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Benefits of CRM for Business Marketing

by Suleman
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Contents

  • Abstract
  • Chapter 1: Introduction
  • Chapter 2: Marketing Strategy & Customer Relationship Management
  • Chapter 3: Multi-Channel Retail Sector, Argos Direct & Tesco: A Case Study
  • Chapter 4: Tourism industry: Globalisation of Markets & CRM
  • Chapter 5:  Research Methodology
    • 5.1. Introduction
    • 5.2. Research Philosophies
  • Chapter 6: Conclusion
  • Bibliography

Abstract

The digital era fueled novel business opportunities and the continuous evolution of online business channels has made multi-channel retailing a reality, with the customer now placed at the forefront of business strategy.  In turn, this has reshaped business distribution and marketing models as in addition to competing in a product marketplace; in certain industries, the customer is the marketplace.

This has propagated polarised discussion with regard to the need for businesses to adopt effective CRM and this paper critically evaluates the benefit of integrating effective customer relationship management into business strategy, with a contextual focus and comparative analysis of the retail sector and tourism industry.

Chapter 1: Introduction

The digitisation of business​​ through the Internet has expedited​​ novel business opportunities through the piecemeal development of e-commerce, thereby culminating in an unfamiliar business paradigm. However, the rapid pace of online business activity has led to ad hoc responsive retail strategy measures in an attempt to balance the interests and protection of consumers, whilst simultaneously facilitating market growth.

Furthermore,​​ a central business strategy mantra of conventional businesses​​ is​​ “location, location, location” as​​ being​​ imperative to profitability and commercial prosperity;​​ however​​ the e-commerce paradigm arguably renders physical location irrelevant​​ (Lloyd, 2004). ​​ As such, the​​ traditional emphasis on​​ “location” has created an inherent contradiction, where “location returns very much to the forefront” (Lloyd, 2004). To this end, it has been argued that the​​ common issues deriving from e-commerce​​ are​​ contractual jurisdiction, applicable law, tax and​​ and consumer protection (Lloyd, 2004).

This in itself highlights the multifarious complex issues​​ pertaining to contemporary​​ retail management strategy as a result of the e-commerce business model. For example, the internet business model reduces overheads and provides increased anonymity with regard to customer interaction​​ as a result of globalisation.

Indeed, Brah et al, further highlight the instantaneous nature of globalisation as highlighted by the​​ increased internet usage​​ and wide dissemination of information (Brah et al, 1999: 3). They further posit​​ that​​ a crucial element​​ is movement of capital, commodities, cultural imaginations and practices (Brah et al, 1999:3).

Moreover, Tomlinson posits that globalisation culturally impacts the contemporary social and cultural framework, arguably creating a fragmentation of the experience of culture and place (Tomlinson, 1999). As such, Tomlinson argues that globalisation is occurring at pace where pre-existing cultural boundaries are being eradicated with the emergence of new​​ cultures (Tomlinson, 1999). To this end, Tomlinson refers to the concept of “complex connectivity” where he argues that connectivity is the central factor in globalisation (Tomlinson, 1999).

For example,​​ the​​ second media age​​ with the appurtenant multiple platforms offered​​ has​​ propagated novel socio-cultural and business opportunities. ​​ On one side of the spectrum, this has led to commercialisation of the customer, which in turn has revolutionised traditional business models.

A prime example of the resultant impact of globalisation on retail business operations strategy is the travel industry, such as the​​ recent merger of package holiday specialists MyTravel and Thomas Cook in 2007 (Taylor, I. 2007). ​​ It was reported that the merger was driven by business necessity in order​​ withstand market conditions​​ in the competitive nature of the market facilitated by the e-commerce business model (Taylor, I. 2007). ​​ Moreover, it was propounded that “the merger is predicted to save £75million a year by 2009/10 through cuts in duplicated services and assets including staff, shops, aircraft, offices and IT systems, particularly in the UK” (Taylor, I 2007). ​​ Whilst some analysts reacted to the merger as a further nail in the coffin of the high street travel agent, the alternative question posed is whether this in fact matters in the digital arena (Taylor, I. 2007).

Nevertheless, the concomitant impact of globalisation on the traditional travel industry business model is in turn reflected by changing consumer habits and multi-chain retail strategy. Furthermore,​​ internet business model and concomitant growth​​ has facilitated novel societal trends and business openings​​ via​​ piecemeal​​ development of electronic commerce.

Indeed, from a socio-cultural perspective, the creation of multi-faceted digital space has seen a significant uptake by youth on a global scale, thereby perpetuating a domino effect on culture, sub-cultures and social behaviour through the "commercialisation of youth" on the one side to changing communication trends with social networking sites (Diamond & Pintell, 2003).  ​​​​ In addition, the empowerment of the customer as a whole through globalisation has contributed to industry segmentation and a changing consumer market, pushing retailers to follow a multi-retailer approach (Levy​​ & Weitz, 2008: 27). In fact, this prompted observers to suggest the corporate usage of techniques for consumer experience management (CRM) to address the challenges of the multi-channel retail marketplace (Levy & Weitz, 2008: 27).

If we consider this contextually, it is submitted that the interrelationship between globalisation and its concomitant impact on the socio-cultural framework in turn impacts modes of travel and thereby the tourism industry. For example, Urry argues that the way in which tourists now book holidays has via the globalisation impact on the traditional tourist business model created the “tourist gaze phenomenon” (Urry, 1990). This not only changes patterns of tourism via bespoke and cultural and urban tourism, it correlates to other social changes via globalisation (Urry, 1990).

In further considering the impact of globalisation in tourism, Wahab refers to the trends in globalisation to tourism with discussions of who the tourist is; their demands and the industry response, particularly in a multi channel climate and sustainable development (Wahab & Cooper, 2001). As such, Wahab & Cooper argue that the globalisation has fuelled increased competition between tourist destinations worldwide (Wahab & Cooper, 2001). Indeed, the​​ e-commerce archetype​​ has clearly​​ fragmented​​ the​​ retail sector​​ and​​ Galbreath and Rogers argue that, “no enterprise can any longer succeed in distinguishing itself through operational excellence, customer intimacy, or product innovation without understanding the needs and desires of its customers” (Galbreath & Rogers, 1999).

Furthermore, the globalisation on the traditional travel industry business model has wider ramifications for tourism from the host country perspective. On the one hand, there are significant benefits for the host country economy in terms of income and contribution to local infrastructure and development. Conversely, globalisation of the tourist industry has altered the way in which holidays are booked and the type of packages offered as a result of increased consumer control and varying demand.

Moreover, it is​​ posited​​ growth of online business models is intrinsically interlinked to the impact of customer relationship managements​​ (CRM). It is​​ submitted that CRM has distinctly altered the way that companies​​ approach planning, with a marked​​ shift from​​ focusing on product​​ to​​ the alternative consideration of CRM, which is “underpinned by information systems convergence and the development of supporting software, which in turn promises to significantly improve the implementation of Relationship Marketing principles” (Ryals & Knox, 2001).

The focus of this paper is to critically evaluate the potential benefits of using CRM in organisations as part of business strategy. To this end, in order to ensure a focused and practical approach to the subject, I have chosen three diverse retail sectors to highlight the potential benefit of using CRM as part of business growth strategy; namely, the tourism industry as a whole, the Argos multi-chain business model in the domestic retail sector and the international success of the Apple iPhone and iPod. ​​ It is submitted that a comparative analysis of dichotomous industries is imperative to ensure an objective and lateral approach to the consideration of CRM as a useful business tool.

Accordingly, I shall firstly consider the interrelationship between economic theory, contemporary marketing strategy and CRM principles in the retail sector in Chapter 2. ​​ Moreover, it is submitted that evaluation of the effective integration of CRM, marketing strategy and theory in relation to Apple’s success with the iPhone supply chain, highlight the potential benefits of organisations using CRM.

In Chapter 3, I shall compare​​ the use of CRM in retail operations by contextually considering the Argos business model in the domestic retail sector and Tesco’s CRM strategy as part of market entry strategy in South Korea.  ​​​​ In Chapter 4, I shall undertake a contextual analysis of use of CRM in the tourism industry by analogy; followed by a discussion of the research methodology and concluding evaluation in Chapters 5 & 6 respectively.

Chapter 2: Marketing Strategy & Customer Relationship Management

The economic concept of “creative destruction” originates​​ from the works of Mikhail Bakunin, Friedrich Nietzsche and Werner Sombart’s “War and Capitalism” where Sombart asserted: “again out of destruction a new spirit of creativity arises” (1913, p.207)).​​ Furthermore,​​ economy theorist Schumpeter adopted the phrase​​ “creative destruction” as​​ imperative in modernist capitalism;​​ referring to the concept of innovation in business planning​​ (Schumpeter, 1942).

Additionally, Schumpeter posited that​​ “capitalism”, then is by nature a form or method of economic change” (Schumpeter,​​ 1942). Furthermore, Schumpeter’s argument was that an innovative mindset​​ was fundamental to business​​ success​​ in capitalism. Schumpeter​​ felt that ignoring the need to innovate would ultimately culminate in what he termed as​​ “creative destruction”​​ of the business​​ (Aghion, P., & Howitt, P., 1992).

Therefore, it is arguable that central to Schumpeter’s theory was the notion that businesses should compete for modernisation rather than focus on competition for target customers,​​ which is directly related to the essence of core CRM strategy for organisations. ​​ Accordingly, the essence of Schumpeter’s theory is that businesses have to continue to innovate to ensure survival and it is postulated that the use of CRM is inherently related to this proposition in the contemporary multi-channel retail marketplace.

CRM​​ derives​​ from​​ the marketing concept of​​ relationship marketing and​​ work​​ of​​ leading theorists​​ Berry (1983) and Reichheld (1996), which​​ suggested​​ that​​ “a 5% growth in customer retention rates culminated in a mean customer lifetime value figure ranging between 35% to 95%, with knock on effects on profit margins”​​ (In​​ Ryals & Knox, 2001). ​​ There are many definitions of CRM but​​ generally, CRM is defined​​ a relationship marketing approach that embodies sales, marketing and customer service​​ (Christopher et al, 1991). Moreover, Galbreath posits that effective with effective CRM activities “an​​ enterprise performs to identify, select, acquire, develop, and retain increasingly loyal and profitable customers”​​ (Galbreath, 1998:14).

Furthermore, in the contemporary marketplace, it is submitted that CRM is correlated to the theoretical rationale for the benefits of adopting blue ocean strategy and arguably underpins the justification for blue ocean strategy in corporate planning; which supports the argument for the potential benefit of CRM in organisations in the retail industry in particular.

Accordingly, it is further extrapolated at the outset that the contemporary marketplace, particularly in context of the evolution of the internet business model​​ has forced businesses to adopt a different approach to​​ corporate marketing strategy and this is​​ arguably supported​​ by the​​ development​​ of the multi-channel retailing paradigm, which has forced​​ businesses to​​ “innovate”​​ in order to survive the market​​ (Levy & Weitz, 2008).

In addition, Kim & Mauborgne claims that the blue ocean marketing approach is crucial in the contemporary business model in terms of the need to maintain a successful CRM strategy by not intervening in the current market room and establishing an uncontested market area. In addition, the core of the Blue Ocean strategy is that the emphasis on competitiveness is wrong and a new market needs to be generated and that as such the systemic approach of the business should be focused on distinction and low cost, at which point (Chan Kim & Mauborgne, 2005).

Indeed, Chan-Kim & Mauborgne comment that “of course competition matters. But by focusing on competition… have ignored far more lucrative aspects of strategy: One is to find and develop markets where there is little or no competition – blue oceans and to protect blue oceans” (Chan Kim & Mauborgne, 2005). Additionally,​​ Murphy (2007) argues that blue ocean marketing is important in highlighting the need to create new markets​​ (Murphy, 2007).

Chan-Kim and Mauborgne further​​ propose the concept of two business “spaces”, namely:

1) Red oceans​​ (pre-existing industries); and

2) Blue oceans​​ (unknown marketspace)​​ (Chan-Kim & Mauborgne, 2005)​​ 

Additionally, under the blue ocean “space” consumer demand is created rather than fought over, which in turn presses the need for organisations to use CRM in retail strategy.

It is further submitted that globalisation whilst fuelling numerous business opportunities, has simultaneously led to market saturation due to the lower costs of market entry under the e-commerce business model within the retail sector. ​​ This in turn has brought the customer to the fore. ​​ Accordingly, whilst this arguably highlights the renewed importance of using blue ocean marketing strategy for business growth, it is submitted that the efficacy of any such strategy intrinsically correlates to the benefits of utilising CRM.

Accordingly, the contextual backdrop of the contemporary marketplace arguably highlights the benefit of organisations using CRM in business growth strategy. ​​ This is further highlighted by the central arguments pertaining to the benefits of blue ocean strategy. ​​ Indeed, Chan & Mauborgne highlight the point that the effective use of CRM and blue ocean strategy provides ample scope for business growth where “companies can create new industries or create a new market from within a red ocean, which changes the parameters of existing industry” (Chan-Kim & Mauborgne, 2005).

To this end, Chan Kim & Mauborgne (2005)​​ argue that purchaser​​ value is​​ increased​​ by​​ offering customers new experiences, increasing customer retention rates. ​​ Indeed, leading independent marketing consultant Morris comments that “of great interest is…. assertion that the innovations which enable these companies to succeed with a blue ocean strategy did not depend upon a new technology. Rather, each company pursued a strategy which enabled it to free itself from industry boundaries” (In Chan Kim & Mauborgne, 2005).

 

Moreover, Chan Kim & Mauborgne highlight the point that effective CRM is a vital component of this and utilise as a prime example of the interrelationship of CRM and successful blue ocean strategy the work of Starbucks and Apple; particularly Apple’s application of the blue ocean strategy through iTunes (Chan-Kim & Mauborgne, 2005). This further supports Chan-Kim & Mauborgne’s arguments that Apple​​ did not compete in the​​ “red ocean” by capitalising “on the desire of every music lover to download just the tunes they want in the instant way they want them”, as a prime example of effective CRM (Chan-Kim & Mauborgne, 2005).

This is further​​ supported if we consider the operations management marketing and multi-retail strategy of Apple in relation to the iPhone, which demonstrates the successful interrelationship of using CRM to inform business strategy from product development to market placement. For example, when the Apple iPhone first arrived in the marketplace, it sold approximately 270,000 units, with an estimated 150 per minute in thirty hours. ​​ The success was further cemented by the average price of the iPhone being placed at $499-599.  ​​ ​​​​ Moreover, it was estimated that sales had reached the million mark by September in the same year of launch, thereby outperforming the adoption rate for the original iPod (Trebilcock, 2007).  ​​​​ In applying effective CRM strategy, Apple then slashed the iPhone’s price by $200, resulting in rocketing sales figures (Trebilcock, 2007).

It has​​ been argued that Apple’s supply chain management was a significant factor​​ in the creation of a new market in line with consumer demand and blue ocean strategy, thereby highlighting the benefit of integrating CRM into an organisation, particularly in the retail sector (Trebilcock, 2007).

For example, in the AMR​​ Annual Supply Chain top 25 report for 2007 undertaken by AMR Research, Apple’s achievements were highlighted for its sophisticated integration of CRM. The company came second​​ in a​​ prestigious​​ list of retail and manufacturing​​ companies (AMR​​ Research, 2007 available at​​ amrresearch​​ /supplychaintop25).​​ 

From practical perspective, prior to sales of iPhone,​​ the product was viewed as the perfect integration of product innovation and brand management​​ through​​ understanding of the customer requirements, which presses the need for a customer centric approach in the contemporary retail marketplace (Trebilcock, 2007).

Indeed,​​ Levi​​ highlighted the importance of timely market placement and commented that “A killer product is only successful if it gets to the right customer at the right price at the right time” (Levi in Trebilcock, 2007). ​​ Levi​​ further​​ observes that it was the interrelationship between CRM and “Apple’s supply chain technology is really the silent contributor to the company’s success in executing the product innovation” (Levi in Trebilcock, 2007).

Furthermore,​​ supply chain​​ management t covers a range of interconnected processes​​ of which​​ CRM is a central component and Quayle​​ suggests that an important aspect is​​ ensuring that​​ “the product reaches the end customer at the right price and right cost and right time”​​ (Quayle M, Jones B., 1999). This is further evidenced by​​ Apple’s ability to ensure the iPhone supplies met demand,​​ which in turn supports the argument for the use of CRM in retail management strategy.

Additionally,​​ Lummus and Vokurka​​ propose the following supply chain model:

“Supply Chain is all the activities involved in delivering a product from raw materials through to the customer including sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, delivery to the customer and the information systems necessary to monitor all of the activities” (Lummus and Vokurka, 1999).

Moreover, Kim and Mauborgne indicate that “the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market creating business offering” (Chan-Kim & Mauborgne, 2005).​​ Additionally, they refer to the fact that the underlying theory​​ of​​ blue ocean strategy is value​​ innovation which occurs “only when companies align innovation with utility, price and cost positions” (Chan-Kim & Mauborgne, 2005).

Kim and Mauborgne explain how to create an uncontested market-space where competition is irrelevant (Chan-Kim & Mauborgne, 2005): “blue ocean strategy is about creating and capturing uncontested market space, thereby making the competition irrelevant. Blue ocean strategy is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players” (Chan-Kim & Mauborgne, 2005).

However, Chan-Kim & Mauborgne argue that “unfortunately most companies seem becalmed in their red oceans. In a study of business launches in 108 companies, we found that 86% of those new ventures were line extensions- incremental improvements to existing industry offerings- and a mere 14% were aimed at creating new markets” (Chan-Kim & Mauborgne, 2005:3). ​​ This highlights that whilst corporate strategy may generally​​ presume the irrelevance of blue ocean strategy, this stems from entrenched corporate culture as opposed to a meritorious argument that blue ocean strategy is just not relevant.

Indeed, Chan-Kim & Mauborgne highlight the point that traditional corporate strategy​​ often military,​​ with references to a​​ “battlefield market place” (Chan-Kim & Mauborgne, 2005). In contrast, blue ocean strategy is about doing business in a market where there is no competitor: “Companies have a huge capacity to create new industries and re-create existing ones, a fact that is reflected in deep changes that have been necessary in the way that industries are classified” (Chan-Kim & Mauborgne, 2005).

Therefore,​​ Chan-Kim and Mauborgne argue that blue ocean strategy and indeed its interrelationship with organisational integration of CRM is effectively a microcosm for an “engine of growth” and that​​ "red oceans are shrinking at a prolific rate”​​ (2005), which further​​ highlights the argument for reformulating​​ corporate strategy.  ​​​​ Indeed, slowly through the internet business mode, the niche markets have begun to disappear, with little evidence of increased demand and Chan-Kim and Mauborgne highlight the​​ reality that “the United Nations statistics even point to declining populations” (Chan Kim & Mauborgne, 2005). ​​ Accordingly, the result of this is that increasingly supply is overtaking demand, which again asserts the relevance of the use of CRM in contemporary company growth.

As such, through their discussion of blue ocean marketing strategy, Kim and Mauborgne highlight the point that integration of CRM in organisational growth strategy is imperative. Moreover, failure to do so has arguably shrunk profit margins and “as brands become more similar, people increasingly base purchase choices on price” (Chan Kim & Mauborgne, 2005). ​​ ​​ This in turn arguably lends itself to support the need for corporate strategy to incorporate CRM as part of business strategy in the contemporary retail business paradigm.

Chapter 3: Multi-Channel Retail Sector, Argos Direct & Tesco: A Case Study​​ 

Supporters​​ of the use of CRM by organisations posit that a central benefit is securing the consistent growth of profit margins via customer retention.​​ ​​ Moreover, as​​ indicated in Chapter 1, Galbreath posits that businesses with effective CRM activities position themselves with a competitive edge by operating “an enterprise performs to identify, select, acquire, develop, and retain increasingly loyal and profitable customers” (Galbreath, 1998 at p.14).​​ 

For example, this is further​​ evidenced by Tesco’s CRM​​ marketing strategy, spearheaded by the famous tag line “every little​​ help”. Additionally, they were one of the first big companies to​​ introduce economy goods ranges and loyalty bonus system to retain customer loyalty.​​ ​​ To this end,​​ CRM therefore​​ operates as​​ a“combination​​ of business process and technology that seeks to understand a company’s customers from the perspective of who they are, what they do, and what they’re like” (Couldwell, 1998).

Moreover, Kutner and Cripps​​ propose​​ a​​ four stage CRM model, which dictates the following principles:

1) Customers should​​ be perceived​​ as​​ business​​ assets;

2) Customer profitability will always be variable;​​ 

3)​​ Customer purchasing behaviour and requirements will continuously vary; and​​ 

4) Understanding customer​​ requirements enables bespoke services to maximise opportunities​​ (Kutner & Crips, 1997).

As such, the globalisation of the retail industry as a result of the e-commerce business model has signalled a fundamental shift in customer and business relationships with an intense focus on CRM.  ​​​​ Moreover, the main objective of CRM is to identify, qualify, acquire, develop and retain increasingly loyal and profitable customers by delivering the right product and service to the right customer, through the right channel, which has become particularly pertinent in the multi-channel challenge reshaping retail strategy.

Additionally, the factors highlighted by Kutner & Crips (1997) underline the importance of understanding consumer behaviour, which is vital to effective CRM.

For example, the concomitant impact of the e-commerce business model has been the proliferation of multiple retail channels targeting consumers. ​​ Moreover,​​ numerous market research projects​​ report that although consumers regularly​​ use​​ websites for​​ information gathering,​​ the result is not always an online purchase. For example, research by Ahuja et al and Lee suggest that online purchasing ranges from approximately​​ 24% (Ahuja et al., 2003) to 32% (Lee, 2002).

This data indicates that consumers combine both online and offline channels in purchasing behaviour, with the consumer having ultimate control of the purchasing decision​​ (Forsythe & Shi, 2003).

Furthermore, Black et al​​ undertook research into customer motivation in the use of​​ a particular retail distribution​​ channels and the results demonstrate​​ four central factors​​ shaping consumer behaviour in the multi-channel marketplace:

1)​​ Characteristics​​ of the consumer;

2) Factors specific to the nature of the product;

3)​​ The mode of retail distribution channel; and

4)​​ ​​ Factors pertaining to organisation​​ (Black et al, 2002)

Moreover, Gupta et al (2003) undertook​​ research into consumer habits and found that​​ regardless of the distribution channel adopted by a consumer,​​ ultimately customer​​ loyalty​​ is inherently reliant​​ on the characteristics of the consumer regarding risk​​ (Gupta et al, 2003).​​ This is further evidenced by Chain et al’s​​ study​​ regarding the weight attached to the product and its concomitant impact on consumer patronage frequency​​ (2004), which​​ determined that this is intrinsically variable depending on the nature of the product.

Furthermore, Schoenbachler and Gordon’s study (2002) demonstrated that businesses​​ adopting a​​ multi-channel strategy are better​​ equipped to accommodate​​ consumer channel preferences​​ as opposed to traditional single channel models, which is arguably evidenced by​​ Argos’ multi-retail strategy. To this end, it is submitted that as the retail industry becomes increasing consumer centric, with the consumer effectively being the “product”, this necessarily requires the integration of CRM into organisations.  ​​​​ However, it is posited that integration of CRM must consider industry specific trends shaped by changing consumer habits in order to operate efficiently.

This is further supported by the fact that a review of the literature indicates that there are​​ multitudinous triggers influencing consumer choice of retail channel. Nevertheles, there remains​​ a lack of consensus as to why consumers​​ use certain channels for variable purposes​​ (Schoenbachler & Gordon, 2002).​​ 

It is further submitted that literature on contemporary consumption​​ elucidates on potential causal factors. For​​ example,​​ the work of​​ Laing et al​​ suggests that​​ contemporary consumption behaviour is​​ influenced by changes in information accessibility as a result of the digitisation​​ (Laing, et al, 2003). As a result, Laing et al argue that​​ consumers have potentially become empowered in their interactions with business, shaped by numerous parallel consumer interactions (Laing et al, 2003).

To this end,​​ Laing et al’s study​​ refers to the example of numerous​​ parallel channels in the tourist industry​​ business model. ​​ For​​ example,​​ some consumers will prefer to interact with travel agents directly on the phone or at the agency whereas other customers prefer to shop online, or combine online browsing with direct travel agency interaction​​ (Laing et al, 2002).

Furthermore,​​ Laing et al​​ contend that the underlying influential factor central to consumer decision making is the nature of information that is provided in the particular retail channel​​ (Laing et al, 2003).​​ If we consider this contextually, it is posited that​​ Argos’ multi-channel retail strategy​​ has to ensure it accommodates variables in consumer demand​​ (Laing et al, 2003).

To this end, it is posited that effective CRM​​ strategy works embodies the successful blend of marketing, service,​​ resource planning, sales and supply chain management​​ (Ryals & Knox, 2001). In terms of practical applicability of CRM to retail strategy, it is submitted that retail businesses (particularly in the multi-channel marketplace) are more successful if they focus on​​ securing a share of the customer​​ marketplace as opposed to concentrating on competitor products.

Moreover, if we consider this in context of the blue ocean strategy,​​ continuous evolution​​ of consumer behaviour supports Kim and Mauborgne’s assertion that: “blue oceans are not about technology innovation” (Chan Kim & Mauborgne, 2005).

Kim & Mauborgne further extrapolate that the company vehicle and notions of “industry” as traditional units of strategic analysis are incorrect and that these have futile explanatory power when it comes to analysing how and why blue oceans are created (Chan Kim & Mauborgne, 2005). Moreover, they posit that “there is no consistently excellent company and therefore the creation of blue​​ oceans depends on a set of managerial actions and decisions involved in making a major market creating business offering” (Chan Kim & Mauborgne, 2005).

Accordingly, it is submitted that effective CRM is​​ imperative as part of business​​ strategy in​​ retaining and securing​​ customers through​​ the multiple retail channels​​ (Trapp, 2007).​​ For example, the Independent Newspaper investigation of CRM efficacy in 2007​​ highlighted​​ the utility of CRM incorporation​​ in​​ the​​ retail​​ sector​​ by analogy with the corner shop “if you’re a corner shop, say, it’s much more straightforward to serve your local customers than if you’re a supermarket chain. You know what the customers want because you seem them on an almost daily basis….. It’s this knowledge and understanding of customers that big companies were trying to replicate when they started to invest in CRM a few years ago” (Trapp, 2007).

Moreover, in the CRM focus, Trapp highlights the importance of CRM in developing an insight into customer preferences and comments that “insights” is the word in of the moment in consulting circles (Trapp, 2007). Moreover, Trapp highlights the point that whilst CRM is arguably a necessity in contemporary retail strategy, the central factor is to ensure the effective implementation of CRM to secure the advantage of consumer patronage. ​​ To this end, Trapp comments that “everybody seems to want that extra little bit of information that gives them an advantage over its rivals. Much has been made in recent years, of how, for example, Tesco seems able to anticipate warm weekends and get the right amounts of beer and barbecue supplies into its stores while its rivals sell out. It’s largely down to analysis” (Trapp, 2007).

If we further consider this in terms of effective customer relationship​​ Bose comments that​​ “at the core, CRM is an integration of technologies and business processes used to satisfy the needs of a customer during any given interaction. More specifically, CRM involves acquisition, analysis and use of knowledge about customers in order to sell more goods or services and to do it more efficiently (Bose, 2002). Furthermore,​​ Bose suggests that​​ the​​ definition of​​ “customer”​​ is wide and encompasses vendors, and channel partners (Bose, 2002).

This is further evidenced by Tesco’s CRM strategy and implementation via partnership with Accenture in South Korea (accenture/global/services/By_Industry/Retail/Client_Successes)

Tesco entered the Korean business market through introducing the HomePlus discount store to Seoul. In partnering with Tesco,​​ Accenture​​ was responsible for providing​​ CRM support technology for the retail joint venture between Samsung and Tesco​​ as part of Tesco’s expansion plans for the Korean market. ​​ (accenture/global/services/By_Industry/Retail/Client_Successes)

The Korean retail market is extremely competitive and there are significant cultural and socio-economic barriers to market entry. Accordingly, Accenture point to the fact that​​ Tesco had to​​ create a niche market to maximise chances of success in the market.​​ ​​ To this end, it​​ appointed​​ Accenture​​ to implement​​ CRM​​ strategy​​ (accenture/global/services/By_Industry/Retail/Client_Successes).​​ 

Additionally,​​ Accenture​​ argues that it was their implementation of CRM strategy that contributed to success, through the use of customer profiling and categorisation of customer types.​​ Once this was undertaken, Accenture then utilised its customer profiling data to formulate CRM strategy to ensure that the Tesco Homeplus stores secured a share of the customer marketplace.​​ (accenture/global/services/By_Industry/Retail/Client_Successes)

Accordingly, the Accenture and Tesco CRM strategy highlights the importance of understanding consumer behaviour and the increasing power of consumers in leading business growth strategy. Indeed, to this end,​​ Chung-Hoon Park and Young-Gul Kim argue that “according to the content and interaction types, customer information can be classified into three types:

1) information of the customer;

2) information for the customer; and​​ 

3) information by the customer”​​ (Chung Hoon Park and Young-Gul Kim, 2003).​​ 

Alternatively, the evolution of the internet business model has further impacted the way​​ businesses are managed​​ (Chaffey, 2006). Moreover in terms of customer relations, Robins argues that two business consequences from this phenomenon; namely the “extensive exploration of the content of the new e-marketing mix” and “the internet is fostering closely integrated, holistic, customer focused and innovative marketing” (Robins, 2000 p.23).

Moreover, Chaffey posits that companies marketing on the Internet are utilising technology as a vital source of competitive advantage than size. Additionally, through the​​ digitisation of retail, businesses are having to refocus​​ strategy towards considering incorporating CRM​​ software (Chaffey, 2006).​​ ​​ Moreover,​​ the benefit of such​​ technology​​ is the ability for businesses to offer bespoke customer services on a wider scale​​ (Chaffey, 2006).

Indeed, the internet business model has clearly segmented the retail marketplace, which reiterates the argument referred to in Chapter 1 that “no enterprise can any longer succeed in distinguishing itself through operational excellence, customer intimacy, or product innovation without understanding the needs and desires of its customers” (Galbreath & Rogers, 1999).

Peppers and Rogers further argued that “Organisations will be more successful if they concentrate on obtaining and maintaining a share of each customer rather than a share of the entire market” (Peppers and Rogers, 1995). Therefore, CRM has become vital as part of corporate management strategy, particularly in the retail sector, further fuelled by the multi-channel e-commerce driven marketplace.

A​​ prime example of this is Argos’ appointment​​ of​​ Manhattan Associates for the delivery CRM based warehouse management system to address significant business volume increases​​ (www.manh.com/library/MANH-Argos-CaseStudy.pdf). The efficacy of this partnership as part of Argos’ multi-chain retail strategy is further described by Manhattan Associates in their 2008 report in Figure 1 below:

Figure 1:​​ Source: Manhattan-Argos Case Study: manh/library/MANH-Argos-CaseStudy.pdf

Additionally, the​​ Home Retail Group’s Annual report 2008​​ states that “our multi-channel offer gives consumers choice and flexibility. Argos and Homebase customers can shop in-store from home or a combination of both (homeretailgroup) Therefore as it is now the consumer that seeks out the channel providers to fulfil their desired needs, the integrated multi-channel is arguably as much about internal operations and suppliers as it is about customer facing services.

Chapter 4: Tourism industry: Globalisation of Markets & CRM

The analysis in the previous Chapter underlines the importance of CRM in contemporary business strategy as a result of the commercialisation of the empowered consumer. Moreover, comparison of Argos in the UK and Tesco in South Korea further highlights the importance of understanding market segmentation and consumer trends in the multi-channel retail environment to ensure that any CRM strategy is utilised effectively to maximise benefit. This proposition is further supported if we consider by analogy the altered tourism business model.

As highlighted in Chapter 1 above, the correlation between globalisation and digitisation of the retail business paradigm has significantly altered the marketplace and traditional tourism industry business channels as customer requirements for holiday packages continue to change. If we consider the UK, traditionally, travel agencies have played a central role within the UK tourist industry and tourism is one of the largest employers and major industry in the expanding market of overseas travel and its annual level is predicted to grow to an estimated 1.6 billion by 2020 (Swarbrook, J. and Horner, S. 2006).

However, globalisation has undermined the traditional travel agency distribution model, forcing travel agencies to re-develop and reformulate competitive strategies to sustain growth (Zhou, Z. 2003). ​​ To this end, Hamal and Prahalad argue that a central element of this is the shift in how companies compete with each other, with the underlying basis of competition moving towards “soft” factors such as reputation, service and market placement and positioning. This in turn reflects the evolution of the “knowledge-based economy” (Hamal and Prahalad, 1996). ​​ A prime example is the merger of MyTravel and Thomas Cook as referred to above.

On the other hand, from a business perspective, it is arguable that the proliferation of the Internet and online growth could in fact have resulted in novel profit opportunities to weather the pattern of losses and closures within the travel agency industry.  ​​​​ This is highlighted by the emerging online market as evidenced by the rapid growth of “virtual” travel agencies such as Expedia and lastminute.com (Evans, N., Campbell, D. & Stonehouse, G. 2003).

At the outset, it is submitted that globalisation via proliferation of the Internet and e-commerce business model has played a vital role in reshaping marketing and distribution channels in the travel business, thereby reformulating the nature of supply and demand within the travel industry (Poon, A 1993). ​​ Within the conventional business model prior to the e-commerce boom, the role of the travel agency has been well defined as a key intermediary in acting on behalf of both buyers and sellers (Renshaw Bottomley, N. 1997).

Moreover, whilst traditional figures demonstrate that business travel accounted for the higher share of the market, private travel is expected to continue to flourish (Swarbrook, J. and Horner, S. 2006). However, notwithstanding the growth of the private traveller market, consumer habits have continued to evolve outside the traditional marketing strategies of the high street travel agency.

Indeed, a central underlying basis for the MyTravel and Thomas Cook merger was the declining popularity of the package holiday (Taylor, I. 2007) where it was asserted that competitor Thomson would be “counterbalancing the drop in pre-packaged sales by actively pushing its new strategy of uber-dynamic packaging” (Taylor, I. 2007). In turn, it is submitted that is clearly a prime example of the practical impact of globalisation on the global marketplace, pressing the need for effective CRM to retain customer loyalty.

Furthermore, the Office of National Statistics indicated that package holidays accounted for 42.3per cent of overseas travel by UK residents in 2005, which is a marked difference from the 54 percent ten years ago (statistics). ​​ This in itself suggests that whilst Internet growth is undoubtedly an important contributing factor to the decline of the high street travel agent, the influence of evolving consumer habits as a result of globalisation cannot be ignored (Swarbrook, J. and Horner, S. 2006). ​​ In fact, it is imperative that agencies acknowledge the interdependence of these factors if the new e-commerce model is to be exploited with maximum commercial success to address declining profits in the industry.

As such, the changing nature of travel habits and market shares has also impacted the previous monopoly of the travel agency as prime intermediary (Buhalis, D. & Costa, C. 2005). ​​ This is further evidenced if we consider the traditional business distribution model between service provider and consumer in Figure 2 below:

Figure 2

The evolution of the traditional business model from deregulation of the travel business in 1978 to online business evolved an integrated group of players in the tourism industry; namely, airlines, online reservations, search engines, systems, travel agents companies. As such, the success of each player was interdependent (Lubbock, M. and Krosch, L., 2000).  ​​​​ However, the growth of the web has enabled sellers such as airlines to have direct access to the consumer online, effectively shifting the balance of the role of the travel agent as intermediary having primary contact with the consumer as indicated in Figure 2 (Swarbrook, J. and Horner, S. 2006).​​ 

Conversely, prior to the e-commerce boom, travel agents were the key players in the distribution channel with access to the GDS and in which they can check availability of the inventory entries (Poon, A. 1993). ​​ However, the online business model has fuelled a competitive market, taking high street travel agencies outside their monopolistic comfort zone (Buhalis, D. & Costa, C. 2005).​​ 

Additionally, outside of the obvious reduction to high street trade, the shifting business models and emergence of a competitive market has resulted in pressure for travel agents to change their revenue models from charging commissions on service providers to charging customers for service (Buhalis, D. & Costa, C. 2005). Indeed, prior to the e-commerce boom it was asserted that “Electronic Business will affect virtually every type of marketing expenditure. It will also affect every aspect of marketing itself from the​​ creation of material to its distribution”. (Cunningham, P. and Froschl, F., 1999 179)

It has been argued that the Internet continues to revolutionise tourism and overseas travel ((Swarbrook, J. and Horner, S. 2006). ​​ According to the Association of British Travel Agents, it is forecasted that 53% of UK adults will have booked a holiday online by 2008 (www.abta.com). ​​ The primary driving force behind the augmentation in online agencies is the low overheads in advertising and online booking and the​​ long-term​​ trend in shifting from package holidays (Taylor, I. 2007)

Moreover, the private traveller market share is significantly increasing and the demands of the private traveller have shifted.  ​​​​ Individuals prefer tailored holidays and consumer demands have developed outside the parameters of the narrow format of the package holidays.​​ Therefore,​​ the development and rapid growth of online agencies such as Ebooker, lastminute.com, Expedia, Orbitz and Travelocity have left the high street firms in their wake in offering flexibility denied by the high street travel agent ((Swarbrook, J. and Horner, S. 2006). ​​ Moreover, the availability of alternative outlets for travel purchase online has rendered the monopoly of travel agents redundant, forcing travel agencies to alter their pre-existing business and marketing strategies.

For example, as mentioned above, airlines are expanding services available, thereby negating the importance of the intermediary travel agent. The British Airways website has a “manage my booking” facility allowing passengers to make travel plans, email itineraries, thereby bypassing the role of the travel agent whether online or high street. ​​ As such, the travel agency monopoly has been quashed ((Swarbrook, J. and Horner, S. 2006). ​​ Moreover, it has been argued that “the Expedia philosophy is about putting the customer in the control seat” (Taylor, I 2007). ​​ Expedia for example, allow customers to personalise packages of accommodation, flights, attractions, car hire and guarantee savings, prices which arguably cannot be sustained by high street travel agency overheads (expedia).

Conversely, it has been argued by the AAP report in relation to Australian tourism that “people will always like to walk into a store and get personal​​ services” (www.aap.com.au). Furthermore, according to the Phocus Wright ANZ online travel overview under the Australian Bureau of Statistics, Australians spent $29.2 billion on travel, however, locally only 20 per cent of bookings were made online (phocuswright).

From the UK perspective, a study by YouGov in online travel trends demonstrates that online bookers often come though family or friend referrals or online reviews then travel agents when seeking advice regarding travel (www.yougov.com). ​​ “However, the need for travel agents should not be underestimated as 46 per cent of online holidaying respondents still visit travel agents to collect destination brochures, which will impact online travel decisions” (www.yougov.com). ​​ As such, travel agents need to change their approach and exploit the manner in which online and offline consumer habits interweave and capitalise on this to drive offline consumer traffic to their online sites instead of competitor sites. ​​ As such, the e-commerce boom can potentially be utilised as tool to drive growth both online and offline.

On the other side of the spectrum, if we consider the airline industry, the underlying issue facing the European airline industry is that the external pressures of falling profits and increased competition in the global marketplace has created an internal pressure regarding staffing needs and working arrangements. This in turn creates internal and localised issues regarding employment and the obvious course of action for management as been to address internal employee relations and personnel management as evidenced by British Airways (Pascale, 2000).

Firstly, both Ryanair and British Airways’s market position appears to link in with the notion of the “high performance work organisation” due to the industry it operates in and market position. ​​ Pfeffer argues that fundamental changes in business environment such as those facing the airline industry are the central catalyst for changes in the work organisation (Pfeffer, 1995). In particular, Pfeffer refers to market maturity in the markets, accompanied by increasing competition and fragmentation of customer demand and the market liberalisation, which in turn has reduced product market barriers as evidenced by the intense global competition faced particularly by British​​ Airways in the face of Ryanair’s business growth fuelled by lower operational costs.

To this end, the globalisation of competition has highlighted the need British Airways and recently Ryanair to find novel methods of maintaining brand position and internal management of costs, which in turn supports the central argument of Ryals and Knox pertaining to the necessity of integrating CRM in a consumer centric marketplace.

Furthermore, due to the aim of British Airways in particular to continue global dominance in the airlines industry supports the proposition in many studies, which indicate that “high performance work organisation is most likely to be used by large companies” (Reinert, H., & Reinert, E.S., 2006). ​​ Accordingly, as part of business strategy, both airlines arguably need to preserve competitive intensity exposure through CRM (Porter, 1995).

Moreover, has highlighted in Chapter 1, it is submitted that​​ the result of globalisation and digitisation of retail has increased the importance of CRM. ​​ For example, this is further evidenced by the British Airways loyalty points and Airmiles scheme. Additionally, Ryannair was one of the first big companies to position itself as offering low cost flights to Europe with online booking facilities and advance booking discounts.

Moreover, the “customer” includes a wide definition including vendors, channel partners, or virtually any group requiring information. ​​ This is further evidenced by reference to Ryannair’s proliferation as an airline.

To this end, Mayer highlights how Ryanair Holdings plc “operates the first of all founded low cost scheduled passenger airlines in Europe. Starting in 1985 Ryanair followed the example of Southwest Airlines, introduced the low cost concept in Europe (Mayer, 2008). As such, Ryannair has become a market leader in the low cost airline market by continuing to maintain low operating costs.

Moreover, Ryanair’s mission statement further highlights the influence of CRM, which states:

“Ryanair will become Europe’s most profitable lowest cost airline by rolling out our proven “low-fare-no-frills” service in all markets in which we operate, to the benefit of our passengers, people and shareholders (Ryanair Report, 1997).

Additionally, in its 2007 Business Report, Ryanair asserted its stated objective to establish itself as “Europe’s leading low fares scheduled passenger airline through continued improvements and expanded offerings of its low fare service”. (Ryanair, 2007: Strategy pp.1-4).

In terms of the analysis of the internal environment, Mayer highlights how “Ryanair, with its 35 Mio passengers in 2006, is the market leader in the intra-European airline market – close packed with Easyjet and followed by Air Berlin” (Mayer, 2008). ​​ Mayer further argues that the central reason for this is the fact that Ryanair operates within a tight and compact organisational structure and with a clear strategy. To this end, an underlying of the airline is the big financial reserves it has retained, which is estimated on 2 billion Euros (International Herald Tribune, 2006). As such, it is commented that these savings and the airline’s profitability enable it to survive in a crisis or compete in price flights as required by the globalisation of the marketplace: “This economical advantage result from its learning curve in aggressively optimising production costs” (Mayer, 2008).

Indeed, Ryanair to this extent has retained its low costs because of outsourcing services to specialised operators and enable aggressive competitive behaviour towards suppliers such as ground handling and airports.

In terms of the customer environment, the main target customer base is private purpose travellers within Europe. As such, this market is inherently price sensitive with a lower income bracket along with other preferences (Mayer, 2008). In implementing a targeted CRM strategy, it is arguable that the Ryanair success story is testament to the proposition that “flying has developed to be a daily commodity like going by bus” (Mayer, 2008).

On the other side of the spectrum, it is posited that individuals are happy to save business travel costs by using Ryanair for short haul flights, thereby highlighting the need to address the continuous changes in consumer behaviour, particularly in the current economic climate. ​​ Indeed, Mayer comments that “an increasing part of the customers purchase their flight tickets either on the airline’s website on their own rather than they authorise the travel agency to book for them” (Mayer, 2008).

If we consider the external business environment factors, it is evident that “people become more price-conscious in their consumption, which increases competition in the market, whereof Ryanair as a​​ cost-effective​​ operator profits from. Furthermore, Ryanair uses the internet as new technological advancement to reduce its distribution costs” (Mayer, 2008).  ​​​​ This is particularly evidenced by the online booking system and cutting out of the travel agent intermediary. Moreover, the heavy online presence enables Ryanair to keep its operational costs low.

Moreover, whilst Mayer makes the point that EU liberalisation of the airline industry has provided a fertile environment for commercial exploitation; the particular success of Ryanair is its low operating cost, understanding of CRM and ability to sustain low cost flights over competitors. As an example, Figure 3 provides a detailed SWOT analysis of Ryanair’s business strategy operations, which in turn highlights some interesting observations about the impact of globalisation on tourism and the travel industry.

Figure 3

Strengths

 

Brand name

Strong Revenue Growth

Business Strategy​​ 

High seat density​​ 

Fast turn around

Small headquarters

Benefits from low airport charges

Low distribution costs (90% bookings via Internet)

Weaknesses

 

Fuel costs

Some secondary airports too far away

Decline in operating margin​​ 

Weakening employee relations

Poor service

Poor press

Opportunities

 

Growing demand for​​ low-cost​​ airlines

Expected market adjustment​​ 

Launch of new routes

Fleet expansion​​ 

Opportunities by EU enlargement​​ 

Low-cost​​ flights on long haul as a new market

Threats

 

Fluctuating oil prices

Dependence on economic cycle

Fierce competition, market consolidation

Threats to security

EU regulations on denied boarding compensation

Involvement of airlines in EU emission trading system

Source Datamonitor 2007: pp21-25.

It is submitted that essentially Ryanair have been able to maintain consistency in production cost efficiency within an increasingly fragmented marketplace, which in turn has sustained leading market position. ​​ Moreover, Ryanair’s objectives further highlight the various profit opportunities from the market: “however, the airline is always threatened by the rise in fuel prices and the general dependence of the airline industry on the economic cycle, but keeping its good cost structure and pursuing an elaborate fuel risk management could limit the threats in competition” (Mayer, 2008, 5).

The central marketing goals of Ryanair are to attack the big network carriers such as British Airways and become the largest airline in Europe (Ryanair, 2007). As such customer profiling and effective CRM is essential (Swarbrook & Horner, 2006). To this end, Ryannair positions itself amongst the price conscious punter and Mayer comments how as a result of globalisation “awareness of different passenger types requires marketing campaigns that cover all categories of potential customers” (Mayer, 2008:6).

Additionally, price flexibility has proved vital and will continue to do so in the difficulties of the current markets. Moreover, in terms of the product, the “idea of Ryanair is to keep the product as simple as possible. Its passengers travel ticketless in one class without any seat reservation. It does not offer free​​ inflight​​ service with drinks or meals….​​ Ryanair represents the pure​​ low-cost​​ airline concept with no frills at all and narrow seating onboard – simply passenger transportation from A to B as​​ point-to-point​​ air service on short-haul routes (Mayer, 2008).

Indeed, arguably of most importance to Ryanair’s competitive position in the European airline industry is the fact that it appears to have mastered the underlying issue of price the key element of its branding and brand value. Indeed, the “price is more important to the customer than the product itself” (Mayer, 2008). ​​ Within this key aspect of the brand, Ryanair exploits the commercial value of the brand by offering differential pricing schemes off peak and advance booking savings.

Additionally, in terms of market placing, in 2006 it is estimated that approximately 98% of tickets were sold online over the Internet booking​​ system (Van Broekhoven, 2006). Additionally, in terms of the marketing mix, Ryanair has “recognised that an innovative communication mix is a key factor for cause for generating demand it is essential to create an awareness of its service (Shaw, 2004).​​ 

If we consider British Airways’ 2007/2008 Annual report and accounts (available at​​ britishairways/cms/global/microsites/ba_reports/pdfs​​ accessed on 17 May 2009) it was asserted that “our strategy set out our priorities for the three years to March 2010, the plan would see us established in Terminal 5, and subject to our financial performance, allow us to order new aircraft for our fleet” as part of its global expansion plan.

Moreover, Hamel & Prahalad argue that the global presence of British Airways is an excellent example of single brand positioning strategy and the need for product repositioning (1996). Indeed, the global nature of British Airways’ focus is evidenced by a number of key partnerships. For example, a key part of British Airways’ globalisation strategy was its partnership with US Air, to gain access to the internal US market, which was opposed by competitors (Douganis, 2001).

British Airways Management has hit the headlines over years and Pascale comments that whilst its strategy has sometimes proved controversial, a consistent thread of sustained growth within the challenges created by globalisation has been the successful interrelationship between its brand position strategy and CRM (Pascale, 2000). Arguably, it is precisely this focus of the airline that has enabled it to retain its market position in long haul international flights.

Indeed, Hamel and Prahalad argue that only four of the world’s top companies have reinvented and regenerated their strategy to such effect and as such, British Airways is a prime example (1996). Moreover, Hamel and Prahalad specifically refer to the role of chief executive of BA, Sir Colin Marshall as instrumental in reinventing the airline brand and maintaining “unfailingly high standards” (1996).

Arguably the previous Concorde service highlights the reinvention ethos of the British Airways brand. Through the niche marketing approach, British Airways previously provided the Concorde Service to a small segment, namely the “mega wealthy or extremely urgent traveller who wants personalised ultra-luxury service” (Flouris et al, 2006). ​​ However, Flouris et al argues that the strategy did not work for British Airways due to the high operational​​ cost and​​ lack of consumer​​ demand (Flouris et al, 2006).

Moreover, Pascale further develops this argument and posits that the British Airways brand constantly searches for areas “that can add new levels of customer service that yield more in terms of loyalty and price realisation than they cost to create” (Pascale, 2000). For example, as stated above, the airline offers prime free mileage programmes “but more as a bonus than a bribe… to create the world’s first truly global airline” (Pascale, 2000).

Indeed, after privatisation in 1987, Marshall expressed the desire to become the “world’s favourite airline” and Hamel and Prahalad refer to this as “a strategic intent”, which facilitated the rapid increase in British Airways’ customer rating (1996). ​​ To this end, Pascale comments that BA’s service ranks among the best and that it is “one of the most profitable airlines in the world” and that “Marshall began leading British Airways down that road by going to those who dealt closely with customers and asking them what needed to happen” (Pascale, 2000).

However, the exploitation of the market by industry players such as Ryanair has made inroads into the market, particularly heightened by Ryanair’s intention to enter the​​ long-haul​​ flight market. Accordingly, Pascale presses the need for British Airways to protect margins and avoid deep discounting and therefore leverage the resources in a manner geared towards customer demand, which further highlights the central importance of effective CRM in contemporary business strategy.

Chapter 5: Research Methodology​​ 

5.1. Introduction

In​​ ensuring an analytical and lateral approach to the topic,​​ which covered a broad range of different sources relating to the topic, it was​​ imperative to​​ execute​​ a​​ logical​​ and​​ multi-layered plan.  ​​​​ This was in turn used as​​ the foundation from which to​​ develop the literature review and discussion regarding integration of CRM into business strategy.

5.2. Research Philosophies

The first stage was to identify the topic and clarify the parameters of the research question. ​​ The topic title requires a consideration of the definition of CRM and its use in assisting business growth. ​​ To this end, it was vital to contextually consider the central factors impacting business growth and profitability in the contemporary multi-channel retail environment, which formed a starting point to consider the benefits of CRM.  ​​​​ Appurtenant to the consideration of the contemporary retail business model was a contextual consideration of various industries in the retail sector.​​ 

The result was the selection of dichotomous industries such as the technology sector, supermarkets, high street shops and the tourism industry, which enabled a comparative analysis to be undertaken to support the central proposition in the paper that CRM is a necessity in the​​ multi-channel​​ retail business model.​​ 

This is further evidenced by the contextual research pertaining to the impact of the globalisation on travel agencies and the airline industry, which resulted in a focused discussion of consumer control via the globalisation paradigm and its interrelationship with the fragmentation of the conventional marketplace.​​ 

Furthermore, the focused approach of the works of Swarbook and Horner, Ryal & Knox, Laing et al and Hamal & Prahald in particular from both an international and localised level was vital in considering the impact of​​ globalisation on tourism and highlighted the need for a contextual and lateral approach.​​ 

Accordingly, the research strategy was rephrased to firstly consider the definition of globalisation and its concomitant impact on the traditional bricks and mortar retail business model versus the digital multi-channel business model. Then this was to be accompanied by a contextual consideration of the concept in terms of the central issues impacting the chosen retail sectors for comparative contextual analysis.

For example, with the travel and tourism industry, relevant factors to consider in relation to CRM strategy were various sectors including travel agencies on one side to airlines on the other. ​​ The final stage of the research strategy was to highlight the consistent trends of opinion in the literary debate pertaining to the empowered customer, CRM and business growth strategy. ​​ To this end, it was vital to undertake a contextual and lateral analysis of the common trends and areas of research under a quantitative approach with a detailed literature review.

The second stage was to undertake preliminary background research, utilising the references cited in the Bibliography.

The preliminary research stage also involved undertaking use of spider diagrams to consider the relationship between the various factors associated with the integration and potential benefit of CRM in an organisation. Furthermore, I undertook mind mapping in order to develop areas of research which may be followed going forward, which is demonstrated by Figure 3 below:

Figure 3

I further undertook a SWOT analysis of integration of CRM as part of organisational growth strategy:

 

 

Strengths

1. Change to traditional marketplace provides opportunities for new businesses in the industry with low​​ start-up​​ costs

2. Strong Revenue Growth

3. Customer Loyalty​​ 

4. Repeat Business

5. Low distribution costs​​ 

6. Increased consumer control

 

Weaknesses

1. Segmentation of marketplace

2. Changing consumer habits and trends

3. Potential price hikes.​​ 

Opportunities

1. Growing demand for bespoke packaging

2. Exploitation of continuing trends in consumer habits

3. Potential creation of new “blue ocean” markets to increase competitive edge

4. Use of CRM as market entry into international territories.

5. Low​​ start-up​​ costs

Threats

1. CRM can exploit business opportunities but threaten traditional employment models

2. Market saturation

 

Additionally, I utilised the literature review to ascertain trends and highlight perceived problem areas in existing research.​​ 

This involved the use of library cataloguing in order to identify appropriate books and media. ​​ This further included the use of established research methodology tools such as OPAC catalogues where all books and other media, as listed using the Dewey decimal classification system (Bell, 2005).​​ 

Furthermore,​​ bibliographies of sources were particularly useful.  ​​​​ Additionally, reference to​​ periodicals, academic abstract services and indexes also assisted in​​ targeting​​ research papers as well as up to date or detailed reports which were not found in academic books on the subject. ​​ For example, the Oxford University Abstracts service (oxfordabstracts) enables cost effective, subject specific abstract and paper management, which is utilised by academic institutions, societies, associations and professional conference organisers worldwide.

As part of the preliminary research phase, the use of Internet data services such as INFOTRAC was particularly useful (for the comparative analysis with international data) as the system includes online catalogues of articles that can be searched by subject or key word.​​ 

Chapter 6: Conclusion

The above analysis highlights that the correlation between globalisation and the digital revolution has fundamentally altered the traditional retail business paradigm. As such, it is evident that the proliferation of the Internet and e-commerce business model has played a vital role in reshaping marketing and distribution channels in retail companies, thereby reformulating the nature of supply and demand. ​​ 

A prime example is the reshaping of the traditional travel industry business model, leading to fragmentation as a result of increased consumer control. Moreover, changes in consumer habits and trends mean that an online presence is not sufficient per se.​​ Indeed,​​ on the cusp of the digital revolution Poon commented that “Tourism involves the movement, accommodation, entertainment and general servicing of clients from one geographical location, to another. These activities must be combined differently, integrated and “packaged” to suit complex and rapidly changing consumer requirements”​​ (Poon 1993).  ​​​​ Accordingly, “The agent who can get you on that sold out flight, or who can knock US $4,000 off that international business class ticket, will not only survive but will prosper because they know how to add value” (see​​ aap).

Accordingly, the key for travel agencies going forward is to reformat marketing strategies, which in turn must identify consumer needs at a profitable margin, with an appropriate interweaving of product, price, placing and promotion as part of the strategy. However, whilst declining profits and mergers driven by necessity clearly point towards the reduction in importance of the high street travel agent, it is far too premature to signal the death knell of the agency within the tourism business. ​​ The Internet has clearly been a central factor in opening the market and the e-commerce business model has reduced the monopoly of the travel agency as central intermediary in the distribution chain to consumer. ​​ Moreover, the evolution of travel demands and consumer habits has moved away from the bread and butter income of the package holiday, yet statistics still demonstrate a significant marketplace wanting personal service offline.​​ 

Additionally, the comparative analysis of dichotomous industries ranging from the technology sector and tourism industry on the one hand to the archetypal high street chain on the other highlights the common underlying thread; namely the creation of multiple retail channels and commercialisation of the empowered consumer, moving between these channels. As such, it is submitted that segmentation of the traditional marketplace has become increasingly shaped by consumer trends, which has pressed the need to integrate CRM as part of business growth strategy. This in turn has created a novel marketplace, where the consumer is effectively the market, thereby creating novel business opportunities. ​​ A prime example is the Tesco venture in South Korea, where CRM was utilised as part of market entry strategy in international expansion plans.

Accordingly, the contextual comparative analysis of diverse industries supports the proposition that CRM is essential to integrate into organisations as part of growth strategy.  ​​​​ However, businesses must understand the​​ contemporary marketplace and consumer trends in order to operate an effective CRM strategy as CRM is arguably an imperative component to ensure the correct distributive mode of product placement as highlighted by the success of the Apple iPhone.​​ 

For example, in the 2007 AMR Research Supply Chain Top 25 report, Apple received a composite score of 6.40 in the review of its supply chain management, with Nokia narrowly securing a lead over Apple. ​​ Importantly, AMR Research highlight the point that “Companies in this year’s supply Chain top 25 are able to respond quickly and efficiently to opportunities arising from market or customer demand. It is not simply a matter of cutting costs” (at​​ appleinsider/articles/07/06/01/report_ranks_apple_no_2_in_supply_chain management.html), which directly correlates to the proliferation of multi-channel retailing.

Furthermore, the observations of the AMR Research report indicate that whilst supply chain management is clearly imperative in business operations strategy, the success of branding and product placement is inherently dependent on the efficacious integration of prior CRM strategy to ensure that product placement is synchronised with consumer demand.​​ For example, this is further evidenced by the success of the Argos Direct supply chain as a result of effective implementation of prior CRM strategy, which has demonstrated perfect synchronicity with online customers and distribution. As such, organisational of CRM is imperative.

Alternatively Weele postulates that an essential component of supply chain management is the just in time strategy (JIT), whereby products and materials are all produced exactly at the right time (Weele, 2005: 218). ​​ Weele further argues that in considering the JIT approach “traditional buyers must radically alter their views and policies on two important aspects, in order to adopt this approach:

  • Willingness to consider single sourcing as an appropriate strategy;

  • Willingness to arrange longer term contracts instead of “one-shot” deals” (Weele, 2005: 218).​​ 

Directly correlated to this is the economic order quantity approach which “takes into consideration the costs of placing an order (setup costs) as well as the costs of carrying resulting inventory” (Cimorelli, 2005:41). However, Cimorelli highlights the need for caution with the EOQ approach and comments that the EOQ approach in reality is most effective as a short term strategy approach in cost minimisation of the “current state” (Cimorelli, 2005: 41). As such, these reservations are further supported by the fact that product demand will inherently be variable, which in turn lends support to a JIT approach in the long term (Cimorelli, 2005: 41).​​ 

This further supports the importance of CRM as an essential component business strategy. Moreover, whilst academic debate is slightly polarised as to the importance attached to various elements of the supply chain model in operations management; it is submitted that the increased profits and success of the Argos Direct business for example, along with the 2008 rise in profits in difficult market conditions demonstrates that effective supply chain management is inherently dependent on the smooth interrelationship of the various sub-elements such as CRM and is vital to contemporary multi chain retail strategy.

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