SWOT Matrix For Kuoni Travel And Tourism Services Report Example
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Value Chain and Strategic Analysis of Kuoni Travels
Kuoni is a Switzerland based multinational travel and tour group providing premium holiday packages, visa processing, destination, and accommodation services worldwide to its valued clients. The tour operator enjoys a credible reputation because of its extensive services portfolio with global coverage. Kuoni Group has divided its global business into segments known as Global Travel Services (GTS), Outbound & Specialists and VFS Global, which altogether employer more than 11,000 workers worldwide. In other words, Kuoni is a multinational traveling services provider that acquires bulk travel group arrangements as a multi-billion wholesaler, which are then sold using global distribution system to the online and offline travel companies and agents that sell services to end users, visitors, tourists and businesses (Kuoni Group, 2014). This paper presents a comprehensive value chain analysis on Kuoni to elucidate valued insights on resources and core competencies. In addition, the researcher will develop a SWOT matrix to summarize strengths, weaknesses, opportunities and threats of Kuoni. Finally, the researcher will document a strategic direction and recommendation for Kuoni’s senior management that could assist company in eradication of weaknesses, responsiveness to global business threats and capitalization of opportunities in contemporary business environment and international market.
Value Chain Analysis
Yilmaz and Bititci (2006) highlights that a tourism product is different from physical goods as it is intangible, which could not be observed and distinguished without having a real time experience. Indeed, the tourism products such as tickets, hotel accommodation, destination arrival and food service during traveling are of perishable nature because it is available for only current sale as it could not be stored for future (Duliba and Kauffman, 2001). Hence, the travel companies achieve distinction in their services quality when they successfully deliver their promises and fulfill value propositions by meeting customers’ expectations. The capability to deliver premium service with all characteristics in a timely manner becomes a rare, inimitable and non-substitutable resource for tour operators. For instance, the travel and tour companies sell a direct experience to tourists; hence, the service perception and quality level varies from customer to customer. However, the word-of-mouth is the most important factor for service demand and growth of tour planners and operators. In other words, the value chain evaluation is conducted by reviewing the efficiency and utilization of human, physical and financial resources to develop core competencies and attain competitive advantage (Alamdari, 2002); (Yilmaz and Bititci, 2006); (Johnson, Wittington and Scholes, 2011); (Hamel and Prahalad, 1990).
The first crucial resource that developed a foundation for Kuoni’s international success is its human resources. The travel company adopts “Get the Right People” strategy to induct diverse, proactive, enthusiastic and innovate employees who are provided enabling and learning work environments, challenging day-to-day work tasks and realistic goals in a supportive culture. The company is committed to ensure fair treatment and organizational justice policy, which not only motivates team members but also instills exemplary team spirit followed by mentoring and counseling by middle and senior managers. Resultantly, the employees of Kuoni are strongly performance and relationship-oriented who intend to contribute their superior service and work commitment for business expansion across globe. Indeed, the workers strongly agree, embrace and extend the strategy of “Do the Right Things” and “Do Things Right”, which then results into developing an enormous customer base for both B2B (wholesale) and B2C (outbound) services (Kuoni Report, 2011); (Kuoni Report, 2012).
In addition, Kuoni has its own framework of business competencies that are communicated to global employees through customized and tailored training programs. The travel group specifically focuses on four main competencies such as “leadership, business development, performance and passion”, which are linked with recruitment and selection decisions for potential candidates at Kuoni. Another major resource of the global corporation is its established international business partnerships with airlines, carriers, suppliers, tour planners and agents across North America, Europe, Middle-East, Asia, Africa and Australia to ensure global presence and extensive network coverage. Apart from these traditional partnerships, the group has also established unique partnerships with diverse businesses, magazines, indirect customers and stakeholders such as Credit Suisse, Monocle, Maurice Lacroix, Zurich Film Festival, Thukral & Tagra and others etc. for product and service innovations, managerial guidelines, relationship development and tendency to think ‘outside the box’ (Kuoni Website, 2014). Next, the corporation is a staunch believer of technological upgrading and exploitation of modern systems and global portals for rapid service connectivity, distribution and consumer friendly reservation.
In other words, the Kuoni Group’s financial strength is not threatened because of its limited dependence on any specific market and core region; rather, the group significantly emphasizes on service extension and market diversification. For instance, the corporation attained the colossal revenue of almost $5.7 billion and EBIT above $150 million in fiscal year of 2013 with stable cash flows and gross margins between 17-18%. The group has initiated managerial and business restructuring by bringing diverse employees on board with extensive travel industry experience and know-how of changing consumer demands and behavioral patterns. For example, the organization recently withdrew managing operations from Italy, France and Belgium to focus extensively on core services and regions with mammoth growth potential such as BRICS and emerging markets of Europe and Asia (Kuoni Report, 2014). The recent 50% decline in international oil prices will create ample opportunities for growth Kuoni Travels as it will open new horizons of growth in developed and emerging markets of Europe, North America and Asia, where tourists and travelers will benefit from increase in purchasing power & savings and decline in prices of tour packages and excursion trips simultaneously. Kuoni could cater to this expected short run demand growth by enticing a new wave of potential customers towards its premium services. However, the oil price reduction may also adversely affect growth in Middle-East region and Soviet / Russian markets where economic growth will be tumbled due to government’s decline in oil revenues (Schwartz, Krauss and Searcey, 2014).
An organization must plan its strategic focus, intent and direction for survival, expansion and sustainable development (David, 2013). It should be noted that Kuoni is specifically diversifying its service portfolio by focusing extensively on growth of Destination & Accommodation division of which contribution in Kuoni’s revenues has increased to 55% in 2013. On the contrary, the travel operator is losing its ground in ‘traditional tour operating business of which the share reduced from 75% in 2010 to 41% in 2013’. Visa processing business is still in its infancy stage with barely 4% share in Kuoni’s global transactions (Kuoni Report, 2014). The researcher would like to develop a strategic direction for international giant that it should focus on BRICS (Brazil, Russia, India, China and South Africa) and other emerging markets of Pakistan, Bangladesh, Malaysia, Indonesia, Saudi Arabia, Turkey, Mexico and Poland for growth of its all three business divisions because the aforementioned countries together represent around 60% of global population with growing economies and increasing leisure, travel and hospitality demand. Unequivocally, Kuoni’s total business from above nations is below 25% that clearly exhibits that the corporation could expand enormously in future if it successfully imprints a strong foothold in developing economies worldwide. Another core strategic direction is about achieving rapid penetration and growth into developed North American region, which currently constitutes only 10% of total Kuoni business. Indeed, it is right time for the global travel and tour player to throw discounted packages and service offerings for North American consumers whose aggregate spending is expected to skyrocket in wake of declining oil prices, low inflation and higher savings. Obviously, the external market change will positively affect demand side of travel and leisure in North American region, thereby creating an opportunity for organizations like Kuoni to penetrate deep inside developed markets with enormous business potential.
Alamdari, F. (2002), “Regional development in airlines and travel agents relationships”, Journal of Transport Management, Vol. 8, pp. 339-348
David, F. (2013), Strategic Management, 14th edition, Pearson Higher Education
Duliba, K.A. and Kauffman, R.J. (2001), “Appropriating value from computerized reservation system ownership in the airline industry”, Organization Science, Vol. 12 No. 6, pp. 702-28
Hamel, G. and Prahalad, C.K. (1990). ‘The core competence of the corporation’, Harvard Business Review, vol. 68, no. 3, pp. 79–91
Johnson, G., Wittington, R. and Scholes, K. (2011) “Exploring strategy”, 9th ed. Harlow: Pearson Education Limited.
Kuoni Report (2011). “Kuoni Annual Report 2011”, Kuoni.com. Available at http://www.kuoni.com/docs/01_marketreport_complete_e_0.pdf [Accessed – December 27, 2014]
Kuoni Report (2012). “Kuoni Market Report 2012”, Kuoni.com. Available at http://www.kuoni.com/docs/kuoni_gb12_marketreport_en_0_0_0.pdf [Accessed – December 27, 2014]
Kuoni Report (2014). “Kuoni Annual Report 2013”, Kuoni.com. Available at http://www.kuoni.com/docs/kuoni_market_report_2013_en_0.pdf [Accessed – December 27, 2014]
Kuoni Group (2014). “About Kuoni Group”, Kuoni.com. Available at http://www.kuoni.com/group/about-kuoni-group [Accessed – December 27, 2014]
Kuoni Website (2014). “Perfect Match”, Kuoni.com. Available at http://www.kuoni.com/brand-culture/partnerships [Accessed – December 27, 2014]
Schwartz, N., Krauss, C. and Searcey, D. (2014). Sliding Oil and Gas Prices Give Americans More Money to Spend. The New York Times, Available at http://www.nytimes.com/2014/11/14/business/economy/lower-oil-prices-give-a-lift-to-the-american-economy.html?_r=0 [Accessed – December 30, 2014]
Yilmaz, Y. and Bititci, U. (2006),"Performance measurement in the value chain: manufacturing v. tourism", International Journal of Productivity and Performance Management, Vol. 55(5), pp. 371 - 389
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