Globalization and Hospitality Industry

3. Challenges brought by Globalization

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).

3 .1 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:

1. Recognize that customer preferences are dynamic and changing.

2. A major driver of changing preferences is new products on the market.

3. 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)

3 .2 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 on 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).

Table 4. U.K. Institute of Sales Promotion.

The usage of direct mail, the most popular type of direct marketing, varies around the world based on literacy rates, level of acceptance, infrastructure, and culture. In countries with low levels of literacy, a medium that requires reading is not effective. In other countries, the literacy rate may be high, but consumers are unfamiliar with direct mail and suspicious of products they cannot see.

3 .3 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 effective and cost efficient than multidomestic campaign (W.J. Keggan, 2002).

3.4 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 passé. 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. Looking at the changing business principles forced by the new e-economy, A. Rangaswamy summarized the situation in such way:

Table 5. A. Rangaswamy, “Toward a Model of eBusiness Performance”, 1999.

From To
Market share	Strategic control
Technology as an enabler	Technology as driver
Seller-centric market	Buyer-centric markets
Physical assets	Knowledge assets
Vertical integration based on size	Vertical integration based on speed
Decreasing return to scale	Increasing return to scale
Firm-centric marketing strategies	Network-centric marketing strategies

In a similar vein, Andersen Consulting stated that the new economy will force companies to adopt some new game plans. Among the most important follow:

1. Secure a dominant market position as quickly as possible.

2. Form alliances based on their potential for market access and synergies.

3. Anticipate very high start-up investments.

4. Defend positions through an ongoing process of innovations.

3.5 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 considered 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.

3.6 Global ethics

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


9-09-2015, 01:27