Discuss about the Demand Driven Strategic Planning.
Business strategic planning encompasses evaluating potential internal and external factors that affect operations and establishing methods on how to cope with the effects. There are some aspects to consider in the evaluation process such as competitive aspects, organizational advantage, and customer needs. Various strategy development tools can be used to ensure effective strategizing in the tourism business industry.
This is a strategic development tool used to analyze the macro factors affecting business. This involves assessing the environment in which a business operates.
These factors include government and policies or regulations by the state that may affect the business. Political factors have a significant impact on the tourism industry globally. Terrorism and changing governments play a huge role in the tourism environment sector. Tourism largely depends on peace from the government. For instance, the tourism sector in Europe is doing well do to political stability in the region (Leite et al., 2017).
These are factors that affect the economy, which leads to impacts on the business. They include operational cost foreign exchange rates, the stability of the global economy and interest rates. The tourism industry is primarily affected by economic factors. The labor market, as well as consumer spending, mainly affect the tourism industry. The demand for hotels in a country is a factor that positively affects the tourism factor.
Social factors include social trends that enhance the knowledge of customer wants. The tourism industry social factors include consumer preferences; for example, more customers are now opting for private accommodation, such as Air BnB rather than hotels.
These factors involve technological innovation that affects the business. Technological factors play a huge role in the growth of the tourism industry. There is increased communication among countries due to technological innovation thus affecting the tourism industry. Mobile technology and social media have transformed this industry. Consumers are now able to make any bookings via social media or using their mobiles.
These are factors in the surrounding environment. The tourism industry is affected by factors such as global warming, waste management, transport, ecological factors and changing weather conditions. For instance, when the weather is stormy, there are fewer airplanes in the air, which impacts the tourism industry negatively (Craverns 2012). Tourism depends on different weather conditions thus environmental factors impacts this industry.
This constitutes the legislation in the area the business operates. The tourism industry has a strong regulatory environment that constitutes of laws from public security and labor sectors. For instance, airlines must make the airline brands safer to travel to favor the tourism sector.
SWOT analysis is a strategy development tool that is used to identify what strengths and weaknesses a business has as well as what opportunities and threats it faces (Cornelissen et al., 2012).
These are the positive attributes of the organization. These attributes are in the internal environment. Business in the tourism industry should use this analysis to identify the positive attributes that make them outstanding. For instance, some of the strengths in the industry include, the existence of many tourist destinations, strong networking, cultural diversity, state stability, availability of excellent accommodation services, the disparity in supply, and convenient and safe transport among others.
These are the negative factors that affect the value of the business. Various weaknesses can be identified in the tourism industry that positions it at a competitive disadvantage. These include the high seasonal use of facilities, poor managerial services, high turnover, and inflexibility in demand by tourists, ineffective services, poor customer services and low innovation (Distribution Access 2012).
Opportunities are external factors that place an organization in a position to prosper in the market. These are the opportunities that the business is likely to venture in. SWOT analysis can be used in the tourism industry to identify opportunities such as the growth of local and international tourism, potential strong cultural aspects, and a stable government (Plesnic?Ar et.al. 2013). For instance, the tourism industry has a strategic position in the economy of a state thus the government is willing to improve this industry.
These are external factors that put a business at risk. The organization has no control over these factors but can put up strategies to counter these risks. The tourism industry might be faced with various threats such as state corruption, poor infrastructural development, slow technological development and uncertainties in the weather conditions (Neves, 2013). For example, Bangladesh tourism industry is largely affected by changing weather conditions especially because this country experiences floods and storms. These natural catastrophes create a poor image of the tourism industry. Other factors such as visa restrictions and economic crisis, largely affect the tourism industry.
The Porter’s five factors is a strategy development tool used in analyzing the competitiveness of the business environment. It also helps to identify which strategies will bring forth profit to the businesses. This tool stipulates the factors that determine attractiveness and competitive intensity of a market. For instance, in the tourism industry, this tool will help to understand where power is in an organization, pinpoint areas of strength, and analyze what products are likely to thrive in the business and how to amend weaknesses.
Suppliers in the tourism industry include financial services, raw materials, labor sources and equipment such as vehicles and cameras. The power of the suppliers is low in the tourism industry. This is because tour businesses are now selling their services directly to the tourists without using tour agencies. They do this through the internet to reach a greater market. With bargaining power, suppliers can fluctuate quality of prices and the prices (Estêvão et al., 2015).
There is the high intensity of competitive rivalry in the tourism industry. This is caused by the possibility of businesses facing competitors both directly and indirectly (Mooradian, Matzler & Ring, 2014). For instance, hotels offer services at different prices and different qualities. Here the competition is direct and high. However, in the case of low cost and high-cost airlines, the competition was intense forcing the high-cost airlines to reduce their costs to keep up with the intense competitions.
This constitutes the power of customers and how they influence prices. In the tourism sector, the bargaining power of customers is often high. This because customers can have a lot of power to affect profitability in business. Customers in the tourism industry make choices according to how affordable prices as well different places from their previous holidays. For example, Thomas Cook, a tour operating business purchases hotel for its customers at low prices. However, if a hotel does not agree, Thomas Cook takes the customers to a different hotel due to the bargaining power of its customers.
The threat of new entrants is an essential factor to consider in making strategic plans. Every profitable market attracts new investors because of profitability (Tan, 2016). Globally, the threat of new entrants in the tourism industry is high. For example, airlines carrying customers to their holiday destinations may attract other new entrants to the same role. This poses a great challenge to the organizations who are at the top position in the market. New entrants prey on economies of scale, switching costs and product differentiation to thrive in the industry.
In a market where there are various choices, customers are likely to make choices among products or services in the market. The presence of substitutes in the market reduces the power of suppliers. In the tourism industry, the threat of substitution is high, when there are other choices in the market, where customers can shift from one to the other. However, the threat of substitution may be low, if a country has established one particular place for destinations such that customers do not have other choices.
Conclusion
The above tools are crucial in analyzing, evaluating and executing ways to guarantee appropriate strategies are established and implemented to give the business a competitive advantage in the market.
References
Cornelissen, J.M.R., Vernooij, A.G., Giani, A., & Duns, H., (2012) SWOT Analysis. Netherlands-African Business Council. https://edepot.wur.nl/297266.
Cravens, D.W., &Piercy N., (2012) Strategic Planning, New York, McGraw-Hill.
Distribution Access, (2012) Factors affecting global tourism. [Australia], VEA Group Pty Ltd.
Estêvão, J. V., Carneiro, M. J., & Teixeira, L. J., (2015) The Evolving Value of eTourism for Suppliers and Visitors.
Leite K., Jose?, G. L., Mello, Luiz C. B., Soares, M ., Joa?o C.B., Cruz, Eduardo P., & Fontanillas, C., N., (2017) Using the MACBETH Method to improve the scenario analysis tool PESTEL in large tourism projects. DYNA; Vol. 84, No. 203, pp. 322-327. Universidad Nacional de Colombia – Sede Medelli?n – Facultad de Minas.
Mooradian, T.A., Matzler, K., Ring, L., (2014) Strategic Marketing, Williamsburg, VA GOOD DOG.
Neves, M.F., (2013) Demand-driven strategic planning, New York, Routledge.
Plesnic?Ar, A., & Zaletel-Kragelj, L., (2013) SWOT analysis. A Handbook for Teachers, Researchers and Health Professionals. Vol. II, Health Investigation. 464-471.
Tan, K.M., (2016) ‘Incumbent response to entry by low-cost carriers in the U.S. airline industry,’ Journal of Southern Economic, vol. 82, no.3, pp. 874-892.
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