Strategy for Tourism

1. Strategy for Tourism Unit 9 Evaluation of Strategies Professor John Tribe

3. Learning Outcomes • After studying this unit and related materials you should be able to understand: • suitability analysis • acceptability analysis • feasibility analysis • ranking • and critically evaluate, explain and apply the above concepts.

4. Case Study 9 • The 2007 Merger: TUI Tourism and First Choice merge to form TUI Travel plc • In 2007 the boards of TUI AG and First Choice recommended a merger between TUI Tourism and First Choice to form the £12 billion travel group TUI Travel plc. • The 2014 Merger: TUI Travel PLC merged with TUI AG to become The TUI Group • In 2014 TUI Travel and its German parent company, TUI AG, merged to create the world’s largest tourism business.

5. Evaluation Framework

6. Suitability • Suitability analysis aims to test whether a strategy fits the situation facing a tourism organisation or destination as identified by strategic analysis. Therefore suitability can be initially divided into • environmental • resource fit, and • cultural fit

7. Acceptability • Acceptability scrutinises strategic options in terms of whether organisational objectives are fulfilled and thus investigates factors such as • profitability (in the private sector) • social profitability (in the public sector) • risk, and • stakeholder satisfaction

8. Feasibility • Feasibility seeks to test whether a strategy can be realistically achieved, and asks whether an organisation already possesses or has access to the necessary resources. It therefore subjects strategic options to scrutiny in terms of: • funding • human resourcing, and • timing / logistics • competitive reaction

9. Choosing between Options • Evaluation of options may generate a series of mixed results with each strategic option having a conflicting list of good and bad points. Such a situation requires prioritisation of evaluation criteria. • This may involve • listing some objectives that must be achieved (e.g. minimum ROCE) • and some effects that must be avoided (e.g. loss of ownership and overall control of the organisation). • These may be classed as essential criteria. • It is then possible to attach weightings to other criteria to reflect their relative importance. • Thus an initial screening of options can rule out those which fail the essential tests, and options may then be ranked according to their performance against the other, weighted criteria.

10. Review of Key Terms • Suitability analysis: Tests whether a strategy fits the situation facing a tourism organisation • Teats of suitability: Environmental fit, resource fit and cultural fit • Acceptability analysis: Scrutinises strategic options in terms of whether organisational objectives are fulfilled. • Test of acceptability: Profitability (in the private sector), social profitability (in the public sector), risk and stakeholder satisfaction. • Feasibility: Test whether a strategy can be realistically achieved • Tests of feasibility: funding, human resourcing and timing / logistics • Screening of options: Ruling out options according to specific criteria • Ranking: Putting strategic options in order of preference

11. Discussion Questions 1. What is meant by cultural fit? Which factors suggest a good cultural fit, and which suggest a poor one, between TUI Tourism and First Choice? 2. Under what circumstances will cost benefit analysis rather than profitability be used to determine the acceptability of a strategy? 3. What factors would make a strategy a high risk one? 4. Evaluate a recent or proposed merger or take-over between tourism organisations. 5. What is sensitivity analysis? What variables would the merger between TUI Tourism and First Choice be sensitive to and with what effects?

12. Strategy for Tourism Unit 9 Evaluation of Strategies Professor John Tribe The End