Price sensitivity model
Chengdu international travel service agent also provides services to both of the customer in B2B and B2C, but these customers have strong bargaining power that caused agent get a disappoint profit. Buyer bargaining power is one of Porter’s Five Forces which refer to the customers clamp down on business to make them offer higher quality products, better consumers and lower price (Swathen, 2010).
In B2B market aspect, like China Petrol and Taiping Life Insurance these big companies are steady source of customers with strong financial, but they also have strong bargaining power that caused agent should decrease margin. In B2C market aspect, customers have many choices to choose and competitors have many strategies, so the bargaining power of consumers will be extremely strong. However, bargaining power of customers through forcing down price caused competitors play against each other and increase competition in the industry (Porter, M, 1998). Therefore, strong bargaining power do not cause profit losses, but also increase the pressure of competition.
Strategies In accordance with the SWOT analysis of the Chengdu international travel service agent, it finds that there are some environment issues. Therefore, making some efficient strategies can help organization to solve problems. Short-term Strategies According to the agent’s weakness lack of
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Because Will’s agent is not a large-scale corporate but is a joined company, publicity on line or paper is necessary for a small firm to attract customer’s attention and create a good company image in consumer mind. The advantages of publicity are low cost and high credibility, so the agent can try to create its own news (Whole sale, 2011). So a good promotion method like publicity is important strategies for Will to attract customer not rely on the old contact.
Furthermore, Will’s agent has excellent employees who are diligent, and it is really a good phenomenon inside the company. As for diligent employees, Will should make some employee motivation strategies like praise their work, reasonable bonuses or planning trip. Motivation, a process that employer encourages employees to work better and get higher performance, is the key to success of any organization (Class of 1, 2011). Every employee wants to gain recognition in his work, so if employers start to appreciate every employees, they will naturally begin to work towards the employer’s expectations and be more diligent (Rampur, S, 2010). Although all of the employees in agent are diligent and excellent, Will also should encourage them to get more profits.
Long-term Strategies After resolve the agent internal issues, Will Yang should make strategies to solve the strong bargaining power of customer. However, there are two major factors to determinant buyer bargaining power that are relative bargaining power and price sensitivity (Fu, Y, 2010). Price sensitivity decides how big the buyer bargaining desires and relative bargaining power decide the extent of hold down price. Therefore, company could improve product quality, improve product availability and understand buyer objective to reduce buyer bargaining power (BRS, 2011). The best way to avoid buyer bargaining is that agent improve their service to customer.
In 2009, China has the largest domestic market all over the world, so Will could do market development strategy. The market development strategy includes two aspects that are finding new segment of market for product and looking new way for old product (MBA lib, 2008). Therefore, Will Yang also could find new and characteristic theme routing of travel. It likes Disneyland Park which is the only theme park design, now it become the second most visited park in the world in 2009 (Disney, 2011). A new and characteristic thing can attract customer’s attention, so Will Yang use new product in market.
In conclusion, according to the SWOT analyses, it can find that Will Yang’s Chengdu international travel service agent has diligent employees and a good work environment condition, but lack of a good promotion. Although Chinese tourism industry has a great growth and customer purchasing power increase, buyer bargaining power is also strong for Will Yang to get profit. Therefore, in order to solve company environment issue, Will Yang could use four ways that are publicity, motivation, service quality improvement and new theme travel routing.
BRS (2011) ‘Price sensitivity model’ brs-inc.com http://www.brs-inc.com/models/model7.asp, accessed 26th May 2011 Class of 1 (2011) ‘Need human resource management homework help’ classof1.com http://classof1.com/homework_answers/human_resource_management/motivational_strategies/, accessed 26th May 2011. Disney (2011) ‘Disneyland’ disney.co.uk