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How Integration Improves The Tourism Industry

1415 words - 6 pages

Thomas Cook plays an important role in the tourism industry. It is a large tour operators often mergers with other companies so as to increase its market position. In the UK tourism industry, the process of merging is called integration which most of the large tour operators will integrate horizontally and vertically. Both integrations can help the companies increase their economies of scales. According to the case study “The Thomas Cook – MyTravel merger in 2007” (Page & Connell, 2009), Thomas Cook was horizontally integrated with MyTravel to form Thomas Cook Group plc. Later on, according to the case study “Thomas Cook pays top dollar” (BusinessLine, 2014), Thomas Cook was vertically integrated with Sterling Holiday Resorts which it is a hotel owned 19 companies. As these two result from the case study above, Thomas Cook had horizontally and vertically integrated with both tour operators and suppliers. Integrated with other companies can gain the most benefits because of owning different components in the chain of distribution and “offer the organization more strategic options in terms of market penetration and market-product development” (Trible, 1997).
Horizontally integration can improve the market share by merging with small tour operators. Thomas Cook not only combined with MyTravel, but also merged with Co-operative Travel in 2008 (SMR, 2010) by attract more customers and make more profit. At the time of merger, “the shares had increased by 52% and 48% owned by the shareholders of MyTravel Group” (BBC, 2009). In the positive side, the market share increased because of the larger scales of the companies. Also, merger with other tour operators can reduce the cost of finding research, so more product produced to meet the customers’ needs and wants. However, there also have some negative impacts, such as Thomas Cook was becoming a larger brand in the tourism industry, the control of it will become more difficult since the organizational structure became bigger. This will lead to the business problems because of the staff employment and the decision making process inside the company. Then the brand was unable to control the whole operation by connect not only the department of itself, but also other departments from MyTravel or Co-operative Travel or other integrators.
Besides the horizontal integration, vertical integration also have different impact on the business operation on Thomas Cook. Vertical integration, which is merged with other companies that are on different levels like hotels, airlines and travel agencies, have divided into forward and backward. “It can reduce the cost of transport and improve the supply chain coordination” (Clinton et al, 2008). Since Thomas Cook is an intermediaries that connect with suppliers and consumers, benefit can gain from them. Thomas Cook can build up a strong network so that it can control the price and purchasing power from the travel agencies. Also, improve the relationship between travel...

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