Subject area:                      Corporate Level Strategy, International Business Strategy

Region:                                   Canada

Company:                            Sky Travel & Tour

Industry:                               Travel

Decision Maker:                Amber Cross, Brandon Newsome, Harrison Fontaine Pedro Aristeguieta, Yodahe (Yodi) Berhanu

Dilemma: Doing business in many developing countries around the world comes with many challenges and unforeseeable obstacles. Ethiopia is certainly one of those countries. David owns Sky Travel & Tour, a leading travel agency in Ethiopia. Through the hard work and dedication of David and his passionate employees, the company has been steadily gaining market share over its 17 years of existence.

On a rainy Friday afternoon, sitting in his Addis Ababa office, David received a call from his contact at Ethiopian Airlines. He informed David that the airline was planning in six months to cut the commission offered to agencies from the sale of tickets. He was devastated, he ran the risk of letting down not just himself, but his family and employees as well. These commissions from Ethiopian Airlines make up over 80% of Sky’s revenue (Exhibit 1). Worse yet, David soon found out that all other airlines had followed suit with Ethiopian. If David does not find a new revenue stream for Sky Travel & Tour, the company could soon be out of business. 

Although Sky does have other revenue streams, David believes it will be difficult to make a significant shift that will enable him to maintain the success of his company. He has even been looking into starting new projects such as resorts in different cities or maybe buying several busses to expand his tour business, however, all of these dreams and aspirations have been put in jeopardy by this news. David has to find a way to save his company.

David has now seen the transportation industry try to significantly streamline costs and expenses. One of the major cost cuts that the airlines have made in Ethiopia is they will no longer be giving commission to the travel agencies who booked the tickets. David received this news over the phone that Friday afternoon and now is challenged to find a way that allows Sky Travel and Tour can make up the lost revenue. 

Mike, David’s general manager, feels strongly about cutting losses with airlines and move forward to grow tour and hotel operations. Mike knows that David has been approached in the past by investors from abroad about partnering to invest in a hotel or a resort somewhere in the country. However, David says, “Airline tickets are a much more frequent purchase, especially with so many individuals coming and going to and from our country”.  David still feels very strongly that the opportunity in which he created his company on is still present, things just needs to be reworked for some sort of monetization. Sky Travel & Tour has been one of the top travel agencies in the country for quite sometime. The cost cuts in the airline industry are going to echo throughout the entire industry and David feels that he might be able to come out on top of it. David now must come up with a business model to enable Sky Travel to remain as one of the premier travel agencies in Ethiopia, delivering superior customer service and travel accommodations to its loyal clientele.