F.A.O: Barry Whitehous
BA (Hons) Business Management (Human Resources)
Due to the financial recession an economic crisis that started in 2007 many businesses from all sectors, governments and individual people where majorly effected. Many businesses have reported devastating results of loss (Mortgage Guide UK, 2008).
Thomas Cook and the UK travel and tourism market as a whole have suffered from this global recession were the total expenditure fell 5.5%. (Keynote) This is because the recession has caused a dramatic fall in the amount off disposable income that people (customers) have. The average person’s wealth has dropped by £16,000 (The Telegraph, 2010) also the household savings ratio has dropped by roughly a third from 4.8% to 3% so consumers would have less money aside for luxuries such as package holidays (Mintel), (TDX Group). This drop in disposable income is due to many factors the main one being that has been catastrophic rise in unemployment since 2007, bringing the total of unemployed at 2.45million (BBC news).
Last visited 20th November 2010
The other reason being the rise in cost of oil so Thomas Cook are now having to spend more money on fuelling the planes. This is also affecting consumers, so on top of many already having less disposable income, they’re having to pay more for fuel.
But there are some companies in the travel and tourism sector such as Ryan Air and Easy jet who are the low budget airlines, who have been offering low prices to match the consumer’s pockets. This is having an immense influence on the travel and tourism sector. This is a growing threat to Thomas Cook and has raised the competitive pressure for them. So not to affect their competitive advantage they cut their costs to be more cost affective to protect their profits as Martin Alley the Director, Shared Services and Procurement of Thomas Cook went to say “We had to cut costs to match theirs”
There are some changes that have been done and yet to be done that will affect the future of Thomas cook for the better. One is the alteration or discontinuation of specific unpopular routes which will help cut out needless costs which will help them compete more (Rosenthal, 2007). As an alternative Thomas cook can explore opportunities in emerging markets such as Lithuania.
Also the Merger with the Co-operative travel will provide opportunities to make sales and to share and cut out costs, a hopeful amount of £35m between the two companies (BBC). As well the partnership with Expedia which made them a leading European online travel agent which this alliance will also give them the opportunity to help them cut out costs of things such as shops and unnecessary staff, both will al help reduce the bargaining power of their suppliers put them in more controlled position. What’s more it will also reduce the threat of new entrants to the market as merges an acquisitions will make them bigger and harder to come up against. (Euromonitor).
In addition there is the planned merger with the one of Russia’s oldest travel business Intourist which will give Thomas cook opportunities to provide seaside and family vacations for Russia’s ever growing demand to places such as Turkey, Egypt and Cyprus (Telegraph, 2010). As well there was the planned merger between with Lufthansa and German discount carrier TUI (Morrow, 2009). In doing this once again it will reduce the threat of new entrants to the market as they are creating an alliance, as well as giving them a better opportunity to give their competitive rivalries such as low budget airline rivals a stiffer contest. In addition Thomas cooks have decided that they wanted to cut cost further and vertically integrate operations by outsourcing suppliers to provide the service they require,...