This 0.3% higher than FC (Morgan, 2017).The figures

This section is the analysis of the tourism market place
in order to identify the challenges faced by FC. Porter’s Five Forces will be
used to implement the analysis.

Traditional
competitors: Overall, Flight
Centre has been the market dominant in tourism industry in recent years. As
shown in the research carried by Morgan (2016), Flight Centre accounts for
12.6% of the market shares, followed by Booking.com with 11.4%. However, this
trend differ for 2017, when booking.com has taken the widest market shares in
tourism with 0.3% higher than FC (Morgan, 2017).The figures in the research
show that there is strong competition between the two companies, and
Booking.com can be considered as the most important rival company to Flight
Centre. However, Morris N. (2016, as cited in Roy Morgan) commented that the
figures presented in the research fail to give a detailed insight into various
categories of customers, as some companies only target at a specific segment of
the market while the others aim at the general preference. However, the rise of
the Internet poses increasing threat to FC by increasing transparency in price
and declining switching costs (Buhalis and Zoge, 2007). Kim’s study (cited in Kim et al.,2004) shows that
price is the main consideration for online customers, and those websites
integrating various offerings from different agencies such as Booking.com or
Expedia.com reduces the power FC.

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New market
entrants: According to Porter (1979), the degree of threat from new
entrants is determined by the barriers to entry of the industry. The author
also identified different barriers, including economies of scales, network
benefit, capital investment, customers’ switching cost, incumbency advantage,
unequal access to distribution channels, and government policies. To the
aspect of economies of scale, especially the price war on ticket and accommodation
price, existing firms in the industry already create a great barriers to new
entry. For instance, FC belong to the Flight Centre Travel Group which also
owns other brands, enabling the companies to have better relationship with
suppliers and hence increase its bargaining power to the suppliers. As a
result, the barrier of incumbency still remains for new entrants. Moreover,
differentiation is one of the difficulties faced by new entrants, because the
Internet allows firms to implement similar services and innovation is easily
imitated (Kim et al., 2004). For example, if a local tourist company creates
a value-added service in conjunction with the tour to the customers, this idea
might only benefit that business for a short period of time before it is
implemented by other competitors. This argument is further supported by
research of Australian Federation of Travel Agents (AFTA, 2017) which reports
that most of Australian travel agencies earn small amount of revenue, and only
2% of them are large businesses based on revenue generation.

Substitute
products: The increasing popularity of intermediate websites results
in self-drive tours as a substitute to tour operating brands of FC, especially
when Australia is among the most famous destinations for self-drive holidays (Vasko, 2014).
However, FC also earns commission from suppliers such as hotels or airlines, so
customers who prefer self-drive tours still use the service of FC. Thus, the
threat from substitution is relatively low for FC.

Customers: The elimination of switching cost and the
increase in cost transparency have raised the customers’ bargaining power
(Porter, 1979). As mentioned by Buhalis and Zoge (2007), customers in digital age
have increasing bargaining power because they have perfect knowledge about
price and the services of different agents, and they also get special offers
from the direct suppliers via their websites. For instance, when a company
plans for their business travel, they might get information about the tour
details and the price from some companies before choosing a travel agency. In
addition, the Internet allows individual customers to gather together and benefit
from lower rates by the suppliers (Fok, 2004).
Therefore, the customers’ bargaining power for FC is high.

Suppliers:
In tourism industry, suppliers are accommodation providers, tourist
attractions, workers in tourism industry, and transportation suppliers.
Overall, the suppliers have lower bargaining power due to the low concentration
of the industry (Fok, 2004).
For instance, there is a wide range of bus rental services in Australia, and
FCGT can choose the firm offering the lowest price with little switching costs.
The similar goes for accommodation providers. Additionally, Fok (2004)
argues that tourist attractions’ entrance fees are homogeneous for all
visitors. Therefore, there is no great effect of suppliers’ bargaining power on
the competitiveness of FC.

Overall, the major threat faced by FC are customers’ power
and the traditional competitors in the marketplace. It is recommended that FC
should focus on those two aspects in creating competitive advantage to the
corporation. 
–         
Inbound
logistics include all activities to get the company prepared for operation. FC
operates as a tour operator and a travel agency, thus its inbound logistics
activities include scheduling of tours and transportation, hotels
reservations, meals arrangement, contracting with entertainment providers &
tourist so attractions, training the tour guide & reservation staff. As a
travel agency, FC also needs to make agreements with the airlines and hotels so
that it can play a role of intermediary.-         
Operation
activities of FC consists of all activities implemented to provide service to
the customers. From an agent aspect, FC receives reservation via phone
calls (explain any questions from the customers and helps them to add any
special requirements such as special medical needs or physical disability. From
a tour operator, FC needs to ensure that the customers are well serviced during
the tour, and this includes introduction of tourist attractions and onboard
services such as meals and beverages, toilet utensils.-         
 Sales and marketing is promoting the
services offered by the Flight Center. For example, when there is a group of
customers making enquiries to the sales team, they will receive promotion about
the tour operated by Flight Center. Marketing activities include the
advertisement campaigns to attract potential customers. Flight Center can
conduct e-marketing by using paid search on search engines such as Google or
Bing!, displaying advertisement on social media such as Facebook or Twitter.-         
Service: service
activities include all activities of taking care of customers in order to make
sure they are satisfies with their trip. For example, during the tour, the tour
guide needs to have first-aid equipment in case of emergency or any necessities
such as umbrella when it rains giving hats to the customers. In addition, FC
has to be flexible in making appropriate adjustment due to unexpected changes
(the flight is cancelled). Based on the some websites which collect the
customers’ review for the FC on TripAdvisor and productreview.com, service is
undoubtedly an area which FC should focus on due to a large number of customers
giving negative opinion on the service. FC seems to have focused on merely the
itinerary but not the on the flight-related services such as transit
accommodation because many customers report that they are not informed by the
company that they need to pay for the transit accommodation, and some customers
whose flights are not properly booked by the company have to pay extra for the
re-booking. Those unexpected occurrence increase dissatisfaction and
inconvenience, especially when the customers have important events after the
trips.-         
Outbound
logistics is the end services such as getting the customers home or moving
them to their next destinations. This can be considered as the value-added
activities for the FC as it leaves the customer with positive expressions about
the company (Fok, 2004).In brief, with low the barriers to
entry, especially economies of scale, Australian tourism industry has 3000
agents (AFTA, 2007) thus it can be considered as monopolistic
competition. In economic theory, firms in this market structure can only earn a
normal profit in long run, which is at the total economic costs of the firms
(Panzar & Rosse, 1987). Additionally, the organization strategy of FC
emphasizes on both quality and price. Therefore, the purely cost leadership
strategy is not suitable for FC. FC is implementing the niche market strategy
because it operates in both corporate traveling and general group traveling
several different brands for different types of customers, including
corporates, school-aged students, and young travelers. This strategy is
suitable because it enables FC to focus on each market and focus on the key
competitive elements. For example, for small firms, the price might be their
first priority due to limited budget, while for some young travelers,
differentiation is their demand because they prefer adventurous experience.