Pestel and Porter's Analysis of Tourism Industry

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Contents:

IntroductionPage 2
Macro EnvironmentPage 2
Competitive Forces in the Tourism IndustryPage 4
ConclusionPage 6
ReferencesPage 6
Introduction:
This paper will be dynamically examining the tourism industry during the 2000s. It will begin by using the PESTEL framework to analyse the macro environment and determine which factors drive the competitive forces within the industry. Following this, Porter’s Five Forces model will be used to analyse the actual competitive forces at work within the industry and determine the relative importance of these forces.

The macro environment
Before one can look at specific factors relating to the firm itself, it is necessary to first examine the nature of the external or macro environment. This involves using the PESTEL framework (Johnson, et al, 2008) which includes analyzing the political, economic, social, technological, environmental and legal forces applicable to the industry.

When looking at the tourism industry during the 2000s, it is important to realise that it is a very volatile, constantly changing atmosphere, due to a number of environmental factors. The first major factor that one must consider with regards to the tourism industry as a whole is the number of terrorist attacks that took place in this period, including the infamous September 11th attack in 2001, as well as the Madrid bombings in 2004 and London bombings in 2005. The first area this would have affected would have been the political environment. A great deal of political instability was created, mainly due to public fear and lack of knowledge on behalf of governments. This forced governments to implement greater security and control mechanisms at airports and other transport services. This would have the effect of increasing the cost associated with travel. Another political issue would have been the wars between America and Iraq and between Israel and Palestine. These would have caused a decrease in demand for travel to these areas.

In addition to these political effects, the terrorist attacks would also have affected the legal and social environments. From a legal perspective, many countries were forced to dramatically decrease the ease with which one could obtain visas. This would mean that the opportunity cost of travel would increase as a result of additional time needing to be spent filling out paperwork etc, which would impact negatively on demand. From a social perspective, a number of travelers became extremely paranoid about the safety of their journey and many decided to postpone or cancel trips all together. Apart from the terrorist attacks, there were other social factors such as changes in consumers’ preferences for certain holiday destinations over others. Another aspect affecting this phenomenon was the outbreak of SARS, which saw a significant decrease in visits to the Far East in 2003 (Asian Market Research, 2003).

With regards to economic factors, it is evident that between 2001 and 2007 the world saw phenomenal GDP growth, especially in developing countries (Wade, 2008). This would cause an increase in demand for travel from citizens in these countries, as illustrated by the statistics in the case study (Viardot, 2005). Another positive factor would have been the integration of countries within the European Union. This would have resulted in exchange rate stability and a decrease in immigration controls, which makes it easier for people to travel between countries (Liverpool Business School, 2009) One must however bear in mind that the case study was written in 2007, which suggests that it doesn’t take into account the effects of the global recession that began in 2008. This would have certainly had a negative effect on tourism, which can be regarded as a luxury good.

Another factor which would have had a significant impact would have been the technological advances of the time. Many countries upgraded their infrastructure, thereby providing things like...
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