Feasibility of a Potential Business Opportunity - Case Study Example

Executive Summary: The paper presents a plan about scope and feasibility of a potential business opportunity, which has been created in tourism and hospitality industry of USA. It should be pointed out that USA was adversely impacted from the global economic turmoil, credit crunch situation and liquidity shortfall that, which resulted in economic contraction of 2 - 4 % in real terms in 2009 as compared to the positive growth in 2007 and preceding years. The tourism business was also negatively affected and observed a downward trend, since number of visitors and travelers reduced by almost 7% in 2009 against 2007 – 2008 (OTTI Report, 2009). For instance, domestic customers also tightened their belt in 2008 – 2009 amid unemployment, inflation and low real incomes, thereby reducing the money spent on luxury and budget trips for relaxation, honeymoon, sightseeing, entertainment, adventure and casual visits to attractive places across the world. In other words, the demand for air travel followed by demand of foreign and domestic trips reduced significantly in last 2 years that resulted in either complete or partial closures of many travel agencies in USA. However, the US economy is now observing growth and coming out of recession; hence new business and investment opportunities have been created in tourism and hospitality industry. The demand of budget and luxury foreign and domestic leisure trips has increased after sharp decline in preceding years because of improvement in employment prospects and purchasing power. The author, being a business executive, has planned to enter aforementioned industry by establishing his own Travel Agency named “The Trips Organizers” in New York and Washington Cities. The company will target middle-middle, upper - middle and elite social classes and offer its premium quality products such as budget and luxury tours to potential US travelers and tourists who wish to enjoy numerous exquisite places, resorts, beaches and wonders outside USA. In addition, the company will also market its products to non-US travelers who wish to visit USA for tourism and who are fascinated with its natural beauty, resorts, backpackers, beaches etc. This opportunity could prove to be highly lucrative because the world is coming out of recession and the demand for foreign and domestic leisure trips is expected to increase at a rate of 5% in upcoming years worldwide. Hence, there is greater probability that our business would remain successful if we offer outstanding, well-differentiated and distinctive services at competitive prices rather charging higher prices because of value addition and branding. (ITA Press Release, 2008) New Opportunity: The Trips Organizers is a tourism promoting agency that would offer budget and luxury tour packages to tourists and visitors from all across the world. However, the company expects that most of its foreign customers will be from countries like Japan, United Kingdom, France, Germany and Italy where consumers have relatively stable purchasing power along with an inclination to have first-hand experience and enjoyment at resorts, hotels, backpackers and beaches of Miami, Florida, New York and other cities. Similarly, the firm expects to receive US customers with an income of $70,000 and above excluding students, non-profit organizations and human welfare trusts for whom separate packages are designed amid their financial limitations. For instance, these tour packages will include tour guide, hotel accommodation, trips to historical places, beaches, theme parks and resorts. Target market: The Trips Organizers is a tourism promoting agency that would offer budget and luxury tour packages to tourists and visitors from middle - middle, upper – middle and elite social classes at competitive and affordable prices, so that they could enjoy vacations and holidays with their family, groups, friends etc. The elite and upper - middle leisure travelers are segmented into various groups such as adventures groups, sight-seeing (with special interests), couples for honeymoons and yearly vacation spenders that have high income level and that do not compromise over their tastes and preferences to save some bucks. The age bracket for this elite market is 24 – 70 years, while expected income is $100,000 and above The next segment is known as Budget-conscious segment that includes families, couples, sight-seeing groups, tourists and irregular visitors from middle – middle class having limited budgets and income of $60,000 – 70,000 who wish to visit fascinating places abroad with limited budgets. The third segment is a special market that includes college and university students, delegations and charity groups etc. who wish to visit foreign countries for fund-raising and donations. The age bracket is 20 - 60 years. Products: The company has devised several foreign trips and tours that as under: Hotels and Resorts in Dubai – (Burj – ul – Arab, Burj – ul – Dubai, various Islands) Explorer – Egypt (Pyramids, Beaches, Resorts) Explorer - France (French Riviera / Provence, Champs Elise) Indonesian Beauty (Bale – Jakarta) French History (Paris / Loire Valley / Normandy) Europe Saga (Amsterdam / Berlin / Manchester / London / Rome) – the most expensive tour China’s growth (3 – gorgeous dam / The Great Wall / Shanghai / Beijing) – especially for students Italy n Italy (Italian Riviera / Tuscany / Florence / Venice / Vatican City) Portugal Adventure (Estoril Coast/ Lisbon/ Algarve) Indian Heritage (Agra / KolKata / Mumbai / Bangalore / Deccan / Goa) Flight to Morocco (Fez / Casablanca / Marrakesh) – for Islamic history Exploring Australia (Gold Coast Packers / Sydney / Melbourne / Perth) Heart of Europe (Germany / Czech Republic / Austria / France) – mega tour Love of Love (Paris / Venice / Gold Coast) Explorer – Iran Explorer – Lebanon (Berut) For all non-US customers who wish to visit USA, the company will offer services and packages for almost 30 states. As mentioned before, The Trips Organizers will premium quality budget and luxury escorted tour packages that will also include other complementary services. The office of tour operator will be opened at a densely populated commercial area so that nearby travelers from commercial and residential towns could approach to have face-to-face discussions and guidance from our office staff. In addition, company will employ an Online Reservation System for bookings and registrations of chosen packages. Indeed, agency’s official website www.trips-organizers.com would provide every detail about available packages followed by offered discounts and commissions on referrals. The complementary services include air-fare discounts from company’s partner airlines, accommodations at luxurious suites free or discounted food at destinations, health insurance, guidance on legal visa and passport formalities of each specific country, choice of clothes according to culture, norms and traditions of host nations, gaming and entertainment, tour guide etc. Indeed, all customers could download free tour reports and experiences of previous clients who had enjoyed from our services. Free medical treatment will be provided to travelers who get injured during tour. Competitive Situation Analysis This next will throw light over expected competition that Trips Organizers would have to encounter during its journey to become a world class tourism agency. The author will use Porter’s five forces model to analyze the competitive position of The Trips Organizers in this highly challenging external business environment. Porter’s Five Forces model: Bargaining Power of Buyers: The bargaining power of customers has increased considerably in last 2 years because of surge in inflation and lack of short – term employment opportunities in the many developed nations. For instance, today potential adventurists and travelers demand more value for the money they spend on trips and leisure trips. Hence, it is worthwhile to point out the fact that increase in bargaining power of consumers has resulted in downward pressure in pricing. In addition, the demand has been relatively lower than normal because consumers have reduced total spending on trips, adventures and tours. In short, potential customers are now demand higher quality goods and services from tourism operators at relatively lower prices. It has become evident that company should also adopt a rational pricing strategy to entice maximum customers. Bargaining Power of Suppliers: The bargaining power of specific suppliers and business partners such as airlines, resort and beach administration, hostels, hotels and food has reduced because of decrease in total business activities and surplus capacity of resorts and hostels. Indeed, suppliers’ business is directly dependent on tour organizers’ business and failure of the latter would also adversely impact the sales of suppliers. Potential New Entrants: Indeed, the steep fall in aggregate demand of tourism and leisure industry because of rising unemployment, inflation and dollar weakness has also impacted the growth of existing businesses. Indeed, many businesses observed closures as they were unable to survive during recessionary cycle. This bleak scenario compelled various potential investors to forgo their aim of entering and investing in tourism and hospitality businesses in 2009 - 2010. It should be highlighted that threat of potential new entrants in this sector is low because of lower than normal returns and weak consumer response after decline in consumer purchasing power. However, the demand has improved in last 3 - 4 (since June) months of 2010 thereby enabling Trips Organizers to enter as potential new entrant in industry with offering unique services to potential tourists. Threats of Substitute Products: The threat of substitute products is relatively higher because existing travel agencies and hospitality businesses could introduce new products and additional services, alluring deals and offers to tempt adventurists and tourists in resorts and hostels during summer vacations. Indeed, this would be an attempt to ensure one’s survival and growth in the wake of rising competition from Asian agencies and relatively sluggish response at domestic resorts because of higher inflation and cash starvation. Nevertheless, travel firms expect that demand would pick up from 2010 and onwards. In simple words, price factor will play extremely important role in contemporary economic conditions as various international tourism / travel businesses and trip organizers will opt out to make the most of new opportunities. (Xinhua, 2010) Rivalry among Competitors: It is worthwhile to mention the fact that rivalry among domestic plus international agencies and competitors would be higher because of any expected price-wars and new product offerings in today’s challenging business environment. Indeed, The Trips Organizers have to focus on Service Differentiation, Value Addition, strong Value Proposition and effective Positioning followed by an aggressive advertising to obtain a clear and distinctive image in the minds of targeted market segments. References: ITA Press Release (2008) “U.S. Tourism Industry Sees Record Spending Growth” International Trade Authority Available at http://trade.gov/press/press_releases/2008/tourism_101508.asp OTTI Report (2009) “U.S. Travel and Tourism Industries: A Year in Review 2009” Office of Tour and Travel Industries Available at http://tinet.ita.doc.gov/pdf/2009-year-in-review.pdf Xinhua (2010) “US tourism industry makes multi-efforts to woo international visitors” Global Times Available at http://business.globaltimes.cn/world/2010-05/534234.html Read More