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The review of a business model: research on changing the business model for a Dutch tour operator

Heijden, Leon van der (2010) The review of a business model: research on changing the business model for a Dutch tour operator.

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Abstract:The travel industry is one of the largest and also one of the fastest changing industries in the World. The emergence of the internet has radically changed the way business is conducted throughout the industry. This research focuses on a Dutch tour operator which is having trouble adjusting to the fast changing business environment. This tour operator did not make the transition to online direct selling but still sells its products via retail partners only. Due to fierce competition of online niche players, who do not have high overhead costs and a large back‐office, profit margins are under pressure and sales are declining. The tour operator has specialized itself in long haul traveling, which means fly‐hotel vacation trips outside of Europe. This market segment is shrinking because of the current economic circumstances, which inevitably means a decrease in sales. Other tour operators facing the same problems often chose to change their strategy of indirect retail selling to a dual strategy of both indirect and direct online selling. For the Dutch tour operator it is clear that changes need to be made to the current business model to be able to sustain a profitable business. Research has been conducted to gain insight into the problems of this Dutch tour operator regarding their current business model and to develop a suitable competitive business model. The results of this research consist of a comprehensive description for a reviewed business model together with the associated critical success factors. The information needed to review the current business model was gathered by analyzing the tour operator itself and its environment. The findings of this analysis show that the main issues the tour operator has to deal with are: inefficient internal handling, slow quote generation, (too) high diversity in product offering, no corporate identity, labor intensive information distribution and diversity in the product offering prevents possible economies of scale. Interviews were conducted with business experts to gain insight into the best practices in the current market and the market environment. The information from the interviews was used to create a best practice business model which could be compared to the current business model. This analysis, together with the identified critical success factors, has led to the identification of nine recommendations divided into three categories: Product, Efficiency and Image. For each of these categories the two most important recommendations are elaborated in the next paragraph which will tackle the formerly mentioned issues and will increase the sustainability of the business model of the tour operator. Product: Margins are small because the current distribution channel is expensive. Therefore direct selling is a must. To be able to keep the associated travel agents satisfied it is wise to start selling directly to customers under a different brand name with the same price. This is less threatening to travel agents. To be able to compete with the larger tour operators detailed knowledge about the destinations is needed. Specific product selection for specific customer segments is recommended for the product offering. It is essential to evaluate each individual destination that is offered at the moment. Focusing on fewer destinations makes keeping the knowledge up to date easier and reaching critical passenger volumes more feasible. Efficiency: An analysis of the internal processes should be conducted. The goal of this analysis is to identify the time consuming elements of the internal processes. By standardizing these activities the total process will become more efficient and less costly. To improve the efficiency of the internal processes even more, the current back‐office ICT systems should be evaluated and if needed replaced. Image: The brand represents the added value a company is able to deliver and helps customers with their product choice. Increasing brand awareness starts with the availability of information about the company. Communicating the product offering and the brand values will increase the trustworthiness of the company. A multi‐channel strategy for product and information distribution is absolutely essential for a modern tour operator. The role of the internet in this strategy cannot be denied. A state‐of‐the‐art website is a must to succeed. One of the consequences of these recommendations is that costs will primarily increase to implement a recommendation before it will yield a return. Since there is no room to invest this can be a problem.
Item Type:Essay (Bachelor)
Mensink Capital B.V.
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management BSc (56994)
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