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Industry Viewpoints on Globalization: Basis for Strategic Government Policy Formation

in Tourism Management

J. Mark Munoz

Tabor School of Business, Millikin University, 1184 West Main St., IL 62522, USA e-mail : [email protected]

Abstract

Research on globalization and its business implications on the travel industry provide a framework from which government tourism officers in the travel industry can plan and implement strategies for success in a global environment. Based on a descriptive survey of 118 senior level travel executives in 35 countries, the author gathered executive insights into the impact of globalization on business and communication, investment and finance, governance, technology, and individual psyche. Research findings point to the evolving nature of business in a globalized environment and point to the need for strategic adjustments in policy development and governance worldwide.

Key words

:

globalization, travel, tourism, hospitality, government policy formation

Introduction

The tourism industry worldwide has experienced new challenges and opportunities brought about by market integration and consumer travel conveniences in a modern society. This scenario is likely to continue into the future. The World Tourism Organization (WTO, 2004) forecasts that international travelers will reach over 1.56 billion by 2020 with Europe, East Asia and the Pacific, and the Americas likely to be the top three recipients of tourists.

This potential industry growth is forcing tourism organizations to be perennially observant of opportunities that exist beyond their borders, and to adequately prepare for challenges that may arise.

Market integration has transformed the business dynamics in several sectors, including the tourism industry. Greenberg and Baron (1997) pointed out that globalization has spurred the business interactions among countries worldwide thus allowing the acceleration of capital flows and increasing economic and political interdependencies. This landscape was primarily shaped by (1) lower transportation and communication costs arising from sprouting technologies, (2) trade liberalization across several fronts, and (3) more aggressive business endeavors in both developed and developing countries that resulted in expansion in exports and cross-border foreign direct investments. This trend has contributed to economic growth and competitive activities worldwide (Greenberg and Baron, 1997).

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In the tourism industry, the global environment led to strategic adjustments in organizational policy formation. The global economy and the challenges that it has brought are forcing travel organizations to respond by cutting cost (Steinbrink, 2003). Choi, Woods, & Murrmann (2000) noted the evolving dynamics of international labor utilization in the hospitality industry.

Wilson, Murray, & Black (2000) observed knowledge gaps in contract catering. Jones (1999) pointed out the pressures to provide attention to multi-location management through activities such as integration, location, configuration, organization, implementation, and adaptation.

As a result, it becomes increasingly important for government tourism planners to understand the implications of globalization on business and governance, and to design and implement strategic approaches that are attuned to the demands of the global environment.

This study explores the impact of globalization on contemporary business as perceived by travel executives and members of the Pacific Asia Travel Association (PATA) in the context of the following concepts advanced by Thomas L. Friedman (2000): (1) the approaches of contemporary business is far different compared to the period prior to the Cold War era; (2) means of communication have expanded and changed; (3) there are evolving approaches to tourism governance; and (4) technology has paved the way for changes in the business environment. Additionally, the author sought to validate if there are psychological ramifications brought about by globalization to individuals and organizations.

Travel executives were selected in this study for reason of linguistic congruency, or proficiency in English. Perspective was a factor because the travel executives must have traveled to various parts of the world. Multicultural exposure or contact with various races and cultures was also a factor. Cross-involvement was considered because the travel executives had been involved in multifarious activities and transactions with people from various sectors. Technological aptitude was a criterion because due to the work they had performed, the travel executives were familiar with the use of recent advances in technology. Furthermore, Cline (2004) stressed the importance of the travel industry because it is the largest export industry in the world due to the large volume of international flow of people and capital in the industry.

Objective of the Study

The purpose of this study is to determine changes that are taking place as a result of a global environment. The insights gathered from executives worldwide form the basis for recommendations for strategic approaches that tourism planners may pursue in response to globalization.

Theoretical Background

There is a paucity of research that allows the measurement of the impact of globalization on the tourism industry. The author hypothesizes that there are implications of globalization in at least six (6) areas and points out relevant research:

1. evolution of business practices;

2. changes in communication patterns;

3. broadening of investment and financial approaches;

4. adjustments in tourism and governance initiatives;

5. technological enhancements;

6. impact on individual and organizational psyche.

Business Practices. The heightened integration of markets has contributed to management adjustments in the private and government sectors. Beamish and others (2000) observe that for the past fifty years, declining tariffs and the emergence of regional trading blocs had an

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enormous impact on world trade and investment and encouraged companies to look at business in a global perspective. Haynes, Lackman, & Guskey (1999) note the shortening of product life cycles in an information age. Cateora and Graham (1999) emphasized the growing need to respond cross-cultural demands in the realm of international marketing and the segmentation of markets.

Communication Patterns. Advancements in the field of communication technologies have made global communication more convenient. Kotler and Armstrong (1999) alluded to the need to make use of global communication adaptation strategies when communicating across borders.

Lussier (1996) pointed out the relevance of non-verbal communication when conducting business across borders. Friedman (2000) noted the “democratization of information” in a global environment as a result of a free-flowing landscape that allows individuals to communicate with others in a faster, deeper, and cheaper manner.

Investment and Finance Approaches. The internet has made the acquisition of financial information and international transactions easier. Malone and Laubacher (1998) refer to the emergence of “electronically connected freelancers” (e-lancers) that operate virtual organizations that facilitate the flow of financial transactions from anywhere in the world.

Friedman (2000) notes that contemporary business operates like Wall Street because global investing has become more convenient and accessible to many individuals.

Tourism and Governance. The global environment also exerts a pressure for governments to formulate policies that are attuned to the changing market environment. Brymer (2004) points out that if the reputation of a country is clear and positive, the possessed brand equity opens new doors and wins contracts. In essence, a positive brand association can contribute to an enhanced product or service perception on foreign markets. Font & Ahjem (1999) point out that tourism strategies should to be aligned with the needs of multiple stakeholders including the public and private sector, non-profit organizations, as well as residents in order to ensure sustainability.

The World Economic Forum gauges country performances through the Environmental Sustainability Index (ESI) that measures environmental endowments and a country’s capacity to manage environmental challenges (Columbia University Press Release, 2002). It is not uncommon for destinations to showcase their “verdant hills”, “azure oceans”, and other exotic sceneries in order to attract visitors and global investors.

Technological Enhancements. The abundance of options for the integration of new technologies offers travel organizations a wide range of choices in order to internationalize and enhance organizational efficiency. Bishop (1999) recommends sensitivity in cross-border expansions by providing assessments pertaining to telecommunication infrastructure, digital capabilities, and online resources. Buss (1982) articulated the inherent challenge of technology and information management internationally.

Individual and Organizational Psyche. While organizations are implementing a range of adaptation mechanisms in response to globalization, individuals are likely to be affected. Fan &

Mak (1998) observed that it is possible that international participants who lack social skills and aptitudes may decide to withdraw from the process and prefer to stay within their comfort zones and interact with co-ethnic or like-minded members. Gudykunst and Hammer (1988) allude to the fact that individuals who are not exposed to cross-cultural environments and who are not familiar with varying cultural codes may experience a high level of stress in social encounters, and suffer from interpersonal anxiety and self-doubt. Mendenhall, Punnett and Ricks (1995) stress the importance of the study of other cultures and highlight the interrelationship between labor and globalization and the importance of ethics in the global environment. Moreover, pressures exist in the learning of new languages to improve modalities of communication across borders.

Theoretical research suggests that the global environment has a potential impact in the modalities of management of contemporary businesses. In this study, the author gathers the

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insights of travel executives worldwide in order to determine a framework for strategic tourism policy formation and implementation by tourism planners worldwide.

Research Methodology and Respondents Profile

In the context of this research, a Travel Executive is defined as a professional performing a management function relating to travel and tourism. A travel executive may be involved in either the production or delivery of a travel-related product or service. This broad definition encompasses individuals engaged in ventures such as travel agencies, travel research and consulting, travel technologies, hotels and resorts, hospitality management, travel media, airlines and aviation, car rental, tour operators, tourism boards, convention and exhibition bureaus, travel distribution systems, travel and tourism education, travel media, destination management, and destination investment companies.

Survey forms were sent out to 1,000 members of the Pacific Asia Travel Association (PATA).

This international organization consists of senior executives in the travel and tourism industry.

There were 118 valid surveys completed and returned, thus an 11.8% return rate. The travel executives were classified according to their primary functions. Cluster 1 (Travel Services) refers to those executives directly involved in the business of selling and promoting travel related products and services. This category includes travel agencies, tour operators, travel technologies, distribution systems, and related businesses. Cluster 2 (Tourism) refers to executives who sold and promoted destinations and tourism in general. This category includes tour boards and destination management companies. Cluster 3 (Airline) refers to executives working in the airline industry. Cluster 4 (Hospitality) refers to executives working for hotels, resorts, lodging and related businesses.

Based on this classification, thirty four (34) percent of the respondents were in the Tourism category, thirty five (35) percent in Travel Services, seven (7) percent in Airline, and twenty four (24) percent in Hospitality. The respondents came from thirty five (35) countries, namely:

Austria, Australia, Bahrain, China, Canada, Cook Islands, Fiji, France, French Polynesia, Germany, Hong Kong, India, Indonesia, Japan, Korea, Macau, Malaysia, Mongolia, Nepal, New Guinea, New Zealand, Pakistan, Philippines, Saudi Arabia, Singapore, South Africa, Sri Lanka, Switzerland, Thailand, Tonga, Turkey, Turkmenistan, United States, United Kingdom, and Vietnam.

Out of the 118 respondents, 87 (73%) were male, and 31 (27%) were female. All of the respondents were college graduates, with fifty (50) percent possessing a Bachelor’s degree, forty seven (47) percent with a Master’s degree, and three (3) percent with a Doctorate. The average industry experience of the respondents was twenty (20) years, with eighty eight (88) percent having at least eleven years of work experience in the industry.

The author collected data regarding the respondents’ perceptions of the potential impact of globalization on business, communication, investment and finance, governance, technology, and individual psyche. Each of the statements in the survey corresponded to a five-point Likert-type scale. The respondents were advised to indicate, as they chose, the scale representing their response to each statement. In order to arrive at a definite interpretation of the respondents’

central tendency, the researchers assigned a hypothetical mean range to the scales in each item.

The quantitative and qualitative scales were 5 for Strongly Agree, range 4.21-5.00 (SA), 4 for Agree, range 3.41-4.20 (A), 3 for Undecided, range 2.61-3.40 (U), 2 for Disagree, range 1.81- 2.60 (D), and 1 for Strongly Disagree, range 1.00-1.80 (SD). Since the purpose of the study was to determine the central tendency of the responses to each statement, the weighted mean of each statement was calculated.

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Findings and Conclusions

Table 1 presents selected feedback of the respondents on relevant business and tourism issues relating to globalization (N = 118).

Table 1.Selected Travel Industry Perceptions on Business and Tourism Issues Relating to Globalization Statement

Strongly

Agree Agree Undecided Disagree Strongly Disagree

F % F % F % F % F % u Scale

In our present time and era, the way we do business is far different as compared to the time prior to or during the Cold War.

62 52.54 45 38.13 5 4.24 5 4.24 1 0.85 4.37 SA

It is easier to start and operate a business today than it was thirty years ago.

26 22.03 36 30.51 23 19.49 27 22.88 6 5.08 3.41 A

The business cycle is faster as a result of globalization

79 66.95 37 31.35 1 0.85 - - 1 0.85 4.63 SA

Our present world has led to changes in the way we communicate with others

24 20.34 53 44.91 31 26.27 7 5.93 3 2.54 3.74 A

Globalization has led to our ability to reach out to people in other countries in a faster, deeper, and cheaper manner

22 18.64 70 59.32 14 11.86 8 6.78 4 3.39 3.83 A

The globalized system has changed the way one invests

35 29.66 70 59.32 9 7.63 2 1.69 2 1.69 4.13 A

The ability of online investors to move resources globally has an economic impact on a country

33 27.97 53 44.91 13 11.02 18 15.25 1 0.85 3.84 A

Globalization has encouraged companies to invest in and explore oppor- tunities world- wide

8 6.78 21 17.80 20 16.95 49 41.52 20 16.95 2.56 D

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There is a need for the standardization of accounting and financial systems worldwide

33 27.97 64 54.24 10 8.47 8 6.78 3 2.54 3.98 A

Globalization has forced government to strengthen their digital infra- structure to be globally compe- titive

38 32.20 51 43.22 19 16.10 8 6.78 2 1.69 3.97 A

There is a need for e-govern- ment

27 22.88 76 64.41 13 11.02 1 0.85 1 0.85 4.08 A

There is a need for more strategic alliance and regional integration among countries

17 14.41 34 28.81 42 35.59 17 14.41 8 6.78 3.30 U

Countries need to brand, market, and sell themselves as investment destinations

12 10.17 51 43.22 34 28.81 20 16.95 1 0.85 3.45 A

A country’s cultural and environmental foundation has an impact on its attractiveness to global investors

13 11.02 40 33.90 32 27.12 28 23.73 5 4.24 4.08 A

Companies that don’t modernize or have top- notch

technologies are likely to fail

19 16.10 46 38.98 43 36.44 8 6.78 2 1.69 3.61 A

Globalization requires companies to restructure to make full use of new

technologies

41 34.74 57 48.30 13 11.02 6 5.08 1 0.85 4.11 A

The greater a country’s band- width, the greater the likelihood of its prosperity

40 33.90 63 53.39 10 8.47 5 4.24 - - 4.17 A

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Globalization has set in at our world today, and most of what we do have international repercussions.

49 41.52 55 46.61 6 5.08 8 6.78 0 0 4.23 SA

The globalized system has changed the way I perceive the world

30 25.42 44 37.29 20 16.95 20 16.95 4 3.39 3.64 A

I feel pressured and threatened as our world further globalizes

39 33.05 66 55.93 9 7.63 4 3.39 0 0 4.19 A

The respondents in the study disagreed that “globalization has encouraged companies to invest in and explore opportunities worldwide.” The heightened risk of terrorist activities in some parts of the world today, was a predominant reason why the respondents disagreed to the statement.

Evidently, investors carefully observe the political and legal climate of different countries before committing an investment. Illegitimate business practices, disregard of intellectual property rights, and the curtailment of human rights could deter inclinations towards international investments.

The surveyed travel executives were not certain that “there is a need for more strategic alliance and regional integration among countries.” This uncertainty is brought about by the fact that while regional integration is generally favorable, it is difficult to completely integrate countries.

Cross-border disparities and conflicts continue to exist as a result of divergence in government visions and objectives, language and culture, business and politics, and the legal environment among others.

Furthermore, trade integration is not at all times a win-win proposition, while certain business sectors may gain a trade advantage other sectors may suffer. This scenario poses a challenge to the complete and absolute trade integration among countries.

Both findings suggest that market selectivity is pursued by global investors and tourism planners and administrators need to provide attention to factors that negatively impact the attractiveness of the country as an investment or tourist destination.

The findings in the study also point to the following : 1) modalities of business has been transformed in a global environment requiring strategic adjustments from both private and government practitioners in the tourism industry; 2) there exists heightened convenience in operational activities brought about by globalization; 3) business cycles have accelerated and require an appropriate response; 4) opportunities for inter-organization communication efficiency can be achieved as global communication technologies are enhanced; 5) realignments in international investment approaches are taking place requiring international financial adjustments and standardization; 6) issues related to branding and regard for cultural and environmental foundation are of importance; 7) technological innovation along with corresponding organizational structure adjustments are perceived as avenues for the building of efficiency; 8) country digital infrastructure and bandwidth are taken into consideration by empowered global investors; 9) the global environment has the potential to shape individual and organizational mindsets and attitudes; 10) the heightened demands of globalization require that attention be placed on potential fears of adjustment that may exist within organizations.

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There is an evident need for the creation and implementation of strategic government approaches in tourism planning that is attuned to the demands of the global environment.

Strategic Approaches to Government Policy Formation in Tourism Management

The executive insights gathered in this study were collected from senior level travel executives from several countries. Though the number of respondents limits the generalizability of conclusions, the findings point out areas for potential consideration by tourism planners. Several insights may be inferred from the survey findings. These insights may be helpful in the development of strategies for dealing with globalization. The author recommends seven (7) action agenda for the consideration of government tourism planners worldwide.

Adopt a Dynamic Branding Approach. The study pointed to the importance of branding and the competitive advantage that may be derived from the creative utilization of a brand. In a global environment, a brand may be formulated and marketed globally from any part of the world.

Bristow & Asquith (1999) noted the success of Asian companies using Western brand names to increase prestige and quality perceptions. Alreck & Settle (1999) recommends the strengthening of relationships with buyers through brand building approaches such as : 1) linking the brand to a particular need, 2) associating the brand with a pleasant mood, 3) appealing to subconscious motives, 4) conditioning buyers to prefer the brand through reward, 5) penetrating perceptual and cognitive barriers to create preference, and 6) providing attractive models for buyers to emulate. Government tourism planners can intensify their branding efforts by highlighting positive brand influences and addressing issues that could negatively impact the perceptions of a destination.

Build on Technological Competencies. The findings point to the importance of digital infrastructure, technology and innovation, and organizational rearrangements in the business and tourism environments. It is important for government tourism planners to capitalize on available technological resources and enhance infrastructure in order to create an environment for the creation of innovative competitive advantages. The survey findings also alluded to the enhanced pace of business cycles. Government tourism planners need to prepare for and nurture a technological environment that is attuned to the technological demands of globalization.

Proactive Use of the Internet and E-governance. The survey results show that the travel executives believe in the merits of e-governance. An interactive platform for governance allows information service deliveries to any part of the world at anytime of the day. It offers a sustainable information flow and facilitates cross-border interaction. Starkov and Price (2001) recommend the adoption of aggressive eBusiness strategies, campaign for cost benefits, and heightened efficiency in marketing and distribution.

Strengthen Inter-organizational Partnerships.The respondents in the study point to the ease of communication across borders in a global environment. This landscape paves the way for enhanced international communication flows and the creation of international partnerships and arrangements. Government tourism planners can form alliances with the private sector as well as other government institutions in other parts of the world. Cline (2004) alluded to the growing trend towards alliance development in the travel industry as organizations strive to gain knowledge in new markets. The creation of innovative organizational models that promote cost efficiency, enhance international coordination, and facilitate marketing efforts can be a valuable tool for tourism planners.

Respond to Changes in Investment and Financial Approaches. Investment flows are facilitated in a global environment. Modalities for financial expansions are enhanced. Government tourism planners need to develop systems that allow the efficient flow of financial information and

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facilitate standardization of financial methodologies across several international locations.

Additionally, as market selectivity is part of the destination selection process improving a country’s financial transparency would be deemed desirable to global investors.

Provide Attention to Cultural and Environmental Factors.The results of the survey point to the importance of cultural and environmental factors in gauging the attractiveness of a destination.

Government tourism planners would be served well by taking these factors into account while pursuing developmental programs or in conducting international marketing campaigns.

Develop a Global Vision and Strategy. The study suggests that individuals are affected by globalization. The surveyed travel executives expressed fears of the pressures of globalization.

Government tourism planners need to assess the impact of globalization in their organizations, and develop a strategic global vision. Tourism organizations would benefit from undertaking the following initiatives: (1) Development of a global vision – solicit top management and employee insights in designing a concrete corporate agenda that responds to the challenges and opportunities brought about by globalization, (2) Globalization assessment – validate the level of awareness and adjustment experiences of executives and employees within the organization, (3) Formation of a globalization committee – create a strategy development group that will take the lead in the formulation of integrated global approaches, globalization assessments, and the implementation of training and organizational development measures.

Travel executives worldwide have coped with globalization by striving to build heightened efficiency in business and communication, investments and finance, governance, and technology. As the tourism industry faces the prospect of further market expansion and growth, government tourism planners play a critical in role in shaping the country’s future developmental agenda and need to implement strategic approaches that are aligned with the changing demands of the global environment.

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Puncte de vedere ale industriei privind globalizarea: baza elaborării politicii strategice a guvernului

în managementul turistic

Rezumat

Cercetările privind globalizarea şi implicaţiile sale economice asupra industriei călătoriilor furnizează un cadru util decidenţilor guvernelor, în domeniul turistic, pentru planificarea şi implementarea unor strategii de succes, într-un mediu global. Bazându-se pe un studiu descriptiv efectuat asupra a 118 angajaţi la nivel înalt din domeniul turistic, din 35 de ţări, autorul sintetizează punctele de vedere ale acestora privind impactul globalizării asupra afacerilor, comunicaţiilor, investiţiilor, finanţelor, guvernării, tehnologiei şi percepţiilor individuale. Cercetarea reliefează natura emergentă a afacerilor într-un mediu global, subliniind necesitatea unor ajustări strategice în elaborarea politicilor şi a guvernării în întreaga lume.

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