M Fabricius
3. Assessing Destination Competitiveness
World Tourism Organization Manila, 20 – 22 March 2006
M Fabricius
A FRAMEWORK FOR DESTINATION STRATEGY
Destination competitiveness
Demand/customer patterns and segments
Resources
Supportive industries
Industry structure
& rivalry
Co
mp
etitor p
erform
ance
Key success factors & capabili-
ties
Vision, goals,
objectives and core
strategiesPositio-ning and branding strategy
Target market
strategy
Target Market
Product Place
Price Promotion
Institu
tion
al Man
agem
ent an
d
Mo
nito
ring
Macro environment: Technological Economic Political Socio-cultural Natural
THE STRATEGY PROCESS
Where are we and how well do we compare?
Where would we like to be? How do we get there?
Who are our clients and what are their preferences?
What do we need to do well to comply to their needs?
What should we develop and sell to them, at what price, how and through what mechanisms?
What core image do we wish to project to them?
How do we ensure and measure success?
What are our dreams, goals to achieve and direction?
Stay ahead?
Integrated Implementation Framewor
k
Development programmesSpatial tourism Development plan ProjectsAttractions HR/awarenessInfrastructureSMME /entrepreneurshipSafety
Marketing programmes
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THE IMPORTANCE OF ENVIRONMENTAL ADAPTATION
THE IMPORTANCE OF ENVIRONMENTAL ADAPTATION
ASSESSING THE COMPETITIVE ENVIRONMENT
• THERE ARE TWO REALITIES– The environment is changing at an escalating rate. – This change is largely outside the control of the
destination marketer
• The KEY CHALLENGE IS TO SCAN AND RESPOND
– What are the trends, possible implications and what can the response be?
• THE ENVIRONMENT NEEDS TO BE EVALUATED AT THE MACRO AND INDUSTRY LEVELS
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THE MACRO ENVIRONMENTTHE MACRO ENVIRONMENT
THE INDUSTRY ENVIRONMENT
•Suppliers
•Competitors
•Customers
The National/ International
Economy
Technology
Government
The Natural Environment
Demographic Structure
Social Structure
ASSESSING THE MACRO COMPETITIVE ENVIRONMENT
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THE ECONOMIC ENVIRONMENTTHE ECONOMIC ENVIRONMENT
• Exchange rates• Interest rates• Economic stability • Inflation • Fuel prices• Aviation costs • Privatisation• Currency re-evaluations
ASSESSING THE MACRO COMPETITIVE ENVIRONMENT
M Fabricius
THE SOCIO-CULTURAL ENVIRONMENTTHE SOCIO-CULTURAL ENVIRONMENT
• Population trends (e.g. aging)• Lifestyle and value trends • New tastes and social trends • Leisure orientation rather than work• Sport, health and fitness orientation• Emergence of global village• Increasing impact of the media • Quality of life focus
ASSESSING THE MACRO COMPETITIVE ENVIRONMENT
M Fabricius
THE POLITICAL ENVIRONMENTTHE POLITICAL ENVIRONMENT
• Global/regional conflicts (e.g. Post 9/11)
• Boycotts/sanctions
• Regional relations• Changes in power structures• Occurrence of extreme events (e.g. terrorist attacks)• Legal restrictions • Positive political developments (e.g. South Africa and
the Berlin Wall)
ASSESSING THE MACRO COMPETITIVE ENVIRONMENT
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THE TECHNOLOGICAL ENVIRONMENT THE TECHNOLOGICAL ENVIRONMENT
• Global distribution systems • Internet and CD Rom marketing• Transport innovations• Virtual reality• Video and teleconferencing
ASSESSING THE MACRO COMPETITIVE ENVIRONMENT
M Fabricius
THE ECOLOGICAL ENVIRONMENTTHE ECOLOGICAL ENVIRONMENT
• Tourism impacts on and is increasingly being impacted by the environment
• Increasing strain on the environment in popular destinations
• Greater awareness of and concern for responsible management of the environment
• Responsible travel (triple bottom line)
• Species awareness
• Increasingly destinations will be confronted with issues such as value, sustainability and ethics
ASSESSING THE MACRO COMPETITIVE ENVIRONMENT
M Fabricius
MACRO ENVIRONMENT – IMPACTS ON STRATEGYMACRO ENVIRONMENT – IMPACTS ON STRATEGY
•Destination positioning: Taking a short, medium & long term view on where and how to position the destination in the face of macro trends (e.g. currency gains, global conflicts, etc.)
•Timing: molding strategy to capitalize on immediate environmental opportunities, riding out or counteracting threats, when and what to communicate, etc. (e.g. safety incidents)
•Tactics: shifting the marketing plan – target markets, promotional spend, distribution channels, product highlights to best capitalize on/counteract macro movements (e.g. global warfare)
•Internal marketing: working with government and business community to soften, counteract or capitalize on macro environment (e.g. regional events)
ASSESSING THE MACRO COMPETITIVE ENVIRONMENT
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IDENTIFYING COMPETITORSIDENTIFYING COMPETITORS
•Comparing apples with apples – benchmarking the most relevant destinations
•Competitors in
•International
•Long haul markets
•Short haul markets
•Local (domestic market)
•Type of product
•Main tourism seasons
•Size of tourism industry and level of development
•Competitors and Complementors.
ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT
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ANALYSING INDUSTRY COMPETITIONANALYSING INDUSTRY COMPETITION
SUPPLIERS
POTENTIAL ENTRANTS
BUYERS
SUBSTITUTES
INDUSTRY RIVALRY
RIVALRY AMONG EXISITING FIRMS
Threat of new entrants
Threat of substitute products and services
Bargaining power of buyers
Bargaining power of suppliers
ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT
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ANALYSING INDUSTRY COMPETITIONANALYSING INDUSTRY COMPETITION
SUPPLIER POWER
Factors determining power of suppliers relative to producers same as those determining power of
producers relative to buyers
BUYER POWER
Price Sensitivity Bargaining Power
Cost of product relative Size, concentration of
to total cost buyers vs suppliers
Product differentiation Switching costs
Competition among buyers Buyers information
THREAT OF SUBSTITUTES
Buyer propensity to substitute
Relative price performance of substitutes
INDUSTRY RIVALRY
Concentration
Diversity of competitors
Product differentiation
Excess capacity & exit barriers
Cost conditions
THREAT OF ENTRY
Economies of scale
Absolute cost advantages
Capital requirements
Product differentiation
Access to distribution channels
Governmental and legal barriers
Retaliation by established producers
ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT
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STRATEGY, STRUCTURE & RIVALRY
•Current competitors: who are they, their resources, cost structures, positioning strategies
•Power of suppliers and buyers: influence on destination competitiveness (e.g. cost structures, quality, diversity and innovation) of major hotel groups, airlines, tour operators, internet services
•New entrants and substitutes: emerging destinations and products on offer, cost and quality comparison with ourselves, options to differentiate
•Complementors: regional and local joint marketing agreements with other destinations, economic sectors and suppliers so as to expand the length and depth of our product
ASSESSING THE INDUSTRY COMPETITIVE ENVIRONMENT
M Fabricius
A FRAMEWORK FOR DESTINATION STRATEGY
Destination competitiveness
Demand/customer patterns and segments
Resources
Supportive industries
Industry structure
& rivalry
Co
mp
etitor p
erform
ance
Key success factors & capabili-
ties
Vision, goals,
objectives and core
strategiesPositio-ning and branding strategy
Target market
strategy
Target Market
Product Place
Price Promotion
Institu
tion
al Man
agem
ent
and
Mo
nito
ring
Macro environment: Technological Economic Political Socio-cultural Natural
ASSESSING DESTINATION POTENTIAL
Where are we and how well do we compare?
Where would we like to be? How do we get there?Who are our clients and what are their preferences?
What do we need to do well to comply to their needs?
What should we sell to them, at what price, how and through what mechanisms?
What core image do we wish to project to them?
How do we ensure and measure success?
What are our dreams, goals to achieve and direction?
Stay ahead?
M Fabricius
FACTOR CONDITION
S
Our resources
FACTOR CONDITION
S
Our resources
STRATEGY, STRUCTUR
E & RIVALRY
Our industry
STRATEGY, STRUCTUR
E & RIVALRY
Our industry
DEMAND CONDI-TIONS
Our markets
DEMAND CONDI-TIONS
Our markets
RELATED & SUPPORTIN
G INDUSTRIES
Our allies
RELATED & SUPPORTIN
G INDUSTRIES
Our allies
MACRO ENVIRONMENT
ASSESSING DESTINATION POTENTIAL
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ASSESSING DESTINATION POTENTIAL
M Fabricius
DESTINATION RESOURCESDESTINATION RESOURCES
RESOURCES
TANGIBLE INTANGIBLE HUMAN
Physical Financial Technology Reputation Culture Skills/ Communi- Motiva- Knowledge cation tion
DESTINATION CAPABILITIES
STRATEGY
KEY SUCCESS FACTORSCOMPETITIVE
ADVANTAGE
ASSESSING DESTINATION POTENTIAL
M Fabricius
RESOURCE STRENGTHS AND WEAKNESSES
RESOURCE STRENGTHS AND WEAKNESSES•Tangible resources
•Unique natural, cultural and man made attractions, activities and facilities
•Quality of hospitality, meeting, transport, catering services, etc.
•Intangible resources
•Reputation: safety, value for money, lifestyle appeal, culture of excellence
•Brand appeal: values, emotional appeal, cultural appeal, innovation
•Technological advancement
•Human resources
•Levels of service skills and customer knowledge
•Communication and interaction abilities – language, cultural interaction, etc.
•Extent of entrepreneurship, innovation, passion,
ASSESSING DESTINATION POTENTIAL
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PromotionPromotionReal Estate
Construction
PromotionPromotionInsuranceLegal
Medical
IT ServicesSecurity
PromotionPromotion
PromotionPromotion
PromotionPromotion
PromotionPromotion
PromotionPromotion
PromotionPromotion
Promotion
TrainingCentres
Transportation
Support Industries
Infrastructure
Food Service
Accommodation
HotelsHostels
Campsites
AirlinesRailway Co.
Buses
AirportsRoads
Telecom
BankingLaundry
Outfitting
Hotel Mgm’tGuideCustomer Service
Tour OperatorsTravel Agents
Government
Car Rental Taxis
Rail
Restaurants
BarsCatering
INDIVIDUALSINDIVIDUALSFAMILIESFAMILIES
TOUR GROUPSTOUR GROUPSSTUDY GROUPSSTUDY GROUPSSPORT TEAMSSPORT TEAMS
PATIENTSPATIENTSDELEGATIONSDELEGATIONSPOLITICIANSPOLITICIANS
BUSINESS PEOPLEBUSINESS PEOPLE
BusinessActivities
LeisureAttractions
HistoricalPlaces
Sight Seeing
Holiday Resorts
Cultural Offer
Action HolidayFacilities
Game Parks
Sport Facilities
Shopping
Public Events
Political Events
Business
Congresses
Study
RELATED INDUSTRIES: THE DESTINATION CLUSTER
ASSESSING DESTINATION POTENTIAL
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DEMAND CONDITIONS: MONITOR THE MARKETPLACE•Markets of origin:
•Profile - who, how many, from where, how, when, how long
•Potential – current performance, expansion potential, emerging markets, future opportunities
•Yield: length of stay, local spend, return visitation
•Local (domestic) market performance
•Trends: global movements, demand consistency, seasonal variations, price sensitivity, sales and reservation channels, market preferences,etc.
•Gaps: where/when/in which segments do we not get our rightful share and what are the reasons
•Impacts: job creation, investment, aviation, environment, social, etc.
•Often too little investment in market analysis, forecasting & segmentation
ASSESSING DESTINATION POTENTIAL
M Fabricius
INTER-INDUSTRY STRUCTURE, STRATEGY AND RIVALRY
INTER-INDUSTRY STRUCTURE, STRATEGY AND RIVALRY
•Institutional “thickness”
•Price competitiveness
•Diversity of facilities and services
•Quality and standards
•Competitive maturity
•Technological astuteness, etc.
ASSESSING DESTINATION POTENTIAL
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STRENGTHS
World class attractions
Established tourism economy
High repeat rate
Good infrastructure
World city brand
Value for money
WEAKNESSES
Limited direct air capacity
Limited business tourism mix
Seasonal pattern
Distance factor
Non-representative industry
Brand/budget fragmentation
OPPORTUNITIES
Events development
Conference/business market
Single stop relaxation destination
More direct airline entry
Product growth opportunities
THREATS
Direct flights reducing
Expensive perception
Crime/violence perception
Benefits don’t filter to grass roots
Budget restriction
Continued brand fragmentation
EXAMPLE: SWOT ANALYSIS
ASSESSING DESTINATION POTENTIAL
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THE COMPETITIVE CONTEXT
WHERE ARE YOU IN THE DESTINATION LYFE CYCLE?WHERE ARE YOU IN THE DESTINATION LYFE CYCLE?
Nu
mb
er
of
To
uri
sts
Involvement
Exploration
Development
Critical stages of capacity management and major rivalry Consolidation
Stagnation
Rejuvenation
Decline
Time
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YOUR ASSIGNMENT YOUR ASSIGNMENT
•Identify your 3 main competitors in the international market
•Use the diamond framework to conduct a SWOT analysis and highlight maximum three (3) most important
•Macro environmental issues,
•Destination levers (Strengths, Weaknesses, Opportunities and Threats)
Facing your destination
ASSESSING DESTINATION COMPETITIVENESS
M Fabricius
Time out !!
ASSESSING DESTINATION COMPETITIVENESS