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The Virgin Companies

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The global travel industry can be characterized as an oligopoly where a few market players control a big size of the industry. This is known in economic theory as C4 where the top four firms control 60% or more of an industry's total sales. In this regard, giant American Express is number one, followed by Carlson Wagonlit Travel Tours (a French company) and Kuoni Travel Holding Ltd. (a Swiss company). The fourth largest is Expedia which is entirely Internet-based, being a spin-off from Microsoft Corporation. The three largest brands above may not be household names because they have numerous acquisitions and tie ups with local firms in the countries where they operate.

That unfamiliarity may mask their real clout as the four top firms practically control the huge tourism industry globally. Of course, there maybe several smaller firms too but the overall trend in the industry is consolidation through buy-out and acquisitions. The rationale for the travel industry (especially the holiday travel market) is an end-to-end delivery system, starting from inquiry, planning, hotel reservation, plane ticket, sightseeing, sports activities and the return trip.

Towards this end, big travel firms are well positioned to take advantage of their wider geographical reach and global delivery systems. The worldwide travel industry can be considered as a generic product in many sense. Although anybody can offer an exotic or out-of-the-way destination, any tourism or travel holiday product can be easily duplicated by any tour operator as the industry has low barriers to entry of new players. This means another tour operator can offer essentially the same type of holiday experience that renders holiday packages more like a commoditised product.

It is hard to maintain a competitive advantage for long periods when there are no differentiating factors or price advantages except through discounting. Along this line, the only competitive advantage left is the ability to deliver all the travel-related products like inquiry, planning, ticket and hotel reservations and bookings from only one vendor called vertical integration.

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preview essay on The Virgin Companies
  • Pages: 11 (2750 words)
  • Document Type: Essay
  • Subject: Business
  • Level: Undergraduate
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