Strategic Management

Macau Express Travel Limited

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Introduction

Tourism plays an important role in Macau. Every year, tourism brings direct or indirect income to solidify the foundation of our government’s revenue. A city no larger than a needle point on a world map contains highly active travel agencies catering inbound and the outbound tourists from the neighboring regions. In this project, we are to study a company in Macau applying the concepts and theories of Strategic Management. Macau Express Travel Limited is the chosen company due to its relatively new establishment in Macau. Serious competitions in Macau from the same industry, there is a lot to study and adapt to various challenges to maintain its stability in the industry. We will focus on the company’s current situation emphasizing on their investment and profitability, current missions and objectives, an overview of the corporate governance giving the background of the management characteristics.  We will analyze on the opportunity and threats as well as strength and weakness and strategic factors from SWOT analysis. Finally, we will discuss upon alternatives and evaluations as well as conclusion.

 

Background of the Corporation

Xpress Group Limited is a limited liability company incorporated and domiciled in Hong Kong. The name of the Company was changed from “China Credit Holdings Limited” to “Xpress Group Limited” with effect from 28 May 2007. This coincides with the Group’s core focus in travel and hospitality businesses with a vision of becoming a leading travel and hospitality service provider serving global communities. The Company’s shares are listed on The Stock Exchange of Hong Kong Limited as a stock code of 185. The principal activities of the Company and its subsidiaries include investment holding, property investment, travel related services, hotel operations, securities investments, treasury investment and credit card business. The acquisitions of subsidiaries in Japan are in line with the Group’s strategy to expand its travel, leisure and hospitality business.

Macau Express Travel Limited is under the Group’s Travel Division, and is a relatively new travel agency in Macau due to the recent establishment on 26 Jan 2007. The service area focus on the outbound and inbound tourism which include group tours to and from Southeast Asia, worldwide air ticket and hotel package bookings, air tickets bookings, hotel room reservations, travel visas, travel insurance and as an appointed agent of Jetour Holiday. Macau Express Travel Limited is at the development stage of its business and is a relatively small company with 17 full-time staffs. It also provides opportunities for higher level education students as Interns to gain beforehand experience of the travel industry.

Macau Organizational Chart

Current Situation

Financial Performance

Xpress Group achieved historic highs in turnover of HKD689 million, representing an increase of HKD244 million or 55% from the corresponding period last year. Net profit amounted to HKD40.1 million, compared to HKD53.1 million for 2006. Earnings per share amounted to HKD 2.35 cents (2006: HKD 3.27 cents). According to the annual financial report that the Accounting Manager of Macau Express Travel Limited provided, Macau Express Travel Limited generated around HKD 26,400,000 sales in 2007 and gross profit amounted to HKD1,056, 000, it is 4% of total sales. Since Macau Express limited was newly established in 2007, the corporation faced a lot of expenses in the past year. There is a loss of HKD 150,000 at the end of the year after deducting the liabilities including the depreciation and rent. The return on investment is -0.083%.

Corporate Outlook

Mission: Xpress Group focuses on the strategic development of the entire corporation through strategic partners and alliances, the development of their own brand names to achieve international recognition and achieving economies of scale for their existing businesses.

Strategy: Since the Xpress Group will continue in its direction to diversify its business risk through the expansion and development of its existing businesses in travel related activity outside of Hong Kong, Macau Express Travel Limited, as a branch of travel agency, plays an important role in Macau’s market. Recently, Macau Express’s travel businesses still mainly focus on selling airline tickets, packages and tours. The Board and Management will also continue strategy of focusing on developing links between travel operators in Japan, Singapore, and Korea etc in order to expand more outbound tours in foreign countries. Moreover, Macau Express Travel Limited will intend to advocate of tailor-made travel, in order to capture new market segments in this competitive market and satisfy different demands.

Policies: The Corporation seeks to create synergies in the activities and businesses it currently has and will undertake in future. Xpress Group’s healthy financial status, together with the continued growth of the businesses and prudent investment strategies, makes the corporation highly competitive.

Objective: The goal of Macau Express Travel Limited is striving to take advantage of new opportunities and develop new strengths and strategies to thrive in a different world. As Macau is facing a prosperous economy, the household income becomes higher than before so that people are willing to spend more on traveling, includes outbound, inbound, domestic tours and individual packages. Therefore, the top management of Macau Express Travel Limited believes that they can snatch at this opportunity and its strong financial support from Xpress group, which can really help them to make their objectives more feasible. Macau Express Travel Limited thinks that they can have breakeven within 5 years and starts to be profitable in tourism business from the 6th year.


Corporate Governance

  • Board of directors

The Board of Directors is presently composed of nine members, comprising five executive Directors, one nonexecutive Director and three independent non-executive Directors. The Directors are, collectively and individually, aware of their responsibilities to the shareholders.

   The Board members as at 31 March 2007 were:

The Board is responsible for directing Xpress Group to success and enhancing shareholders’ value by formulating the Group’s overall strategy, key objectives and policies. The Board monitors and oversees the operating and financial performance of the Group pursuant to these objectives. To assist the Board in its functions, the Board established and delegated specific responsibilities to two Board Committees, namely the Audit Committee and the Remuneration Committee. The respective roles and responsibilities of each Board committee, their work and activities are included in this Report. The Board has also delegated the day-to-day management and operation of the Group’s business to the management team.

  • Top Management

Mr. Chan Tung Moe, the Chief Executive Officer and a Director of the Company, is responsible for the overall management of the Group’s business. Previously, Mr. Chan was in charge of the overall management of Xpress Finance Limited, the Group’s credit card business, and also has experience in technical and business development in the finance and technology industries. He holds a Bachelor’s Degree in Applied Science with honors and a Master’s Degree in Electro-Mechanical Engineering with honors. Mr. Chan is the son of Mr. Chan Heng Fai and Ms. Chan Yoke Keow.

Mr. Yuen Ping Man, is the joint Company Secretary and the Senior Manager, Corporate Services of the Group responsible for the corporate secretarial function of the Group. Mr. Yuen is also the Chief Operating Officer of Xpress Finance responsible for compliance, human resources, sales & marketing, customer service and general administration of Xpress Finance. Mr. Yuen has over 15 years’ experience in corporate secretarial, business development, human resources and general administration. Prior to joining Xpress Finance in June 1997, Mr. Yuen worked in two listed groups and a financial institution. Mr. Yuen holds a Master’s Degree in Business Administration. He is a fellow member of the Institute of Chartered Secretaries and Administrators and of the Hong Kong Institute of Company Secretaries, a member of the Hong Kong Securities Institute, the Hong Kong Institute of Human Resource Management, the Hong Kong Institute of Marketing and the Hong Kong Institute of Purchasing & Supply and an associate member of Institute of Financial Planners of Hong Kong and Society of Registered Financial Planners. In 2007, he is also  responsible for managing development and operation of  the travel businesses in Macau Express Travel Limited.

Mr. Lee Chun Ting, Alex, is the Managing Director of SingXpress Travel Pte Ltd. Mr. Lee is responsible for the strategic planning and development, sales and marketing of the travel services for Hong Kong and Singapore. Mr. Lee has 19 years’ practical experience in and solid understanding of a diverse range of business management. Before joined the Group, Mr. Lee worked as key management staff in several major travel services companies both in Hong Kong and Singapore. He was the Chairman of Outbound Tours Operators’ Association (OTOA) from 1998-2002 and a Director of the Hong Kong Travel Industry Council (TIC) from 1996-2004. Also, he takes the responsibility of managing the businesses in Macau Express Travel Limited.

Ms. Kou Wai Man, is the Customer Service Manager of Macau Express Travel Limited. She is responsible for assisting the development and planning of travel services for Macau. Ms. Kou has 13 years ‘practical experience in travel agency. She was the Operation Supervisor in Sunflower Travel Services Limited from 1995-2006.

External Environment: Opportunity and Threat

Seven Forces

Competition rises in industries, in order to examine ones ability in reacting different competitive intensity; seven main forces are focused on here. Whether one has a strong or weak force, in short run, some aspects may mean disadvantages, however, a better and clear understand and accurate forecasting must help in shifting to opportunities.

Suppliers

Travel industry’s suppliers may include a wide range, from airlines, hotels, transportation, food and beverage, insurance, local contractors, souvenir shops, banking etc. They have high bargaining power because they can contact the final consumers directly. For example, the travel agency can only sign a contract with one hotel for certain number of the rooms. If more rooms are needed suddenly due to the request of the tourists, they may need to pay higher price to acquire the room. On the other hand, if the travel agency cannot sell all the rooms that they have agreed to sell, the travel agency has to bare the cost and risk itself.

Buyers

Buyers include locals and foreigners, because travel includes inbound and outbound style, the boundary is as wide as the whole population in the world; besides they can purchase by individual or as a group format. Buyers have a higher bargaining power again, since industry is offering similar product, and there is almost no changing cost; beside, traveling occupies a relatively high portion of buyers’ salaries to some extend.

Substitute

In terms of product for product substitution, consumers can directly contact the suppliers instead of consuming the service from travel agencies. From generic substitute theory, consumers can choose other sort of entertainment which can satisfy their wants, e.g. spa for relaxation, branded items for self actualization etc. Substitutes have relatively strong effect on this industry.

Entrants

According to the Macau Business Law, new entrance has to invest a minimum of MOP1,500,000 capital, bail of MOP500,00, insurance of MOP700,000, premise of at least 40 sq. meter gross area, a technical director etc., these very basic terms show a very high barrier on entering this industry. Thus, this aspect shows a low competitive intensity to this industry.

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Rivalry

In 2006, there are 145 travel agencies registered in Macau, a 34% increased since 1999 at moderate growth rate. However, lack of bargaining power information between competitors, they are offering similar products in the eyes of consumers, and due to ease of mobility to Zhuhai and Hong Kong, that they becomes two of Macau’s main competitors; this create a high intensity in the travel agency industry.

Stakeholders

Stakeholders include a wide range, in travel agency industry, the dominate ones are the local and destinations governments, local citizens, academic institutes, unions, Destination Marketing Organization; special interest group, e.g. ...

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