Pestel and Porter's Analysis of Tourism Industry
Introduction Page 2
Macro Environment Page 2
Competitive Forces in the Tourism Industry Page 4
Conclusion Page 6
References Page 6
This paper will be dynamically examining the tourism industry during the 2000s. It will begin by using the PESTEL framework to analyse the macro environment and determine which factors drive the competitive forces within the industry. Following this, Porter’s Five Forces model will be used to analyse the actual competitive forces at work within the industry and determine the relative importance of these forces.
The macro environment
Before one can look at specific factors relating to the firm itself, it is necessary to first examine the nature of the external or macro …show more content…
Competitive Forces in the Tourism Industry:
It is very important for managers to be able to understand the competitive forces in an industry, as these help to determine how attractive the industry is and whether an organization is likely to succeed (Johnson et al, 2008). In this regard, Porter’s Five Forces model will be used, in order to determine how new entrants, substitutes, the power of buyers and power of suppliers affect the competitive rivalry within the industry.
The threat of new entrants:
The first major issue that a firm in the tourism industry would have to consider when it comes to the threat of potential new entrants, is the fact that there are extremely high capital requirements. Examples of capital requirements… This acts as a large barrier to entry. It is also the case that, according to the case study, the ten biggest tour operators control approximately 80% of the market. This means that there is less likely to be price retaliation amongst the top firms, and they also possess extremely high economies of scale (Liverpool Business School…). In addition to this, brand recognition is very prominent, with many people being very aware of and loyal to brand names such as TUI, Thomas Cook, My Travel and Club Med. All these factors mean that barriers to entry in the tourism industry are high and that,