Thomas Cook in

tourism industry
Strategic Management Final assignment

Martynas Simanavicius, Student No. 21188211

Introduction
This report will perform the internal analysis of the Thomas Cook
tour operator company. The goal of internal analysis is to understand the
business in depth. This paper will identify the strategic capabilities, such as
resources and competencies, of the firm along with the SWOT matrix and the
application of the value chain. The end of this report will provide a strategic
direction or a method for Thomas Cook tour company.

Resources
The resources of an organization are treated as the assets that
deliver value added in the organization (Lynch, 2011). Financial resources
represent the firms ability to finance its strategy. In order to identify Thomas
Cook financial resources, it is necessary to look into its cash flow statement
and some key ratios. According to KeyNote (2014), this organization received
370 million net cash from operating activities in 2013. This key indicator
shows that Thomas Cook does really well in tourism industry. However, the
liquidity current ratio, which compares current assets with current liabilities and
measures whether a firm has enough resources to pay its debts in 1 year
period of time, says differently. It indicates the ratio of 0.54 (see appendix 1),
when acceptable current ratios stand between 1.5 and 3. With this low ratio,
Thomas Cook is meant to have problems in meeting short-term obligations.
In contrary to this, Thomas Cook has high pay per employee (34,000/year)
and high sales per employee (352,000/year). It makes them one of the
leaders of the market.
Physical resources for tour operators include property, where the
retail outlets or hotels are located, airplanes or cruise ships and computers with
programs that allow employees to look for travel/package deals. However, the
planning of these resources is not easy. Suppose a cruise line or an airline fleet
needs an update which will take 2 years for the new airplanes to be delivered,
or new buildings of certain type are required. If a company is not able to plan in
advance and effectively compete in resource market, it will have to settle with
the second best alternative which will make them weaker against competitors.
Thomas Cook has its own airline which makes them stand out against a
majority of tour operators.
Human resources in an industry, as suggested by Pender and
Sharpley (2004), are the high levels of human involvement in the development
and delivery of services or vacation experiences. Thomas Cook is one of the
leaders in tourism market and in order to remain in this position, they put extra
emphasis on education of the employees and improvement of their skills. As
mentioned above, employees generate really high profits per year, thus with
22,672 employees currently working for Thomas Cook and over 22 million

customers departed in 2014 (ThomasCookGroup, 2014), human resource

sector remains at the top of the list. However, the number of employees has
reduced significantly during the year 2013. As stated by Wikipedia, Thomas
Cook had 31,000 employees working for them in 2012, and due to the use of
technology substitution (electronic ticketing and check-in with airlines and
hotels), the human mediation in service sector has been reduced (Independent,
2013).
(Appendix 1. Liquidity and employee performance ratios, adapted from
Keynote,
2014)

Strengths
Thomas Cook is the oldest living tour company in the UK which
began its international activity in 1841, offering one-day rail excursion
(ThomasCook.com). Its longevity gives it a major strength. The companys
merger with My Travel Group plc. in 2007 made the company bigger and
stronger than before. The UKs travel market is known for its strict rules, such
as airline rules, legal laws and insurance that tour operators must cover. With a
huge percentage of tourism market in UK, Thomas Cook has the trust and
satisfaction of customers. A significant point on receiving trust from customers
is being true to them. For example, during the 2010 volcano eruption in

Iceland, Thomas Cook did not leave its customers stranded it stayed true to
them. Moreover, Thomas Cook has access to lots of world markets, with
around 1200 distribution channels. Since the company owns them, there is no
need for intermediaries, and thus it allows itself to be competitive and offer
affordable prices. Furthermore, with its own 88 airplanes and over 3,000 retail
outlets, it has a strong and secure market position because it does not have to
worry about airline regulations, and, having its own insurance company, it does
not have to spend additional costs on insurance (UKEssays, 2013). With these
strengths, Thomas Cook can satisfy every customer with its capabilities.

Weaknesses
Even though Thomas Cook shows great performances in the
market and is one of the leading companies, it has its weaknesses against
others. First of all, the company owns many different brands, such as Thomas
Cook Signature or Thomas Cook Style Collection. Market diversification is
not an awful thing, but they face problems with marketing and customers get
confused where to go due to so many brands that sound very similar. Another
point is net debt. With approximately of 326 million of debt in 2014
(ThomasCookGroup, 2014), market fluctuations makes the company more
susceptible. Furthermore, tour operator companies keep coming into market
quickly, making greater competition and thus lowering market share for the
leading companies. The last weakness is the cost of operations. With 22,000
employees working, their wages cost 939 million for the year ended 30
September 2014 (ThomasCookGroup, 2014). This expense, along with 6.7
billion of cost providing tourism services, hurts the company sharply.

SWOT matrix
SWOT is a strategic planning method consisting of strengths,
weaknesses, opportunities and threats involved in a certain business. Strengths
identify advantages over competitors, weaknesses show disadvantage relative
to others, opportunities point the possible improvements of a business and
threats are the elements that might cause problems for the business. Below is
the possible SWOT matrix for Thomas Cook tour company.
(Appendix 2. SWOT matrix. Created by me.)
Perfor
mance
Factors

Enhancers

Inhibitors

Strengths:

Internal

Longevity
Trusted by customers
Well known around the
world
Owns
lots
of
assets
(airplanes etc.)

Opportunities:

External

Mostly based in Europe

which is popular tourist
destination
Growing tourism industry as
tourists spend on traveling
More
destinations
to
greener,
eco-friendly
places

Weaknesses:

Different brands
Significant debt
Large
cost
of
operations
Competitors
reduce
big market share

Threats:

Peoples busy lifestyles

make them choose
short holidays over
long ones
Terrorism in popular
tourist
destinations
(e.g. Paris shootings)
Currency
rate
depreciation

Core Competencies
Core competencies are the main strengths that a business has. They
consist of knowledge and technical capacities that make a business
competitive. A core competency allows a business to expand and satisfy the
customers at the same time (Investopedia.com). These competencies should
not be easy for a competitor to mimic. Thomas Cook has its mainstream
travel which is pre-packaged holidays, primarily charter packages. Then it has
independent travel competency, which consists of customized packages that
include individual preference components. Finally, Thomas Cook offers travel
and financial services (what smaller companies do not) such as travel money,
travel assurance and travel finance.

Value Chain
(Appendix 3. Porters generic value chain table, adapted from Porter, 1985)

Value chain (see appendix 3) is a set of activities, carried out internally by a

company, that interact amongst themselves. These activities are grouped into
two headings:

Primary activities those that are directly concerned with creating and
delivering a product or service (includes inbound logistics, operations,
outbound logistics, marketing and sales and service)
Support activities may increase effectiveness or efficiency, even though
they are not directly involved in production (includes firm infrastructure,
human resource management, technology and procurement). Porter
(1985) states that businesses do not usually undertake all primary and
support activities.

Thomas Cook primary activities:

Inbound logistics information and access to hotels and activity areas in

as many tourist attraction places as possible, airport transfers, car and
craft rentals, repair and maintenance, sports etc.
Operations in-flight service, baggage handling, ticketing, seat pricing,
package pricing, holiday packaging, inventory control, reservations and
information handling, brochure production and distribution.

Outbound logistics management, assortment strategies, brochure

display, information processing, reservations, confirmations, customer
advice.
Marketing and sales customer loyalty scheme, advertising, promotions,
sales aids, trade shows, cooperative advertising and most importantly
sales.
Service complaint management, key account management, itinerary
development, guest questionnaires, client database management and
client advice.

Thomas Cook support activities:

Firm infrastructure general management, making plans in advance,

managing finance appropriately, making strategic alliances with smaller
tour operators, thinking about mergers or acquisitions, quality
management.
Human resources development recruitment of employees that are most
suited for the job, giving them additional training and education, proper
motivation, paying them fair salaries and benefits, calculating the
turnover of the employees, allocating proper labour hours.
Technology improvement of online reservations systems, undertaking
research and development, proper engineering (safety and security),
updating telecommunications and providing entertainment for
customers.
Procurement acquiring the most recent equipment (or upgrading to it),
managing fuel, food and beverage supplies, taking care of contracted
and professional services, acquiring needed real estate and buildings
(Pender and Sharpley, 2004).

The most valuable activities for Thomas Cook are access to many different
markets, gathering valuable and important information, perfect customer
service, responding to customer needs and preferences, and to industry trends,
investing in their core brands as well as their processes and technology
infrastructure. All of this has huge value to consumer. Activity, that could be
improved, is financing. With a huge debt and high costs, Thomas Cook has a
disadvantage against competitors.

Strategic direction for Thomas Cook

The most optimal choice of strategy for Thomas Cook would be the
vertical forward integration strategy from diversification strategies family. In
forward integration the organization gains control of its outputs, in other words
it becomes its own distributor, such as through outlet store or franchising. Even

though Thomas Cook sold Co-operative Travel Management and Gold

Medal to other tour operators for 13m and 45m respectively
(UKBusinessPark, 2014), it is highly suggested to acquire more retail agencies
mainly because it allows a stronger influence on consumers choices (Pender
and Sharpley, 2004). Brochure space in the retail outlet is dominated by
brochures of the associated tour operator, and when a customer comes in,
he/she will take a look at five or ten of them which will make his crucial
decision. Moreover, a customer is not likely to be aware of hundreds of other
tour operators, and most of their choices come from advice from relatives,
friends or sometimes even travel agents. Hence, as Thomas Cook has great
trust from customers and is well known around the world, this company has a
huge advantage there. Although tour operators and associated agents create
some suspicion, a retail outlet is used as a point of easement (Carey and
Gountas, 1999). This distribution chain leaves customer with little to no choice
but to use this intermediary for the booking of their journeys. However,
nowadays lots of bookings are made via the internet, but the real advice can be
obtained from the travel agents in retail outlet stores.

Bibliography
Websites:
1. http://annualreport2014.thomascookgroup.com/
2. http://www.independent.co.uk/news/business/news/thomas-cook-axes-2500jobs-as-it-closes-195-high-street-travel-agencies-8522654.html
3. http://www.investopedia.com/terms/c/core_competencies.asp
4. https://www.keynote.co.uk/market-intelligence/view/product/10975/travelagents-%26-overseas-tour-operators?
highlight=tour+operators&utm_source=kn.reports.search
5. http://www.thomascook.com/thomas-cook-history/
6. http://www.tutor2u.net/business/strategy/resources.htm
7. http://www.ukbusinesspark.co.uk/thk12927.htm
Books:
1. Carey, S. and Gountas, Y. (1999) Changing attitudes to mass tourism
products: the UK outbound market perspective. Journal of Vacation
Marketing,December.
2. Lynch, R. (2003) Strategic Management. Harlow: Pearson Education.
3. Pender, L. and Sharpley, R. (2004) The management of tourism. London:
Sage Publications.
4. Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining
Superior Performance. New York: Simon and Schuster.
5. UK Essays (November 2013) Thomas Cook And The Package Holiday
Industry Marketing Essay. [online]. Available at:
http://www.ukessays.com/essays/marketing/thomas-cook-and-the-packageholiday-industry-marketing-essay.php?cref=1 [Accessed 13 January 2015].