World maps illustrate the boundaries separating countries, but these divisions do not accurately represent the increasing interdependence of the global economy. The concept of international business was infrequent and the term multinational was rarely utilized just thirty years ago (Gomes, 1991).
Today, the structure of the global market for goods and services has undergone a significant change. Many companies have transitioned from being multinational to operating as trans-national or global companies, with far-reaching consequences for almost every industry. Experts predict that by 2015, global corporations will control approximately half of the world’s assets. Currently, companies are in the process of internationalizing production for various manufactured goods, with mega-companies owning factories worldwide.
Globalization has become a term encompassing various global challenges in politics, sociology, the environment, and economics. The previous world we knew no longer exists, as we now live in a “shrunk” world (Dr. M. Cho, 2005). The globalization of business and lifestyles involves communicating across long distances in different languages, frequent travel to foreign countries, dealing with multiple currencies, and adapting to various political, social, regulatory, cultural, and customs systems.
Identifying the aspects of globalization is straightforward, but comprehending the underlying current and future trends can pose challenges. Upon analysis, it is evident that several factors are reshaping the global hospitality industry; however, there remain intricate questions that need resolution.
- International expansion with common product and brand position;
- Sales and marketing programs that fully capture global economies of scale;
- Organizational structures that allow global delivery of services with local operational control;
- Cross-border employee training to support operations (Cline R. S. n. d. ).
Globalization is the rapid movement of people, information, and money across international borders on a global level, which was unimaginable in the past. Despite its popularity as a trendy idea, ‘globalization’ is a complex concept that requires careful explanation. Different experts provide various definitions of globalization, and this paper seeks to explore these definitions and the factors behind them. It will also compare globalization with other concepts.
Globalization has greatly influenced the internationalization of the Hospitality Industry, bringing about different challenges that require addressing. Consequently, the industry is taking steps to meet global business needs through strategy implementation and embracing globalization. To fully comprehend this concept, it is crucial to understand its origins. Interestingly, in the 1970s, the New York Times made no mention of “globalization.”
The term “globalization” had a low frequency in the 1980s and slightly increased in the first half of the 1990s. It appeared more frequently in the latter part of that decade. In 2000, there were 514 mentions of “globalization” in New York Times stories. This number decreased to 364 in 2001 and then slightly increased to 393 in 2002. Around 1999, the concept of being “anti-globalization” emerged based on New York Times stories. Searching for “globalization” on Google yields approximately 1.6 million links, while searching for “anti-globalization” yields about 80,000 links.
Approximately 500,000 references discuss the topics of globalization and inequality. Around 700,000 references focus on discussing globalization and the environment. There are also nearly 200,000 links related to globalization and labor standards. In addition, there are 50,000 references to globalization and multinational companies (multinationals). Moreover, there are 70,000 mentions of globalization and cultural diversity. When searching for the combination of globalization and the International Monetary Fund (IMF), there are 180,000 suggestions available. In a study conducted by S. Fischer in 2003, it was observed that multinational companies tend to be attracted towards locations that offer “incentives” such as subsidies, low taxes, low wages, and easy market access in their pursuit of improved efficiency and cost-effectiveness in business operations.
Globalization is a phenomenon where companies expand internationally to overcome challenges such as high wages and labor unions in their home country. With a wide range of products available, businesses aim to maintain customer loyalty. In today’s world, people travel extensively and expect to find familiar products and services globally. The business world operates in a competitive environment where one must adapt or be left behind.
There are different interpretations of globalization by various authors. One such interpretation, provided by Scholte, categorizes it into five primary categories: globalization as internationalization, which involves cross-border relations between countries; globalization as liberalization, which includes the removal of government-imposed restrictions on movements between countries; and globalization as universalization.
Globalization is the process of spreading ideas and experiences worldwide to achieve a global harmonization of aspirations and experiences. It can be seen as either westernization or modernization, where social structures like capitalism and industrialism are disseminated globally, often at the expense of local cultures and self-determination. Alternatively, globalization can be viewed as deterritorialization, which involves reshaping geography to overcome territorial boundaries and distances.
Values also play a significant role in shaping globalization. One perspective characterizes it as “Americanization” or “McDonaldization,” highlighting the dominance of American consumer culture over other cultures. In contrast, another definition recognizes that globalization enables cross-cultural impact by fostering cultural interactions and knowledge exchange between societies.
According to Rothenberg (2002-2003), globalization is the increasing interaction and integration among individuals, businesses, and governments from various countries. The concept of “globalization” often pertains to the expansion of international financial markets and markets for goods and services. Additionally, Carson (2006, p. 11), as cited in OECD’s Handbook on Economic Globalization Indicators, describes globalization as a dynamic and intricate process wherein national resources gain greater mobility across borders and national economies become more interconnected.
Globalization is commonly defined as the system of interaction among the countries of the world to enhance the global economy. It involves the integration of economics and societies worldwide, encompassing technological, economic, political, and cultural exchanges. This integration is made feasible primarily by advancements in communication, transportation, and infrastructure.
Regardless of how it is defined, globalization will lead us towards innovation and uncharted territories that we must confront and manage, considering its impact on various areas of business.
The hospitality industry is inherently global, with its international nature. As international trade and business grow, there is no doubt that the industry will become even more crucial in this highly competitive business environment.
The international hotel industry is difficult to define as it involves exporting hospitality services and generating export income. Hotels have traditionally welcomed foreign guests, making the industry inherently global. However, over time, the industry has become more complex in terms of scope, ownership, management, and affiliation.
According to Gee (1994), there are various models to consider for properties, such as: independently owned and operated properties, properties that are independently owned and operated with chain affiliation, chain-owned and-operated properties, independently owned, chain-operated properties, franchised properties, referral group properties, and others.
The growth of international tourism organizations is becoming increasingly significant, necessitating proper coordination and regulation of passenger movement worldwide. The industry is shaped by the key concept of sustainable development. Various sectors within the hospitality industry have been greatly influenced by globalization. For example, from 1980 to 1998, the global accommodation capacity saw a rise from 8 million beds to 15.4 million beds. Europe experienced the largest increase, accounting for 38.5 percent, closely followed by the USA at 33.5 percent.
During the nineties, the hotel industry in South Asia experienced significant growth with approximately 70,000 hotels opening. In East Asia and the Pacific Ocean, there was a 45 percent increase in hotel openings. Six Continents Hotels successfully partnered with 47 global air carriers. Radisson Hotels, a subsidiary of Carlson Group travel companies, expanded their international presence through strategic partnerships with local hotels like Edwardian Hotels in Great Britain and Movenpick in Switzerland (Tipuric 2002: 212). The tour operator industry has also witnessed consolidation through a robust global distribution network of tour operators and travel agencies.
The German TUI, previously known as Preussag, is listed among the largest corporations. In 1997, Preussag entered the European travel market by acquiring TUI, which is the largest tour operator in Germany. One year later, Preussag purchased Thomas Cook and Carlson UK, and in May 2000, it acquired the prominent British tour operator Thomson. However, due to anti-monopoly regulations, Preussag had to sell Thomas Cook. C&N Touristik was established in 1998 when the German company Karlstadt Quells decided to collaborate between its TO NUR Touristic Gmbh and Lufthansa’s charter air company Condor Flugdienst Gmbh.
The acquisition of Thomas Cook was made by TUI, who were compelled to sell it in order to surpass Thomson. TUI made the decision to discontinue using the name C&N and preferred Thomas Cook due to its more favorable reputation (Klancnik 2003: 55). Furthermore, TUI established a strategic partnership with the French tour operator Nouvelles Frontierres in the year 2000, acquiring 13 percent of its shares. TUI also engaged in a similar partnership with Italy’s leading tour operator Alpitour, purchasing 10 percent of its shares (Tipuric 2002, 212). The air travel industry is witnessing worldwide mergers among air companies. The five major alliances in this industry are Star Alliance, Oneworld, Wings, Qualifier, and Global Sky Team.
The initial development occurred when hubs emerged, providing services to millions of passengers from smaller markets like Frankfurt and Vienna. Through deregulation, airlines gained the ability to operate flights from any location and in any direction, exemplifying the undeniable impact of globalization (V. Peric, 2005). The Hospitality Industry experiences both positive and negative consequences as a result of globalization.
Globalization has allowed managers in the Hospitality industry to gain exposure to different cultures and broaden their understanding by interacting with people from diverse backgrounds. However, hiring employees from different countries, which is typically cost-effective, can lead to language barriers and communication challenges with customers. Consequently, this may cause frustration among some customers. Nonetheless, globalization has also resulted in a larger market and considerably expanded the customer base within the hospitality industry.
The hospitality industry is experiencing growth due to various reasons for people’s travel, such as holidays, business purposes, and health-related matters. The majority of its revenue comes from international travelers. Nonetheless, it is crucial to exercise caution and avoid causing offense due to the cultural diversity. What may be deemed acceptable in one culture might be considered inappropriate in another.
Globalization has a positive impact on the economy by attracting visitors who spend money, thus increasing foreign exchange and pumping money into the country. This multiplier effect boosts the economy. Additionally, events and disasters in other countries can also have an impact. For example, during a financial crisis, people tend to spend less and avoid traveling. Similarly, increased terrorism can deter visitors from traveling to certain countries.
Globalization has resulted in increased interdependence among nations, economies, and individuals. The tourism industry, primarily controlled by major corporations, has witnessed substantial expansion. While globalization offers advantages, it also poses various challenges.
Globalization is interconnected with the various challenges and dissatisfactions experienced by people worldwide. It is relevant to and affects educational, economic, and political issues. The emergence of a global economy is causing national economies to become outdated and creating markets that extend beyond countries. These transformations are impacting different aspects of our lives, drawing attention to our education systems, leading to economic displacement, and sparking strong reactionary movements.
As we enter the future, national economies will merge into macro-regional economies, like the European Union and North America. Competition among these economies will lead to various effects such as an increase in skill requirements for our workforce, more transnational labor movement, and heightened public health concerns worldwide. Meanwhile, globalization, advancements in information and communication technology, and a greater emphasis on shareholder value are causing significant changes in the business environment of hotel chains. These changes necessitate the adoption of modern marketing strategies.
Relationship marketing and customer relationship management (CRM) are seen as promising solutions to the challenges brought about by globalisation (Medlik, S. 2001). The globalisation trends have led to significant changes in demands, labour, knowledge, and capital, with a focus on regions that offer the greatest potential for the future. This has resulted in a standardisation of production technologies, business strategies, marketing plans, and management styles. Despite the fact that tourism production is influenced by local conditions, the tourism industry is still impacted by globalisation.
According to Muller (2001), tourist products and destinations are becoming increasingly interchangeable, with the direction and pace of development being determined by continental and inter-continental transport networks. The success of tourism is now heavily influenced by distribution channels and reservation systems. Globalization in tourism is driven by excess capacity in various aspects, such as carriers, accommodation, adventure and leisure parks, sport facilities, and cultural events. The decline in tourism numbers in countries like Austria, Switzerland, and Germany can largely be attributed to the fact that almost all national economies globally have recognized tourism as a factor for development and have become involved in the competitive globalization scenario (Lockwood et. al, 2001).
Globalizing marketing is a challenging endeavor that involves formulating and executing a global marketing strategy. It can be especially complex for even the most experienced individuals when expanding to foreign markets. However, having comprehensive market data on customers and competitors worldwide can simplify this process.
However, in order to effectively analyze this data, managers must reconsider their perceptions of customers and competitors. Ted Levitt made a compelling case in 1983 for why companies should standardize their marketing efforts. Levitt believed that markets were becoming globalized due to two key factors: global communication and technology diffusion. With the advent of satellite TV broadcasting the same programs worldwide and the ability to communicate instantly on a global scale, markets are inevitably becoming more similar.
The rapid advancement and widespread adoption of technology make it necessary for today’s production to stay competitive against global competitors who can quickly integrate the latest product inventions. As a result of these forces, product standardization becomes not only possible but also the preferred option (Johansson, J. K., 1997). Given that global marketing proposals are often based on subjective information, global marketers must develop and present a more qualitative argument in support of a global approach.
The main focus should be on the extent of the convergence of preferences (W. J. Keggan, 2002). When analyzing the global convergence of preferences, it is important to acknowledge that customer preferences are constantly changing and dynamic. One significant factor driving these changes is the introduction of new products into the market.
The initial introduction and testing of the latest standard-setting products occur in prominent markets. Alongside examining typical customer requirements, it is essential to analyze the competition, considering both domestic and global rivals. This incorporates an additional layer of intricacy to the evaluation process.
The global competitor is generally more formidable and unpredictable due to their wider range of competitive actions. They have the potential to enter any local market where they currently do not have a presence, posing a constant threat (Johansson, J. K., 1997). Globalizing marketing requires coordinated efforts across borders and a global management perspective on marketing operations in each country. This often entails some degree of marketing standardization. Marketing standardization has both advantages and disadvantages.
Table 3. Advantages and Disadvantages of Marketing Standardization. W. J. Keggan (2002)
Advantages|Disadvantages|
Cost reduction. Standardization brings about cost reductions through scale economies, leading to significant savings in manufacturing and purchasing due to longer production series.
Off-target. Standardized products, services, and promotional mix may not align with customers’ preferences in specific countries as customers in different countries have varying tastes and needs.
Global promotion encompasses a range of activities, including in-store point-of-purchase displays, Sunday newspaper coupons, satellite TV advertising, sponsorship of symphony orchestras and athletic events. The global sales promotion, public relation, and publicity have also become effective promotional tools due to advancements in global communications and the expansion of new markets. Additionally, participation in international trade fairs, direct marketing, and personal selling are crucial, with the latter being more focused on localized efforts but still holding importance (W. J. Keggan, 2002).
Public relations professionals with global responsibilities are required to do more than just handle media relations and represent their company. They are expected to fulfill multiple roles simultaneously, such as fostering consensus and understanding, building trust and harmony, shaping and influencing public opinion, and proactively addressing conflicts and resolving disputes. Furthermore, the practice of public relations can vary across different countries depending on cultural traditions, social and political contexts, and economic factors. For instance, in developing nations, effective communication may involve methods such as using gongman (the town crier), congregating in market squares, or seeking resolution through the chief’s courts. Even in industrialized countries, there exist significant differences in the way public relations is conducted.
The United States relies on the hometown news release to place a lot of the news in small, local newspapers. In Canada, however, the combination of large metropolitan population centers and Canadian economic and climatic conditions has prevented the development of a local press (Johansson, J. K., 1997). Building a relationship with the customer is essential for successful personal selling in a salesperson’s home country, but global marketing poses additional challenges as the buyer and seller may have different national and cultural backgrounds.
Sales promotion laws and usage differ globally but can include various strategies such as promotional pricing tactics, contests, sweepstakes and games, premium and specialties, dealer loaders, merchandising materials, tie-ins and cross-promotions, packaging, trade-shows, and sponsorship (W. J. Keggan, 2002).
Global advertising is the most visible promotional activity, and it is characterized by advertising that is more or less the same across many countries. This type of advertising often appears in media platforms with global reach. However, achieving complete uniformity in global advertising can be challenging due to linguistic and regulatory variations between countries, as well as differences in media availability. Nonetheless, even with these challenges, localized advertising can still be considered globally oriented. In contrast, multidomestic advertising refers to international advertising that is intentionally modified to suit specific markets and audiences in terms of message and creative execution (W. J. Keggan, 2002).
When it comes to global advertising, decision makers face multiple traditional challenges. These challenges include determining how to distribute an advertising budget among different market countries, deciding on the message to convey in each market, and selecting appropriate media platforms. However, before addressing these management decisions, advertisers must set objectives for their advertising efforts in different countries. To do so, it is crucial for decision makers to first identify the expected outcomes of the global advertising endeavor.
Initially, conducting an evaluation of the role of advertising in country markets and exploring various advertising media is crucial in global advertising management (Johansson, J. K. , 1997). Despite the limitations of standardized and translated messages, global advertising has emerged as a significant option compared to customized multidomestic advertising. This shift is made feasible through advancements in global communications technology, the expansion of global media platforms, and the dominance of global advertising agencies.
The desirability of global advertising has increased due to the potential spillover effects from unified messages and the growing homogeneity of many markets. As countries become wealthier, the introduction of new products and services necessitates more information for customers. This leads to a greater importance placed on advertising, resulting in higher advertising expenditures as a percentage of the GDP. For global marketers who face increased spending requirements in all markets, a coordinated approach with synchronized campaigns, standardized patterns, and a unified image across trade regions is typically more effective and cost-efficient compared to a multi-domestic campaign (W. J. Keggan, 2002).
E-marketing, also known as global e-marketing, encompasses the potential of information technology and the Internet in influencing marketing strategies and practices. It is considered a groundbreaking development in the history of marketing due to its ability to overcome distance barriers. Traditionally, distance played a significant role in global marketing, influencing trade behavior. However, the Internet has completely revolutionized this aspect, being independent of geographical distance.
The world has achieved a significant milestone – for the first time ever, communication across the globe has become equitable. People from any location on the planet can now interact with each other in real-time, without any extra charges based on distance. Email has emerged as a groundbreaking communication medium that complements fax and telephone, eliminating geographical barriers. It is a potent marketing tool that enables personalized and direct messaging for both business-to-business (B2B) and business-to-consumer (B2C) communication (Johansson, J. K., 1997). Marketing segmentation has always aimed at providing a unique value proposition to the maximum number of customers.
Prior to the Internet, marketing efforts involved creating offers for specific segments of the market, which consisted of a group of customers. However, with the emergence of the World Wide Web, it has become possible to implement marketing programs that directly target a specific segment. Additionally, relationship marketing has become a significant focus in recent times. The Internet has provided extensive opportunities for establishing relationships with customers worldwide, as well as potential customers, suppliers, and channel members.
The end of segmentation signifies that marketers can now shift their focus towards providing value to each individual customer (W. J. Keggan, 2002). Furthermore, the transition from an industrial to a post-industrial e-economy presents global marketers with a new set of guidelines. Traditional principles, like the importance of a physical retail store’s location, have become outdated. People nowadays prefer the convenience of purchasing goods online rather than wasting time navigating through traffic to find them in town.
Among the most important goals are securing a dominant market position as quickly as possible, forming alliances based on market access and synergies, anticipating high start-up investments, and defending positions through ongoing innovation.
Global pricing is more complex than pricing in the domestic market. While the actual price level may be a small concern, there are several challenges such as currency fluctuations, devaluations, tariff-induced price increases, credit risks that are hard to assess, transfer prices, and price controls. These are all common issues faced in global pricing.
Many of the challenges in global pricing revolve around the limitations imposed by institutions in the host country, which restrict strategic decision-making. The issue at hand is how to effectively coordinate pricing across different countries in order to cater to multinational customers, while still allowing local subsidiaries to operate autonomously and avoiding any illegal price-fixing with independent distributors. A competitive analysis can be as straightforward as determining the pricing strategies employed by both global and domestic competitors operating in a specific country. These prices often serve as the benchmark for setting the minimum price at which a firm’s product will be considered in the local market, beyond which potential buyers will refrain from making a purchase.
The analysis can also aim to identify the unique advantages that the company’s product may possess in comparison to existing offerings, known as “perceived value” pricing (Johansson, J. K., 1997). When a company operates in multiple nations, its product may be priced differently in different countries. This can be unfavorable for global customers, as they generally prefer uniform prices for the same product worldwide.
The acceptance of the entire ethics of marketing thinking and practice is being questioned. In recently emerged markets, customers may not be accustomed to Western marketing methods and may oppose the blatant promotion of a company’s product. It is not only the aggressive advertisements that create issues; individuals may find the concept of “everything has a price” morally repugnant. As the initial excitement in these new nations wears off, certain promotional activities are likely to face regulations.
Marketers need to accurately gauge the public’s mood and avoid actions that may incite negative feelings. Ethical marketing may be more strictly regulated in certain countries compared to the United States (W. J. Keggan, 2002). In China, marketers may struggle to safeguard a successful brand from imitators while also contending with the impact of foreign global brands.
Despite the contraction of economies and decreased travel in 2009, global hotel markets are predicted to continue facing pressure. Nevertheless, the global hotel industry remained profitable in 2008 due to cost control and maintaining the bottom line. However, the challenge extends beyond efficiency to integrating the various components of the system and working towards a shared vision (Ernst & Young LLP, 2009, New York).
The first step could involve selecting one specific area to focus on and creating lasting connections between institutions addressing related matters. Additionally, in addition to the marketing obstacles mentioned earlier, there are various other challenges such as labor shortages, cost control, heightened competition, interactive reservation systems, innovations in guest-room technology, data analysis, and yield management. Moreover, the industry’s growth is influenced by overall economic conditions.
Companies all over the world are facing these issues to varying degrees and handling them in different ways. Many international hotel companies have chosen to develop single brands and products in order to benefit from economies of scale. They then offer these products in a standardized manner across as many markets as possible. Additionally, hospitality companies that obtain funding from the public marketplace are striving to operate as global enterprises.
Hotel companies that are expanding globally face different traditions, structures, and attitudes towards property investment and valuation in different countries. In order to compete, they need to focus more on the trends of globalization. The industry needs to adapt to the demands of the global village in various aspects of its operations, such as food, services, amenities, staffing policies, and training. Michael Fishbin, National Director of Hospitality Services, stated that in the current economic climate, most markets are challenging and growth will be difficult for most operators.
In light of this, hotel operators will prioritize cost reduction, improving operating efficiencies, enhancing Internet communication with guests, and emphasizing green principles. It is crucial for all hotel organizations aiming to establish brand recognition internationally to comprehend the essence of globalization.
A truly global enterprise will have the ability to quickly react to market opportunities, regardless of their location, by implementing proven business concepts within a global context. For large, well-established international hotel companies that have explored the world for new opportunities, globalization has been a strategic concept for several years. These companies have had to address nearly all of the challenges faced by global enterprises – and often even more.
While a manufacturer with an overseas plant only needs to export their physical production, a hotel company must export their entire operating business to operate in various cultural and geographic locations. This means that hotel companies need to have the ability to establish a complete business
