Implementing porter 5 forces on Tourism industry and explanation

Essay by lustercherryUniversity, Master'sB+, November 2008

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The UK Inbound Tourism IndustryIntroduction:Tourism is seventh of the largest industries in the UK, worth £74 billion to the UK economy. There are currently 2.1 million jobs in the industry. Within the inbound Tourism to the UK, 30 million overseas visitors who came in 2005 spent £14 billion on holidays 2005 was a record year for UK inbound tourism both in terms of volume and value. The UK ranks fifth in when compared international tourism earnings league behind the USA, Spain, France and Italy. Within UK home Tourism, UK residents in 2005 took 59.3 million holidays of one night or more spending £11.5 billion. They even took 22.5 million overnight business trips spending £5.3 billion and £52.7 million overnight trips to friends, family& relatives spending £5.4 billion (Mintel 2008)(Visit Britain, ).

Porter’s Five Forces:Fig 1:Threat of New EntrantsThreat of new entrants into the tourism industry is very high; there were a handful of low-priced carriers in the UK, flying mostly to holiday destinations.

The market valuation of Ryan air become more than that of British Airways.

Since then, there are many more new entrants in the low-cost carrier sector, posing major threats to the front runners, Ryan air and Easy Jet. A shake-out of the low-cost segment is taking place. The share price of Ryan air has begun to decline because of the threat of new entrants (Beech and Chadwick, 2006).

Factor 1 - Economies of ScaleNew entrants have to match existing providers to be able to survive and grow. One appeal for new airline entrants is the forecast increases in UK air travel from 200 million at present to 500 million journeys in 2030. The World Tourism Organisation estimates the doubling of air journeys over the same time period. Matching the cost base of existing new careers, new entrants...