In modern world the number of issues the company should deal with is dramatically increasing. Some main threats of the previous years are replaced by more significant ones. To remain competitive the organization should pay attention to all the decisions made on different levels. The company is also exposed to new types of risks. It means that the organization should use new approaches to manage both external and internal operations. The main requirement to the behavior of the firm is to be as flexible as possible. New strategies need to be defined in accordance with environmental issues and up-to-date visions and values.
The given characteristic of the company’s decisions is only general vision. In fact, for formulating goals thorough analysis is needed. Companies have some unique features due to their industrial, structural and corporate differences. And all these features should be defined in order to implement new strategies etc.
All the threats mentioned above become even more crucial when the company relates to the travel industry. International law, governmental restrictions in different countries, fulfilling promises given to clients, environmental issues are only some representation of challenges the travelling organization should deal with.
For our particular case that relates to the Ctrip.com International Ltd. (Ctrip) the situation is influenced by special cultural environment of the host country and increasing competition from other companies that were previously incapable to gain significant market share. Now Ctrip Company is widely considered to be developed enough to keep its leading position. But within every new day it becomes more and more complicated task for company to remain successful. What will happen with Ctrip in five years? Will its current strategy help in overcoming new obstacles? Or should some important steps be implemented right now to prevent the catastrophe in future? We are to answer these and some other specific questions in our research.
First of all let us identify the central issue the company will face in the next 5 years and try to define the main decisions to be made. Naturally the company will have to adopt lots of decisions but the most important of them will refer to the following issues:
Broadening the customer base
The problem of increasing competition by other companies
Operational issues (corporate strategy, functioning of particular departments such as call center, online efficiency etc)
Setting up long-term goals
Defining company’s position at the market
Dealing with new governmental legislation
The company will have to decide:
Whether stick to FITs or begin to diversify its customer base
How to limit threat from the online companies if this kind of risks is even possible
Whether the call center fully adjusted to meeting needs of the clients
What long-term goals are to be achieved
How to remain market leader in general
What system of functioning at the foreign markets should be chosen
All the points mentioned above are rather general vision of its future challenges largely simplified in order to fit requirements of this particular assignment. We still remember that in reality the number of issues is significantly differs from that in this research, but to make thorough analysis it is better to study only 6 of issues which may be ranked as crucial. The factors of influence on the decision making process are to be also analyzed in this case study.
Further analyses of situation depicted in case
The analyses of the case situation will be hold on the basis of knowledge of practical tools that we learnt. Special attention must be also given to SWOT and PEST analysis which are widely used in managerial practice. We should look through current structure of the company and identify its type (functional, matrix, hierarchical etc). This factor will largely influence the recommendations to be given for future.
Up to now the company has been successfully performing its functions for quite significant period of time. Its main strategy was to find needs of customers to be met. For instance when CTRIP understood that it would be good for business travelers to have rest and order leisure tours the company established the system of packaged tours. When it found out that corporate clients are interested in reducing cost for corporate travelling CTRIP provided them with such as opportunity. As you see it used quite simple principle but it proved to be very effective.
For getting clear understanding of the current companys situation by briefly overview of its organizational structure, control system and strategy formulation.
Organizational structure
There are some important structure characteristics such as degree of specialization that should be defined for CTRIP Company. (Table 1)
In a traditional travel agency, one staff member handled an order from beginning to end. Ctrip, by contrast, had a clear division of labor, with separate teams handling different parts of an order. For example, it separated activities such as making hotel reservations or booking domestic air tickets into order taking and order processing; each was handled by a different call center team. Each department is aimed at solving tasks relating to the particular activity of the company. There are departments such as packaged tours, hotel reservations, air ticketing. Each of them has a particular sphere to deal with but usually all these departments are involved in the complex process of fulfilling the order of the customer, so for instance, «packaged tours» may solve the problems occurred in «air ticketing». The single structure of Call Center has deeply specialized departments such as Reservation for Hotel, Reservation for Domestic Air, Ticketing Quality Assurance, Reservation for Packaged Tours, Customer Service, Reservation for Corporate Travel Management, Reservation for International Air Ticketing.
Ctrip’s leaders encouraged an equal and open culture. There is little standardization; the main departments have subordinate ones but their cooperation is rather free communication than reflection of formalized responsibility. Also the organic structure results in law degree of formalization.
Departments frequently used experiments to support their decision making. As the result of experiments the sales team trains new members to work more effectively. If good idea is emanated by employee from low levels he can present it to the CEO or CFO without limitations. That helps company to achieve to goals simultaneously: diversify process of decision making and higher trust for companys leaders by the employee. Decision making is quantity-oriented; the performance of the company is to be measured by some special indicators. Such a data-based approach is used by different levels of decision-making.
The control is carried out by CEO and CFO and some particular departments such as Call Center etc. But Quality assurance is able to make intervention in the work of departments to provide the client with highest level of services.
Exhibition 1 Structure characteristics of CTRIP Company
Communication patterns may be considered as effective. The company uses cross-department interactions in order to set up positive corporate environment and increase productivity in general. But mostly the cooperation take place between interrelated departments that report to the same authority such as all the departments which summon up the Call Center.
The CTRIP is highly developed organization and organic structure suits its purposes in the best way. Such kind of structure helps company to better adjust to the vulnerability of the market. The organic structure also involves different approach to process betterment and scientific management which are largely used by STRIP. The strategy of 6-Sigmas is carried out by all the departments whatever their particular fields.
It is necessary to define the CTRIPs structural form using course materials. Noting that the pure structural forms such as functional, hierarchical and matrix are rather theoretical models and in reality the company uses alternative structures to be flexible while facing new challenges. CTRIPs organizational structure may be characterized as very close to functional one. The departments are set up according to the activities they perform. Such kind of organizational structure is effective in context of travel industry business environment. CTRIP is prepared to remain competitive within particular market segments because to the implementation of program of continuous betterment.
National culture influences the process of modification of preferred organizational structure. It is interesting to analyze the influence of Chinese culture on the CTRIPs performance. It is well-known fact that companies whose host country is China have to bear in mind the following factors:
Difficult market access
Consumer preference is more diverse than it previously was
Bureaucracy
Governmental challenges
Increasing competition
Also the global challenges may make Chinese government to restrict the travelling by foreigners to the country and close the boarders. Due to this fact CTRIP will lose significant part of its services and therefore its market share will be limited.
The previous governmental acts ensured that the increase of other companys share is unlikely possibility. But with emergence of online travelling market which is not generally restricted the company is to face new decisions.
Control system
The control system is highly developed. Special attention is paid to the quality control. Here is the analysis of control levels and their functions. Using the data given in case and analytical data from other sources we formulated balanced scorecard for CTRIP. (Exhibit2)
Exhibit2 Scordcard Matrix for CTRIP 1
The control system in the CTRIP Company has its special features. The CEO supervises the work of all the departments besides ones which relate to financial area. Such departments are controlled. There is responsibility down the chain between CEO and Call Center and between Call Center and its departments accordingly. The process controlling is widely used to provide midcourse correlation if it is necessary. According to the available reports two types of evaluation are mainly used. There are processing and summative evaluation mechanisms which are considered to be important.
It is interesting to look through how CTRIP implements different types of evaluation and which of them they choose in particular cases. For example, the special attention is paid to process evaluation due to the market volatility and because it is even impossible to forecast results of fast-growing travel industry for a long period of time. That is why CTRIP uses outcome evaluation in departments which do not operate directly in market such as human recourses etc. It is rich international company which always needs comprehensive analysis that is why the formative approach is preferred to the summative one. CTRIP is able to establish its own intra-evaluation departments in order to avoid the leak of information. That is why it chooses internal evaluation.
Strategy formulation
It appeared from the case outline that the CTRIP follows the international strategy. Almost half of the online travel agency market is controlled by So it needs to clarify the strategy as clear as possible to prevent the competitors from succeeding at the market .To define some steps that should be implemented it is necessary to draw up matrix for SWOT-analysis of CTRIP company.
Exhibit 3. The SWOT-analysis of CTRIP Company
As one may conclude after looking through the given table CTRIP has more advantages than disadvantages. It is a leader of the local market. Billions of people are the clients of the company. Some of them are rather occasional but main part of them has been with the company for significant period of time. The evidence to that fact can be found in the case when clients who ordered the services for three times are likely to stay with company forever. (That means becoming life-long customer).
China is country with largest potential market in the world. At the same time it is not easy for companies to enter the market but according to Bill Neil this market is paradise for companies who managed to gain market share.
CTRIP is known for highly developed corporate environment that ensures the mutual trust and long-term relations between the company and its employees. One can hardly believe that without such relation-based system CTRIP could be rated as one of the most influential Chinese companies. In case particular approaches to keeping such an environment are described. But maybe scientific approach to shaping corporate environment was the key point of success.
Speaking about CTRIP activities outside Chinese market they do not suffice to promote the corporate visions outside. There is quite serious competition by other companies. So this fact may be defined as one of the main weaknesses.
Company has many possibilities for further development and some factors may have really positive impact on the realization of its strategies. Lower fuel cost will allow people to travel with less spending that will result in increased demand for travelling services. Naturally CTRIP is also to get benefits from this situation. Emerging markets will propose useful space for the potential growth of CTRIP.
The company is well-known among foreign travelers who visit China nevertheless there is no established system of providing services for Chinese people to travel outside the country and within its borders. There is an idea of reconstruction Chinese historical places in order to organize new travelling service across ancient Chinese places.
The main follower of the company is Baidu which is also online travel company that tries to follow the strategy of CTRIP and take away its market share. Also some other online companies may pos quite significant threat to the well-being of the CTRIP. The Chinese legislation is also dramatically influential. All the amendments is posing significant threats.
Identification of the main decision alternatives and assessing their pros and cons
We should understand that thorough study of the main decisions is hard for completing within given assignment.
The company will have to decide whether stick to FITs or begin to diversify its customer base. The market of budget travelling is very large. The competitors such as eLong and Taobao chase this segment. Taobao allows its clients such as online department stores, hotels etc. to create their own accounts on the companys website. This attracts budged travelers. Another target audience of CTRIP is luxury travelers. Both of these two segments are beneficial enough. So the company should decide whether to focus on FITs or modify the strategy to meet the needs of luxury groups. The main alternatives in this case are defined as following. From the one hand competitors were already chasing the budget travelers and it is important to answer them in order to remain dominant power. But in some way focusing on the orders with law cost will lead to diluting the band image. It is unacceptable because from the very beginning the concept of the company was to provide outstanding services of the highest quality. From the other side, paying more attention to the luxury travelers will result in promotion of the companys image. But while comparing profits received from the luxury segment with the amount of money brought by the budget travelling proposals it is clear that total output of budget travelling is significantly higher than luxury one.
Another important decision relates to detailed evaluation of the level of threat posed by online competitors. This solution is crucial because if the threat is dangerous immediate actions should be obligatory taken. These measures are aimed at preventing the further market advance of competitors by establishing new system of behavior. From the brief overlook of the mentioned problem it is clear that currently the risk rising from competition is quite law. Nevertheless it must be taken into account because if no measures relating to this sphere are taken the level of threat may increase dramatically within the next five years or more.
The third main decision the company faces refers to the problem of the Call Center. CTRIP has the largest call center in the industry. The tasks fulfilled by it are viewed as the crucial factor of the general services advantage. Besides handling reservations for hotels, international and domestic air ticketing and other significant tasks it also carries out the function of customer support and problem-solving. In 2011, Ctrip renamed the call center the “service and contact center” because it communicated with customers not only through phone calls, but also using instant messaging, e-mail, and fax. Moreover, if a customer placed an order online, it would still be processed by call center staff. In case the customer ordered a domestic flight ticket on the Ctrip website, the order processing staff in the call center would make clear some additional order information, book the ticket, and issue it on the Travel Sky terminal. But usually staff responded to the non-urgent orders online, the hot-line was established for dealing with emergent issues. Now most of the companies prefer to establish centers of support in order to focus on different ways of providing help without exaggerating the role of phone calls. According to CTRIPs CEO the little time needed for processing the order by the considered Call Center compared to similar ones in America and other countries. Though the call center was renamed in order to fit new tendencies one of its main activities – advising clients by phones – remained without changes. The majority of the Ctrips customers preferred to place an order by phone as it was more convenient. Another reason for that is weak Internet coverage in China. But with the improvement of technologies Chinese customers started to accept online services more and more. Also the 90% of the global travelling companies are dedicated to online customer support services. Ctrip should decide whether the call centre will be able to provide competitive advantage within future. Of course all the decision alternatives have their pros and cons, it is better to choose one of them with possibility of practical implementation.
The other factors of decision-making may be found is drawing up long-term strategy. Whether the company should adjust its goals to that one’s of competitors or to continue searching new goals to be achieved independently of the market tendencies. Should the main objective remain the same?
Market leadership is usually defined as the position of a company with highest market share which is able to influence the main market characteristics to some definite extent. But is it possible to be the market all the time? Or one day leader strategy is to be replaced by another less influential one. Ctrip should decide what to do right now in order to avoid unexpected problems in nearest future. If the decision is to continue to be a leader op-to date changes are needed, restructuring of the company is required. This process will be cost intensive and only after thorough comparison of benefits with investments the changes can be made. Sometimes it is better to lose the position of leader but continue to benefit working within particular market segment concentrating on the details.
Final decision that should be made is what strategy should be chosen for operational activities on the foreign markets. The small share on the foreign travelling market is one of the main weaknesses of Ctrip. For this end the company should define the main instruments to be used in order to acquire new market share. International, multinational, transnational and global strategies are possible alternatives that occur in process of decision-making. The choice of particular strategy helps the company to be prepared for further competition. But if for instance the company starts to implement global strategy some disadvantages may occur such as insufficient attention to the cultural specific situation etc. From the other hand chosen strategy will enhance the performance of the company in general.
All the decisions for company to be adopted bring some specific consequences. That is why before making final choice of the particular decision in is important to consider all the advantages and disadvantages which may occur after implementation of chosen strategy.
Making and justifying recommendations and a brief implementation plan development
First of all, we should recollect the main theoretical stones relating to the issues of consulting and strategic plan implementation. The process of plan implementation includes setting objectives for the definite period of time. There are some important factors of macro environment influencing the recommendation development such as political, legal, ecological, economic, ecological and legal. Pros and cons of multiple-industry strategies usually include two aspects such as improving economies of scale and scope, tendency to increase bureaucratic costs etc.
The problem of call center was presented in our study in detailed form. It is a source of additional operational cost. We offer to solve this problem by replacement of the use of the telephone service bi more efficient internet one. The up-to-date situation within the sphere of IT allows the company to secure its competitive advantage without losing trust and credibility by customers. The online support may be even more convenient for clients. The problems in Internet connection remain a little bit, but most Chinese companies managed to overcome this obstacle. Another beneficial possibility is to implement the mobile program which will turn the voice message of the client into written one and send it to the Board of customer support. So the client avoids probable personal inconvenience as the result of the typing procedure and has the feeling of the phone conversation. This will help company to cut its spending significantly and even improve the way of meeting needs of the customer.
Our second recommendation relates to betterment of price competition. Ctrip should improve the level of offered business services to increase income rather than just participating in price wars with competitors. For this end it is better to focus on middle-class travelling and increase total output by increasing the number of fulfilled orders. The cost of tours should be objectively defined to make every dollar spent by customer worth of the service the client receives.
While dealing with the problem of diversification we suggest the company to divide the operational activities of air-ticketing, hotel reservation and other departments into to parts. One of which should focus on providing the budget travelers with specific services, another is to work within luxury segment. Both segments should ensure clients to receive the highest level of quality to make budget travelers to fell like making luxurious trip. The main difference is not basic but rather extra commodities rich people should pay for. As well as Ctrip appreciate full equality between managers and employees from lower levels the company should implement such an approach towards correlation between budget and luxury segments. Such a vision will help the company to be competitive within these two market segments without deluging the company brand image. It is no use in focusing on particular segment. Choose of one of the considered alternatives has some significant disadvantages reflected in losing of some market share. To be competitive the company needs to organize the segment-oriented managerial system through modification of already existing department.
Also we recommend the company to work with innovative travelling offerings. Now the travelling industry is dramatically evolving. Even if the posed risk does not seem to be dangerous for Ctrip it is necessary to start dealing with potential problem than be late. The growth of competitors who work online should considered the factor of threat to the companys well being. The increased competition was described in our study. The continuous improvement and implementation of innovations are the key effective instruments to limit the threat of potential competition. Diversification of target clients is also important thing.
Also Ctrip needs to convert its employees from ticket clerks into efficient travel consultant. Despite implementation of packaged tour system Ctrip remains to be rather booking service. It would be also interesting if Ctrip started to offer highly developed travelling programs of visiting Chinese historical places. Some of these places are unknown for the customer audience, so Ctrip may offer to discover such places. In most cases the infrastructure of historical places is not developed enough for advertizing them as must-sees. To enhance travelling conditions Ctrip can organize, for example, in the process of their reconstruction by participating in governmentally-private partnership. The benefits of such activities will be acquiring of monopoly right to organize travelling to the reconstructed places.
The cooperation with companies manufacturing apps such as Google, Samsung, Lenovo and others will also have positive impact on the Ctrips further growth. It will result in devising new technological programs in order to make client stay with the company all the time while using of his Smartphone. Also additional educational programs for the staff members should be hold in order to enhance the corporate image of Ctrip.
China is an attractive country for foreign students to study in. That is why we recommend to pay more attention to the possibility to act as educational mediatory between students and Chinese University. While launching the program it is better to start cooperating with Imperial Capital University, Nanyang Public School and Harbin Institute of Technology because they are open for such programs and are able to cooperate without complicated preparation procedures. China is known for the highest quality level of medical treatment. But the medical tourism is not developed enough to meet the needs of the foreign patients.
So starting to work within the sphere of health-care tourism is great chance for Ctrip of further development.
We have drawn up brief implementation plan for Ctrip. The goals are to be achieved within the next five years. The Exhibit 3 presents 8 main improvements that are to be implemented and some additional midcourse goals that are rather components of the basic 8 ones. The line Participants specifies particular divisions or departments that should fulfill the tasks listed. Also time needed for achievement of the objective is also specified. We have decided to omit one really important component of the real implementation plan – cost of each improvement due to the lack of public information available to public to be make correct evaluation.
Exhibit 4. Brief Implementation Plan
Conclusion
While working on the Ctrip case we have applied our theoretical skills to the process of problem solving. We have completed analysis of the companys performance to formulate the recommendations for the CFO of the company concerning the most important issues. By the way we have improved our analytical and report writing skills.
References
(n.d.). Retrieved from Ctrip official website: english.ctrip.com
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