horizontal integration is where an organisation owns two or more companies, on the same level of the buying chain. An example of this is the First Choice Group; they own First Choice Travel Agency and First Choice Hypermarket, both of which are on the same level of the buying chain. The advantage of horizontal integration is that it can increase the company’s market share. Another good example of this type of integration is when EasyJet purchased the airline Go from British Airways. Now EasyJet and Go both operate under the company name of EasyJet.
vertical integration is when an organisation own companies on two or more levels of the buying chain. Examples of this can be found within “The Big 4,” all of them own an airline, travel agent and a tour operator. The companies have until recently used different names for their travel agency, airlines and tour operators, but now they are power branding their companies so that customers can see whom they are booking with. An example of this is TUI UK, which has rebranded its companies using the Thomson name. Task 2B
The Essay on Skillsoft Business Integration Levels
Information Technology, IT, is an integral property in a business’ success. In order for an organization to reach its maximum potential this organization will need to be coordinated and integrated. For as the organization moves on to higher levels of integration it will find many potential benefits to be gained. These can be broken down into five different levels of business and IT integration. ...
This diagram shows the vertical integration that Thomson used to expand as an organisation. Sector 2004 (Year) 2005 (Year) Airline Britannia Airways Thomson Fly Tour Operator Thomson Thomson Travel Agent Lunn Poly Thomson An example of Horizontal & Vertical Integration “The Big 4” World Of TUI Thomas Cook My Travel Group First Choice Airline Thomson Fly Thomas Cook Airways My Travel Lite First Choice Airways Tour Operator Thomson Thomas Cook Holidays Airtours First Choice Travel Agent Thomson Travel Thomas Cook Travel
Going Places First Choice Travel Shops [IMAGE] Airline [IMAGE] Tour Operator Travel Agent Task 2C Using the information you have presented for Task 2A & 2B, and explain the effects of integration on the structure of the travel and tourism industry in general. The structure of the industry has changed due to the amount of integration. Integration has a positive and negative impact on the industry. Vertical integration is when an organisation wishes to buy another organisation on a different level of the buying chain.
An example of this is shown above, Thomson brought the airline, Britannia Airways and also Lunn Poly, a travel agent. This shows how Thomson has been vertically integrated. As Thomson brought Britannia Airways it has allowed them to offer customers lower fares. This means that the tour operator is making more profit. The same is not true for travel agents, they are paid a low rate of commission, and therefore most of profit will go to the tour operator. Integration is good as it allows the organisation to control their pricing and communicate well with companies on all levels of the chain.
Horizontal integration is when an organisation buys another organisation on the same level of the buying chain. A good example of this, when “Go” a budget airline owned by British Airways was taken over by EasyJet in 2002. When the companies merged EasyJet “power branded” this means that all of the logos and names that Go had used previously where replaced by the EasyJet name and logo. This had a negative impact on customers, EasyJet has more market control, and this allows them to dictate what the prices can be.
The positive side of this integration is that EasyJet now has more customers flying with them and therefore can have more market space to promote themselves. Tour operators have an advantage over travel agents has they have a bigger market share. When a tour operator is integrated with a travel agent, the travel agent will sell the products and services of tour operator. The tour operator has control on the amount of the commission that the travel agents will receive.
The Essay on The Composition of the Business of Travel Agent
The Composition of the Business of Travel Agent and Tour Operator or how They are comprised. First, what is Business travel? Business travel is stated as the practice of people traveling for purposes related to their work. It is on the rise especially with foreign business markets opening up. Then now, Travel agents are professionals who provide assistance with organizing and booking travel. At ...
If the travel agent doesn’t wish to accept the offer, they may lose a lot of business, as they are not selling as many products, to cater for the customers needs. Independent travel agents are being seriously affected by integration, big companies such as First Choice, are controlling the amount of commission travel agents receive. They are also losing commission as tour operators and airlines are selling their products and services direct on the Internet. Older customers still prefer to use high street travel agents as they may not know how to use the Internet or would like the reassurance of booking in person.
Travel agents are having to change to meet the needs of the customer, and are turning to the ‘niche’ market to make commission. Airlines have also been affected by integration, British Airways wanted to merge with American Airlines, but IATA declined their proposal, as they would be able to dominate the pricing of transatlantic flights from the UK. Horizontal and vertical integration has reduced competition within the industry, as more organisations are buying each other out to expand due to the demand that is being received from the public for their products and services.
Companies that are integrating are able to set the price, and smaller companies such as Collette Worldwide Holidays, will be unable to compete. The risk that larger companies take when integrating, is small compared to independent organisations. Larger organisations, such as Travelcare make a bigger profit and therefore it will not affect the organisation, if the merge doesn’t work. Smaller companies like Southall Travel may have their business ruined if it doesn’t work.
