industry which relies wholly on transport and costs a lot of money (Grinstein, 2008).Recent research by Unilever Company in London shows that customers buy products from specific companies based on their ethical Performance and responsibility towards the environment and society. Consequently, Thomas Cook has increased its campaign on the use of sustainable goods and products, however; this still proves to be costly.
In the same way, a major challenge is the existence of threats to the company’s survival. Consumers carefully compare prices, tracking more affordable offers to ensure satisfaction (Varadarajan, 2010). Most emerging travel companies have displayed the costs of air travel on social media platforms. Thomas Cook has lost its market share to Thompson and Expedia Company, which discloses its travel package, luring consumers due to the cheap deals offered.
Prevalent cyber-attacks have prevented online booking and money transactions. In the case of Thomas Cook, if the website of the carrier gets, attacked customers lose money. Correspondingly, a lower number of booking to various destinations is envisaged due to the fear of the safety of their money. Terrorism is world’s leading fear company. Multiple attacks have been staged in countries ranging from Morocco to France. Additionally, insurgents view visitors as soft targets to spread their ideologies and induce fear. Tourism demands patterns are altered, as tourists do not prefer areas with unrest. Amid the period that followed the Paris attack, Thomas Cook canceled flight destinations to France to keep its clients safe.
The weak currency in the current market due to Brexit has led to the low demand for travel. Too little is being invested, and the profits made leave the firm poorly positioned. Investor confidence is low, an appointment of a more experienced executive is likely to restore normalcy. The responsibility to improve how the airline operates should be emphasized to create an environment conducive to collaboration with competitors, suppliers, and the broader industry.
In an era where technological innovations form the backbone of a revolutionized world, travelers have had the experience to enjoy a borderless world. However, geopolitical tensions have caused instability in most of the tourism destinations in the world. In Africa, Kenya and Nigeria share the largest of this global catastrophe while France in Europe has been attacked more than twice in the last five years. As such, countries have preferred to close their borders rather than being more open to collaborating security within them. Britain through Brexit has been widely criticized (Teece, 2010).
Due to the impact and cause of these attacks, it is apparent that the International Community through the United Nations issues a way forward to prevent further deaths and destruction of property. Rather than managing situations after they occur, a more proactive method should be enhanced to avoid them. Technology in border control, airports, stadiums and all areas with large crowds should be improved.
Intelligence sharing induces more holistic management of global terrorism. Eavesdropping and predicting terrorist activity should be at the forefront of any government. Equally important is the actual communication from government sources to companies involved. Organizations should be ready to collaborate with governments to prevent terrorist attacks.
All firms should educate their clients on the best way to react to a terrorist attack. It may include speeches during annual general meetings or through monthly publications. Development of a new framework by company leaders should be unveiled to guide global travelers to restore confidence in areas that have been attacked. Travel is already a way of life in every civilized society. The concept of a trusted traveler agenda should be developed to catalyze the current disaster to a more comfortable solution (Armstrong, 2015). Since Companies cannot predict all terrorist threats, working to reduce consequences can be a significant step. To improve management of the risk, they can employ the following: Firstly, Identifying threats to understanding why terrorists would attack them and what to do in the event of such a scenario. This crucial step assesses potential risks.
Secondly, discuss how you will react if there is an attack. Some of the categories may include physical assets, people, information and the process required to evacuate those injured or escape routes for those not yet exposed to the attack (Harris, 2009).
Thirdly, identify the best measures to be applied to reduce risk. This should be implemented in the physical structure of a building in that it should be exposed to deter terrorists. Its design should be in a manner that delays any intruder for the relevant authorities to respond in time. Highly fortified walls, metal detectors, and cameras can aid to minimize the impact of an insurgency.
Finally, reviewing security measures frequently and continually performing drills would add value in the face of an imminent attack. Clients as well workers in an organization remain vigilant to close gaps existing that were previously undetected. (Michaelidou, 2011)
Conclusion
Thomas Cook Company has over the years grown to earn its reputable status. Its strength lies in its capital available therefore forming mergers necessary for its growth. However, challenges in the tourism sector remain to be a credible threat to its advancement. Terrorism has cost the company millions of pounds due to flight cancellation to specific destinations. Similarly, uncontrollable nature persists to be a threat. Remarkably, the organization has overshadowed many of its competitors by providing luxury travel and high-quality experience to its customers throughout the years. The bond formed with its clients is undoubtedly substantial. The firm’s role in the reduction of carbon emission is commendable as it lowers the impact of climate change on the ozone layer (Morgan, 2009). The Collaborative Environmental Management approach provides for the ‘optimum flight’ project a method to measure the optimum conditions of a flight and its impact on fuel efficiency. The airline firm took part and concluded that at least 2 percent of fuel could be saved by reduction of truck miles, continuous descent approaches and minimizing flat landing. The project encourages cooperation between different companies to share information on technological growth aimed at reduced fuel usage.
References
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015.Marketing: an introduction.
Pearson Education.
Tomczak, T., Reinecke, S. and Kuss, A., (2018)..Introductionin Strategic
Marketing (pp. 1-18). Springer Gabler, Wiesbaden.
Teece, D.J., (2010). Business models, business strategy and innovation. Long range planning,
43(2-3), pp.172-194.
Varadarajan, R., (2010). Strategic marketing and marketing strategy: domain, definition,
fundamental issues and foundational premises. Journal of the Academy of Marketing Science, 38(2), pp.119-140.
Michaelidou, N., Siamagka, N.T. and Christodoulides, G., 2011. Usage, barriers and
measurement of social media marketing: An exploratory investigation of small and medium B2B brands. Industrial marketing management, 40(7), pp.1153-1159.
Harris, L. and Rae, A., (2009). Social networks: the future of marketing for small business.
Journal of business strategy, 30(5), pp.24-31.
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