Impact of Corporate Tax on TUI's Business Environment Post-Brexit Case Study

Introduction - A Strategic Analysis of TUI’s Internal, Micro, and Macro Environments

The business environment is a total of all forces including internal and external that impacts the activities of the business. The external factors include political, social, legal, technological and environmental factors. Competitors, employees, rules, policies are example of internal environment. The aim of the present study is to furnish the overview of the TUI Group and impact of increasing corporate tax on the internal, micro and macro environment of the company.

Internal business Environment- The internal environment is the sum total of all factors such as inside the company like current employees, management mainly the corporate culture that defines the behavior of the employee (Afsar et al, 2020). This environment consist structure, resources, culture that represents the inner working of the company.

Micro Business Environment- It refers to an environment that has direct contact with the organization and that impacts the day-to-day activities or performance of a business. It includes customers, competitors, employees, shareholders, suppliers and so more.

Macro Business Environment- It refers to the external factors of the environment that significantly impact the success, strategies and decisions of a business. It includes political, social, and technological and more factors that remains outside business. This factors not easily controlled by the company.

SECTION 1

Business Overview

The TUI Group is one of the world`s main tourism company. The TUI means Touristic Union International, conduct its business activities in the public and private sector both. The company has a headquartered in Hanover, Germany. Under the Umbrella of the company, it operates 400 hotels, 16 cruise ships,1200 agency of travel, have a digital platforms for above 160,000 tours, 5 airlines with 130000 aircrafts as well as provides destination services in the main holiday countries in all over the world. It furnishes variety of travel and holiday services. The Executive Board of the TUI includes five members, twelve members in the Executive Committee and twenty members in the Supervisory Board.

The TUI Group earn annual revenue in the year 2023 was €20,665.9 million; the company earns a profit of €455.7 million. It has number of employees working in the company including 65,413 (Annual Report, 2024). In the year 2023, the operations of the TUI in the UK, Ireland and Nordic countries, it recorded the large number of customers like 7.4 million. As the company operates in the tourism sector, it leads to cater to the customers around 21 million in a year. The companies conducting business in an environment has to face several challenges as well as competition, the company has to evaluate the activities of its competitors to remain leading in the field of business. The competitors of the TUI includes Make my trip, Expedia, Hopper, Webjet, Qunar, Travix, Adventure and so more. The direct competitors of the TUI involve Jet2holidays, Thomas Cook, Loveholidays. On the Beach. The TUI is a large company, the organizational structure of the company aids to build a positive environment within the company. The structure of the company motivates communication, fairness, risk-taking, teamwork and creativity in the company. It has open-door policy in which the feedback from all the employees considered. This leads to influence the employees to bring innovative ideas, when employees idea encouraged this enhance them to perform better. The TUI used democratic leadership style for its company as this style motivates its employee to participate in all process and share ideas, opinion and feedback to solve the problems and challenges of the company (Hilton, Arkorful and Martins, 2021). This kind of leadership style motivates employee and with the help of this they feel valued, this aids to increase their performance, aids in increase revenue of the company as well as attaining the goals of the TUI.

SECTION 2

Impacts of increment in corporate tax after Brexit on internal environment of TUI

The internal environment of the TUI includes employees, manage, resources, goal and objectives. The Brexit is an removal of the United Kingdom from the European Union (Sekścińska and Piórkowska, 2020). There is increment in the corporate tax after the Brexit. This leads to impacts the profitability of the TUI Company because it has to pay more tax than before. This directly imposes impact on the employees, partners, structure and organization of the company. Due to this, the employee get less money or remuneration as the company profits decline, the partners of the company will get few money as there are small part retain as profit after paying corporate tax.

The increment in the corporate tax leads to increase cost of operations of the TUI, the leaders and managers of the company needs to take some important decision to decline this cost by reviewing the company framework, policies, rules and regulations (Adedoyin et al, 2023). It will impact the companies working; due to this the company needs to emphasis on reducing the cost of operation. Thus, it is a biggest disadvantage for the company as it declines profits, leads to de-motivate the employees and partners as they get less income.

Recommendations for recover from challenges of internal environment

As the TUI is facing challenge of increasing cost due to increasing in corporate tax after Brexit, this significantly impact its profit earning capacity. The company need to make focus on reducing cost of business activities such as recruitment, advertising for little period of time (Barabanova, Bohatyryova and Gorina ,2020). This aids the company to maintain the situation of increasing cost and after evaluating the strategies of the reducing cost the company can with steady recover from this situation. The TUI reduce it cost by preparing a plan, recognizing and declining the unnecessary expenses leads to save money of the company.

The ultimate burden of the increasing corporate tax shifts on the customers of the TUI in terms of increasing price. To overcome this company should make sure that it provide quality services, if it failed to done this than the consumer may shift to other company. It will be harmful for the reputation of the TUI. Thus, by given proper emphasis on cost cutting strategy the company can overcome the impacts of increasing corporate tax on the internal environment of the company.

SECTION 3

Impacts of the increasing corporate tax after Brexit on the micro-environment of the TUI

The micro–environment of business includes factors such as customers, suppliers, competitors, shareholders, employees. As the removal of UK from the European Union leads to increase the corporate tax. The tourism company TUI has to pay more tax to the government. This increases the cost of operations of the TUI that significantly impact the customers of the company (Susan ,Abena and Kelly,2020). There is increase in the price of the tickets of the aircrafts as well the cost of services. The increment in the prices leads to decrease the demands for the TUI which significantly impact its revenue and profits. This increment in corporate tax make difficult for the company to do its operations in the cost effective manner.

The employees and shareholders also affected by this as they get less amount of money in terms of remuneration and return on profits. As the Brexit, increase the cost of importing supplies, this leads to increase the cost of fuel for the TUI, this one of the main factor that affecting the regular activities of the TUI as the tourism sector is depend on the supply (Bakker et al,2022). Thus, it impacted the profit earning capacity of the business.

Recommendations for recover from challenges in Micro-environment of TUI

The TUI has to take corrective actions to overcome the situation of decreasing cost of operations. As the increasing corporate tax increase the prices of the tickets, this make the decrease in demand. Thus, the company makes some better decisions regarding providing better services that provide a competitive advantage to the company that attracts the large audience towards the company (Adedoyin, 2021). When a company offers good services, the customers prefer to choose TUI Company than other competitors. This helps the company to maintain its profits so that able to pay good amount of money to its employees and shareholders.

The TUI also makes a strategy to cut the cost related to fuel. As per the International Air Transport Association, fuel involves 30% of operating cost for the airline. By adopting the innovative technology such as SITA OptiClimb lead to deliver fuel and reduced emission. This technology aids to save 5.6 million tons of carbon in a year. When a company works towards protecting the environment by using sustainable fuel and techniques to reduces carbon emission, than it leads to attract more customers as people are more aware about the environment.

SECTION 4

Impacts of PESTLE factors on the operations of TUI

There are various factors that remains outside a company but impacts the operations of TUI.

• Political- The political factors include rule, regulation and policies of the different countries. As TUI is a company that deals in tourism operates its business in different country, it needs to pay tax according to the rates and policy off the different countries (Aburumman, 2020).
• Economic- The economic factors include interest rate, inflation and so more. In UK, the airlines that operating at low cost is increasing that negatively impact the TUI operations.
• Social- The social factors includes beliefs, values and taste and preference of the customers. As the TUI operates at different locations all over the world and the needs and preference of customers of different are also different. This impact TUI significantly.
• Technological- In the times of digitalization, the use of technology is important for the TUI. It needs to invest much capital in the research and development to give more benefits and good experience to its customers (Buijtendijk, van Heiningen and Duineveld, 2021).
• Legal- the TUI has to follow several rules imposed by the government to offer travel services to its customers. To operate business in the European country, the TUI need permit and has to fulfill certain criteria (Alina and Fabrizio, 2021). The company requires license to furnish its services in different countries.
• Environmental- The TUI or aviation industry has a huge impact on the environment. Thus, reducing the environmental footmark is one of the main areas of TUI (George, 2021). To reduce environmental impact, the company plan to decline use of plastic straws from the cruise ships.

Recommendations to recover from challenges of macro-environment of TUI

The TUI needs to analyze the political conditions as well as tax rates and policies of different countries before operating their operations. This aids the company in deciding the price of the services so that company remains at profit after pay tax at different rates (Slocum Aidoo and McMahon, 2020). The company should adopt the technology, this will aid the company in providing better services to its customers while keeping their cost minimized. As the needs and preference of each country people is different, the company after analyzing the preference charge price and provide services accordingly. This aid the TUI in attracts more customers. Before operating its operation in different country, the company should obtain required permission so there is no problems arise for any law of breach.

Conclusion

To sum of all, it is concluded that to operate the business successfully the company need to analyze its business environment. It means the internal and external factors so that company efficiently achieves its goal. The present study is based on the impacts of the corporate tax after Brexit on the micro, internal and macro environment of TUI. The company should use cost reduction strategy to improve its operations at micro and internal environment. The company should invest in research and development and make use of technology to enhance its operations and scalability and to improve experience of its customers.

Recommendations of strategies

The company should make an annual budget to estimate the cost and revenue of the business. This strategy aids the company to overcome the problem related to the cost so that there is no direct impact on the profits of the company (Pencarelli, 2020). Also, the company needs to evaluate the market conditions that have significant impact on the operations of the TUI, this helps the company in overcome the situation in the advance. So, there is no impact on company directly. Thus, by evaluating the business environment the TUI can conduct its business successfully.

REFERENCES

Books and Journals

• Aburumman, A.H., 2020. The concept of global governance in tourism franchises: a case study of TUI group. Entrepreneurship and Sustainability Issues, 8(2), p.1321.
• Adedoyin, F., 2021. Analysing the effect of taxation on consumer behaviour in the tourism industry (Doctoral dissertation, Bournemouth University Business School).
• Adedoyin, F.F., Seetaram, N., Disegna, M. and Filis, G., 2023. The effect of tourism taxation on international arrivals to a small tourism-dependent economy. Journal of Travel Research, 62(1), pp.135-153.
• Afsar, B., Maqsoom, A., Shahjehan, A., Afridi, S.A., Nawaz, A. and Fazliani, H., 2020. Responsible leadership and employee's proenvironmental behavior: The role of organizational commitment, green shared vision, and internal environmental locus of control. Corporate Social Responsibility and Environmental Management, 27(1), pp.297-312.
• Alina Mihaela Dima & Fabrizio D'Ascenzo (ed.), 2021 "Business Revolution in a Digital Era,"Springer Proceedings in Business and Economics, Springer, number 978-3-030-59972-0, December
• Bakker, J.D., Datta, N., De Lyon, J., Opitz, L. and Yang, D., 2022. Post-Brexit imports, supply chains, and the effect on consumer prices. UK in a Changing Europe.
• Barabanova, V.V., Bohatyryova, G.A. and Gorina, G.O., 2020. Marketing mechanisms of tourist industry development in an unstable environment. Journal of Geology, Geography and Geoecology, 29(4), pp.625-636.
• Buijtendijk, H., van Heiningen, J. and Duineveld, M., 2021. The productive role of innovation in a large tourism organisation (TUI). Tourism Management, 85, p.104312.
• George, R., 2021. The Tourism and Hospitality Marketing Environment. In Marketing Tourism and Hospitality: Concepts and Cases (pp. 183-219). Cham: Springer International Publishing.
• Hilton, S.K., Arkorful, H. and Martins, A., 2021. Democratic leadership and organizational performance: the moderating effect of contingent reward. Management Research Review, 44(7), pp.1042-1058.
• Pencarelli, T., 2020. The digital revolution in the travel and tourism industry. Information Technology & Tourism, 22(3), pp.455-476.
• Sekścińska, I. and Piórkowska, A., 2020. Does Brexit mean Brexit? An analysis of the semantic field of the lexeme Brexit. Crossroads. A Journal of English Studies, (31 (4/2020)), pp.66-87.
• Slocum, S. L., Aidoo, A., & McMahon, K. (2020). The Business of Sustainable Tourism Development and Management. Routledge. https://doi.org/10.4324/9781351031066
• Susan L. Slocum, Abena Aidoo, and Kelly McMahon (2020) The Business of Sustainable Tourism Development and Management. London, Routledge.

Author Bio

Serena Rogers   8 years | PhD

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