The essay tends to discuss strategic management as a concept and process in relation to the case on TimeOut Travel. The external and internal environments of TimeOut Travel will be described and their influences on the company performance will be examined. By defining Business level strategy (BLS) in relation to the case on TimeOut Travel, the role of BLS will also be carefully examined and discussed. Finally, the essay will propose an option for growing TimeOut Travel, taking into account the business environment and its current BLS, as well as the needs of the owner.
Strategic Management Strategy is not products, services, or resources. It is rather a set of plans and actions designed to gain competitive advantages, and thus, achieve above-average financial returns. Usually, competitive advantages will be gained when a company implements a strategy its competitors are unable to duplicate or costly to imitate. According to Michael E. Porter, the major contributor of the competitive advantage theory, competitiveness is “what the customer is willing to pay for.
” (Drejer 2004, 510) Strategic management process, therefore, is the full set of commitments, decisions and actions to implement the strategies. In the case of TimeOut Travel, Halteh, the owner of the company with 17 years of travel-industry experiences, has successfully implemented differentiation business strategies to create competitive advantages and make profits. To improve business performance of TimeOut Travel, these business strategies will be analysed in details in the section of Business Level Strategies and alternative strategies will be proposed in the section of Future Growth.
Firm Environment As described in the case of TimeOut Travel, the external environment to the SMEs in the travel industry has been more complex and challenging than ever before. Economically, travellers are discouraged to make international leisure travels after the terrorist attacks of 9/11 in 2001 and the Bali bombings in 2002. The business of TimeOut Travel suffered seriously from these terrorist events. These events could be fatal to small travel agencies like TimeOut Travel if the safety worries persist for a considerable long period of time.
Politically and legally, compulsory Business Activity Statements (BAS) was introduced and imposed by the government, which significantly “increased the cost and complexity of Halteh’s accounting needs. ” At the industrial level, low-cost airlines such as Virgin Blue and Jetstar as well as online fares have made the travel industry more competitive than ever. This paradigm shift in the travel industry could also be fatal to TimeOut Travel if Halteh does not take an appropriate business strategy to adapt to the change.
Internally, TimeOut Travel has experienced challenges in covering staff absences. As a matter of fact, these are “internal and external contextual factors that were found to impact on performance in the small tourism businesses globally. ” (Morrison 2004, 168) Business Level Strategies The business-level strategy refers to the core strategy deployed to create differences in the compnay’s position relative to that of its competitors. The company has choices of using cost leadership, focus, differentiation or combination.
In selecting a business-level strategy, the company must identify its target client, their business needs and then determine the way to meet the needs. First of all, in identifying clients, market segmentation is commonly used to divide people with similar needs into individual and identifiable groups. In the case of TimeOut Travel, potential clients are segmented “based on demographics and travel preferences. ” Secondly, business needs are related to the value of the service. Two main forms of value are: low cost with acceptable features and highly differentiated features with acceptable cost.
Obviously, TimeOut Travel has chosen the latter as its core business strategy. “Ballroom cruise tour” is a typical example of her business success using differentiation strategy. However, without price information of specialized tour programs TimeOut Travel offers, it is hard to predict how competitive these tour services are compared to those of its competitors. If its competitors offer the same tour with the same features at significantly reduced prices, TimeOut Travel could easily lose its business advantages in this regard.
Future Growth Given the size of the company, TimeOut Travel should develop its competitive advantages with focus on intangible assets such as experiences, innovations, reputations and royalties. Differentiation rather cost leadership should be considered as the main strategy, which means that the company must provide non-standardized services with differentiated features. To avoid price competition, TimeOut should enhance its ability to continuously and consistently upgrade the differentiated features.
Innovations coupled with the ability to think and manage strategically are “the key factors that distinguish and elevate the entrepreneurial firm from the small business venture. ” (Beaver 2002, p. 35) Customer satisfaction should also be the primary concern of TimeOut Travel. The quality and uniqueness of the service become critical to maintain customer satisfaction and royalty. Given the size of the company, TimeOut Travel could be more agile and reactive to customer specifications, compared to other giants in the travel industry.
Charles Darwin once said that “it is not the strongest species that survive, nor the most intelligent, but the one most responsive to change. ” In the rapidly changing business environment, responsiveness to customer specifications is crucial for TimeOut Travel to survive and thrive in the long run. Employees in the service industry are “a key input for delivering service excellence and productivity”, both of which can be “important sources of competitive advantage. ” (Wirtz 2008, p.4)
Therefore, more training should be provided to the unexperienced employees; more attractive employee compensation packages should be designed and implemented to discourage frequent absences. To reduce stresses on her own working life and minimize the long-distance drive every day, Halteh could consider build a web-based information system to work at home. The web-based IT solution will provide “the opportunities for cost reduction in the travel service sector. ” (Brown 2009, p. 6)
As a small travel agency, TimeOut Travel is experiencing preceded changes and challenges from the external and internal environment. Since its establishment in 1998, TimeOut Travel has achieved above-average business performance by implementing differentiation strategies. To continue its success and reach its new business goals, TimeOut Travel should take more thoughtful differentiation strategies for its future growth. Only those companies with strong adaptabilities to change and continuous innovation capabilities will survive and thrive in the long run.