First part of the assignment will be looking at the concepts, processes and practices in strategic management in the tourism industry. The second part will be focused on the case study review data of a strategic nature, related to Classic Airlines in order to design and justify innovative solutions to their issues. The Third part of the assignment will be based on strategic recommendations based on the results analysis for classic Airlines.
Strategic management consists of the analysis, decision and actions that are undertaken in an organization order to create and sustain competitive advantages. Strategic Management is concerned with analysis and strategic goals (vision, mission and strategic objectives) including the internal environmental analysis. This takes the form of a thorough analysis of the internal processes and structures of a business and external environment (external analysis).
Strategic decisions are taken by organisation leaders, those decisions will be addressed two basic questions such as: what shall we compete in? And how should we compete in those industries? The Organisation will apply to both domestic and international organisation and finally the actions will take place with the right use of resources. (Dess, Gregory G, G. T. Lumkin and M.L Taylor, Strategic Management).
To sustain the competitive advantage in the market domains, organisation are closely focusing on their external environment of any changes so as strategic management will engage in the formulation of strategies at the corporate, business and functional levels. They will create strategies control systems that will help to close the gap between creating and implement strategies (A).
1. At the corporate level strategy is about asking questions about the organisation is at present or would like to be, the strength of the organisation if they can expand. Do the organisations have the resources and skills needed to sustain or create competitive advantages in the industry?
2. At the business level the managers will ask the question such as: how they can create comparative advantage in their market domain in each strategic business unit, they will focus on how to continue to maintain cost leadership or differentiation.
3. At the functional level, organisation objectives are to sustain its advantage by concentrating on its main related production, operations, administration, marketing and other support functions. Innovation is present at all time to insure products and services development while focusing on quality and high customer satisfaction (F.Okiumus, L.altiney, P.K chathoth, Strategic Management for hospitality and Tourism)
Mintzberg's suggested 'five Ps' possible strategies
Plan strategy 'also known as a deliberate strategy, Is often referred as a planned strategy, it refers to something intentionally put in train and its process is monitored from the start to finish some organisation follow this model of strategy.
Ploy strategy- also known as deliberate and short strategy, it's a detail strategy with tactical actions. It has limited objectives change may occur at short notice 'Mintzeberg' describe Ploy strategy as a maneuver with the intention to threats competitions.
Pattern Strategy- also known as emerging strategy, it is described as 'Pattern of behavior which happen in an instant just like behavior will rarely produce elaborate plans.
Position Strategy- is used to position the organisation in the market place these strategies help organisation to fit into its organisation environment and will be able to develop sustainable competitive advantage. Organisation can use the following strategy for a better understanding for a strong position related to the external analysis, such as PEST, Porter's Diamond, and Porter's five forces.
The perspective Strategy - organisation will apply this strategy to change its culture, its beliefs and feel in a particular ways that the organisation want its employees to achieve. (N. Evans, G. Stonehouse, D. Campell Startegic Management for Travel and Tourism).
Concepts, processes and practices in strategic Management
In travel and tourism stakeholders are an important part of an organisation. They ensure the well being and future prospects of the organisation. It is important to understand the needs and expectation while developing and implementing a plan in an organisation, as stakeholders are the one who provide resources to the organisation through shareholding and loans. Those resources enable the organisation to develop their planning successfully, customers are as important stakeholder group too that allow the organisation to grow and successes in some organisation they are customers oriented and they tend to have more success in the market place and they often dedicated greater sources to the management of their relations with the employees or customers for examples by looking at the hours they work.
Examples of internal stakeholders:
' Board of directors
' Employees collectively
' Individual representatives (founding entrepreneur)
' Employees Representative (Trade Union, Trade Association)
' Functional business are (Finance, Marketing and so on)
' Geographical areas of the organisation (Europe, Asia, Africa and so on)
Examples of external Stakeholders:
' Creditors (existing and potential)
' Suppliers (existing and potential)
' Customers (existing and potential)
' Pressure Group (environmental)
' Competitors (current and future, national and international)
' Government (Legal, fiscal and regulatory impacts)
' International regulatory bodies (International Air Transport Authority IATA)
' Local community
Vision, Mission, Aims and Objectives
Mission statement defined what an organisation is, why it exists, and its reason for being, it's easy to write for small organisation but very complex for big organisations. The Mission Statement will communicate its objective to its employees, customers, suppliers and communities. The mission statement will need to be accurate and reflect the organisation objectives and values for both profit and none profit organisation. Every aspects of the organisation is taken into consideration the products and services the organisation offer, in term of the pricing, quality, services, market place position, growth potential, the use of technology and their relationship with their stakeholders (Cambell and Yeung 1998) state that Mission Statement itself is important for mangers to believe that they have a 'mission' toward employees efforts to match the value of the organisation but it may be difficult to achieve as behaviour and organisation culture are evolves.
The Vision and Mission Statement help formulate the goals and objectives of an organisation. Those goals are the driving force of what the strategic plan intends to achieve. Goals setting will establish a target level for tourism development, marketing, promotion and sustainability of the products and services the organisation may have. Organisation may have several goals that may be achievable in short- term which is one or two years, or long term goals which can take up to five years to achieve in that case the mission statement will be review and revised.
Goals set by the organisation should be 'SMART' Specific, measurable, attainable, realistic and timely. The goals should be straight forward and be able to measurable for example the growth of visitors to a destination will be a certain percentage each year or in the near future the organisation will reach a certain number of visitors.
Objectives support the goals and intention that explain the expected achievement in the strategic oriented target of the destination. The objectives will be the priority to the resources available strategies are important for the actions and operations essential to achieve objectives and strategic tourism plan.
Stone 1996 describes the following when writing a Mission Statement
Positive tone: employees feel motivated and encourage.
Individuality: It should be individual to other organisation base on its objectives, strengths and weaknesses.
Enduring: Does not change for a number of years as it may cause confusion to its stakeholders.
Adapted: Different groups for examples employees only, shareholders and external group and others who may be involved in the organisation.
Example of KLM's Mission statement
'With Air France, KLM is at the forefront of the European airline industry. Offering reliability and a healthy dose of Dutch pragmatism, 32,000 KLM employees work to provide innovative products for our customers and a safe, efficient, service-oriented operation with a proactive focus on sustainability. KLM strives to achieve profitable growth that contributes to both its own corporate aims and to economic and social development.
KLM works to create sustainable growth at Schiphol, to gain access to any market that will increase the quality its network and to maintain a level playing field for all industry players. It also works to ensure a balance between the company's interests and those of the people living and working close to the airport. (KLM website)
Brouther et al 1993 developed the 4cs criteria to determine if a proposed partnership is likely to be working at an operational level.
Capability: criteria ask questions if the prospective partners have the ability to successes or to carry respective role in the alliances.
Compatibility: criteria are concerned with the ability between the partners to work together effectively. In relation to organisational culture and work relationships between the staffs and managers from both parties.
Commitment: criteria show the willingness of partners to commit the resources, effort and area of expertise into the alliance. One partner might invest more than the other partner which will be unfair as the other will benefit more by contributing less.
Control: criteria or the appropriateness of the alliance activities partners can be dominant and may ensure the efficiency of the alliances owing the partner's area of expertise or market position. The control to regard fairness and equality rather than system allow the partners achieve their strategic objectives.
Public-private partnerships is also known as joint development common in travel and tourism industry, which comprise most areas, large, medium to small enterprises, along with the interest group from public sector agencies and communities are becoming more families. A range of public and private sector along with the community stakeholder group are working together to form public- private partnership.
Resources, competences, core competences and competitive advantage
Some organisations are more successful than others not only base on their revenues, but on their Component sectors such as in travel and tourism industry one organisation might have a product or services that might exceed customers' expectation compare to their competitors, which will lead to sustainable competitive advantage which the combination of application of competencies (skills) and the deployment of resources (assets) in creating value for consumers.
Resources fall into five broad categories ' human, financial, physical (buildings, equipment, stock, operational (airplanes, ships, coaches etc.) and intangible (e.g. 'Know how', patents,
Legal rights, brand names, registered designs, etc.) They are the input in the business activities which contribute to its success.
A competence is a collection of attributes without a business cannot enter or survive in the industry. The Organisation will develop its Competences from resources and embody skills and technology or 'know how'.
Also known as distinctive capability is specific attribute to a particular organisation, which enables it to produce performance above the average for the industry. It's a reflection of the organization, how they have employed their Competences and resources more effectively compare to their competitors. The result of a distinctive capability is an output where customers value higher than competitors.
Strategies are used for the purpose of competitive advantage. If an organisation is able to gain higher profits compare to competitors. The profits will be reinvestment in its strategy which will help to maintain competition over competitors in the market. If superiority is maintained successfully over time, a sustainable competitive advantage will be achieved. It is important for management to reinvest the superior profits so as the Competitive advantage can be maintained, failure to do so will lead to a lost in the advantage.
According Ralph Stacey (1996) he defines culture of any group of people that is set of beliefs, customs, practices and ways of thinking that they share with each other through being and working together. It is a set of assumptions people simply accept without question as they interact with each other. At the visible level the culture of a group of people takes the form of ritual behavior, symbols, myths, stories, sounds and artifacts.
It is essential for management to understand the culture of the organisation both in analysing a strategic position and then in the implementation of strategies. Because it can affect all aspects of an organization's activities human personality are different, some people's personality means they are motivated, sharp and exciting. Others are dull, tedious and apathetic. Culture is important as it may be influence employee motivation, attractiveness of the organisation as an employer and hence the rate of staff turnover, employee morale and 'goodwill', productivity and efficiency, the quality of work, the nature of the employee and industrial relations, the attitude at the workplace, innovation and creativity.
The Internal and External Environment of Organisation
An Organisation has two environment, internal environments know as (Micro) and external environment also known as (Macro). (Micro) is concerted with the internal of an organisation which the business has control. Unfortunately a business cannot manage the (Macro) environment, but managers can set strategies to cope with the changes as they occur.
Analysing the internal and external business environment
S: strengths e.g.: reputation, economics of scale W: weaknesses, e.g.: poor cash flow, low market share is based on the internal analysis. O: Opportunity e.g.: new product, strategic space and T: Threat e.g.: demographic change, increase in competition are based on the external analysis of the organisation.
Travel and tourism organisation need to know how well they are performing. One way they can do this is by using an analytical tool the SWOT analysis to examine the internal and external factors that may be affecting the organisation performance and success. The analysis will help to discover what factors are lacking in the organisation success causing it to fail in the market its competing. The result will help managers to focus on new strategies.
Strategic choices are concerned with making the decisions about an organisation's future and the way in which it needs to respond to the many pressures and influences (Johnson and Scholes, 2002). A strategic choice is concerned with three stages: Formulation of options for future development, Evaluation of available options and selection of options.
Corporate level strategy
Strategy at this level is concerned with the overall purpose and scope of an organisation.
This might include the broad determination of which business areas or geographical areas
The organisation might want to be involved. This area of strategic choice is thus closely involved with the organisation's mission and formulate its mission statement.
Business level strategy
Strategy is concerned with how to compete successfully in the markets. Mangers focus on the hall organisation every strategic business unit (SBUs). Managers are concerned with different levels of strategy, how can they gain advantage over competitors and how it can be achieved. The development of products or services which methods to use to achieve competitive advantage.
These three concerns of business level strategy can be addressed by considering:
Strategy bases of competition ' Competitive strategy.
Strategy use for the direction of development ' Direction Strategy
Strategy methods are used for development ' Methods Strategy.
Operational level strategy
Strategy is concerned with more detailed implementation issues relating to how the proposed corporate and business level strategies can be successful if put in practice. The concern is how the changes arise from the adoption of corporate and business level strategies can be managed effectively and on the detailed decisions that have to be made in each area of the organisation to implement the higher order decisions.
In Oder to assess each option fairly and equally top management will ask questions on each option regarding: resources, acceptable, consistent, effective and sustainable in Oder to gain competitive advantage of each of the options should be suitable, feasible and acceptable.
Strategic analysis reveals internal strengths and weakness and its external opportunity and threats. If the organisation did not carry out a SWOT analysis if will be difficult to know which strategy is the correct choice. As part of the process a detail strategy may develop for each part of the organisation such as: Marketing, Finance operation and personnel function area culture and structure of the organisation will be included in the propose strategy and finally the strategic implementation which often mean an internal change in order to achieve agreed organisational objective.
The travel world is a competitive industry, airlines, company needs to use their resources to maximize their growth and profitability by focusing on strategic marketing plan, The Airlines need to make some changes in order to compete in the travel industry. Marketing managers need to focus on new long term objectives in order to gain the potential market and increase future demand.
Classic airline is facing numerous challenges, stakeholders are not satisfied due to their needs and wants are not being netted. Both internal and external marketing programs fail. The airline is experiencing poor sales and the level of profit decrease, Classic Airlines will have to develop a new effective marketing plan of action what will help to retain existing customers which will help to increase sales and increase profitability. Classic Airline might experience some difficulties while implementing the plan due to negotiation and internal resistance to change, communication between managers and employees.
Classic Airlines like other airlines company their main purpose is to provide products and services and meet the customers' needs and wants. Classic Airlines are facing a decrease in passenger numbers which is affecting their revenue. In order to achieve successes Classic Airlines need to link each Co corporate goal to its customers. The Airlines will gain competitive advantage by linking each phase of its strategic marketing process with its goals the process will help to create value and excellent to customers.
Classic Airlines will need to develop its market process thought a plan which contains marketing activities for the Airlines company future. The marketing plan will focus on the customer priority supply chain management, demand forecasting, sales initiative, finance strategy and customer service programs and how to meet the company goal while maintaining customer focus as a priority for the marketing plan. In order to be successful Classic Airlines need to find a balance of satisfying their customer needs and wants the managements need to be proactive toward the customer behaviours strategies would have to be change automatically and instantly management need to take risk in order to be able to lead the Airlines, management might consider join alliances with skyway ( Latin American Airline) upgrade their customer relationship management system focus more on internal marketing by using gorilla marketing strategies.
Managers at Classic Airlines can use the marketing research which will help to identify and forecast the market potential and future demand analysis competitions and customer behavior as well as their customers future needs. Marketing managers will be able to reduce risk and uncertainty by improving decision.
Management at Classic Airlines can use SWOT analysis, which will identify their strengths, their weakness and external opportunities and threat of the company. The Airlines should use the their strength, such as the knowledge to achieve competitive advantage, minimize their weaknesses by improving their image and reputation they can focus on satisfying customer by offering value for money and establish long term customer relationship.
By adding a new product unrelated to the existing product line classic Airline can use diversification strategies which can help the company increase sales without the needs of offering discounted airfares.
While taking decision marketing managers of Classic Airlines need to remember the company goal and its vision, the needs and wants of customers and satisfying the stakeholders the right use and allocation of resources, communication between management and stakeholders in decision making, employees need to be confident so as they can deliver up to the standard of the company to become profitable and successful. Management can gain employees' trust by offering job appraisal and suggestion box. The Airlines need to be able to adapt to different trends.
In order for classic Airlines to become a leading Airline, its management need to focus on its customer relationship which has a direct impact on the performance of the Airlines Company. Customers' wants will be achieved by effective change internal and external marketing plan thought which opportunity to improve their capability and deliver what customers wants. The marketing plan will allow the Airlines Company to transform their customer relationship effectively toward the organisation needs which are customer retention. Classic Airline will be able to adopt changes that are needed for the company while focusing on customer relation, develop policies and programs that will be beneficial to the entire Airlines Company.
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