World maps define national boundaries, but those lines belay the increasingly clear nature of the global economy. As recently as 30 years ago the international enterprise was a relatively rare phenomenon, and the term multinational was seldom heard (Gomes, 1991).
Today, many companies have transcended the multinational phase and operate as trans-national or global companies. These labels reflect a major shift in the structure of the world market for goods and services – a shift to a competitive framework that has far-reaching impacts for almost all industries. Experts have predicted that by the year 2015, global corporations will control approximately half of the world’s assets. Сompanies are in the process of internationalizing the production of a vast array of manufactured goods, with mega-companies controlling factories all over the world.
Globalization has become an umbrella word for a number of political, sociological, environmental and economic trends which present challenges on a worldwide scale. The world as it was known long time ago, does not exist any longer, now we experience “shrunk” world (Dr. M. Cho, 2005). The globalization of business and lifestyles is characterized by communicating over vast distances in foreign languages, frequent travel to overseas countries, dealing in many currencies, and coping with a variety of political and social systems, regulatory environments, cultures and customs.
While these aspects of globalization are easy to identify, understanding the underlying current and future trends can be problematic. Analysis, however, reveals that a number of issues are reshaping the global hospitality industry, although there are clearly some complex questions that are still to be resolved:
- 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 typified by the rapid movement of people, information and capital across national borders worldwide in ways that would have been difficult to envision not too many years ago. Yet ‘globalization,’ accepted though it is as a fashionable force, is a big concept requiring careful definition. As many experts you as many definitions you will get, therefore in this paper I will challenge to point out different definition of globalization and what is behind it. This paper will outline such issues as globalization vs.
Internationalization and its difference. Globalization has huge influence on Hospitality Industry, and it brought lots of challenges, consequently Hospitality Industry should and does keep up with rigid business by defining strategies and tends toward Globalization. Globalization and its definition In order to understand globalization, after defining it, we should have a look at how it got started. “During the 1970s the word “globalization” was never mentioned in the pages of the New York Times.
In the 1980s the word cropped up less than once a week, in the first half of the 1990s less than twice a week – and in the latter half of the decade no more than three times a week. In 2000 there were 514 stories in the paper that made reference to “globalization”; there were 364 stories in 2001 and 393 references in 2002. Based on stories in the New York Times, the idea of being “anti-globalization” was not one that existed before about 1999. Turning from the newspaper to the internet, “globalization” brings up 1. 6m links through the use of the Google search engine, and typing in “anti-globalization” brings up 80,000 links.
Type in globalization and inequality and there are almost 500,000 references, 700,000 references to globalization and environment, almost 200,000 links to globalization and labour standards, 50,000 references to globalization and multinationals, and 70,000 references to globalization and cultural diversity and search of globalization and the IMF yields 180,000 suggestions. The search for better and cheaper ways of doing business always seems to be an unstoppable force that drives multinationals to locales that offer the greatest “incentives” – subsidies, low taxes, low wages, and easy access to markets” (S. Fischer, 2003).
These locales almost never include the home country whose very success has made it unattractive due to high wages and societal protectors such as labour unions which struggle for working rights and employment law. With such vast variety of product, companies need to keep customers’ loyalty, thus forced to go internationally. People nowadays aggressively travel, therefore expecting to find known product or service worldwide. Business world works in a jungle way – “either you have dinner or you are dinner”. What is Globalization?
There are nearly as many definitions of globalization as authors who write on the subject. One review, by Scholte, provides a classification of at least five broad sets of definitions: Globalization, as internationalization. The “global” in globalization is viewed “as simply another adjective to describe cross-border relations between countries. ” It describes the growth in international exchange and interdependence. Globalization, as liberalization. Removing government-imposed restrictions on movements between countries. Globalization as universalization.
Process of spreading ideas and experiences to people at all corners of the earth so that aspirations and experiences around the world become harmonized. Globalization as westernization or modernization. The social structures of modernity (capitalism, industrialism, etc. ) are spread the world over, destroying cultures and local self-determination in the process. Globalization as deterritorialization. Process of the “reconfiguration of geography, so that social space is no longer wholly mapped in terms of territorial places, territorial distances and territorial borders. (Najam, A. , Runnalls, D. , Halle, M. , 2007) Values can play a role in defining globalization. A definition of globalization as “Americanization” or, perhaps, the “McDonaldization,” of the world presents globalization as a process driven by American consumer culture that rolls over other cultures. On the other hand, another definition of globalization highlights its cross-cultural impact, taking into account the nature of globalization as a way cultures interact and learn from each other.
Globalization is the acceleration and intensification of interaction and integration among the people, companies, and governments of different nations (Rothenberg, L. E. , 2002-2003). The term “globalization” is widely used to describe the increasing internationalization of financial markets and of markets for goods and services. Globalization refers above all to a dynamic and multidimensional process whereby national resources become more and more internationally mobile while national economies become increasingly interdependent. OECD’s Handbook on Economic Globalization Indicators, p. 11 cited by C. S. Carson (2006).
Out of all these definitions the one which state that Globalization is the system of interaction among the countries of the world in order to develop the global economy and refers to the integration of economics and societies all over the world, involving technological, economic, political, and cultural exchanges, which made possible largely by advances in communication, transportation, and infrastructure, is the most common one.
Having in mind different areas of business, we can define globalization in a dissimilar way, but no matter how it is described, globalization will drive us toward something innovate and unexplored, which we will have to face and deal with.
Globalization and Hospitality Industry The hospitality industry is by nature an international one. As international trade and business expand, there is little question but that international linkage will become even more important for the industry in such competitive business environment.
Defining the international hotel industry is not an easy mission. Broadly, the international hotel industry can be defined as an industry that exports hospitality services and generates export income. In a sense the hotel industry has always been international, because most hotels have received foreign guests at one time or another. As the industry has evolved over the years, its structure has become increasingly more complex with respect to range, ownership, management, and affiliation.
There are many models one may observe, 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 (Gee, 1994).
Increasing importance of international tourism organizationsNecessity for global coordination and regulation of passenger circulationSustainable development as quality and dominant idea. Most of sub industries of hospitality industry were influenced by globalization. Here are some examples: Hotels: in the period between 1980 and 1998 the global accommodation capacity increased from 8 to 15. 4 million beds. The largest increase took place in Europe, it accounts for 38. 5 percent and is followed by the USA accounting for 33. 5 percent.
In the nineties most hotels, around 70,000, were opened in south Asia, a 45 percent growth was achieved in East Asia and in the Pacific Ocean. Six Continents Hotels has established strategic partnerships with 47 global air carriers. Radisson Hotels, which are part of Carlson Group travel companies, expanded with the help of international strategy based on SP with local hotels worldwide, such as Edwardian Hotels in Great Britain and Movenpick in Switzerland (Tipuric 2002: 212). Tour operators: global distribution network of tour operators and travel agencies is one of the most consolidated businesses.
The German TUI, former Preussag, features on the list of the largest corporations. Preussag entered the European travel market only in 1997 when it purchased TUI, the biggest German tour operator. One year later it bought Thomas Cook and Carlson UK and in May 2000 the major British tour operator Thomson. Due to anti-monopoly regulations Preussag was forced to sell Thomas Cook. C&N Touristik was founded in 1998 when the German company Karlstadt Quells decided to start cooperation between its TO NUR Touristic Gmbh and Lufthansa’s charter air company Condor Flugdienst Gmbh.
They purchased Thomas Cook, whom they were forced to sell, if it wanted to overtake Thomson. They decided to stop using the name C&N since Thomas Cook sounds better (Klancnik 2003: 55). In addition, in the year 2000 TUI formed a strategic partnership with the French tour operator Nouvelles Frontierres by purchasing 13 percent of its shares. It also entered into a SP with the leading Italian tour operator Alpitour by buying 10 percent of its shares (Tipuric 2002, 212). The air travel industry: air companies are merging worldwide. The five major alliances are: Star Alliance, Oneworld, Wings, Qualifier and Global Sky Team.
Everything started with the appearance of hubs offering services to millions of passengers from smaller emissive markets, such as Frankfurt and Vienna. Deregulation, the measure allowing flights out of the domestic country, made it possible for air companies to fly from everywhere and in all directions which is the most evident proof of globalization (V. Peric, 2005) Globalization has positive and negative impacts on the Hospitality Industry.
Exposure to different cultures: Due to globalization the managers of the Hospitality industry are able to learn about different cultures-as they get to mingle with people from various walks of life – and thus, increase their knowledge. Language Barriers: Due to globalization, the hospitality industry can employ people from different countries – as it is usually cheaper – they may sometimes have problems in communicating with customers. Many customers get quite irate as a result of this. Larger Market: Due to globalization the customer base has increased greatly.
People travel not only for holidays, but business, health and various other purposes too. Thus, this has increased the market for the hospitality industry, which gets its major income from international travellers. Cultural Barriers: As there are people from various cultures, one needs to be careful not to offend them. What is acceptable by one culture may be frowned upon by another.
Boosts the economy: Visitors come in and spend money – multiplier effect – and foreign exchange increases. Thus it is of great value to the economy as globalization helps to pump in money into the country. Events/Disasters in other countries: A disaster or even taking place in one country may affect other countries also. As an example, the financial crisis makes less people want to spend money or travel; due to increase in terrorism some visitors yet are not ready to travel to certain countries.
Globalization has increased the interdependence between countries, economies and people. Tourism has become big business and is run by great trusts. Nevertheless, in addition to all gratuities, globalization brought lots of challenges.
Globalization is, in one way or another, related to or has relevance for the many challenges world is facing today and the discontents experienced by its population. Whether the challenge is educational, economic or political, the rise of a global economy is rendering national economies obsolete and creating markets that transcend national boundaries. These changes are rippling across our lives and focusing attention on our education systems, producing economic displacement, and engendering intense reactionary movements.
As we move into the future we can expect that national economies will become part of macro-regional economies (European Union and North American), and that competition across these economies will result in, among other things, upward pressures on the skill sets of our labour force, increases in transnational labour and its movements, and increased public health issues for all nations. Dramatic changes of the business environment of hotel chains due to globalisation, advances in information and communication technology, and increased focus on shareholder value call for modern forms of marketing.
Relationship marketing and its practitioner’s equivalent customer relationship management are the promising, but disputed replies to these challenges (Medlik, S. 2001). Dealing with world-wide globalization trends is new to all of us. Everything is in a state of flux: demands, labour, know-how and capital are all flowing to where the biggest hopes for future lie, with the resultant standardization of production technologies, business strategies, marketing plans and management styles. Although tourism production is tied to local conditions, the tourism industry cannot avoid being affected by globalization.
Tourist products, and even whole destinations, are becoming interchangeable; continental and inter-continental transport networks determine the direction and speed of development; distribution channels and reservation systems are increasingly a decisive factor in success (Muller, H. 2001). Worldwide excess capacity in all departments of tourism-carriers, accommodation, adventure and leisure parks, sport facilities, cultural events, etc. -is a key driving force in globalization. Drops in tourism figures in highly differentiated national economies (Austria, Switzerland, Germany, etc. are largely due to the fact that almost all national economies worldwide have discovered tourism as a development-promoting factor and been drawn into the globalization maelstrom through the competitive situation (A. Lockwood, et. al, 2001).
Globalizing marketing Formulating and implementing a global marketing strategy is a complicated task. Expanding overseas will bring trouble sorting out the many complex issues involved, even for those who have great experience in local markets. Good market data on customers and competitors across the globe make the task easier.
But perceptive analysis of such data requires some managerial rethinking about customers and competitors. A strong argument for companies to standardize marketing was made by Ted Levitt, who in 1983 argued that markets were globalizing because of two factors: global communication and technology diffusion. With satellite TV broadcasts beaming the same programs all over the world and with instantaneous global communications, the world is moving inexorably toward greater homogeneity of markets.
At the same time, the increasing speed of technological innovation and diffusion make today’s production soon outdated by the onslaught from global competitors able to incorporate the latest product inventions. The joint effect of these two forces makes product standardization not only possible but the preferred alternative. (Johansson, J. K. , 1997) Because of the soft and impressionistic data that usually underlie a proposal for global marketing, the global marketers need to develop and present a more qualitative argument in favour of global approach.
The focus should be the degree to which a convergence of preferences is under way (W. J. Keggan, 2002). There are at least three important driving points in an analysis of the global convergence of preferences: Recognize that customer preferences are dynamic and changing. A major driver of changing preferences is new products on the market.
The new standard-setting products are first introduced and tested in leading markets. In addition to the analysis of common customer needs there is also need to analyze competition. The analysis of global competitors adds a level of complexity to the analysis of domestic-only competitors.
The global competitor usually has available a wider repertoire of competitive actions, which makes for a stronger competitor and makes prediction more difficult. Global competitors are always a threat to enter any local market where they at the moment might not have a presence (Johansson, J. K. , 1997). Globalizing marketing involves global coordination of marketing activities. It involves taking a global management perspective on the marketing operation in any country. Most typically it involves a certain degree of marketing standardization. There are several advantages and disadvantages of marketing standardization.
Table 3. Advantages and Disadvantages of Marketing Standardization. W. J. Keggan (2002) Advantages|Disadvantages| Cost reduction. Cost reductions gained by scale economies constitute the primary benefits from standardization. Because of the longer production series there are considerable savings to be gained in manufacturing as well as purchasing. Off-target. Standardized products, services and promotional mix are likely to miss the exact target in terms of customers’ preferences in any one country, because customers in different countries have widely dissimilar tastes and needs.
Global promotion Global promotion involves a variety of activities, ranging from in-store point-of-purchase displays and Sunday newspaper coupons to satellite TV advertising to sponsorship of symphony orchestras and athletic events. The global sales promotion, public relation, and publicity have also become powerful promotional tools because of developments in global communications and the opening up of new markets. Then there is participation in international trade fairs, direct marketing, and personal selling, the last typically more localized, but still important (W. J. Keggan, 2002).
Public relations professionals with international responsibility must go beyond media relations and serve as more than a company mouthpiece they are called n to simultaneously build consensus and understanding, create trust and harmony, articulate and influence public opinion, anticipate conflicts and resolve disputes. Public relations practices in specific countries can be affected by cultural traditions, social and political contexts, and economic environment. In developing countries, the best way to communicate might be through gongman, the town crier, the market square, or the chief’s courts. Even in industrialized countries, there are some important differences between PR practices.
In the United States, much of the news in a small, local newspaper is placed by means of the hometown news release. In Canada, on the other hand, large metropolitan population centres have combined with Canadian economic and climatic conditions to thwart the emergence of a local press (Johansson, J. K. , 1997). Effective personal selling in a salesperson’s home country requires building a relationship with the customer; global marketing present additional challenges because the buyer and seller may come from different national and cultural backgrounds.
Sales promotion laws and usage vary around the world but may consist of any of the following: 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 The most visible promotional activity is perhaps global advertising. Global advertising can be defined as advertising more or less uniform across many countries, often in media vehicles with global reach. In many cases complete uniformity is unobtainable because of linguistic and regulatory differences between nations or differences in media availability, but, as with products, localized advertising can still be basically global. In contrast, multidomestic advertising is international advertising deliberately adapted to particular markets and audience in message and/or creative execution (W. J. Keggan, 2002).
There are several traditional problems facing the decision maker in global advertising. One is how to allocate a given advertising budget among several market countries. The other is the message to use in these various markets. A third is what media to select. But even before tackling these management decisions, the advertiser needs to define the objectives of the advertising in the different countries. And before doing that it is imperative that the decision maker identify what can conceivably be expected from the global advertising effort.
Thus, the logical starting point in global advertising management is the assessment of the role of advertising in the country markets and the alternative advertising media (Johansson, J. K. , 1997). Despite the drawbacks of standardized and translated messages, global advertising has become an important alternative to adapted multidomestic advertising. The technological advances in global communications, the growth of global media, and the strength of global advertising agencies have combined to make global advertising possible.
And the possible spillovers from unified messages and the increasing homogeneity of many markets have made global advertising desirable. As the affluence of countries grows, new products and services appear, and customers need more information. Advertising becomes more important and advertising expenditures as a percentage of the GDP increase. For the global marketer, faced with increasing spending needs in all markets, a coordinated effort with synchronised campaigns, pattern standardization, and unified image across trade regions is usually more ffective and cost efficient than multidomestic campaign (W. J. Keggan, 2002).
Global e-marketing E-marketing is a term that can be used to label the potential of information technology and the Internet, and the impact on marketing. E-marketing is perhaps the single most important new development in technology in the entire history of marketing, particularly the ability to leap over distance. In global marketing, strategies and practices reflected the importance of distance. The most important variable impacting trade behaviour is distance. However, the Internet is totally independent of distance.
For the first time in history, the world has become a level playing field. Anyone, anywhere in the world can communicate with anyone else in the world in real time with no premium charged for distance. E-mail is major new communication tool that supplements fax and telephone to eliminate the barrier distance. E-mail is a marketing communication tool that offers unprecedented power for one-to-one message for both B2B and B2C communication (Johansson, J. K. , 1997). The aim of marketing segmentation has always been to create a unique value offer for as many customers as possible.
Before the Internet, this meant, in practice, creating an offer for a segment of the market that was an aggregation of customers. Almost overnight, the World Wide Web has emerged as a powerful new tool for accomplishing what in the past was only theoretical possibility in marketing: creating marketing programs that target a segment as one. Another major thrust of marketing in recent years has been relationship marketing. The Internet has opened up immense new possibilities for creating a relationship with global customers, potential customers, suppliers, and channel members.
The end of segmentation means that marketers can now focus on delivering value to the individual customer (W. J. Keggan, 2002). In addition to increasing volatility, the move from an industrial to a post-industrial e-economy also represent the global marketer with a new set of rules. Long established principles, such as the emphasis of retailers in “location, location, location”, are passe. People in such rigid time prefer to buy goods via the Web, instead of spending valuable time fighting traffic to buy these goods somewhere in a town.
Among the most important follow: Secure a dominant market position as quickly as possible. Form alliances based on their potential for market access and synergies. Anticipate very high start-up investments. Defend positions through an ongoing process of innovations.
Global pricing Pricing globally is much trickier that pricing in the home market. The level of price is often a minor headache compared with problems of currency fluctuations and devaluations, price escalation through tariffs, difficult-to-access credit risks, transfer prices, and price controls – all common issues in global pricing.
Many of the problems in global pricing concern host country institutional limitations that constrain strategy. The problem is that of coordinating pricing across countries, to satisfy multinational customers, without imposing a straitjacket on local subsidiaries and illegally fixing prices for independent distributors. The competitive analysis might be as simple as finding out what global and domestic competitors in particular country maker charge for their products and services. These prices tend to set the “reservation” prices in the local market, that is, those limits beyond which firm’s product will not be onsidered and people will avoid buying.
The analysis can go further and attempt to isolate the differential advantages that the firm’s product might have over these existing offerings, so-called “perceived value” pricing (Johansson, J. K. , 1997). When a company operates in several nations, the same product might appear on the market in different countries at widely different prices. A global customer does not usually like to pay different prices for the same product in different parts of the world.
There is a question about the extent to which the whole of ethics of marketing thinking and practice is accepted. In many newly opened markets, customers are not used to the way of Western marketing, and many can be expected to voice opposition to the unabashed trumpeting of a firm’s product. It is not just the hard-hitting advertisements that cause problems; people might find the “everything has a price” mentally abhorrent. Certain promotional activities are likely to become regulated as the free-to-all euphoria in the new countries recedes.
It will be important for marketers to correctly read the mood of the populace and to not engage in practices that will stir up negative sentiments. Ethical marketing is likely to be enforces much in some of these countries than it is in the United States (W. J. Keggan, 2002). The marketer in China is likely to find it difficult to protect a successful brand from imitators, at the same time as will challenge the foreign influence of a global brand.
Global hotel markets are expected to continue to feel pressure from contracting economies and reduced leisure and business travel across much of the world in 2009. However, despite declines across most major regions of the world in 2008, operating performance in the global hotel industry remained profitable as hoteliers focused on controlling costs and preserving the bottom line (Ernst & Young LLP, 2009, New York). The challenge, however, is larger than efficiency alone. It is also about making the various components of the system work together and towards a shared vision.
As an initial step, one could envisage choosing just one area with which to begin and establishing modalities for deep and permanent links between institutions that are dealing with clearly related issues (Najam, A. , Runnalls, D. , Halle, M. (2007). Besides all marketing challenges stated before, there are numbers of others, including operating issues (labour shortages, cost containment, increased competition), technological (interactive reservation systems, guest-room innovations, data mining, yield management) and economic issues (dependence upon the nation’s economy).
All these issues are challenging companies around the globe in a different degree; therefore they are also managed in a different ways. A number of international hotel companies have sought the economies of scale attendant to developing single brands and products, and providing them in a uniform fashion to as many markets around the globe as possible. Hospitality companies that seek capital from the public marketplace (a trend which is clearly going to continue and expand) trying to function as global enterprises.
Hotel companies expanding globally confront varying traditions, structures and attitudes to property investment and valuation in different countries. To compete, they must pay closer attention to the trends of globalization. The industry must reflect the requirements of the global village in many aspects of its operations, including food, services, amenities, staffing policies and training. Conclusion “There is little doubt that most markets in the current economic climate are challenging at best and growth will be hard to come by most operators, “said Michael Fishbin, National Director of Hospitality Services.
As a result, this year we will see hotel operators continue to focus more of their energies on cost reduction, improving operating efficiencies in their hotels, reaching out to guests via enhanced Internet communication and strengthening their brands through an emphasis on green principles in activities related to both development and operations,” he added. The message today is that it is incumbent on all hotel organizations that have aspirations to develop brand names across national boundaries to understand what globalization means.
A truly global enterprise will have the ability to react quickly to market opportunities, no matter where they present themselves by applying business concepts that have been proven in a context of a global undertaking. For the larger well-established international hotel companies that have circled the world in the quest for new opportunity, globalization has been a strategic concept for a number of years. International hotel companies have had to confront virtually all of the issues facing global enterprises – and in many cases more.
Unlike a manufacturer with an overseas plant, for example, a hotel company must export its entire operating business to function in diverse cultural and geographic settings. Hotel companies must have the capability of establishing an entire business concept in dramatically different local environments. In a world moving more and more towards globalization, hotel organizations will need to communicate more quickly, operate more productively, offer their employees greater opportunity and deliver their customers enhanced benefits Those companies that address these issues today will be better prepared for the global market space of tomorrow.
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