Orbitz External and Internal Environmental Analysis

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Environmental Analysis of Orbitz

External Environmental Analysis

The external environment includes several factors that have significant impact over the business operations. Following are the most important factors that are related to the external environment of the business:

Remote factors: Remote factors include the factors related to economical and technological aspects. The US economy is quite favorable for Orbitz as number of online travel buyers is increasing continuously. US is the largest economy in the world that has a significant impact over the businesses has they have lot of opportunities to expand their business. But at the same time, the current recession has affected the income level of people that reduced significance of business to expand their business. But at the same time, declining interest rates is posing opportunities for business as it is enabling the people to get more finance at lower rates that is causing an increase in the liquidity and spending of the people on travel activities. It is because the spending on travel and tourism has increased by 3.2 percent in the second quarter of 2011 due to increase in GDP by 2 percent for same period (Bureau of Economic Analysis, 2011).

The increasing spending on tourism is also causing an increase in tourism prices that is significant to increase revenue and profitability for Orbitz. Technological aspect is also important for online travel organizations in US environment. In US, most of the people are techno savvy and use internet and other tools to make their purchase decisions. In 2009, it was found that most of the travel organizations in US are getting failed due to loss of transactions and use of less effective technologies (Travel Blackboard, 2009). Orbitz has the opportunity to improve website recognition by improving its promotion on radio, TV and other aspects (Orbitz Worldwide, Inc, 2010). It also provides opportunity to attract other partners as they could perform under their website with their own brand by making a shared agreement with Orbitz.

Industry factors: Industry factors such as availability of substitutes, entry barriers etc also have significant impact over the business operations. In US, entry barriers in travel industry are in moderate form as there are several organizations that are operating in the travel industry and each has distinct position. The capital investment requirement for online travel industry is not much higher and switching cost for customers is also lower that create a threat for Orbitz as new firms could enter that will increase overall competition and may reduce market share and customer base for it (Enz, 2009). But on the other hand, the access to distribution channel and partnership with hotels, car renters etc create barriers for the new firms in the industry. Thus, there is a threat from this factor for Orbitz.

The threat of substitute is higher for travel companies in US travel industry. It is because there are several travel companies that provide their services through internet and in traditional way. People prefers the traditional way for their travel plans more due to increasing fraudulent activities in internet world. Hotels and airlines also provide some packages that influence the travel plans of travelers (Wang & Pizam, 2011). It has a significant impact over the travel firms in the industry as customers tend to move towards the services of hotels and airlines as it reduces their overall cost of traveling. These factors have a significant impact on overall industry.

Operating factors: Operating factors include the external factors that affect the operations of a business within the industry. The travel ...