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Strategic Factor Analysis Summary- Applicability in the Case of City Tourism in Novi Sad (Serbia)
Nemanja Davidovic
Department of Geography, Tourism and Hotel Management Faculty of Sciences, University of Novi Sad Novi Sad, Serbia nemanja.davidovic@dgt.uns.ac.rs

Abstract - Strategy formulation and strategic planning is often concerned with developing and organizations mission, vision, objectives and strategies. The first step is always situation analysis. Over the years, SWOT analysis has proven to be the most widely used management technique. However, it has drawbacks, mostly related to a single level of analysis and absence of weights to reflect priorities. The SFAS (Strategic Factor Analysis Summary) Matrix summarizes the strategic factors, using weights, rating and weighted score. The results of this study will provide situation analysis and open a process of finding a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses in the development of city tourism in Novi Sad, Serbia. Keywords - SFAS, tourism, Novi Sad

The fundamental underlying premise of strategy nowadays becomes the notion that even a larger, more powerful competitor can be defeated if it can be out-maneuvered using strategic skill. As in the battlefield, so is in tourism: organizations attempt to out-maneuver their competitors [1]. Decisions regarding the segments of the market they wish to pursue and the type of tourism products they wish to develop for their markets must all be carefully planned out in what is known as the strategy [2]. The purpose of the strategy is to make an organization (in this case, a city tourism destination) adapt to its environment. There is a need to continually review strategic objectives because the environment is always changing. If there were only one ideal position, there would be no need for strategy [3]. The term strategic management is used synonymously with the term strategic planning. The strategic planning is more often used in the business world, whereas strategic management is often used in academia. Strategic management is the most important activity undertaken by any organization. How skillfully these activities are carried out will determine the eventual long-term success or failure of the organization [4]. The strategic planning process consists of a careful analysis of the tourism industry and the opportunities and threats that competitors and environmental factors may bring. Tourism strategy represents a key challenge to managers because of the nature of the products being sold and of the complexities of the environment in which tourism exists. In particular, strategy is formed by the fact that most

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Tamara Jovanovic
Department of Geography, Tourism and Hotel Management Faculty of Sciences, University of Novi Sad Novi Sad, Serbia jtamara@uns.ac.rs

tourism products are services rather than goods (because they are intangible) [5]. The first step in strategy formulation is strategic analysis. The purpose of strategic analysis is to gather information about the internal and external environment. External environment is scanned to identify possible opportunities and threats, whereas internal environment is scanned for strengths and weaknesses. Strategic analysis is often referred to as SWOT analysis. SWOT is however only one of the possible techniques for situation analysis. SWOT is an acronym used to describe the particular strengths, weaknesses, opportunities and threats that are strategic factors for an organization. It has proven to be the most widely used and enduring analytical technique in strategic management [6]. A detailed internal and external analysis is a necessary prerequisite for the SWOT information because it emerges from the internal and external analyses. The process sometimes involves an additional stage of condensing SWOT into a survey of the key issues- those which require the most urgent action or which the strategy should be particularly designed to address [7]. If the information from the analysis is flawed of insufficient, there is no certainty that the strategy formulation will be the right one. Once the destinations internal strengths and weaknesses and its external opportunities and threats have been established, the challenge becomes to select a strategy that will address the weaknesses and threats and, at the same time, will build upon its strengths and exploit its opportunities. Although it is the most widely used management tool, SWOT is not a panacea. Primary criticisms of SWOT analysis are: generation of lengthy lists, ambiguity of words and phrases, only single level of analysis and it uses no weights to reflect priorities. The EFAS (External Factors Analysis Summary) and IFAS (Internal Factors Analysis Summary) tables have been developed to deal with many of the criticisms of SWOT analysis. When used together, they are a powerful analytical set of tools for strategic analysis. The SFAS (Strategic Factors Analysis Summary) Matrix summarizes strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table. Possible alternative strategies can then be generated by referring to EFAS and IFAS tables in generating TOWS (SWOT backwards) Matrix [8].

I.

INTRODUCTION

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EFAS factors can be divided into known categories of chances and threats. The ability of the organization to respond to each of these factors is then analyzed, taking into consideration their importance for that specific organization. This is done by choosing up to 10 chances and threats (individually) that have relevance to the organization and they are sorted in the first column. In the second column, each of the factors importance is assessed (with grades from 0 no importance to 1 of great importance), depending on their influence to the strategic positioning of the organization. Greater the weight of factors, the bigger the influence that it has on the future success of the company. Sum of the weight has to be equal to 1, no matter the number of factors. Ability of the organization to respond to each of these factors is rated in the third column, with grades from 1 to 5 (1- inadequate, 5 excellent). This rating shows with which success organization uses chances and responds to threats from the surrounding. Multiplication of the weight of the factor and ability of the organization to respond to it gives a weighted score for each individual factor (fourth column). In the fifth column comment is given about the choice of each factor and importance and grade is analyzed. Total weighted score tells us how successfully the organization reacts to the factors from the external surrounding. With this, organizations of same industry can be compared between themselves. Average organization in any economy will always have a weighted score 3. Analysis of the internal surrounding IFAS, often called organizational analysis, is based on the identification and development of the organizational resources. It is performed the same way as the EFAS. SFAS analysis synthesizes results of EFAS and IFAS analysis and therefore becomes a very powerful technique of the strategic analysis of the surrounding that has fully responded to the shortcomings of the SWOT analysis. In SFAS matrix strengths, weaknesses, chances and threats are summarized into about 10 strategic factors. This is done by choosing individual factors of EFAS and IFAS analysis that are of the greatest importance to the organization and they are put into first column. Next to the factors there is a label that says whether the factor is strength, weakness, chance or a threat to the organization. After that, importance of these factors is evaluated again (with grades from 0 no importance to 1 of great importance) depending on their influence on the strategic positioning of the organization (second column). Total importance must be equal to number 1. Ability of the organization to respond to each of these factors is graded in the third column, with grades from 1 to 5 (1- inadequate, 5 excellent. Multiplication of the weight of the factor and ability of the organization to respond to it gives a weighted score for each individual factor (fourth column). Total weighted score tells us how successfully the organization has dealt with their strategic factors. In the fifth column, explanations and additional comments are written, for every factor. Final result is the summary of the most important internal and external

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II.

RESEARCH METHODS

strategic factors in one table. SFAS matrix represents the bases for formulating strategy1 III. RESULTS

From Table 1 (in appendix), we can see the External Factor Analysis Summary (EFAS) of City Tourism in Novi Sad. Geographic position of Novi Sad (Serbia) is favorable, considering that it is located on corridor 10 and corridor 7 i.e. river Danube, that is certainly one of the most significant water roads in Europe. However, there is still space for further use of this potential. Since March 2012, Republic of Serbia has become a candidate for the membership in European Union. Candidate status implies greater access to larger number of funds for tourism development and it certainly positively affects the image of this country. Conditions to travel have been substantially improved in the last two years, for both the receptive and initiative tourism. In year 2009, visas for Serbian nationals have been revoked for traveling in the countries that are in the Schengen Area. Since 2010 citizens of EU can enter Serbia with only an ID card as it is the case with other countries that are members of the EU. In the city of Novi Sad there is a possibility for brownfield investments, first of all with buying out military objects and turning the same into cultural centers or accommodation objects. Chances for the long term sustainable development of tourism are in: creating public-private partnerships in marketing and promotion, investing in infrastructural capacities, education and expert advanced training of touristic staff, safety, preservation of living surrounding and cultural heritage and other investments of joint interests. University of Novi Sad has to be included in the industry (so called transformation towards Entrepreneur University). The quickest way to accomplish this is through market oriented research and collaboration between research centers and tourism industry. Biggest threat for business in Serbia, not only in tourism sector, is corruption, which is still widely distributed. High interest and inflation rates influence negatively on business, as well as world economical crisis that has started in 2008. That has affected the extenuation of the general economical activities, as well as weakening of the exchange rate of dinar to euro (that kind of situation on the other hand benefits foreign tourists and exporters). Low credit rating of the state, unstable political situation and slow process of joining EU sends negative signals to the foreign investors. Big problem for local businessmen is inadequate tax policy of the state. Reform of the tax politics is needed, first of all charging VAT after charging the goods. Finally, incentive means for tourist agencies and tour operators that positively influence receptive tourism are necessary. Those means are present in the surrounding countries (tax payment through incomes of the receptive tourism, both domestic and foreign). Final evaluation of the analysis of the external surrounding (EFAS) of Novi Sad is 2.3 which means that this destination responds below average to challenges from the

Although this grading cannot be totally objective, since different people have different attitudes, nevertheless these grades are representative enough to illustrate relative importance of certain factors.

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surrounding when compared with other destinations (see Table 1 in the Appendix). From Table 2 (in appendix), we can see the Internal Factor Analysis Summary (EFAS) of City Tourism in Novi Sad. Novi Sad is, because of cultural heritage, called also Serbian Athens and it strives to become European city of culture. Besides rich cultural heritage in the city itself, there are equally important objects in the near vicinity of the city, first of all, monasteries of Fruska Gora and town Sremski Karlovci. It is very important to repair the outlook of these objects, since certain parts are very badly neglected. Also, it is important to clearly define which organization has jurisdiction for the management of these objects. As we can clearly see in the analysis of the seasonality of the numbers of arrivals and overnight stays of tourists in Novi Sad, largest number arrives during certain, popular manifestations, such as Novi Sad Fair (Agricultural fair) and music festival EXIT. The most significant natural resources in Novi Sad and surrounding are river Danube and National Park Fruska Gora, but potentials are not fully used in tourism development. Labor power in tourism sector has substantial education, above all, thanks to the tourism studies at the Department of Geography, Tourism and Hotel Management. Material base of tourism has been significantly improved in the last decade, primarily thanks to the opening of large number of new accommodation objects. There is tourist organization in Novi Sad, but unfortunately it is not organized and run according to the principles of the organization for management and marketing of the destination. Until that organization happens, it is necessary to elect the director of the tourist organization by means of competition. Multiethnicity of Novi Sad also contributes to its tourist attractiveness. City of Novi Sad does not have a recognizable image. Tourist offer of Novi Sad is diversified, unclear, inconsistent, uncoordinated with the needs and contemporary trends and especially contemporary standards. Ecological conscious of the local community is also not developed enough, so garbage represents a major issue (beside roads, on bicycle and mountain paths, beside the port and marina on the beaches, in the Danube, on parking lots where tour buses are parked, etc.). Prevention and sanctioning action is needed. Prevention, that would mean charging for the plastic bags in the stores, paying for the return of the plastic packaging, cans, etc. (these actions have given positive results in Germany). Also, it is necessary to introduce fines for throwing away garbage outside the bins, containers and provided landfills. Entrepreneurs, micro, small and middle enterprises dont have enough support from the state in starting their own business. There is a great need for introduction of incentive means (planned according to the strategy and action plan for tourism), for the receptive tourism as well. For the needs of tourism industry, education system should be revised and outdated and unnecessary courses should be excluded. Education system should be made more flexible and in accordance with the needs of the market and more practical activities should be available for students. Novi Sad, although it has favorable geographical position, does not

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use it enough, primarily because of outdated and inadequate traffic infrastructure. Final evaluation of the analysis of the internal surrounding (IFAS) of Novi Sad is 2.81 which means that this destination does not use its advantages sufficiently and weaknesses are overcome below average when compared with other destinations (see Table 2 in the Appendix). From Table 3 (see the Appendix), we can conclude that the greatest strength for developing tourism in Novi Sad lies in cultural heritage, manifestations and natural resources, and biggest chance is in geographical position on the Danube and corridor 10. Insufficient is the support to micro, small and middle enterprises that want to start their own business, ecological consciousness is low and above all, no recognizable image of Novi Sad, represent the greatest weaknesses. High level of corruption, high inflation rate, high interest rates and world economic crisis represent largest threats for tourism in Novi Sad. Compared analysis of internal and external surrounding of Novi Sad resulted with the grade 2.45, which means that Novi Sad as tourist destination is below average in comparison to other destinations (see Table 3 in the Appendix). For the development of the adequate tourism strategy, data should be transferred into TOWS matrix [9].

IV.

CONCLUSION

This paper showed that SFAS as a situation analysis tool can also be used in tourism industry, through the case study of city tourism in Novi Sad, Serbia. It successfully overcomes the criticism of SWOT analysis and provides essential information of the industry environment necessary for generation of alternative strategies. The results of this study highlighted 11 most important factors for city tourism development. The total weighted score of SFAS analysis is 2,45 which is below the industry average. The total weighted score in IFAS and EFAS Tables were also below the industry average of 3,00. The second step of research should include generation of alternative strategies. A strategic fit of future tourism development strategy of Novi Sad should be based on WT Strategies, meaning that generated strategies should be the ones that minimize weaknesses and avoid threats. These should include other strategic management tools applied in the field of tourism. The methodology used in this paper is recommended in the future situation analysis of tourism in other markets.

ACKNOWLEDGMENT The paper is supported by Ministry of Education and Science, Republic of Serbia (grant: 176020). The research that is presented here is a part of the doctoral dissertation of Nemanja Davidovic at the University of Novi Sad.

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[1] [2] [3] [4] [5]

P.F.Drucker, Management Challenges for the 21st Century. New York: Harpercollins Publishers Inc. 1999 M. E. Porter, What is Strategy?. Harvard Business Review, 1996, pp. 61- 78 F.R. David, Strategic Management- Concepts and Cases. New Jersey: Prentice Hall, 2011 R.M. Grant & J. Jordan, J., Foundations of Strategy. Chichester: John Wiley & Sons Ltd., 2012 L. Moutinho, Strategic Management in Tourism. Oxon: CABI Publishing, 2000

External Factors CHANCES Geographical location EU candidate country status Cooperation of academia and private sector Possibilities for Brownfield investments Public-private partnerships Nature reservation Koviljsko- petrovaradinski rit Visa regime THREATS World economic crisis High interest rates High inflation rate Unstable political situation High corruption rate Low credit rating of Serbia Slow EU accession process Inadequate tax policy TOTALS

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REFERENCES

[6] [7] [8] [9]

S.P. Robbins & M. Coulter, Management. New Jersey: Prentice Hall, 2012 C.W. Stern & M.S. Deimler, The Boston Consulting Group on Strategy. New Jersey: The Boston Consulting Group. 2006 J.D. Hunger & T.L. Wheelen, Essentials of Strategic Management. New Jersey: Prentice Hall. 2011 N.Davidovic, The Learning Area Principles as a Framework for the Development of Tourism Development Strategy of Novi Sad, Doctoral thesis, unpublished

APPENDIX

TABLE I. Weight

EXTERNAL FACTOR ANALYSIS SUMMARY (EFAS) OF CITY TOURISM IN NOVI SAD Rating Weighted score Comment

0,15 0,05 0,03 0,03 0,03 0,01 0,05

4 4 3 3 3 3 5

0,6 0,2 0,09 0,09 0,09 0,03 0,25

Corridors 7 and 10, close to Airport Nikola Tesla New funds for tourism development available, better image of Serbia and Novi Sad Market orientated research and cooperation of R&D centers and tourism business Transformation of military real-estate Foundation of efficient long-lasting models of PPP to increase the competitive advantage of Novi Sad tourism offer Potential for ecotourism development Abolishment of visa regime in Schengen area for citizens of Serbia and travel of EU citizens to Serbia with a valid id (passport no longer required)

0,1 0,1 0,1 0,05 0,15 0,05 0,05 0,05 1

1 1 2 2 1 2 2 2

0,1 0,1 0,2 0,1 0,15 0,1 0,1 0,1 2,3

Decrease of all economic activities, low Serbian Dinar exchange ratio High interest rates discourage credit financing High inflation rate (higher than 10%) creates unfavorable business climate Relations to EU and open issues with Kosovo* Corruption is wide spread and has a high rate Credit rating of Serbia is BBThe reform process in Serbia is slow VAT should be collected at the payment date

TABLE II. Internal Factors

INTERNAL FACTOR ANALYSIS SUMMARY (IFAS) OF CITY TOURISM IN NOVI SAD Weight STRENGTHS Rating Weighted Score Comment

Cultural heritage Natural resources

0,1 0,07

4 4

0,4 0,28

Petrovaradin fortress, cultural and historical spatial areas, medieval monasteries on Fruska gora Danube, NP Fruka gora...

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Lack of infrastructure adapted locations ready for investors, lack of subsidies for investors on city level Lack of support for SMEs and new entrants in tourism Lack of integrated cultural centre and lack of organization for cultural heritage management Low environmental awareness Gap between education courses and market needs

Lack of support for SMEs and new entrants in tourism Low environmental awareness Undefined image of Novi Sad as a tourism destination External Factors Geographical location World economic crisis High interest rates High inflation rate High corruption rate TOTALS

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Events Educated work force Developed tertiary sector Material base of tourism Existing DMO Multiculturalism

0,1 0,05 0,01 0,05 0,05 0,02 WEAKNESSES

5 5 4 4 3 5

0,5 0,25 0,04 0,2 0,15 0,1

EXIT, Novi Sad Fair... Tourism courses at University of Novi Sad

Increase in number of beds and accommodation facilities in the past 10 years Tourism organization of Novi Sad

Geographical location is not fully utilized Aging population City economy lacks compatibility with resources available Lack of spatial planning and irrational usage of space

0,05 0,01 0,01 0,01 0,05 0,1 0,02 0,1 0,05

2 4 2 1 2 2 1 1 3

0,1 0,04 0,02 0,01 0,1 0,2 0,02 0,1 0,15

Corridor 10, railroad and corridor 7 are not fully utilized Increase in population is due to migration

Construction sites and buildings without permit No funds for promotion of investments Lack of start-up loans for incoming tourism

Rubbish and litter problems Education courses should contain more internships and be market orientated Tourism offer of Novi Sad is highly diversified, unclear, inconsistent, and inadequate to its demand, contemporary tourism trends and standards

Undefined image of Novi Sad as a tourism destination TOTALS

0,15 1

0,15 2,81

TABLE III. Internal Factors Cultural heritage Natural resources Events Type Strength Strength Strength Weakness Weakness Weakness Type Opportunity Threat Threat Threat Threat

STRATEGIC FACTOR ANALYSIS SUMMARY (SFAS) OF CITY TOURISM IN NOVI SAD Weight 0,15 0,05 0,1 0,1 0,1 0,15 Weight 0,1 0,03 0,05 0,05 0,12 1 Rating 4 4 5 2 1 1 Rating 4 1 1 2 1 Weighted Score 0,6 0,2 0,5 0,2 0,1 0,15 Weighted Score 0,4 0,03 0,05 0,1 0,12 2,45 Comment Petrovaradin fortress, cultural and historical spatial areas, medieval monasteries on Fruska gora Danube, NP Fruka gora... EXIT, Novi Sad Fair... Lack of start-up loans for incoming tourism Rubbish and litter problems Tourism offer of Novi Sad is highly diversified, unclear, inconsistent, and inadequate to its demand, contemporary tourism trends and standards Comment Corridors 7 and 10, close to Airport Nikola Tesla Decrease of all economic activities, low Serbian Dinar exchange ratio High interest rates discourage loan financing High inflation rate (higher than 10%) creates unfavorable business climate Corruption is wide spread and has a high rate

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