Internationalisation involves expansion of a firm’s core business activities into new markets. It is a systematic process characterised by an in-depth scrutiny of potential markets. The process involves identification of strategic partners useful in the process of entry into the new market. Internationalisation of company’s operations is primarily influenced by resources available for disposal.
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There are two major strategies that companies use in internationalization of operations. The first strategy is the direct approach. Companies set up plants which they use to introduce their product or service in a new market. Alternatively, companies can use strategic partnerships and acquisitions to penetrate a new market. Strategic partners provide information on the local market’s trend which is useful in decision making for an international company.
TUI AG has employed use of strategic alliances and acquisitions to expand its operations. The tourism industry entails several core elements. They include transport and accommodation. TUI AG has started or acquired different companies in transport and hotel industries. For example, TIU AG operates both charter and low cost airlines. Charter airlines include TUIfly, Jetfly, Corsairfly and Arkefly.
Low cost airlines include TUIfly command and Thomsonfly. Similarly, the company owns and operates tour agencies and operators in different countries. Tour operators and agencies are the main catalyst of success in the tourism business. Among the functions of the tour agencies include hotel booking for guests. To this end, TUI AG has invested heavily five star hotels.
TIU AG comprises of major hotel brands including Magic Life, Riu, Iberotel and Grecotel. These brands are spread over different countries in Europe. Hagan-Lloyd operates luxury cruise ships whose occupants are booked in different World of TUI hotels when cruise ships dock in different European countries.
There are several benefits that are associated with TUI strategy that integrates different tourism activities. One key benefit is independence. TUI operates a range of businesses that complement each other in the tourism industry.
Therefore, the company does not rely on outside players for provision of customers to its businesses. For example, Hagan-Lloyd cruise occupants are booked into TUI‘s hotels when cruise ships in different location in Europe.
Another benefit is convenience. Customers are in position to experience a whole package without need of involvement of many players. This is economical on both time and money. TUI offers a broad range of tourism products and prides itself in continuous product innovation. Increased innovation is a good marketing tool as customers promote the products through word of mouth.
One disadvantage of the integrated tourism activities is that tourism supply chain that decline in tourism activities can be detrimental to TUI’s operations.
This is because most of her companies are either directly or indirectly related to tourism. TUI, therefore, aims at diversifying its portfolio by launching operations in emerging markets including China and India. China, for example, has experienced average annual growth of 8% per annum.