Introduction
Background Study
Horizon Travel is a private limited company that operates within the travel and tourism industry. The firm’s headquarters are situated at Brisbane, Australia. Over the past few years, the firm has expanded into the international market.Currently it has opened ten other firms’ world wide. The firm specializes in organizing tours and travel for both individual and institutional customers. The firm is fully licensed and is accredited as a travel agency by three main firms which include, Australian Federation of Travel Agents (AFTA), International Air Transport Association (IATA), and Travel Compensation Fund (TCF) (‘Welcome to Horizon Travel’ 2006 Para. 4).
The firm also specializes in organizing reservations for its customers to various tourist destinations. The management of the firm organizes holidays into various categories on the basis of customers’ destinations such as Africa, Asia, Australia, Middle East and the Mediterranean region, Pacific region and American holidays. The management of Horizon Travel outsourced the services of ABE Australia which is an experienced consultancy firm in the tourism industry.
In the recent past, information technology has undergone a rampant change in Australia. This is due to the high rate of technological innovation that has affected firms in various industries, such as the travel and tourism industry. One of the technologies that have undergone rampant change in Australia is Information Communication Technology (ICT). This has had a positive impact on the wholesale and retail travel industry in Australia. This is due to the fact that the travel and tourism industry is information-intensive. In other words, ICT has resulted into the emergence of Marketing Information System (MIS). Most of the wholesale and retail travel firms have incorporated MIS systems into their operations. This has necessitated the transfer and management of travel information within the firm. It has also enabled travel agents to serve their customers in a better way. The effect is that the wholesale and retail travel firms are now better able to satisfy their customers (Bulharis 1998 p.2).
Aim
The aim of this report is to analyze the benefits and disadvantages that Horizon Travel faces from continued integration of retail agents, call centre and electronic commerce as its marketing strategies. The objective of the report is to advise the management on how it can introduce a more effective electronic marketing and management system in its operation.
Scope
This report specifically covers how retail agents, electronic commerce technology, and the call centre have been utilized as marketing strategies in the travel and tourism industry and particularly in Horizon Travel. The report analyzes the changes that have occurred in the social cultural environment in relation to Internet technology. The various ways in which the Internet has been incorporated by the society in their consumption pattern are illustrated. The report also analyzes of the competitive environment within the travel and tourism industry.
The various electronic commerce technologies available within the travel industry are identified. The report also includes the benefits and disadvantages of incorporating, retail agents, B2B and B2C in the operation of Horizon Travel. Various ways in which the management of Horizon Travel can improve on its electronic marketing technology have been recommended. However, the report does not specify the actual cost that will be involved in implementing these technologies but only identifies the general cost variables.
Literature Review
Changes in Social Cultural Environment
Internet as Information Search and Communication Tool
In the recent past, the technological environment has experienced rampant changes due to the high rate of technological innovation. This has had an impact on the social-cultural environment. Amongst the technologies that have emerged lately include information communication technologies such as the Internet. Individual and institutional consumers have integrated Internet technology in most of their buying practices. According to Chan and Swatman (2001 p.3), consumers undertake a comprehensive decision making process in determining the goods and services to purchase. This process consists of various phases. One of the phases in the decision making process involves searching for information related to the needed products and services. Effective search for information enables consumers to purchase the product or service that will result in their satisfaction.
On the other hand, searching for information enables the consumers to choose their most preferred supplier from whom to buy the product or service. According to Chan and Swatman (2001 p.3), Internet refers to a number of computers that are interconnected, enabling various parties to access the other computers.In recent times, most businesses post their products and services information on the Internet. Traditionally, consumers searched for product s and services information from friends, relatives and other family members. With the emergence of Internet technology however, consumers search for information on products and services via the Internet. This is due to the fact that the society has identified the Internet to be an effective source of information.
Increased adoption of Internet as a source of information also arises from the increased trust of information on the Internet. It is also easier to use the Internet as a source of information as compared to using books and other similar sources of information, such as the print media (Marko 2008 p. 9).Through the Internet, consumers are able to access a wide range of information with regard to the products that they want and also get information related to similar products. According to Bulharis (1998 p.5), there was a revolution in information technology that was experienced from 1995. This resulted into a large number of customers within the tourism and travel industry relying on the Internet as a source of travel information.
Bulharis (1998 p.5) asserts that customers utilize both the commercial and non-commercial information from the Internet in planning and making changes to their travel needs. On the other hand, the society has also adopted the Internet in searching for changes in products and services. Consumers can also search for products availability (Noor & Ali 2006 p. 97). This is due to the fact that organizations have integrated the Internet as a communication tool. Through the Internet, consumers can send e-mails to various business organizations, to either complement or complain about their products and services.
Internet as a transaction Tool
Most business organizations are integrating Internet technology in conducting their marketing activities. One of the ways through which organizations have adopted the Internet in their operations is by use of electronic marketing. To reach the global market, the management of various firms is integrating on-line advertisements in their promotional strategies. In addition, society is also integrating the use of Internet in their day- to- day buying processes, by conducting on-line transactions. According to Noor and Ali (2006 p. 99), these transactions relate to online buying and payment for products and services. Through the Internet, the consumers are able to make purchases of a variety of products and services in a more cost-effective manner. Consumers have also adopted other Internet technologies, such as electronic banking, which enables them to make payment of the products and services purchased online. Changes in the competitive Environment
In the recent past, the travel and tourism industry has been characterized by intense competition (Bob 2004 p.1). This is due to the lucrative nature of the industry, profit-wise. This has resulted from the fact that various economies have experienced economic growths that have culminated into an increase in the consumers’ disposable income. As a result, there has been an increase in the demand for products and services within the travel and tourism industry. The increase in profit potential of the industry has resulted into an increase in the number of domestic and foreign investors who have ventured into the industry.
The degree of competition has also been intensified by the increased rate of deregulation in the industry by the government in question. This has resulted into an increase in ease of entry into the industry. The increased ease of entry on the other hand, has resulted into an increase in the degree of rivalry amongst firms in the industry. This is due to the fact that there are a large number of small firms which offers the same products and services. To differentiate their products, most of the firms in this industry are developing new products to meet the dynamic needs of the customers.
A number of firms have been established within the Australian tourism industry. Examples of these firms include Qantas Air, which owns Qantas Holiday, Octaviar, Flight Center limited, Virgin Blue Holdings limited and AAPC limited. The intensity of competition has resulted into an increase in the number of travel firms offering substitute products to the consumers. This has culminated into a price war amongst the firms. To attain a high competitive advantage, management of firms in this industry is adopting competitive pricing strategies in order to attain a high competitive advantage.
According to Nishaal and Guntur (2006 p.4), price competitiveness is an important element within the travel and tourism industry. The Management of firms in this industry is considering re-adjusting their pricing strategy to attract potential customers and gain a higher market share. In addition, price war in the industry is intensified by the fact that the industry is characterized by minimal switching costs for the consumers. This is due to the fact that consumers have attained a higher bargaining power relative to the suppliers (Bob 2004 p. 2).
The competitive nature of the industry has also been increased by the fact that firms are integrating information technology in their operations. For example, information technology is being utilized to increase the degree of connectivity between the suppliers of the of the different travel packages. Some of the suppliers of these services include the hotel companies.
According to fact file (Anon 2009), Qantas Holiday has outsourced information technology from various companies. This has enabled it to develop a high competitive advantage. Some of the companies that the management of Qantas Holiday has formed strategic information technology alliance include International Business Machine, SITA, Telstra, and Amadeus. Amadeus provides the firm with an effective Global Distribution System which enables the management to make reservations cost effectively. On the other hand, Telstra enables the firm to manage its domestic communication network cost effectively. Alliance with SITA enables the management of the firm to develop an effective communication network with international customers and other business partners.
Technology Available To Facilitate E-Commerce In The Travel Industry
There are various technologies available to facilitate e-commerce in the travel industry. One of these technologies is the Automated Reserve System (ARS), also referred to as Global Distribution System (GDS). This is a worldwide computerized network that enables consumers to book for reservations in hotels, airlines, rental cars and other items that are related to the tourism and travel industry. The technology is used as a single point of access by the travel agents.
Currently, there are four main GDS systems available to the firms in the travel industry. These include Amadeus, Galileo, Sabre and Worldspan. Amadeus is currently the leading GDS system within the industry. It has a comprehensive network which serves approximately 57,000 travel agents world wide. The system is also connected to 58,000 restaurants and fifty car rental firms. Galileo, Sabre and Worldspan systems offer a wide range of connectivity to travel information world wide. For example, Sabre owns Travelocity.com which is the leading website in providing travel information to customers. They also support various electronic commerce functions to the travel agencies such as e-ticketing, booking hotel rooms and rental cars (Das 2002 p 1).
Through the GDS system, firms within the travel and tourism industry are able to link with their customers (Bulharis 1998 p. 2). For instance, through the use of ARS technology, firms in this industry are able to provide information related to their products to a wide range of customers. The information provided through the GDS system relate to availability and price of the travel package and other features of the product.
Through the use of this information technology, firms in this industry are able know the demands of the customers in a more effective manner (Marko 2008 p. 3). This is due to enhancement of communication between consumers and the firm. This in return enables the firm to establish customer loyalty.
The second type of technology that supports electronic commerce within the travel industry is Calypso. According to tourism technology designed to perform (Anon 2009), this technology is a reservation system that has got a wide range of customers and other technology-driven features. Calypso system enables firms within the travel and tourism industry to be efficient in their management. This is due to the fact that it is easy to manage a wide range of multiproduct reservations.
In an effort to support marketing of tourism products, various Calypso technologies have sprung up. These technologies can be integrated with the Internet to enable on-line booking. For instance, the Calypso Net is a B2B engine that enables the available travel agent to interact with the wholesaler of the tourism products on the web. This enables the agents to make reservations more cost effectively. The Calypso system is also composed of the Calypso WebBook which is a B2C engine which makes it possible for customers to conduct on-line booking. Through utilization of these technologies, a firm such as Horizon Travel can be able to develop a comprehensive database related to travel.
The third type of expertise that supports electronic commerce is CONTOURS technology which helps in the designing of various rules related to pricing, distribution and packaging of travel products. This e-commerce technology ensures that there is flexibility which makes it possible for firms in the travel and tourism industry to make adjustments to the rules without reprogramming the whole system.
Through this technology, the management of Horizon Travel can be able to sell its products or services on real time basis. This can either be through the World Wide Web, directly to the consumers or through the call centers. This technology also enables the management to streamline critical operations across the various travel enterprises. These operations include business reports, tracking of payment and reservation history.
Business To Business (B2B)
Retail Agency
Firms in the travel and tourism industry have utilized retail agency technique in marketing their products for a long period of time. Initially, the retail agents sold travel packages to various customers through the use of brochures. In some cases, the travel firms either established their own retail agents or outsourced an independent retail agent. Horizon travel incorporates the use of travel agents in marketing its travel products.
Benefits Of Marketing Using Retail Agency
There are numerous benefits that Horizon Travel can achieve by marketing its travel packages through the retail agents and the call center services. These include the following;
Central Reservation
The retail agents’ act as a central point through which Horizon Travel would market its travel packages related to reservations to its customers. This is because the retail agents are usually located in strategic locations where the general public can easily access them. The ease of accessibility enables the retail agents to have a face- to- face contact with the customers, enabling them to provide customized services which results into increased effectiveness in marketing the travel package. This culminates into a high level of customer satisfaction. On the other hand, the retail agents can be able to advise the customers effectively in relation to their travel demands. This is due to the fact that these firms specialize in relation to certain travel destinations.
Effectiveness in Travel Organization
The retail agents help customers in organizing a wide range of information in relation to travel arrangements. Through the call centre, retail agents are able to communicate with customers, thus making reservations effectively. Increased efficiency in providing services also results from the fact that the retail agents can easily liaise with the service providers such as the hotels and car rental firms. Thus, through incorporation of business to business techniques, the firm through the retail agent or direct B2B is able to enhance its relationship with its trading partners (Vatcharaporn & Sivaporn 2001 p. 264).
The retail agents are also involved in intensive research in relation to the emerging travel destinations. This enables them to advise the customers more effectively depending on their travel needs. By selling the travel packages, the customers achieve a high rate of satisfaction, and thus the firm attains competitive advantage.
Increased Marketing
Considering the fact that information is paramount in the travel industry, the retail agents have integrated business to business technology within their operations. This has enabled them to market the travel packages through various technologies, such as the Internet and telemarketing. Through these technologies, the retail agents are able to promote the company products more effectively.
Reduction in Cost Of Wage
Through the use of business to business techniques in conjunction with a call centre, Horizon Travel will be able to reduce the cost of operation. This is due to the fact that only a small number of staff will be required. This will result into a reduction in the company’s level of wages. On the other hand, the firm will be able to streamline its diverse operations such as bookings through integration of B2B software (Thomas, 2007, p. 1).Consequently this will result into increased efficiency of operations.
Disadvantages
Cost of Implementing The Software
In order to effectively integrate B2B technology in its operation, the management of Horizon Travel will be required to have software that supports electronic commerce. The cost of implementing a new technology into a firm is usually very high. This means that Horizon Travel will incur a high capital expenditure. On the other hand, the management of the firm will be required to train its employees on how to operate the new software. This will result into an increase in the firms’ capital expenditure (Chan & Swatman 2001 p 5).
Information technology is characterized by a high rate of volatility. This means that the management of the firm will be required to continuously update its systems for it to be competitive. This is due to the fact that the firm’s technology may not be compatible with the new technology (Chan & Swatman 2001 p 5). With regard to the software industry, new and more efficient software are being developed. This means that the firm will be required to change its software from time to time leading into an increase in cost.
Insecurity
In the event that Horizon Travel has not configured its security devises in its e-commerce technology effectively, the firm faces a high degree of insecurity. This is due to the fact that there are chances of waywardness in the transactions, such as payments being hacked. This may result into a great loss to the firm.
Business To Customers (B2C)
Business to consumers (B2C) refers to the process through which a firm applies electronic commerce technologies to market its products directly to the consumers (Vatcharporn &Sivaporn 2001 p.263). By utilizing B2C technology, there are various benefits that Horizon Travel can attain. These include the following;
Increased Customer Loyalty
Through the use of B2C, the management of Horizon Travel will be able to communicate with the consumers on real time basis (Vatcharaporn & Sivaporn 2001 p. 263). This ensures that consumers receive the correct information in relation to their travel demands. This results into establishment of trust between the consumers and the firm which culminates into creation of customer loyalty.
Through B2C technology, Horizon Travel will be able to target a particular customer category. This means that the firm will devise travel packages that meet the demands of the identified customers. The result is that the firm will develop a higher competitive edge (Himanshu 2008, p. 2).
Disadvantages
Considering the fact that business to customer e-commerce technology is a new aspect in the market, it is only a small percentage of consumers who know how it operates. This means that some consumers have not fully integrated e-commerce in their operations. Hence, through B2C technology, Horizon Travel will not be able to meet the needs of all its customers. This means that the firm will have to use traditional methods of marketing in some market segments.
Conclusion
Horizon Travel has been performing well in its operation through integration of the call center and travel agents in marketing its products. However, the management should also consider improving on its electronic marketing strategies such as B2B and B2C in the firm’s call centre and travel agents. This will enhance the operations of the travel agents. Considering the fact that technological environment is dynamic, the management of the firm should continuously scan the environment to identify these changes. This will enable the management of Horizon Travel to incorporate an electronic marketing and management system that will result into the firm developing a high competitive advantage.
Through these technologies, the firm will be able to meet the needs of its customers more effectively. Such technologies will also enhance effective supply of information to the customers, considering the fact that information is very crucial in the travel and tourism industry (Sheldon 2003 p 1). By incorporating such expertise into its operations, Horizon Travel will also be able to establish a good relationship with its trading partners. This will result into the firm achieving a competitive advantage within the industry.
Recommendation
In order to be more competitive within the travel and tourism industry, the management of Horizon Travel should consider implementation of the following options
- Update its booking system with the current electronic commerce technologies such as Calypso technologies which include; Calypso Net, Calypso WebBook and Calypso Content Manager.
- Implement the various GDS systems such as Amadeus, Galileo, Sabre, and Wordspan.
- In implementing these technologies, the management of the firm should plan for sufficient time to ensure that they are effectively installed.
- The management should also consider the plan for the required capital to purchase the necessary hardware and software, cost of maintenance, customization cost, cost of training and integration cost.
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