The Financial Support for the Development of the Tourism Business - Research Paper Example

 ADI Travel Agency will enter the tourism market as a joint venture with a city-owned public-use airport and a few mid-level hotel chains. The joint venture strategy is an approach for ADI Travel to break into the tourism market and allow each partner to bring something the other needs to the venture while extracting a share of the benefits. ADI Tourism, as a new business, would be entering an unfamiliar market and the joint venture would prove a faster avenue than to enter alone and also provide learning opportunities for the partners. BUSINESS mission statement Mission of the ADI Travel Agency is to go beyond traditional day-to-day business and make efforts to improve individual lives and freedoms by partnering with governments and the civil sector to address domestic, national, and global issues. BUSINESS Vision Within the next five years, ADI Company will become the premier travel agency known both domestically and internationally for the excellent service, safety and creativity it offers to the customers worldwide. Guiding values The core values of the company include: the best customer service, safety and security, comfort, creativity, resourcefulness and sustainability. BUSINESS SWOTT Analysis The current level of incentives for tourism business is low and somewhat meaningless to encourage the development of the industry. The mobilization of the development of ADI Tourism development strategy is dependent upon a partnership of public sector investment (especially in infrastructure) (Edgell, 2010). At every stage of implementation, there is a need for local governments to stimulate private investment by creating favorable conditions for investment with specific incentives including financial (Edgell, 2010). The issues related to providing the incentives only to certain type businesses, the level (size) of incentives and the extent of outreach are emerging as a debatable issue. The design of general investment incentives, revenue and taxation legislations, or incorporation of project legislations is necessary for the travel industry and ADI Travel Agency. Designing a major incentive will declare the city a “tax haven”, removing all restrictions on corporate tax, income tax, estate duties, capital gains tax and sales tax. The investment incentive process must be conspicuous, transparent, regular (following a time scale), clear and defined, supported by legal enactment which will relieve the city budget of undue burdens, provide initial development momentum, support travel program acceleration, and provide flexibility so that travel projects can be encouraged and facilitated. Designing a competent and modern incentive and investment package has been challenging and fiscal incentives may not be sufficient to attract the desirable and appropriate level of tourism development. Safety and security has become a key issue for traveler choice. The safety and security of travelers is critical for growth of global tourism and recent policies on safety and security have become integral to the development of tourism. The key challenge and market trend for the tourism industry is for policy makers to balance safety and security measures with the freedom to travel. Strategy Analysis ADI Travel will have a marketing strategy aimed at frequent flyers. ADI Travel Agency will rely heavily on establishing long-term relationships with core repeat users of their services who will likely become frequent buyers of the our travel agent’s expertise and advise (Edgell, 2010). This will ensure that ADI Travel receives a high level of repeat business and will increase their competitive strength. The existence of many large travel agencies or lack of affordable office space in good locations can pose weakness for ADI Travel and will be considered in the local market analysis together with strategies to overcome these barriers. For ADI Travel to become a successful organization of the future for tourism implementing a strategy for better educated and skilled human resources is required. Perpetually educating employees and encouraging international experience will introduce great advantages. This continuous learning strategy will make ADI Travel better adjusted to manage and create leaders during situations of instability at the work place. Technological Analysis ADI Travel will depend heavily on finding and developing new means to distribute travel and hospitality products and services, marketing information to consumers, and providing comfort and convenience to clients (Edgell, 2010). The Internet has presented an opportunity for ADI Travel to communicate with its customers by e-mail-changes in weather conditions, prices, schedules, and programming (Edgell, 2010). The travel agency sector is highly competitive and the threat for travel agents today is technology. Technology enables travelers to become more independent and dispense with the services of the travel agent. The usage of information technology (IT) in the tourism industry is often less than satisfactory and cost effective. However, after analyzing the emerging trends it is evident that IT will enable ADI Travel to advance its offering and delivery mechanisms additionally than in previous decades. The re-engineering process trend in tourism has generated a paradigm shift, altering the structure of the entire industry and developing a whole range of opportunities and threats. Competitive Analysis Competitive analysis should be used to gather information not only on primary competitors but also on secondary. ADI Travel’s secondary competitors can also be a threat. A secondary competitor can be a smaller travel agency with less threatening product offering, one having only a few features in common with ADI’s product or service, or one competing indirectly with ADI Travel, but is an alternative that will not be ignored. Traditional ways ADI Travel can use to identify competitors can be to speak with the product team, sales and marketing department, conduct a web search, read trade and travel magazines, and conduct surveys. Employing market analyst and research companies is an efficient and current way to collect information about competitors. These companies will help ADI to identify and analyze emerging trends in products/services and evaluate their impact on the travel industry. Economic Analysis The economic performance of the generating region is important, together with some aspects of the economic situation in the destination or resort to understand how ADI Travel’s customers and markets’ relative buying (consumption) power is effected by current economic conditions. External economic forces include economic growth figures; income growth relative to distribution of income; unemployment levels; gross domestic product and average annual wages/salaries; availability of credit; exchange and interest rates. These external forces will affect ADI Travel with opportunities or potential threats. Although it is impossible in most situations to estimate price elasticity precisely, it is possible to get a sense of whether a certain class of potential travelers’ demand is elastic or inelastic with respect to price and\or income. These estimates are important because proper implementation can make a significant difference in ADI Travel’s profitability. ADI Travel’s elasticity estimates can provide a basis for price-discrimination, from which revenues can be maximized by charging different market segments different prices. Global Analysis Significant restructuring of the tourism scene is evident in a large part of the globe. Geographical change is again in evidence. Global geopolitics can work negatively and positively for the development of tourism. Changed geopolitical circumstances can present an opportunity for ADI Travel Agency to redirect growth of tourism down the path towards sustainability, while contributing to the reconstruction of devastated economies, shattered societies and degraded environments. Since we all live in an interrelated and interdependent world, political instability and unrest in one country is likely to affect governmental policies of other nations. Governments, when reacting to political unrest in a third country, usually adopt policies that influence, in one way or another, tourist flow into that country. ADI Travel will have to provide a travel advisory service concerning safety or potential risks for their clients traveling to certain regions known for the political unrest. The company’s investment on tourism may be blocked by government policies which will have a direct impact on the development of ADI Travel Agency and possibly threatening its future. Throughout the world there is a growing recognition of the vital contributions that a “healthy” environment makes on the individual and society. The natural environment and wildlife are key elements of recent global tourism appeal. ADI Travel specific role will be in partnership with the tourism industry, government and global community to facilitate a balance of protection and promotion, creation and maintenance of wildlife, environment and national assets. Culture Analysis The culture of the travel industry has changed over the past decade and is continuing to reform. Given the international orientation of the travel industry, diversity will be another issue that ADI Travel will have to take into account-cultural diversity within ADI Travel can add to customer service as a diverse customer make-up and provide a wider variety of skills needed for international customers. The travel industry has been criticized for taking a standardized approach to service and low-paid hours, but as more and more courses are becoming available along with higher education, a trend of professionalism within the travel industry is evident. The combined elements of these cultural webs will represent the dominant cultural philosophy of ADI Travel Agency. The dynamic nature of external and internal tourism environment is such that travel businesses have to be receptive to changing rapidly as and when factors occur. The changes should not be viewed merely as reactive a process and ADI Travel Agency will seek ways in which the travel business can drive change in a competitive environment. ADI Travel Agency must enlighten its leaders and go beyond traditional day-to-day business and make efforts to improve individual lives and freedoms by partnering with governments and the civil sector to address domestic, national, and global issues (Blanke, 2088). Balanced Scorecard To implement the ADI’s mission and vision relying mainly on its core values, company has developed a strategic plan for the next 5 years. The plan is comprised of four main parts and provides main objectives, measures, targets and initiatives to achieve set strategic goals. Thus, the Balanced Scorecard will assist a company in turning a strategy in operational initiatives that will move ADI travel agency toward its long-term goals. Financial Perspective To increase profits, ADI Travel agency needs to implement three major financial objectives: to increase its market share, to increase its revenues, and to improve competitive position. All these strategies will enable company to earn profits, and to invest part of earned money for the further development. Financial Metrics       Financial Objective Type Measures Target Goals Supporting Initiatives Increase market share  Measured by % rate of annual growth  Yr (2012) increase market share by 15% Yr (2015) – 45%  improve competitive position, launch new directions and service Increase revenue  Measured by % rate of revenue growth  Yr (2015) – 20%  Evaluate economic threats while considering developing of new directions (elasticity of demand, exchange and interest rates, income growth, etc.) increase sales by listening to the customers and improving quality of service (see customer and learning perspective) Improve competitive position  Increased market share (%), measured annually    determine the relative “power of each competitive force; gather information on both primary and secondary competitors; develop a highly competitive strategy after market analysis Customer Value Perspective From the customer’s perspective, there were identified three major objectives for the ADI Travel Agency’s success. These objectives require such actions: to increase customer’s retention and loyalty, to increase customer’s satisfaction, and to increase customer’s database. To increase customer’s retention and loyalty, and customer’s satisfaction company has to establish long-term relationships with the core repeat users, provide comfort and convenience to clients; provide sufficient information and timely delivery (discussed previously). High service will also cause increase of customer’s retention, because quality of service is one of the main factors in tourism business. Finally, the increase of customer’s retention will lead to stable company’s business, ensuring constant sales and thus profits. If the clients will be satisfied they will advise our company to their friends, colleagues, relatives. Such mouth-to-mouth advertisement will increase customers’ awareness and company’s market share. Increased market share will enable company to be stronger among competitors, and will lead to growing profits. By increasing customer’s base, the company will be enabled to give its advertisement to its customers who are more likely to use ADI Travel services. This will also positively influence financial statement of the company. Customer Metrics       Customer Objective Type Measures Target Goals Supporting Initiatives Increase customer’s retention and loyalty  % of repeated visits of customers to our travel agency (will be measured through the ADI’s client database) Gradually Continued growth Yr (2012) - 10% Yr (2015) - 30% establish long-term relationships with core repeat users;  provide comfort and convenience to clients; ensure safe and secure services by analyzing current global political, economic and environmental situations and providing a travel advisory service for the clients travelling or those going to travel to certain regions known for the political unrest Increase customer satisfaction  % of customers satisfied with our services measured trough surveys conducted among our clients  Yr (2015) customer’s satisfaction should exceed 85%  provide a high-quality of service, increase communication with current and potential customers, analyze customer’s feedback and response adequately to improve service; rely on the customer’s wants and needs Increase customer base  %, measured through the client’s base  Yr (2015) – 40% Develop new market niche, propose new directions that capture various segments; develop new directions in global tourism, focus on the natural environment and wildlife; focus on the issues of cultural diversity, providing a wider variety of skills needed for international customers Process or Internal Operations Perspective Relying on the SWOTT analysis and current global trends, there have been identified three major objectives for the development of ADI Travel agency’s business. The perspectives referring to the Internal Business Processes category highlight such objectives: to find affordable office in good location, to improve technological capacity (IT development), and to increase amount of operations done per year. By finding an appropriate office space for the ADI Travel agency, customer’s loyalty and confidence will increase, as well as the customer’s awareness. This will lead to increased sales and increased revenues. By improving technological capacity, company will be enabled to be more competitive comparing to other firms, its information delivery will be increased, clients will receive timely offerings, schedules, prices, etc. Thus, ADI customers will be more informed about ADI Travel Agency proposals. This will lead to increased market share and thus increased revenues. By launching marketing strategy aimed at frequent flyers, the company will increase amounts of operations, achieving “economies of scales”. It will be a competitive advantage of the company which will lead to positive financial statements. Internal Business Process Metrics     Internal Objective Type Measures Target Goals Supporting Initiatives Improve technological capacity (IT development)  % of increased information delivery, concerning offerings, prices, schedules, etc.  Yr (2015) – 50%  find and develop new means to distribute travel and hospitality products and services; develop marketing strategies that will make customers less independent; to save costs for IT support it is possible to outsource this business (for instance to India) Increase amount of operations  Measured by % of increased operations comparing with the historical data  Yr (2015) – 75%  Launch marketing strategy aimed at frequent flyers Find affordable office space in good location Measured by profitability ($paid for office space vs. $ earned) Yr (2015) – increase profitability in result of good office location by 25% make analysis of equity market, consider 3alternatives: buying/leasing/rent Learning and Growth (Employee) Perspective The company needs to implement four major objectives, identified in the category of Learning and Growth Perspectives. These include: employees development, setting positive corporate culture, increase international partnerships with strategic partners worldwide and entering new markets. So as the tourism business relies heavily on the quality of service, the company needs to focus on the employees’ development, ensuring professionalism and high responsibility. For this purpose, ADI Travel Agency needs to launch a continuous learning strategy by training and educating staff, motivating properly employees, and encouraging international experience. Undoubtedly, these measures will require significant efforts and costs. However, by implementing this strategy, ADI employees will increase customer’s satisfaction, by providing adequate and professional service to the customers. High-service and focus on cultural diversity will enable company to gain a competitive advantage, to increase the market share, and thus to increase profits. By setting positive corporate, ADI Travel will also be enabled to utilize its staff more efficiently, simultaneously increasing employees’ retention and job satisfaction. Increasing international partnerships with strategic partners worldwide, ADI Travel Agency will be enabled to strengthen its market position, to increase its capacity, and will be enabled to capture new markets. This diversification will also increase customer’s loyalty and will create customers’ value. Efficient implementation of the strategy will cause to financial and reputational benefits. Performing the strategy of joint-venture with a city-owned public-use-airport and a few mid-level hotel chains, ADI Travel Agency will allow company and its partners to extract a share of additional benefits. ADI, as a new business, would be entering an unfamiliar market and the joint venture would prove a faster avenue that to enter alone. Learning and Growth Metrics     Learning Objective Type Measures Target Goals Supporting Initiatives Employees development Measuring the % of increased employee’s performance; measured by % of sold services  Yr (2012) – sales should increase by 10-15% Yr (2015) – by 40% Continuous learning strategy: to provide training and educating seminars; to motivate employees by providing bonuses (%) of each service sold; to encourage international experience Set positive corporate culture  Measured by employees’ retention and increased feedback (%)   Yr (2015) -  employees retention – 90-95% Yr (2015) – employee’s feedback – by 80%  incorporate positive corporate culture; encourage teamwork and cooperation; adopt a cultural philosophy comprised of education and professionalism within the travel industry Increase international partnerships with strategic partners measured in times Yr (2015) – in two times negotiate with partners abroad, consider legal and regulatory issues, and political stability while setting strategic partnership Market expansion: enter new directions  Measured by sales growth in new markets (%)  Yr 2011 > 15% enter a joint venture with a city-owned public use-airport and few mid-level hotel chains;  analyze global trends, evaluate competition rates; develop competitive strategy on ecotourism; develop new directions that will be different from those already existing (apply innovative approach) Communication Plan Proactive communication is a significant organizational process, especially in the tourism industry, which requires effective information flow. There have been determined the major project stakeholders, including: ADI’s project managers and employees, sponsors, joint venture partners (hotel and airport managers), customers (current and potential), government. The start of the project plan implementation is planned on January, 2011. Project close out report will provide summary of plan implementation on January 2016. During this period, the ADI management is planning to conduct team meetings, project status reports, major milestone announcements, regular conference with remote stakeholders; present government required reports and financial reports; provide continuously marketing news and new information to customers. Brief explanations are given in the Addendum, providing information about the types of communication required by ADI travel agency, tourism industry and by law. Monitor and Control The ADI Travel Agency will apply four methods to control and monitor the strategic plan of the company, including: premise control, strategic surveillance, special alert control and implementation control (Pearce-Robinson, 2009, p.410). Premise control Travel industry is highly dependent on environmental factors. That is why control of the environmental and industry factors is an obligatory measure for the company’s success. The company’s business is especially dependent on environmental factors, because any environmental change can influence either positively or negatively on it. For example, climate change can open new alternatives for travelling or on the contrary, break new/existing routes and tours. It is also necessary to control industry factors, because they can either create new opportunities for ADI’s business or impose significant threats. Such aspects as travel restrictions, tourism trends and tendencies, legal requirements for travel operators, etc. should be periodically controlled and taken into account while implementing company’s strategies. Strategic surveillance ADI’s management should monitor a broad range of events inside and outside the company that are likely to affect the course of its strategy over time (Pearce-Robinson, 2009, p.412). The subjects, necessary to control and monitor will be unfocused. Thus, ADI’s managers and analysts control the strategic objectives through travel conferences, travel magazines, intended and unintended observations (Pearce-Robinson, 2009, p.412). The company will look at consumer lifestyles and preferences and satisfy their changing needs and wants. Special alert control A special alert control is very significant issue for ADI travel agency, which operates internationally and thus is imposed to a broad range on sudden, unexpected events. Such unexpected events as political conflicts, wars, cataclysms, terrorist act, and many others can drastically alter the ADI’s strategy (Pearce-Robinson, 2009, p.412). On the assumption of the company’s marketing strategy aimed at frequent flyers, special alert control will enable company to minimize or avoid possible negative outcomes. It is a crucial point for the company, which strives to ensure safety and security to its customers. By implementing special alert control, the company will be ready to trigger an immediate and intense reassessment of its strategy and current strategic situation (Pearce-Robinson, 2009, p.412). Customers will enjoy comfort, safety and security during their trips. Implementation control The development of strategic objectives and initiatives in the Balanced Scorecard enabled ADI Travel Agency to plan its further activity in integral manner. Implementation control will be exercised as the strategic initiatives will unfold (Pearce-Robinson, 2009, p.412). This measure will enable company to mobilize it resources, add or reassign key people, undertake special programs, and initiate strategy-related activities. So as the company’s strategy highly depends on employees, implementation control measures will help company to evaluate its efforts on educating and training the ADI’s employees. ADI management will be enabled to assess whether the overall strategy should be changed in light of the results associated with the incremental actions that implement the overall strategy (Pearce-Robinson, 2009, p.412) Conclusion For entering the tourism market, ADI travel agency has evaluated the main internal strengths and weaknesses, external threats and opportunities. Analysis of various factors, including technological, competitive, economic, global, and cultural has enabled company to develop its strategic plan. Balanced scorecard of the ADI Travel Agency is shaped with the firm’s mission, vision, core values and financial gains. However, financial perspective can be hardly achieved without focusing on customers, internal processes, and learning and growth aspects. To implement and control the strategic plan, ADI has defined four major types to control its business processes. These include: premise control, strategic surveillance, special alert control and implementation control. Thus, for successful implementation of the strategic plan, the company needs only financial support for the development of its business (target audience: bank capitalists). References Blanke, J. (2008). The Travel and Tourism Competitiveness Report. New York, NY: CBI Publishing Co. Edgell, B. (2010). Tourism Trends and Policies 2010. Hoboken, NJ: Corrigenda Publications. Pearce-Robinson, (2009). Strategic Management, the McGraw-Hill Companies, pp.410-422. Addendum SWOTT Analysis Table External Factors and Trends Opportunity Threat Trend Legal and regulatory Policies on tourism promotion Revenue and taxation legislations and investment incentives Public interest in Security Global Restructuring of the tourism scene\Global geopolitics Political unrest Public interest in protecting national assets\wildlife\environment Economic Positive growth and performance Reduced growth or stagnation Travel expenses\price elasticity Technological Instant communication Clientele independence Re-engineering of business processes Innovation Cross-Channel and Viral Marketing Investment in new innovation- risk and uncertainty Communication-Twitter and Mobile platforms Social Volume-reaching the masses Negative public perceptions Twitter, Facebook, Travel brands, etc. Environmental (ecological) Segment marketing for Ecotourism Used as a marketing tool only-negative impact on ecosystem protection-deceptive green marketing Change in lifestyle-clientele searching for outdoor activities-natural and spiritual Competitive analysis Forces within an industry Secondary competitors Competitor identification methods Internal Factors and Trends Strengths Weaknesses Trend Strategy Frequent Flyers\Marketing Plan Barriers to market entry Education of employees Structures Market positioning-market mix Being a too small or too large company Outsourcing Processes and systems Computerized information Minimal employee training Research and development programs Resources Secondary research analysis Limited capital and\or limited distribution channels Focus groups and surveys Goals Culture Financial Reformation of the industry Goals that are not specific or measurable Technology and diversity Market brand Professionalism Communication Plan ADI Travel Agency Audiences What When How Responsible Sponsor Project Team Joint venture partners local airport and hotels; Customers Project Plan Start Jan. 2011 Document: Strategic Plan Director, Project manager approve receive approve - Team Meetings Weekly Document minutes in Project Library Project manager - actively - - Project Status Reports Monthly Report sent via e-mail Project manager review prepare review - Major Milestone Announcements As completed Email Lead analyst review contribute review - Regular conference with remote stakeholders Weekly calls and videoconferences Lead analyst approve review receive, review, discuss - Government required reports Annually Report Accountant and director - input - - Marketing News It depends (daily, weekly, monthly) news on a Website, by e-mail IT administrator and marketing manager - consult consult, review receive, review, feedback Financial reports Annually report; presentation Project manager, financial director receive, review, approve - review - Project Close Out Report End of Project January 2016 Document Director, Project manager review and approve prepare contribute Read More