In the era of information, the travel industry is expanding rapidly due to

technological advances that make travel possible and less expensive. Because of
information technology (IT), the travel information is able to flow easily within travel
industry. As the travel industry is increasingly dominated by information, travel
agencies cannot ignore how the travel information flows to entire networks. This is
where IT plays a great role to solve this problem. IT helps customising the entire of
products and services easily. For example, the complex and flexible of travel offerings
can be updated in certain period. Through IT, a good quality of products and services
can be produced at a reasonably low price.

The size of the travel industry can generate large volumes of information to be
processed and communicated. Information flows exist between various sections of the
travel industry and various agents in travel. Figure 1.1 describes how information
flows in the travel industry (Sheldon, 1997:3). Consider a simple case among
suppliers, intermediaries and travellers. Travellers need information about product,
schedules, fares, rates, availabilities, destinations and bookings. This information can
be obtained through intermediaries, or directly suppliers. In return, intermediaries or
suppliers need information on travellers to create the reservation. There is a case
where information flows to more than one intermediary and supplier. For example, a
travel agent may book a client’s trip using tour operator causing information to flow
between those two intermediaries. How information flows within travel industry is a
job for IT. In these days, the rapid face of development in IT creates opportunities for
travel industry around the world. With the help of IT, travel agencies can establish
telecommunication networks to spread travel information to end-users. For example,
travel agencies can develop website that easily accessed by customers in order to
introduce their products and services. The application of IT is critical to increase the
efficiency, productivity and market reach of travel intermediaries.
 “The SWOT analysis (strength, weakness, opportunities, and threats) examines
the company’s internal strength and weakness with respect to the environment and the
competition and looks at external opportunities and threats” (Strauss, 2003:22). By
considering all of the issues that firms deal with, travel agencies can formulate
strategies that will take advantage of its opportunities by building on its strength,
avoiding any threats, and compensating for its weakness. Consider Adventure Holiday
current condition. In term of strengths, firms are able to sell directly to consumers and
use IT to improve its performance. Being able to sell directly to customers through IT
helps firms to rival its competitors. In term of weaknesses, firms have not recognised
the use of website to market its products and services. This is a critical area that firms
must take into account of. In the era of information, firms must solve how to move
information and reach to customers. In these days, using website to market firms’
products and services is a general idea for every firms to compete each other. In a
customer area, firms only set particular targets or focus on some segments. This step
only bars the expand firm’s business because it does not cover all segments of
customers. Consequently, it may decrease firm’s profit and harm customers’
credibility. In term of threats, the firm will find its position difficult to compete with
other competitors since it does not have its own website and make limited use of IT in
business. Moreover, the firm only provide products and services to a particular target
of customers. Such problems have to be improved immediately. In term of
opportunities, the firms must recognise the use of website and make a lot of use of IT
in its business to secure its position. The firms must be able to cover all segments of
customers to increase its performance and higher earnings.

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 One of the most well known frameworks for analysing competitiveness is Porter’s
competitive forces model (1985). This model has been used to develop strategies for
companies to increase their competitive edge. It also demonstrates how IT can
enhance the competitiveness of corporations. The model recognises five major forces
that could endanger a company’s position in a given industry. Consider this
framework to formulate strategy for a travel agent.

1. New entrants: In travel industry, “new entrants” mean a new firm is entering a
market by bringing new production capacity, the desire to establish a secure
place and important resources to compete. A travel agent must observe what
products or services new entrants can provide to establish its position in a
travel market. This is important for a travel agent to formulate best strategies
to anticipate what new entrants can attract customers. Consider a new firm is
introducing the use of website to market its products or services. The website
allows customers to access any valuable travel information. In this new way, a
new firm is hoping to minimise its operating expense and save more time to do
transactions. Customers may find this website conveniently to do transactions
or look for travel information. Recall that Adventure Holiday does not have
the website for marketing purpose and made limited use of IT. Through this
example, “new entrants” pose a threat to a travel agent. It is necessary for a
travel agent to keep updating what is new on IS/IT since this is a subject that
easily changed in short term. This is important because a travel agent needs to
take precaution steps to formulate its strategies in order to match new entrants.
Note that the Internet technology may pose a threat since the Internet reduces
geographic barriers. This allows new competitors to enter marketplaces.
(http://www.ebusinessiq.com/webinars/232-eBusinessIQ%20Webinars.html)
Firms must be fully aware of this problem.
2. Rivalry among competitors: This is the most powerful of the five competitive
forces. In this point, a travel agent must battle against any rival firms in term
of competitive strategy. A good competitive strategy helps strengthening firm’s
position in order to survive. This can be done by trying all possible ways of
gaining an advantage over rival firms. The competitive strategy may include
price competition, advertising battles, new products introduction, new
technology introductions, increased customers services or warranties, etc.
 Consider the use of website for marketing products or services. In these days,
firms use website as a tool to introduce their products or services. Competition
among firms through internet is intense as most competition among firms
focuses on the same functions, such as offerings, ease of use, payment options
and personalisation.
3. Bargaining power of buyers: Customer satisfaction is the fundamental of
success for firms in order to compete in travel market. This problem depends
on what and how firms influence consumer’s purchasing decisions. Firms
must take into account of the power of customers seriously. The power of
customers is able to force down prices, bargain for higher quality or more
services, and play competitors against each other – all at the expense of firms’
profitability (Porter, 1985). This power determines the firms’ survival in term
of profitability. Consider the use of website is for customers’ advantages. The
establishing of website allows customers to access information and do
transactions electronically. This will save time and reduce cost for customers.
Firms may hope that customers will find this technology convenient and
attract more customers to do transactions with them, if compare to traditional
travel agent. This phenomenon is called “switching cost” – that is the costs
associated with buyers changing suppliers or to substitute products. Recall that
Adventure Holiday set target on students and young professionals under 25
years old. It would be better that Adventure Holiday is able to target all type of
customers without discriminating. This shows the firm is flexible in dealing
with customers. Note that Internet may increase bargaining power of
customers. This is true when the Internet facilitates comparison-shopping and
gives more information to customers to decide which preference is better.
(http://www.ebusinessiq.com/webinars/232-eBusinessIQ%20Webinars.html)
4. Bargaining power of suppliers: In travel industry, suppliers such as airlines,
hotel, rental companies and tour operators, normally cooperate with a group of
intermediaries, such as travel agencies, rather than directly with consumers.
Travel agencies will find its position in difficulty if the suppliers try to
eliminate the relationship with travel agencies in order to pursue direct
relationship with customers. Terminating the relationship with travel agencies
allows the suppliers to minimise cost and maximise profit, such as agencies
fees. Consider the airlines set up its website to expand their direct sales
 activities without any intermediaries, such as travel agencies. If the suppliers
need any intermediaries, such as travel agencies, to get through customers,
they can exert their bargaining power by threatening to raise prices or reduce
the quality of purchased goods or services (Porter, 1985).
5. Substitutes: Travel agencies are competing each other to develop substitute
products or services. Substitutions allow customers to change one’s preference
to other preferences. The ease of changing is influenced by the buyer’s
switching from use of one products or services over to substitutes. If the
substitute becomes more attractive in terms of price, performance or both, then
some buyers will be tempted to move their custom to a competing firm.
Consider the customers may find booking a trip on the Web convenient or
access travel information easily, if compare to be done through telephone or
going to travel agencies office.

Porter (1980 and 1985) suggests how to develop a strategy aimed at establishing a
profitable and sustainable position against these five forces. Porter (1985) proposed
the following generic strategies: cost leadership, differentiation, and focus. The cost
leadership allows suppliers to develop products or services at lowest cost. For
example, the establishing of website allows travel agencies (or suppliers) to provide
low-cost products or services in market. Normally, reducing cost may lower the
quality of products or services. Consider customers may find that the website would
not give sufficient information to answer customers’ question. Even though originally
this is for cost control, travel agencies should not ignore the quality of products or
services. The differentiation strategy encourages firms to develop unique and high-
quality products or services at a competitive price. This strategy ensures of higher
earning for firms because it creates a secure position within the framework of five
competitive forces. Differentiation provides protection against competitive rivalry
because of brand loyalty by customers and resulting glower sensitivity to price. The
focus strategy helps firm to determine the selection on a particular buyer, segment of
the product line or geographic market. Compare to both strategies mentioned before,
the entire of focus strategy is set on particular target and it is easy to develop
strategies on it. Consider Adventure Holiday only deal with particular customers.
Focus on particular segment market helps travel agencies to achieve their objectives
easily. Observing all of strategies mentioned above, the differentiation strategy gives
the best result for firms to achieve higher profit as this strategy encourage firms to
develop unique products or services in order to exercise monopoly power.

In this era of information, firms cannot ignore the use of Internet to in order to
compete against any rivals. The Internet is the most common channel used by
customers to research travel options, seek the best possible prices, and book
reservations for airline tickets, rental cars, hotel rooms, cruises and tours (Laudon,
2004:660).
Developing website to introduce products and services must be simple as possible
for all customers. In that way, customers will not find difficulty to access information
or do transactions through website. The website provides all information needed to all
customers (whether it is for pleasure, business, group, free and independent travellers
(FITs) or any other type). This information includes itineraries, schedules, payment
information, destination, product information, and passenger information. The website
builds chat groups and bulletin boards. This is where customers may find travel
information directly from experienced people. The payment system should be made
simple as customers conduct transactions through Internet. Developing website is
important as it offers much more information and many more travel options than
traditional travel agents. Since travel services can exist through Internet, the e-
commerce business model should work well in travel agencies. Travel is an
information-intensive product requiring significant consumer research. It is an
electronic product in the sense that travel requirements – planning, researching,
comparison-shopping, reserving, and payment – can be accomplished for the most
part online in a digital environment.