This 0.3% higher than FC (Morgan, 2017).The figures

This section is the analysis of the tourism market placein order to identify the challenges faced by FC. Porter’s Five Forces will beused to implement the analysis. Traditionalcompetitors: Overall, FlightCentre has been the market dominant in tourism industry in recent years. Asshown in the research carried by Morgan (2016), Flight Centre accounts for12.6% of the market shares, followed by Booking.com with 11.4%.

However, thistrend differ for 2017, when booking.com has taken the widest market shares intourism with 0.3% higher than FC (Morgan, 2017).The figures in the researchshow that there is strong competition between the two companies, andBooking.com can be considered as the most important rival company to FlightCentre.

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However, Morris N. (2016, as cited in Roy Morgan) commented that thefigures presented in the research fail to give a detailed insight into variouscategories of customers, as some companies only target at a specific segment ofthe market while the others aim at the general preference. However, the rise ofthe Internet poses increasing threat to FC by increasing transparency in priceand declining switching costs (Buhalis and Zoge, 2007). Kim’s study (cited in Kim et al.,2004) shows thatprice is the main consideration for online customers, and those websitesintegrating various offerings from different agencies such as Booking.

com orExpedia.com reduces the power FC.New marketentrants: According to Porter (1979), the degree of threat from newentrants is determined by the barriers to entry of the industry. The authoralso identified different barriers, including economies of scales, networkbenefit, capital investment, customers’ switching cost, incumbency advantage,unequal access to distribution channels, and government policies.

To theaspect of economies of scale, especially the price war on ticket and accommodationprice, existing firms in the industry already create a great barriers to newentry. For instance, FC belong to the Flight Centre Travel Group which alsoowns other brands, enabling the companies to have better relationship withsuppliers and hence increase its bargaining power to the suppliers. As aresult, the barrier of incumbency still remains for new entrants. Moreover,differentiation is one of the difficulties faced by new entrants, because theInternet allows firms to implement similar services and innovation is easilyimitated (Kim et al., 2004).

For example, if a local tourist company createsa value-added service in conjunction with the tour to the customers, this ideamight only benefit that business for a short period of time before it isimplemented by other competitors. This argument is further supported byresearch of Australian Federation of Travel Agents (AFTA, 2017) which reportsthat most of Australian travel agencies earn small amount of revenue, and only2% of them are large businesses based on revenue generation. Substituteproducts: The increasing popularity of intermediate websites resultsin self-drive tours as a substitute to tour operating brands of FC, especiallywhen Australia is among the most famous destinations for self-drive holidays (Vasko, 2014).However, FC also earns commission from suppliers such as hotels or airlines, socustomers who prefer self-drive tours still use the service of FC. Thus, thethreat from substitution is relatively low for FC. Customers: The elimination of switching cost and theincrease in cost transparency have raised the customers’ bargaining power(Porter, 1979). As mentioned by Buhalis and Zoge (2007), customers in digital agehave increasing bargaining power because they have perfect knowledge aboutprice and the services of different agents, and they also get special offersfrom the direct suppliers via their websites.

For instance, when a companyplans for their business travel, they might get information about the tourdetails and the price from some companies before choosing a travel agency. Inaddition, the Internet allows individual customers to gather together and benefitfrom lower rates by the suppliers (Fok, 2004).Therefore, the customers’ bargaining power for FC is high.Suppliers:In tourism industry, suppliers are accommodation providers, touristattractions, workers in tourism industry, and transportation suppliers.Overall, the suppliers have lower bargaining power due to the low concentrationof the industry (Fok, 2004).For instance, there is a wide range of bus rental services in Australia, andFCGT can choose the firm offering the lowest price with little switching costs.

The similar goes for accommodation providers. Additionally, Fok (2004)argues that tourist attractions’ entrance fees are homogeneous for allvisitors. Therefore, there is no great effect of suppliers’ bargaining power onthe competitiveness of FC.Overall, the major threat faced by FC are customers’ powerand the traditional competitors in the marketplace. It is recommended that FCshould focus on those two aspects in creating competitive advantage to thecorporation.

 –         Inboundlogistics include all activities to get the company prepared for operation. FCoperates as a tour operator and a travel agency, thus its inbound logisticsactivities include scheduling of tours and transportation, hotelsreservations, meals arrangement, contracting with entertainment providers &tourist so attractions, training the tour guide & reservation staff. As atravel agency, FC also needs to make agreements with the airlines and hotels sothat it can play a role of intermediary.-         Operationactivities of FC consists of all activities implemented to provide service tothe customers. From an agent aspect, FC receives reservation via phonecalls (explain any questions from the customers and helps them to add anyspecial requirements such as special medical needs or physical disability. Froma tour operator, FC needs to ensure that the customers are well serviced duringthe tour, and this includes introduction of tourist attractions and onboardservices such as meals and beverages, toilet utensils.

–          Sales and marketing is promoting theservices offered by the Flight Center. For example, when there is a group ofcustomers making enquiries to the sales team, they will receive promotion aboutthe tour operated by Flight Center. Marketing activities include theadvertisement campaigns to attract potential customers. Flight Center canconduct e-marketing by using paid search on search engines such as Google orBing!, displaying advertisement on social media such as Facebook or Twitter.-         Service: serviceactivities include all activities of taking care of customers in order to makesure they are satisfies with their trip.

For example, during the tour, the tourguide needs to have first-aid equipment in case of emergency or any necessitiessuch as umbrella when it rains giving hats to the customers. In addition, FChas to be flexible in making appropriate adjustment due to unexpected changes(the flight is cancelled). Based on the some websites which collect thecustomers’ review for the FC on TripAdvisor and productreview.com, service isundoubtedly an area which FC should focus on due to a large number of customersgiving negative opinion on the service. FC seems to have focused on merely theitinerary but not the on the flight-related services such as transitaccommodation because many customers report that they are not informed by thecompany that they need to pay for the transit accommodation, and some customerswhose flights are not properly booked by the company have to pay extra for there-booking.

Those unexpected occurrence increase dissatisfaction andinconvenience, especially when the customers have important events after thetrips.-         Outboundlogistics is the end services such as getting the customers home or movingthem to their next destinations. This can be considered as the value-addedactivities for the FC as it leaves the customer with positive expressions aboutthe company (Fok, 2004).In brief, with low the barriers toentry, especially economies of scale, Australian tourism industry has 3000agents (AFTA, 2007) thus it can be considered as monopolisticcompetition. In economic theory, firms in this market structure can only earn anormal profit in long run, which is at the total economic costs of the firms(Panzar & Rosse, 1987). Additionally, the organization strategy of FCemphasizes on both quality and price.

Therefore, the purely cost leadershipstrategy is not suitable for FC. FC is implementing the niche market strategybecause it operates in both corporate traveling and general group travelingseveral different brands for different types of customers, includingcorporates, school-aged students, and young travelers. This strategy issuitable because it enables FC to focus on each market and focus on the keycompetitive elements. For example, for small firms, the price might be theirfirst priority due to limited budget, while for some young travelers,differentiation is their demand because they prefer adventurous experience. 

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