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Page 1: Background - Helhel.org.uk/studies/international management... · Web viewVirgin Holidays adds that arrangements can be made for disabled tourists on Virgin Airlines and that specially

Report on a TUI Information Systems Strategy

Produced by: Heledd Straker of Halle and Ridder, 16th March, 2006

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ContentsBackground..........................................................................................................................4Executive Summary.............................................................................................................5

Summary of Recommendations.......................................................................................51. Control and Communication................................................................................52. Market Knowledge..............................................................................................53. Cost Containment................................................................................................5Concluding Remarks - Risk and Return Investment...................................................5

Implementation Timeline.....................................................................................................6Issues and Objectives...........................................................................................................7Recommendations................................................................................................................8

1. Control and Communication........................................................................................81.1 Wiki Database........................................................................................................81.2 Crisis Management System (CMS).......................................................................91.3 Destination Management System (DMS)..............................................................91.4 Forecasting System..............................................................................................10

2. Market Knowledge....................................................................................................102.1 European Markets................................................................................................102.2 Disabilities in Europe..........................................................................................102.3 Emerging Markets...............................................................................................10

3. Cost Containment......................................................................................................113.1 Offshore Hiring....................................................................................................113.2 Automated Systems.............................................................................................11

Conclusive Remarks - Risk and Return Assessment.........................................................12Distribution List.................................................................................................................13Glossary.............................................................................................................................14Version Control.................................................................................................................16Revision List......................................................................................................................17Appendices........................................................................................................................18Appendix A........................................................................................................................19

Facts and Figures in the Tourist Industry......................................................................19Case – Oyster and ENGADIN Card..........................................................................20

Appendix B........................................................................................................................22Disabled European Tourists...........................................................................................22

Categories of Disabilities...........................................................................................22Case – Virgin Holidays..............................................................................................23

Appendix C........................................................................................................................24Emerging Markets.........................................................................................................24

Russia.........................................................................................................................24China..........................................................................................................................25India...........................................................................................................................25

Appendix D........................................................................................................................26Offshore Hiring to India................................................................................................26

IT................................................................................................................................26Finance and Accounting............................................................................................26

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Academic Appendices.......................................................................................................27Academic Appendix A......................................................................................................28

Theories of Travel Motivations.....................................................................................28Your Culture or Mine?...............................................................................................28Look Where We Went…...........................................................................................28Maslow for Tourists...................................................................................................28I’ve Changed My Mind.............................................................................................29Them Foreigners........................................................................................................30

Academic Appendix B.......................................................................................................31Empowerment of Stakeholders......................................................................................31

Empowerment of Customers.....................................................................................31Empowerment of Employees.....................................................................................31

Academic Appendix C.......................................................................................................33Knowledge Management – “Re-Everything”................................................................33

Bibliography......................................................................................................................36Articles.......................................................................................................................36Books.........................................................................................................................36Others.........................................................................................................................37Websites.....................................................................................................................37

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BackgroundOnce known as a coal and steel conglomerate, TUI AG’s main businesses are now Tourism and Logistics. It is the largest integrated tourist operator in the world, successful through the firm’s growth strategy, fuelled by its ability to co-ordinate multiple enterprises and funded by the divestment of its raw materials divisions.

TUI has a strong presence in Europe where communication with consumers includes a network of websites linking local names under one brand. A TV Travel Shop, Germany GmbH & Co., is owned by TUI1. The company has entered emerging markets, including a joint venture in 2004 with Mostravel, to create TUI Mostravel Russia (TMR) where the aim is to capitalise on a growing outbound market2, and where TUI is aiming to increase its 34 percent share to a majority in 20063. TUI also owns a 50 percent share in the Indian incoming agency, Le Passage to India Ltd4, and is considering entering the Chinese market.

With regards to the Logistics division, economic growth in Asian economies has contributed to the prosperity and growth of the Shipping sector. The acquisition of CP Ships in 2005 has made TUI the fourth largest shipping company in the world5.

The firm faces a number of constraints, including external threats of volatility in the Middle East and rising oil prices which are causing tourists concerns over travel safety. Internally, the company relies on divestments for its investments and is seeking ways to cut costs, resorting often to downsizing. These are acceptable solutions, though TUI could benefit from improvements which would see more long term benefits. These advancements can also boost communication channels and co-ordination of the firm’s functions, which is essential in such a large company.

With regards to competition, TUI competes on the high street with other tour operators, such as First Choice, and on the internet with online tour operators like lastminute.com. The internet is an increasingly large source of custom, where consumers search for and book holidays, but low switching costs mean that business is easily lost to competition. In addition, TUI’s movements into emerging markets mark it as an early adopter; however, other firms could follow TUI and threaten its position. TUI relies on indigenous firms for information, rather than gathering and integrating the data itself, which lays it open to information asymmetry and opportunism.

The purpose of this report is to assess TUI AG and offer recommendations to improve the firm’s performance in the tourist sector. TUI needs to regain control over the business, developing communication channels through the implementation of information systems. The firm is encouraged to introduce systems which are designed to evaluate new markets and add value through maximally efficient allocation of human resources.

1 http://www.tui-group.com/en/ir/history_of_the_group/2 Noakes, G. ‘Russia targeted as part of drive for new markets’, Travel Trade Gazette UK & Ireland, 3.6.20023 http://www.tui-group.com/en/ir/key_figures/key_figures_out_of_the_annual_report_2004_of_the_tui_group/index.html4 http://www.tui-group.com/en/ir/history_of_the_group/5 Noakes, G. ‘Tui AG expands shipping division’, Travel Trade Gazette UK & Ireland, 25.11.2005 Issue 2692, p16

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Executive SummaryTUI is currently relying on relatively short term solutions, including focusing on growth rather than on utilising existing assets, and cutting costs by downsizing.

Over the next five years TUI should seek both to incrementally and radically improve its business by following the recommendations below. Control and Communication is the most crucial, followed by Market Knowledge, and Cost Containment.

Summary of RecommendationsThe recommended information systems below are interconnected by a central wiki technology database, discussed in point 1.1.

1. Control and Communication1.1 A wiki technology database will greatly improve control and

communication, with data input by stakeholders via an intranet or extranet.1.2 A Crisis Management System (CMS), based on information collated on

past crises, will train employees and managers to deal with incidents. 1.3 A Data Management System (DMS) for the customer provides flexibility

and control. A Pre-Pay loyalty chip card enhances these desirable aspects.1.4 A forecasting system to predict market trends will be based on collated

information from CMS and DMS.

2. Market Knowledge2.1 Managing market knowledge can gain competitive advantage in European

countries and other potentially profitable markets, including:2.2 Disabled European tourists, including a DMS designed to suit their needs.2.3 Emerging markets, Russia, China and India, which require a continuously

updated system to understand and respond to rapidly changing markets.

3. Cost Containment3.1 Offshore hiring in India will reduce costs while adding value and

improving productivity. 3.2 Automated information systems can replace people in unskilled, routine

work.

Concluding Remarks - Risk and Return InvestmentThe systems for Control and Communication will greatly affect TUI. They have a higher risk factor, but also greater returns. The recommendations for Market Knowledge and then Cost Containment are less risky and have slightly lower returns. However, they are highly beneficial to the company and the network structure of the information systems means they are essential to the success of the potentially more profitable Control and Communication.

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Implementation TimelineThe five-year timescale for the complete implementation of the Information Systems strategy for TUI is demonstrated below (Fig.1)

Q42010

Q32010

Q22010

Q12010

Q42009

Q32009

Q22009

Q12009

Q42008

Q32008

Q22008

Q12008

Q42007

Q32007

Q22007

Q12007

Q42006

Q32006

Q22006

Q12006

Q42010

Q32010

Q22010

Q12010

Q42009

Q32009

Q22009

Q12009

Q42008

Q32008

Q22008

Q12008

Q42007

Q32007

Q22007

Q12007

Q42006

Q32006

Q22006

Q12006

Now

Creation of learning culture

Annual progress evaluation

Analysis of markets

Offshoring

Wiki databaseWith CMS and DMS Introduction of

loyalty card

Bi-quarterly evaluation

Automated Systems

Fig. 1IS Strategy Implementation Timeline over five years

The creation of a learning culture should begin immediately, facilitated by the development and implementation of the wiki technology. The establishment of a new culture requires long term planning, meaning that annual evaluations need to be conducted to monitor improvement.

In quarter one of 2007, the analysis of all recommended markets may take place and as markets change often, a bi-quarterly review is required to monitor those changes.

By the fourth quarter of 2007, the customer services and information systems technology should be familiar to the in-house IT professionals, meaning IT maintenance and indirect customer care can be outsourced to India.

In addition, by this point in time, a marked development should be observed in culture, and information systems should be more stable, enabling the introduction of the loyalty card.

Automated systems have been initiated prior to this report and development and implementation of further systems may continue in response to changing market needs.

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Issues and Objectives

Tourism Logistics Trading Other

Sectors

Percentage of business

5%3%

19%

73%

= 100%

Fig. 2Graph showing percentage of each industry in TUI

TUI’s main business is tourism (Fig.2), gaining 13.1 billion euro of an overall group turnover of 18 billion euro in 2004, as well as heavy investment into the industry, suggesting that the improvement of business performance should concentrate on tourism.

TUI has three main objectives, each of which has a technological solution6. TUI is a very large firm composed of multiple businesses, meaning that the main objective for TUI should be to reorient its focus from expansion to improving co-ordination within and between its businesses. It needs to gain further control over the company by fostering a learning culture, facilitated by a network of communication channels within the company and with the customer. This will improve the accuracy and agility of customer service and continuously advance the company’s position in the market place, maintaining a competitive advantage.

TUI is aware of its markets, but now needs to activate the intellectual capital of its employees worldwide to understand and anticipate market shifts. This must be extended to emerging markets and to monitor the changes. The firm seems not to have adequate knowledge of emerging economies which are changing more rapidly than those in Europe.

TUI is correct in following a cost containment strategy, but it is losing intellectual capital by downsizing. It needs to redirect this strategy, reallocating human resources more efficiently, which will add value to the business and reduce costs. An additional purpose of this cost-cutting strategy is to support the above information systems.

6 The tourist industry and investments in IT – see Appendix A

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RecommendationsThe following recommendations form an interconnected network of information systems (Fig.3), categorised into three main issues: Control and Communication, Market Knowledge, and Cost Containment. They are ordered in terms of importance, with Control and Communication being the most essential for achieving unrivalled excellence.

Wiki Database

Disabled Market +

DMSForecasting

CMS

DMS

European Markets

Emerging MarketsOffshoringAutomated

Systems

Fig. 3Network of Information Systems designed for maximum

Knowledge Management efficiency

Control and Communication

Con

trol

and

Com

mun

icat

ion

Market K

nowledge

Cost containment Cost containment

Market K

nowledge

1. Control and Communication

1.1 Wiki DatabaseTo increase control and add value to the activities of TUI by establishing effective communication channels, a wiki-technology database is strongly recommended. It is designed to gather and integrate information about internal processes of each firm and observations of the external environment. Information can be added and accessed by all employees and customers. It will increase networking between firms, resulting in the sharing and co-ordinating of employee and customer knowledge in the Tourist and Logistics sectors. The desired result would be closer alignment with the company strategy and a faster and more agile response to consumer needs. The database will work successfully as a central information system within a web of other related systems, including CMS and DMS.

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IntranetLinked to the wiki database can be an intranet, which will enable employees to contact each other via chat rooms, discussing ideas which can improve the business7. It would be similar to an online Quality Circle8 and will improve communication between workers and between workers and managers.

ExtranetCustomers can input their thoughts into the wiki database via the extranet. This can include creating and accessing personal accounts, which would enable the firm to monitor and track customer trends. Customers may also report on previous travels9, which would be beneficial both to TUI and other consumers.

1.2 Crisis Management System (CMS)A CMS can be linked to the wiki database, which should be developed to gather information from previous crises (9/11, 7/7). Data may be entered by employees from all levels and customers, meaning that TUI can respond quickly to both internal and external issues. From this, workshops could be introduced to train employees and managers to work together efficiently during a crisis.

1.3 Destination Management System (DMS)It is recommended that TUI maximise customer empowerment by developing a DMS and integrating it into the extranet wiki database. This would require an integrated website, where the list of featured firms are replaced by a search engine (created by an XML program), whereby customers choose destinations, modes of transport and budget, and the system produces results based on these, or similar, requirements.

Loyalty Chip CardTUI could introduce a loyalty card, where customers can pay a fixed amount onto the card and then proceed to use it at any TUI-owned facility10. The card would be scanned like a normal credit or Oyster card and the appropriate value is deducted. Customers may get an option of setting up a Direct Debit link to the card so as to avoid running out of credit while still abroad. This would provide a very flexible market offering, for which TUI could charge a premium, as it allows customers the convenience of making travel decisions while on holiday.

In addition, the chip on the card will be designed to gather information on each customer’s movements, so that personalised adverts can be emailed to them in the future and TUI’s market knowledge can be improved.

1.4 Forecasting SystemAn information system utilising the information gathered from the wiki database, CMS and DMS, can be developed, enabling the firm to predict trends based on multiple

7 Empowerment of employees – see Academic Appendix B8 Total Quality Management through the empowerment of employees – see Academic Appendix B9 Theories on travel motivations – see Academic Appendix A10 For further explanation and real life case examples, see Appendix A

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variables from each of the interrelated systems11. These can include longer term, mass responses to volatility in the Middle East, and national economy fluctuations due to factors such as oil price hikes.

2. Market KnowledgeA learning culture within organisation is useful, as a company can change not only with the times, but be able to anticipate those changes. Research into the markets in which TUI is in and currently entering will improve its competitive stance by enabling more accurately response to employee and customer needs.

2.1 European Markets The wiki database can be used to gather and implement knowledge of existing and potential markets, beginning with Europe, where TUI has a strong presence. An information system can be established for employees, managers and customers to input knowledge of trends in European markets, which can be used to respond quickly to cultural needs and be able to predict changes using the forecast system12. For example, TUI’s 2004 annual report gives percentages of the specific destinations of every country in Europe in which it does business. It could use this information to conduct deals with tourist facilities in the destination countries or tailor its marketing to each country to promote its preferred tourist venues.

2.2 Disabilities in EuropeIt is recommended that TUI takes the extensive knowledge employees have on European markets and tailor its services to disabled tourists in Europe, as this is a large, relatively untapped market13. The firm needs to conduct research into its facilities to evaluate their accessibility to disabled people. In addition, online training of interface staff may be required, who may also use forums on the intranet to attain further advice. A specially designed DMS for disabled tourists, similar to the previously mentioned system, can be developed to cater for their specific needs.

2.3 Emerging MarketsIt is suggested that TUI apply the learning capability of its employees and initiate a research program designed to collate and utilise information on emerging trends. Markets are changing rapidly and it is essential that TUI is up-to-date with this information. For example, at the moment it is potential profitable to establish inbound tourist operations for Russia, domestic tourist facilities China, and both inbound14 and outbound tourism for India15. In India there is also a greater opportunity to work with the government to gather and manage knowledge of the present and future movements of the Indian tourist market16.

11 The necessity of a forecasting system – see Academic Appendix B12 Theories on travel motivations - see Academic Appendix A13 For further information on disabled European markets, see Appendix B14 Travel motivations of people – see Academic Appendix A15 For further information on emerging market trends, see Appendix C16 For further information on emerging market trends, see Appendix C

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3. Cost ContainmentIt is advised that TUI continue its cost-cutting strategy, but to simultaneously add value by exploiting technological opportunities.

3.1 Offshore HiringInformation TechnologyIn addition to exploring the Indian tourist market, TUI is recommended to consider India for Offshoring in the form of Information Technology Extended Services (ITES), in IT maintenance and indirect customer-service activities. This approach to offshore hiring can result in the company paying zero tax17. This will reduce costs, halving them in some cases if a fixed price is agreed. The Indian government encourages such investment, reducing the bureaucracy in the industry. In addition, this will help in the gathering of local knowledge to enter into the wiki database and improve market and customer awareness.

Accounting and FinanceIn 2008 it is predicted that suitable finance and accounting professionals in emerging economies will outnumber those in developed countries18, exceeding demand by 78 percent. TUI can take advantage of this opportunity, employing low-wage workers in India, China and Russia, who can help to keep track of finances and contain costs.

3.2 Automated SystemsCost-reducing automated systems can be created to replace mundane, unskilled work, such as routine emailing of customers to inform them of bargains. Systems within the website can be developed, such as Extended Mark-up Language (XML), so that there is greater standardisation and control of incoming information from the public, which can be translated into meaningful knowledge. In addition, the professional employees in India can maintain these systems to reduce errors and update information.

Conclusive Remarks - Risk and Return AssessmentThe recommendations are prioritised above in terms of importance and they can be viewed below with regards to levels of risk and return (Fig.4), which illustrates their interconnectedness within a hierarchy19:

17 Offshoring in India – see Appendix D18 Offshoring in India - see Appendix D19 For full theory of Knowledge Management theory, see Academic Appendix C

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Return

Automated Systems

Offshore hiring

Market Knowledge

Control and Communication

Risk

Low

Low

High

High

70% risks70% returns

Fig. 4Prioritisation of TUI’s recommendations in terms of

importance, and levels of risk and return

Return

Automated Systems

Offshore hiring

Market Knowledge

Control and Communication

Risk

Low

Low

High

High

70% risks70% returns

Fig. 4Prioritisation of TUI’s recommendations in terms of

importance, and levels of risk and return

The wiki technology and connected CMS and DMS involve extensive work, time and thus risk, as they involve radical changes of the company, but the potential returns are great. Although Market Knowledge and Cost Containment (Split into its two sections, Offshore Hiring and Automated Systems) are lower in importance, risk and return, all the systems are interrelated, meaning that changes at the lower levels affect the potentially more profitable Control and Communication level.

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Distribution List

Distribution RoleTUI Board of DirectorsMalcolm Berry Managing DirectorMargaret Gallagher Senior Executive

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GlossaryBusiness Innovation Model (BIM):A framework used to improve a business by focusing on technology to create and implement innovative solutions, which anticipates problems and achieves existing goals.

Business Process Re-engineering (BPR):An activity where a firm re-examines its business strategies and orientation, and undergoes a radical change of processes in order to redirect the firm towards established goals.

Crisis Management System (CMS):An information system designed to transform gathered data into meaningful information to help managers prevent and deal with crises.

Destination Management System (DMS):An information system which enables customers to design and manage their holidays, such as booking hotels in different countries and flights with different companies.

Foreign Direct Investment (FDI):The act of a company investing capital in another country in order to control a business, either by building a business or acquiring an indigenous firm. This is different to portfolio investment, where a firm or individual buys shares in a company, which gives them a potential profit share, but they have no control over the firm.

Human Resources Development (HRD):A model with the purpose of maximising the efficiency of the labour force by valuing and empowering workers and managers.

Intellectual Capital (IC):The knowledge within the mind of employees, which can be used to improve the business.

Information Communication Technology (ICT):Technology designed for the purpose of establishing communication channels between employees, managers and most usually, communicating with customers.

Information Technology (IT):A branch of engineering designed to receive, store and transmit information via computers.

Offshoring or Offshore HiringThe act of a firm hiring workers, skilled or unskilled, in lower wage countries than workers in the company’s home country. The aim is to reduce labour costs, while maintaining or improving productivity.

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Organisational Development (OD):The activities of a company, including leadership management and culture, which identify and work towards the firm’s strategic goals.

Information Technology Extended Services (ITES):Another form of Offshore hiring in the IT sector in India, which exploits a loophole in the law, allowing foreign firms to pay zero income tax.

Total Quality Management (TQM):A set of activities which work towards business excellence by focusing on the human element of the firm in order to eliminate errors and improve production.

Visiting Friends and Family (VFR):A term used to categorise the motivations for travel, often used to describe Indian tourists visiting other countries.

Wiki technologyAn internet information technology system, which can be used and changed by any member of the public, free of charge. An example is Wikipedia.com, an encyclopaedia of which entries can be added to and altered by anyone and everyone.

Extensive Markup Language (XML):A computer program enabling a firm to design a standardised meta-language (like HTML, a language for describing languages) in order to control and interpret data, for example from customers, into meaningful information.

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Version ControlTitle Report on a TUI Information Systems StrategyProject TUI Management ReportClient Company TUI AGPublish Date 16 March 06Version number 1.0Revision number 0File name Report on TUI Strategy v1.0.docDocument Reference CAT/001

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Revision List

Version Rev Publish date Distribution Revision notes

0.1 1 2 Feb 06 Malcolm BerryMargaret GallagherDavid Straker

Initial draft

0.2 1 16 Feb 06 Malcolm BerryMargaret GallagherDavid Straker

Reflective Statement

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Appendices

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Appendix AFacts and Figures in the Tourist IndustryCommunication via technology is crucial for the success of the tourist industry, as suggested in Fig.1,

Fig. 1Radar graph showing the IT focus of tourist companies.

Taken from http://www.ebusiness-watch/re/tor/SR09_Tourism_2005_web.pdf

A = Basic ICT Infrastructure;B = Internal processes;C = Supply-side e-business activity;D = Electronic marketing and sales

e-Business Scoreboard 2005: Tourisme-Business dimensions (sub-indices)

A = Basic ICT Infrastructure;B = Internal processes;C = Supply-side e-business activity;D = Electronic marketing and sales

e-Business Scoreboard 2005: Tourisme-Business dimensions (sub-indices)

The radar graph illustrates that the tourist industry is investing heavily in electronic marketing and sales, which implies that in order for TUI gain a competitive edge, communication with their customers is essential. For example, the rapid and accurate response of communication technology can postpone what Buhalis (2004) refers to as the “perishability” of products, such leftover airplane seats, which they can advertise as a “last minute” offer, days before the flight. The wiki technology database and the DMS will be useful to develop and advance marketing and sales, meaning that TUI can improve their customer service more efficiently and send their offers to the right people, as well as advertising them clearly on their website.

The wiki technology and DMS will also boost the basic ICT structure of the firm, an area the graph indicates to be suboptimal suggesting that, while the marketing side of the industry is good, the interaction with the customers is moderate at best. The network of information systems in the Recommendations will thus help TUI gain a competitive advantage in this field.

Finally, it can be observed that technology in internal processes is virtually ignored. This can be hazardous, as it means firms may not have efficient operations,

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which may result in the declining of customer service in the long run. The wiki technology and the CMS will improve internal operations of TUI, as it empowers workers, making them feel more valued as employees, while preparing them and managers to cope with potential and actual internal and external problems.

Case – Oyster and ENGADIN CardLoyalty cards are a popular method of retaining customer fidelity, making them feel part of an exclusive group and rewarding them for their loyalty with discounts and other benefits. The card for TUI is based on the Oyster Card (Fig.2) used on London transport onto which customers pay a fixed amount and then which customers can use on any London public transport. The card is swiped across a plate and the appropriate amount is deducted. Customers can top up online, like a Pay-As-You-Go mobile phone, and set up an account which results in an automatic top-up if the amount on the card falls below five pounds20.

Fig. 2Oyster Card for convenience, cost reduction,

and speed of transaction

The Oyster card has been successful in London, with over two million users. The card offers convenience, cost reduction (in many cases, the costs of travel are halved), and speed of transaction, as it eliminates queuing. A customer’s movements can be followed with the card, which has been used by the police to track and find criminals21.

The TUI chip card also has a Direct Debit function to reduce the risk of tourists being stranded abroad if they run out of credit on their card. However, to increase security a PIN number will be required of the user, like most credit cards.

A loyalty card in the tourist industry is currently being used by Swiss tourist operator, Engadin AG22 (Fig.3).

20 http://www.tfl.gov.uk/tfl/fares-tickets/2006/oyster/general.asp#what21 Murray, D. ‘Police using Oyster cards to track suspects’, Evening Standard, 13.3.200622 http://www.ebusiness-watch/re/tor/SR09_Tourism_2005_web.pdf

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Fig. 3ENGADIN Card

The ENGADIN Card is a destination loyalty card for Swiss winter tourists, which is used at any Engadin facilities to gain discounts. It is fitted with a chip, which gains information about the customer’s activities, which is collated and used as personalised advertising in the future. Access Arena AG developed the card and charge Engadin an annual licensing fee of 14,981 euro.

Customers can buy cards of varying levels, such as the Comfort ENGADIN Card, which costs an initial 30 euro and then 12 euro per year. This card gives higher discounts and has a payment function. The less expensive ENGADIN Card, at seven euro and then three euro per year, does not have a payment function and the discounts are less.

The concept of the chip and payment function is very similar to the card recommended above, although in TUI’s case the customer is required to make a payment before using the card. Like Engadin, TUI could also outsource the development of the chip to India (See Appendix D).

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Appendix BDisabled European TouristsThe European Commission Directorate (1996) identifies a large untapped market to be that of the disabled tourist population. These are the current figures of the disabled and non-disabled population in Europe and the UK (Table 1).

*39,000,000(78% of total)

*11,000,000**8,600,000*50,000,000Disabled

*191,225,321(27% of total)

*517,016,607****60,441,457***708,241,928Non-disabled

Unemployed in Europe

Employed in Europe

Population in UK

Population in Europe

*39,000,000(78% of total)

*11,000,000**8,600,000*50,000,000Disabled

*191,225,321(27% of total)

*517,016,607****60,441,457***708,241,928Non-disabled

Unemployed in Europe

Employed in Europe

Population in UK

Population in Europe

Table 1.Figures of disabled and non-disabled people in Europe

*** http://en.wikipedia.org/wiki/Europe#Demographics

* http://europa.eu.int/comm/employment_social/health_safety/docs/disabled_%202002_en.pdf

**** http://www.cia.gov/cia/publications/factbook/rankorder/2119rank.html

** http://www.webcredible.co.uk/user-friendly-resources/ web-accessibility/benefits-of-accessible-websites-1.shtml *** http://en.wikipedia.org/wiki/Europe#Demographics

* http://europa.eu.int/comm/employment_social/health_safety/docs/disabled_%202002_en.pdf

**** http://www.cia.gov/cia/publications/factbook/rankorder/2119rank.html

** http://www.webcredible.co.uk/user-friendly-resources/ web-accessibility/benefits-of-accessible-websites-1.shtml

As can be seen, the number of disabled people in Europe equates to approximately 83 percent of the total population of the UK. This suggests that if TUI can alter its marketing and tourist facilities to cater for disabled people, they have the potential to profit enormously. It is also important to note that like many tourists, disabled customers are unlikely to travel alone, meaning that if TUI attracts a disabled customer, they will bring their friends and family23.

In addition, the figures show that disabled tourists are far more likely to be unemployed than non-disabled tourists, which suggests that there is likely to be a greater proportion of this market looking for budget holidays. TUI can thus tailor its DMS for disabled tourists, offering special discounts and sending emails to registered customers informing them of future offers.

Categories of DisabilitiesThe European Commission Directorate splits disabilities into five categories, each of which TUI can discover which of its facilities can cater for them:

23 European Commission Directorate – General XXIII Tourism Unit. (1996). Making Europe Accessible for Tourists with Disabilities: Handbook for the Tourism Industry

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1. Physical (e.g. unable to walk). Requires facilities, such as hotels with wide corridors, ramps or lifts.

2. Sensory (e.g. blindness, deafness). Facilities can ensure a combination of auditory and visual aids and cues.

3. Learning (e.g. dyslexia, autism). Larger or simple text alternatives can be added to signs and other points of information, such as the website.

4. Mental health (e.g. depression). Facilities can develop a more leisurely atmosphere and tourists are treated with more emotional care.

5. Other (e.g. diabetes or epilepsy). Staff at tourist facilities are made aware of who has these disabilities so that they know what to do if they need assistance.

For all people with disabilities, the Commission states that up-to-date and accurate information is essential for disabled tourists, meaning that the wiki database, which is continuously updated, will be suitable for this market. In addition, Bacchus (2004) discusses communication technologies on the internet which can reach a wider range of users, such as video and audio feeds, and webcams. This means that any tourist, both disabled and non-disabled can discuss issues directly with a tour operator representative to ask questions and to obtain further up-to-date information.

Case – Virgin HolidaysVirgin Holidays has a separate section on their website, “Customer Care and the Disabled”, where they dedicate a team to cater for the needs of the disabled. They claim to have located tourist facilities which are accessible for disabled tourists and have clearly labelled them so that customers do not have to search for appropriate facilities. Virgin Holidays adds that arrangements can be made for disabled tourists on Virgin Airlines and that specially designed seats are available on all airplanes.

TUI can adopt Virgin’s attitude and make their website inviting as well as accessible to disabled tourists, without patronising or segregating them.

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Appendix CEmerging MarketsTUI is entering the markets of Russia, China and India and there is potential to succeed if the right market research is gathered and utilised correctly. Table 2 shows the population and tourist figures for each emerging market.

^** 28,850,000^**41,760,000^**1,100,000,000**1,300,000,000China

^* 18,000,000^*21,000,000unknown*144,000,000Russia

^***6,000,000^***2,360,000^***300,000,000***1,027,000,000India

Outbound Tourism

Inbound Tourism

Domestic Tourism

Total Population

^** 28,850,000^**41,760,000^**1,100,000,000**1,300,000,000China

^* 18,000,000^*21,000,000unknown*144,000,000Russia

^***6,000,000^***2,360,000^***300,000,000***1,027,000,000India

Outbound Tourism

Inbound Tourism

Domestic Tourism

Total Population

*** http://www.censusindia.net/results/resultsmain.html^*** http://www.neoncarrot.co.uk/h_aboutindia/india_tourism_stats.html#tourists*** http://www.censusindia.net/results/resultsmain.html^*** http://www.neoncarrot.co.uk/h_aboutindia/india_tourism_stats.html#tourists

* http://www.historycentral.com/NationbyNation/Russia/Population.html^* http://www.russiantravelmonitor.com/02/tourfigures.shtml* http://www.historycentral.com/NationbyNation/Russia/Population.html^* http://www.russiantravelmonitor.com/02/tourfigures.shtml

** http://www.est-direct.com/china/popula.php?lang=en^** http://www.dominicantoday.com/app/article.aspx?id=5911** http://www.est-direct.com/china/popula.php?lang=en^** http://www.dominicantoday.com/app/article.aspx?id=5911

Table 2.Population and tourist figures in emerging economies

RussiaAs can be seen, domestic tourism is the most popular type in China. Although statistics could not be found for Russian domestic tourism, its similarity of culture to China implies that its domestic travel will be high. For example, both include characteristics of a post-Communist society, such as a strong sense of national pride24 and anxiety over the permeation of Capitalist West into their culture. Hall (2004) argues that although the concept of “freedoms” symbolises post-Communist ideals, Russians are far more likely to travel within their own country. More research into this type of tourism in Russia is needed for a sufficient evaluation of whether TUI should enter this market.

TUI has embarked upon a joint venture with Mostravel to create an outbound tourist establishment; however, the figures above suggest that inbound tourism would be more lucrative. As a result TUI could market Russia more aggressively to foreign markets and incorporate incoming tourist facilities into TMR to capitalise on this opportunity.

24 Hall, P, ‘Tourism in Communist and Post Communist Societies’, in Harrison, D (edt.) (2004). Tourism in the Less Developed World: Issues and Case Studies

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ChinaLew (2004) observes that outbound tourism is heavily regulated and restricted, meaning that the Chinese find it difficult to gain an exit visa. This suggests that it would not be advisable for TUI to enter the outbound tourist market at this stage, as the firm would have to battle with the government.

Lew (2004) notes that domestic tourism in China is growing rapidly following an increase in wages. The industry is not well regulated and rampant entrepreneurialism means that TUI could face stiff indigenous competition, in this lucrative market. However, the Danwei (collectives), government run public work units, own most of the hotels in China and operate joint ventures with foreigners. This provides an opportunity for TUI, which could enter the domestic tourist market by working with the Danwei. This offer of FDI would be appealing to the government, which Lew (2004) reports to have been encouraging such investment since 1999 to help build up the Chinese service sector.

IndiaTUI has bought shares in an incoming agency to India (50 percent share in Le Passage to India Ltd.)25, and there is indeed great potential profit to be made here, but this is discussed in Academic Appendix A. Based on the figures in Table 2, it seems that domestic or outbound tourism would be more financially advantageous. Singh (2004) observes that the vast numbers of people engaging in domestic tourism is a result of an established tourist industry, where millions of people travel across the country on religious pilgrimages. Unlike the disorganised Chinese government, the Indian government has a separate Tourist department, which gives allowances to domestic travellers. In addition there are long established accommodations for different types of domestic tourists, which implies that the competition facing TUI in India would be harder to overcome than that in China.

On the other hand, outbound tourism is increasing due to the number of globally situated Indians who are visited from people at home. Categorised as Visiting Friends and Family (VFR), this is a large market upon which TUI could capitalise. The issue with establishing an outbound tourist business is the potential taxes TUI would face (48 percent income tax). However, if TUI can set up a local company similar to ITES (see Appendix D) this could fall into the tax loophole and reduce tax by 100 percent. Singh (2004) states that the government is encouraging FDI, and its strong Tourist department suggests that TUI could work with the government to facilitate its entry into the Indian market.

25 http://www.tui-group.com/en/ir/history_of_the_group/

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Appendix DOffshore Hiring to IndiaITDavies (2004) argues the case for Western companies outsourcing IT and customer care processes to India. He states that IT maintenance in particular is best reallocated to India, as it represents last year’s work and it would enable inhouse professionals to focus on the core competencies of the business. This would result in an improvement in service, as the Western IT employees would be happier for being allowed to do their work and not resentful of the mundane maintenance creating a bottleneck in IT development.

Davies (2004) postulates that if firms can gain a fixed price for offshore hiring, they could halve their costs. He also discusses a tax loophole which can be exploited by firms such as TUI, where they are advised to engage in ITES, rather than straight outsourcing. This means that professionals from India would have to be qualified, which would result in the firm paying zero tax. In addition, the Indian government has reduced the bureaucracy required to enter the IT industry, providing further incentive for foreign firms. Currently few companies have realised these particular advantageous methods of Offshoring, implying that TUI could reap the benefits of being an early adopter of such an opportunity.

Finance and AccountingFarrell, Laboissière, and Rosenfeld (2005) report that by 2008, the number of finance and accounting professionals in emerging economies, such as India, will outnumber those in developed countries26. It will exceed demand by 78 percent, meaning that TUI would be in a powerful buying position and will be able to drive down prices and wages, helping the firm to reduce costs. The professional employees will also be able to keep track of TUI’s finances and accounts at a lower cost than professionals in the West.

26 Farrell, D., Laboissière, M., & Rosenfeld, J., ‘Offshore Talents’, McKinsey Quarterly, 2005. See Appendix D for more details on Indian Offshoring

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Academic Appendices

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Academic Appendix ATheories of Travel MotivationsBefore analysing the tourist industry with regards to TUI and its proposed technology solutions, it is perhaps necessary to discuss the theories explaining the reasons behind the motivation to travel, as from this information TUI can further understand and predict present and future trends.

Your Culture or Mine?Coleman and Crang (2004) argue that tourism can either be seen as opening up to another culture, or as the expansion one’s own culture into a new place. Adventure holidays fall into the former category, as people travel in order to claim mastery over nature by travelling into unknown new worlds and engaging in thrill-seeking activities. The latter is referred to as the “McDonaldisation”27 of travel, where customers are insulated from anything truly foreign and are exposed only to a standardised tourist experience, remaining within the confines of a “tourist space”28.

In both cases the concept of the unknown landscape is perceived as mysterious and dangerous. This stems from the eighteenth century romantic Western view of nature as awesome and grand, which arose from the Middle Age, Judeo-western deep-seated fear of the wilderness.

Tour operators face the challenge of determining customers’ motivations to travel, as many consumers fall in between the two categories mentioned above. Bell and Lyall (2004) discuss people travelling to visit familiar landmarks, such as the Grand Canyon or the Taj Mahal. The heavy advertising of such spectacles at home makes the travel to foreign lands seem less uncertain and the acceptance of landmarks in their home country results in travel being both about discovering a new culture and extending one’s own.

Look Where We Went…Another reason to travel is competitive story-telling. Within many cultures one gains social prestige if one has been in the physical presence of a foreign landmark which is perceived by that society as desirable29. TUI needs to recognise this social characteristic and advertise particular places and landmarks to appropriate markets, based on their research into each country. The social benefits of travel reporting also point to the necessity for TUI to include customers’ stories on its website, as tourists advertising destinations and indirectly challenging other tourists may encourage more custom.

Maslow for TouristsPearce (1982) offers a framework which splits varying motivations to travel into a hierarchy, based on Maslow’s hierarchy of needs (Fig.4).

27 Coleman & Crang, ‘Introduction: Between Place and Performance’, in Coleman, S & Crang, M. (edt.) (2004). Tourism: Between Place and Performance, pg1228 Coleman & Crang (2004), pg1229 Bell, C. & Lyall, J., ‘The Accelerated Sublime’, in Coleman, S & Crang, M. (edt.) (2004). Tourism: Between Place and Performance, pg8

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Relaxation

Stimulation

Relationships

Self establishment and development

Fulfilment

Fig.4Pearce’s (1982) travel motivation model, based on

Maslow’s hierarchy. Taken from Ryan (1997)

Maslow’shierarchy of needs

Physiological

Belonging

Safety

EsteemSelf-Actualisation

At the lower levels, tourists go abroad to seek relaxation, which echoes the more physiological needs represented in Maslow’s hierarchy. These tourists will not be seeking challenging holidays, suggesting that many will be inclined to embark upon the more standardised touristy holidays discussed by Coleman and Crang (2004). Other tourists, often those with more travelling experience or money seek higher goals, such as the seeking of stimulation, like Coleman and Crang’s (2004) adventure-seeking holidays, and self-development, similar to Bell and Lyall’s (2004) argument of social prestige.

India on TopAt the top of the hierarchy is fulfilment and many tourists from developed countries now travel to Eastern countries such as India, to “find themselves”, to seek enlightenment. If TUI wishes to increase their share in Le Passage to India Ltd. to a majority, they could include adverts and web pages targeting these markets, offering “enlightenment” holidays. For example, Singh (2004) observes that Southern parts of India are creating an image for themselves as “alternative medicine” destinations to encourage more international tourists.

I’ve Changed My MindRyan (1997) observes that many people’s travelling motivations change while they are on holiday. For example, often people go abroad for relaxation purposes, but then seek stimulation after a few days. TUI can use its market knowledge to identify motivations of its customers, based on factors such as economic and past travel behaviours. The loyalty card will also aid customers’ shifts up the hierarchy. For example, tourists may be travelling to seek stimulation, but then they meet others and wish to change their plans to develop relationship needs.

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Them ForeignersAs well as seeking a type of tourist experience, people tend to want to visit certain places, but the destinations they choose are at least partially based on their perception of the alien culture. Coleman and Crang (2004) argue that:

“The intellectual vision of these territorially monopolistic, bounded and coherent cultures has been inflected

by nationalist interpretation at home.”30

Every culture has a view of the “typical” cultural characteristics of the people in visited country. For example, the British tend to view Americans as loud and boorish, while Americans see the British as being intelligent but prudish. TUI has extensive information on the commonly visited places by each country in Europe within which it does business. It could use its information to understand why each nation frequently visits particular others and tailor its marketing tactics and customer care services accordingly.

30 Coleman, S & Crang, M, ‘Introduction: Between Place and Performance’, in Coleman, S & Crang, M. (edt.) (2004). Tourism: Between Place and Performance, pg5

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Academic Appendix BEmpowerment of StakeholdersRogers and Slinn (1993) argue that a successful tourist business focuses on the management of its facilities and the empowerment of all those who have an interest in the state of the firm. They argue that a firm must monitor and understand the changing needs of its stakeholders, particularly customers and employees.

Empowerment of CustomersThe theories in Academic Appendix A make it evident that customers are increasingly wanting more and more personalised holidays, over which they have greater control. The internet has empowered consumers, as it has helped reduce switching costs so they can more easily find a better deal. It also suggests that their needs are more sophisticated and demanding, which means that tour operators need to respond to those needs, as it is now far easier to lost custom to competitors31. The extranet linked to the wiki database will give customers a sense of control over the company, as they will feel that what they say matters, and the DMS and loyalty card will enable those customers to take control over their holidays.

Empowerment of EmployeesRyan (1997) argues the company’s first customer is in fact the employee, whose motivations and needs should be catered for first using a Human Resources Development (HRD) model (Fig.5).

HRDHow people fit together. What

makes them feel valued.

ODWhat is the company

strategy and culture?

Where is it going?

TQMThe diagnosis and solving of

problems. Maintaining excellence

+ =

Fig.5How HRD and OD work together to create TQM

Ryan (1997) describes a “cycle of achievement”, which will develop if the firm employs the HRD model, which is designed to make workers feel valued and respected, a feeling they will transfer that to the customer, resulting in an improvement in service. Green (2004) adds that HRD needs to work with and align with the Organisational Development (OD) model, such as the company strategy, direction and culture, in order to achieve Total Quality Management (TQM). TQM refers to a company aiming to achieve

31 http://www.ebusiness-watch/re/tor/SR09_Tourism_2005_web.pdf

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excellence through maximum efficient allocation of resources and the elimination of errors. Focusing mainly on the human element, Deming (1986) advices the application of specific methods for achieving TQM through HRD and OD, such as Quality Circles, where employees are empowered by working together and discussing how the company can be improved.

TUI’s intranet and the creation of a learning organisation will empower employees, as it calls for the knowledge input of workers. The intranet will help to develop an in-house community, which will reinforce the feeling of belonging and value for employees. As a result of the improved communication, mistakes will both be reduced and identified faster.

TQM and the marketing departmentImproved communication channels increases the productivity of functions within a company, such as the marketing department. Yale (1995) discusses the importance of marketing in the tourist industry, stating that the marketing department cannot know a market properly unless it is continuously updated by other employees and the customers themselves. Time is an important factor, meaning that up-to-date information is essential to analyse and interpret current trends and how they change. Yale (1995) emphasises the need for forecasting systems, as many firms do not consider the element of time in their marketing strategies. Thus the forecasting system for TUI will be successful, as it considers the future as well as the present market state and it is constantly updated by information from the CMS and DMS.

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Academic Appendix CKnowledge Management – “Re-Everything”The overall structure of the Recommendations stems from Malhotra’s (2000) Knowledge Management framework, Business Innovation Model (BIM). The “re-everything” approach of BIM is the next step after Business Process Re-engineering (BPR), automation and rationalisation of processes (Fig.6).

Return

Automation

Rationalisation

BPR – Internal: business processes

Business Model Innovation(Re-Everything) – External: organisation and its business

Risk

Low

Low

High

High

70% risks70% returnsAutomation

Rationalisation

BPR – Internal: business processes

Business Model Innovation(Re-Everything) – External: organisation and its business

Risk

Low

Low

High

High

70% risks70% returns

Fig. 6How Business Model Innovation is the next step

beyond BPR in Knowledge Management

Malhotra (2000) argues that BIM is fast-acting, as it redirects and boosts its existing assets in a new, technologically sound way. It anticipates problems rather than reacting to them, unlike BPR, which is reactive and too slow, requiring the elimination of existing processes before the introduction of new ones. Although BIM is high risk, the potential returns are great, making it a profitable investment if conducted properly.

TUI’s recommendations of Control and Communication, Market Knowledge, and Cost Containment relatively well into Malhotra’s (2000) model, although Automated Systems and Offshore Hiring in Containment are split into Automation and Rationalisation (Fig.7).

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Return

AutomationAutomated Systems

RationalisationOffshore hiring

BPRMarket Knowledge

Business Model InnovationControl and Communication

Risk

Low

Low

High

High

70% risks70% returns

Fig. 7TUI’s recommendations within the framework of

Malhotra’s (2000) model

Highest priority in the recommendations is Control and Communication, which requires a radical change in the business in terms of business innovation. TUI’s wiki database does this, altering some of the business processes and how the firm perceives its business. BPR means starting with a “clean slate”, while BIM utilises what the firm already has. TUI has a huge potential knowledge pool, which can be exploited to vastly improve the company in far less time than it would take to completely restructure its business processes.

Malhotra (2000) observes that companies are evolving from being technology focused to using those technologies to become more customer-orientated, in particular “e-Customer focused”. TUI must use information systems to cater for the customer on the internet, reinforcing the importance of technological communication with the customer, online. For example, it has been shown that 75 percent people search the net for alternative options before deciding on a destination32, implying that the marketing and accessibility of the company online is crucial.

The recommendations of market knowledge should come after the wiki technology has been developed, providing a technological foundation for research to begin. Market Knowledge is an example of BPR, as it requires an internal change of processes and culture, where employees and managers incorporate the new technology and a learning attitude into their working day. Thus a learning organisation is born, which can be implemented to gather information and create knowledge about the European and emerging markets.

32 http://www.ebusiness-watch/re/tor/SR09_Tourism_2005_web.pdf

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Offshore hiring is an example of rationalising automated processes, as it has been suggested that more IT and ICT specialists are needed in the tourist industry33 in order to keep up-to-date with new technology and communication technology. If professionals from low wage countries can be employed to maintain and update the technology and deal with indirect customer-service, then this could result in extensive financial savings for TUI. These savings can be added to via the employment of finance and accounting professionals, who are in increasing supply in India (see Appendix D).

Automated systems for routine work are a basic mark of automation of processes, as it saves on financial and human resources, while improving efficiency.

As mentioned in Recommendations, while Control and Communication and Market Knowledge are deemed greater in levels of risk and return than Cost Containment, they are arguably no less important due to their interconnectedness. A firm needs a foundation of automation and rationalisation of processes in order for BPR and BIM to be more effective. This suggests that Malhotra’s (2000) claim that BIM is the next stage in the evolution of Knowledge Management is not entirely sufficient to explain TUI’s case, as the different levels are interdependent. All levels of recommendations are required for the successful implementation of the information systems strategy.

33 ? http://www.ebusiness-watch/re/tor/SR09_Tourism_2005_web.pdf

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