LA-D Other Factors Affecting The Industry Flashcards
External factors
Arising from issues outside the organisations control
Internal factors
Within the control of the organisation
Economic external factors
Strength of the economy - business cycle Disposable income Currency exchange rates Oil prices Responses to economic factors
Economic external factors - strength of the economy
How does it affect the industry as a whole?
Impacts how much money people can spend on travel and holidays
Impacts how much businesses can borrow and how much they can impacts back into their business
Economic external factors - strength of the economy
Recession
The economy is in recession when there is a significant decline in the production of goods and services, employment and income for no longer than 2 financial quarters
Economic external factors - strength of the economy
Growth
The economy is growing when there is a positive change in the production of goods and services over time. In a period of growth, customers are likely to spend more money.
Economic external factors - disposable income
Recession - people have less disposable income and more likely to lose their jobs
- means more likely to take a cheaper holiday or not at all
- DI also affected if the interest charged on mortgages goes up or down as this influences the amount of money people have to spend on their mortgage repayments
Other factors affecting the industry - currency exchange rates
Growth and recession
Growing economy - the currency becomes stronger -worth more-compared to currencies in other economies
Recession - the currency will become weaker -worth less
Other factors affecting the industry - currency exchange rates
How does it affect the tourism industry if pound is strong against Euro?
UK outbound travellers will get more euros for their pounds and will have a cheaper holiday in Europe
However a strong pound will make inbound tourists from Europe to U.K. less likely because their holiday will be more expensive for them
Other factors affecting the industry - currency exchange rates
How does this affect businesses and organisations?
Monitor exchange rates closely as they affect the prices that they pay for accommodation and services in overseas resorts
Other factors affecting the industry - oil prices
What does it affect?
Indirect effects?
Why do oil prices fluctuate?
Transport principles such as airlines
They are very dependent on the price of oil and tour operators are indirectly affected by this as they have to buy flights for their customers
World oil prices fluctuate depending on the supply and also any political situations that may affect access to oil reserves
How do organisations respond to economic factors?
- general businesses
- negatives
One way that organisations respond to economic factors is by using competitive pricing. This is where they look at competitor prices and try to undercut them. One negative of this is that organisations may continue to undercut each other making prices so low that it is unsustainable and leads to them not making a large enough profit. -fail
How do organisations respond to economic factors?
-transport principles - airlines
A strategy that transport principles use is called fuel hedging where they agree a set price for fuel for a period of time. This can negatively affect the business as if the the price of oil drops they still have to pay the agreed upon price. However if the price goes up and the business has insuffecient funds for the cost of fuel in the price of the holiday, they may pass this cost onto customers which is a very unpopular strategy and may lose customer loyalty
Other factors affecting the travel and tourism industry
Economic factors Social and lifestyle factors Government legislation and legal factors Safety and security Health Environmental and climatic factors
Social and lifestyle factors that affect the t and t industry
Rise of the grey market Millennials Changing family structures Changing working patterns Holiday allowance and pay Current fashion and trends
Why do businesses need to understand lifestyle of customers?
To know their market and how to target them specifically
