TUI AG's Restructuring and Expansion Essay Example | Topics and Well Written Essays - 1250 words

TUI AG's Restructuring and Expansion - Essay Example Product-market diversification refers to the strategy where the company simultaneously seeks to expand both into new products and new markets. New product expansion is manifested through activities such as the opening of the â€Å"World of TUI Travel Mall† in Berlin whereas new market expansion is characterized by the acquisitions and joint ventures done throughout the organizations growth. Vertical integration strategy involves TUI AG seeking to gain control of both inputs and outputs within the tourism industry’s supply chain. TUI does this through owning and operating companies in both the tourism destinations and source markets as well as the distribution channels, hotels and airlines (Sigala, 2008). Horizontal integration refers to when the company combines with competitors operating in the same industry and doing the same things for example in 1998 HTU took a minority stake in First Reiseburo Management GmbH & Co. KG., a competitor in Germany (Sigala, 2008). T UI’s operations enable its business strategies to be successful through a number of ways. Firstly, through operations the company is able to set and control quality levels uniformly across its integrated tourism supply chain. ... 2-What benefits does TUI AG achieve through its integrated tourism supply chain? Are there any disadvantages to this? The three major benefits to TUI AG of having an integrated tourism supply chain are: increased guarantee of product quality, better protection of proprietary technologies and processes, and lower transaction costs. By controlling both its inputs and outputs, TUI AG has a greater ability than a non-integrated tourism company to implement standard quality control systems as well as share best practices across all its products. Further, the organization can integrate operations across its supply chain to create a seamless experience for its customers. With regards to better protection of proprietary technologies and/or processes, TUI could have developed a more effective way of, say, minimizing the time it takes a customer to move from holiday planning to actually going for the holiday. If the company were to use an external service provider it may have to share some of its knowledge to make the experience seamless. On the other hand, by having all service providers within its supply chain, the company can keep the process secret or as a competitive advantage for a much longer period. Lower transaction costs are achieved in two ways. To begin with, TUI could standardize infrastructure and procedures across all its subsidiary companies which would make transactions cheaper and less time consuming across the supply chain. Secondly, by having an integrated supply chain TUI is guaranteed of retaining maximum value from the customers thus the margins set across the value chain are lower. This implies that the subsidiary companies across the value chain face lower costs than those faced by