Thomson Airways External Analysis

Question: Discuss about the Thomson Airways for External Analysis? Answer: External Environment Analysis Introduction The role of strategy is supreme while running any business. The strategy decides the structure and process of a business and sometimes the structure and process of the trade also picks the strategy of the trade. The present report studies the external environment affecting the Thomson Airways. It may be noted that Thomson Airways is one of the top companies in the aviation sector in UK(Lundgren, 2015). This company was used for the previous version of the assignment, and the present assignment is continued with the same company. This report critically analysis whether current strategy of the company is still relevant with the changes in the aviation industry. PESTEL Analysis Political There is no significant change in the political environment. The political environment is as stable as it was last year(BusinesWeek, 2015). Economical The world economy has witnessed a decline in past few months(Ahenkora Peasah, 2011). With the collapse of the China share market and a constant deterioration in the value of the currency of Australia and several Asian countries the purchasing power of these customers has reduced. Which may not a good thing for the aviation industry as such? However, the good news is that the price of petroleum products including the aviation fuel has declined significantly in the past few months. This reduction in the petroleum price will help the airline to reduce its operating cost. The operating cost as a percentage of sales revenue was 101% (313/310) for the year ended 2014 and was 97% (892/918) for the year ended 2013. Thus, the economic conditions are favoring the airline as it will be able to reduce its operating cost. Social There has been no significant change in the social condition of UK. However with the increased terrorist activities in the world and increased threats, airlines have to take special care of the security services while check in and while boarding the passengers. This will cause company to spend more in technological sector and administrative services in form of recruiting more security personnel. This also increases the risk to the company as if there is any default in the securities measures; it will send a wrong impression in the eyes of customers. This year may provide more sales lead to the airline industry due to Olympic 2016(PWC, 2015). Thus, each and every airline will focus on getting more sales from the flights to Brazil Olympics. Besides that the image of Thomson Airways is of an airways company which provides high-class services. The emergence of infectious disease such as Jika virus may have a negative impact on the sales of airlines companies. Thus companies needs to include this factor while amending its strategy for attracting more sales. Technological The aviation technology has remained same for past few decades and company is not expected to incur cost on this front. However there are modern aircrafts which are more fuel efficient and thus can reduce the operating cost for the airline(Guardian, 2016). Purchasing new aircraft will require additional funds and this is possible if the company is able to get debt from financial institutions or go for a public subscription. With the development of Internet and advent of smartphones there is huge scope for the company to sell the tickets through online channels and attract the customers. Now a days most of the customers purchase the tickets online, and it is necessary to focus on the online market(Saunders, et al., 2012). Even in online market people prefer purchasing the tickets through the mobile app. Hence, if the company can sell more and more tickets with the online platforms such as websites, iOS apps, Android apps than it will be beneficial for the company. Environmental The industry position in respect of environment is unchanged(WAW, 2014). The future trend may be using the bio fuel but in recent few years it may not be possible to replace the traditional aviation fuel with the bio fuel. However now days the sustainability and the environment safeguard practices of a company are important and are given high value by various stakeholders. Legal The tax rates may keep on increasing in coming years and this may create problems for the company(BATA, 2015). However, the plus point of the company is that during past two years company suffered losses and it was able to carry forward these losses to next accounting years. PORTERs Five Forces Buyer Power The buyers are looking for the airline which provides bests services for lower price. Thus, there is a sort of price war among the companies. However some of the companies can charge a premium price for business class seats(Ferrell Hartline, 2010). The position of Thomson Airways is strong in the aviation sector at UK and it is the third largest service provider. However, the customer expectations are even increasing in each industry and also in airline industry. Now customer needs more safety feature in air travel. However this field is still ignored by some of airlines(CAA, 2016). Thomson can make this a unique selling point and the management can work in this direction. Threats of Mobility It is easy for the new companies to provide a cheaper priced tickets to capture market share(Bigler Williams, 2013). Now a days there companies are providing cheap tickets for the tickets which are booked well in advance. Threats of Substitutes Thomson Airways is an established company and it is providing services at competitive prices. If Thomson Airways can continue this trend than it will be able to retain its market share and may attract more customers. Industrial Rivalry There is high competition in this aviation sector and the same trend is expected to continue in the coming future also. Thomson Airways need to take initiative to retain its market position(Parker, 2013). As the price of the air tickets is reducing, companies need to go for cost reduction and cost management. Supplier Power As the Thomson Airways is in service industry the dependability of the supplies is relatively on the lower side. Besides that investment in the technology has reduced the bargaining power of the suppliers. Strategic position and Value proposition Thomson is positioning itself as a company which takes care of customers. A value proposition originates how a company satisfies the customer desires(Cravens, et al., 2009). Thomson Airways is looking for both economy class and business class passengers. The management took care of customer requirement of easy of booking the tickets and launched its online platform and smartphone apps. Relevance of current strategy SAFE Tool Suitability The current strategy of the company focuses on the technological innovations and system development which results in a better user experience for the customers(K., 2016). The app developed by the company is working well as it provides a comfort to the customers to book the tickets and check other relevant information from their smartphone itself. It appears that the company is moving in right direction. The more company invests in the technology, more it will help the customers and it will increase the goodwill of the company. Company has a number of brands and thus a good mobile app may help the customers choose the most suitable product and this may result in increased revenue for the company. The present strategy is definitely in line with the opportunities available to the company as more passenger may available due to various events in the year 2016 such as Olympics. The focus on the technological innovations such as customer friendly websites and smart phone does not require a massive cash outflow. The requirement of low cash outflow to enhance customer experience, supports the poor financial condition of the company. Acceptability The new strategy of the company is to maintain its sustainable position in the market with the help of new services such as holiday planning. This strategy is very much relevant to the current market position. This strategy also meets the expectation of the stakeholders. The business of the company showed a downward trend in past few years. Hence the stakeholders expects that the company is back on track as soon as possible. This strategy is poised to bring the company back on track without making huge investments in assets and technological innovations. The risk associated with the present strategy is moderate as company is not going to lose much on its investment if the present strategy fails. The return expected by adapting this strategy is much more as compared to the investment ought to be made to implement this strategy. Feasibility This strategy is very much feasible due to requirement of relatively low investments. It may be noted that the fuel cost has declined worldwide and this has helped the aviation sector as input cost has declined. Thus the company can save good chunk of money due to low price of aviation cost. This money can be used to invest in the technological innovations such as development of mobile friendly websites and smart phone apps. Balanced Score Card Strategy Example Key Performance Indicator Financial Perspective Net Profit Margin The profit margin of the company has shown a declining trend. This is an indication of the present position of the company. However company has good relationship with banks and there is no shortage of funds at any time. Customer Perspective Passengers Billed The passengers billed has shown a declining trend. Internal Perspective Assets Strength Company has invested in technology and the number of customers which are booking the air tickets from mobile app is on the rise. Future Perspective Use of technology Company has developed user friendly websites and smart phone apps. Company is putting heavy reliance on technology. TUI website is one of the top websites in relation to the aviation sector. Thomson Airways focuses on the customer preferences and this is the main strategy of the company(Bryman Bell, 2015). The company is focusing the expanding its business through the demand of existing customers. Conclusion The upcoming few years will be of great importance for the aviation sector. While the reduced cost of the aviation fuel can be seen as boon to the aviation sector it is up to the government whether it passes on this benefit to the companies or increases the tax on the fuel cost. Another important strategy is to provide an excellent user experience to the customers. Thomson Airways is doing this on both fronts, i.e. flying services and ground services. To improve the user experiences of customers, company has developed online platforms and apps for the booking of the tickets and providing various other services. The company should look for new ways of cost reduction(Neuman, 2011). This can be done by purchasing modern aircrafts which are more fuel efficient and reducing the administration costs. However, management should ensure that the cost reduction does not affect its brand value. Thus, the strategy of the company appears to be good on paper but whether it actually works in real business situations, will be witnessed in upcoming years. The company should constantly monitor where the solutions provided by its online platform and makes necessary changes to it. Besides that company strategy appears to be alright. Hence it is recommended that the company should continue with the current policy. References Ahenkora, K. Peasah, O., 2011. Crafting Strategy That Measures Up. International Journal of Business and Management , 6(19), pp. 278-284. BATA, 2015. UK tax on flying cost passengers over 3.1 billion last year. [Online] Available at: https://www.bata.uk.com/01/uk-tax-on-flying-cost-passengers-over-3-1-billion-last-year/ [Accessed 18 Feb 2016]. Bigler, W. Williams, F., 2013. WORLD-CLASS STRATEGY EXECUTION THROUGH ON THE JOB LEADERSHIP DEVELOPMENT. 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