GLOBALISATION INNOVATION AND STRATEGY

Analyse and evaluate the impacts of globalisation for a sector(s) of your choice within the
global hospitality industry, highlighting both the positive and negative consequences

Catherine Alderson
Hospitality with Events Management
11026074

Contents
1.0 Introduction
2.0 Executive Summary
3.0 Main Body
3.1 Globalisation within Hospitality
3.2 Culture
3.3 Society
3.4 Politics
3.5 Global Economy
3.6 Environment

4.0 Conclusions
4.1 Advantages of Globalisation
4.2 Disadvantages of Globalisation
4.3 Summary

5.0 References

1.0 INTRODUCTION

As a term, Globalisation can be described as a transplanetary process, or a set of processes

involving the increase in liquidity and the multidirectional growth flows of objects, people,
plans and information as well as the structures they come across, and create (Scholte 2005
and Ritzer 2009). Although this is a well thought systematic definition of globalisation, there
are many significant changing trends that may affect any specific definition, Holton (2005
pg. 14) agrees with this by citing any stable meaning of the concept is hard to identify.
Globalisation is a well-known worldwide concept, which is broadly asserted into day-to-day
social life through many different global processes. From this, the world economy through
basic dynamics has globalised, being further dominated through uncontrollable market
forces (Hirst et al. 2009). As a concept, globalisation has various features which affect the
world economy which can be categorised using the diagram shown in figure 1.1.1 below,
and under the following headings (Shrivastava, 2012);

Financial Current financial market, and the emergence of financial markets. Better
access to external business funding and finance for borrowers. (Shrivastava, 2012)

Political Regulating the relationships between governments and guarantees the

moralities arising from economic and social globalisation. (Shrivastava, 2012)

Economic Common global markets, based on the freedom to exchange capital and
goods. Given an economic collapse, the markets within the countries would not be
able to contain this. (Shrivastava, 2012)

Cultural Growth of cross-cultural contacts, a businesss desire to increase the

customers standard of living, and present them with foreign: products, ideas,
technology and practices. (Shrivastava, 2012)

Social Any running business has an effect on the community and country it is
situated in. It is the responsibility of that organisation to address the issues that arise
with this, and effect the local environment positively rather than negatively.

Technical Development of global technologies, and greater data flow using

technologies such as internet, communication and satellites. Growth in the number
of standards e.g. copyright laws and world trade agreements. (Shrivastava, 2012)

Figure 1.1.1 The Dimensions and Layers of the International Environment, Adapted from
Morrison (2011, pg. 28)
As any concept, globalisation has its advantages and disadvantages. Some of the main
advantages and disadvantages, where globalisation brings potential benefits to international
producers and intercontinental economies are:
Increased access to bigger markets - improving higher demand for products which
leads to reducing average production costs. (Economics Online, 2014)
Source reduced cost materials allows worldwide to be cost competitive in their
national markets, as well as overseas markets. (Economics Online, 2014)
Diseconomies of scale large national companies can encounter difficulties
connected with organising activities of subsidiaries created in different countries.
(Economics Online, 2014)

 Over-standardisation of products Global companies standardising certain products,

leading to lack of diversity and small local producers being disadvantaged.
(Economics Online, 2014)
Globalisation is vastly increasing within the current hospitality industry, this report aims to
discuss how different hospitality companies have dealt with current issues of globalisation,
to advance and progress as a business through the changing sector in which they are
operating. It also aims to discuss how increasing levels of globalisation effects hospitality
companies internal and external operating environments through both positive and
negative effects, under the following headings: globalisation within hospitality, culture,
society, politics, global economy, and environment.

2.0 EXECUITIVE SUMMARY

This report aims to outline, analyse and evaluate the current globalisation impacts affecting
the hospitality industry. This will be done through addressing both positive and negative
consequences globalisation has on the current hotel sector within the hospitality industry.
The main body of the report then goes on to discuss how the hospitality industry is globally
affected by globalisation, and the issues that arise from this. It outlines that the hospitality
industry is one of the biggest global service markets today, and it is also one of the quickest
growing industries. From this the report then introduces two international companies:
Hilton and Marriott, as discusses how these organisations have become globally successful
hotel businesses through expansion and location of their establishments, to suit different
target consumer markets.
Culture is then discussed, and the findings from secondary literature are then evaluated
against Hilton Internationals organisation views. The findings in this section are:

Culture can be described as an aspect that is held together by language, history and
loyalty to national homeland (Morrison, 2011).

Hilton is deemed a decentralised and cultural operating organisation.

Cultural Diversity can have negative effects on the hotel industry, such as cultural
differences and language barriers.

Under the society heading, corporate social responsibility is discussed within the context of
Marriott Hotels, the findings from this are:

One of Marriotts main aims as a business within their hotels worldwide, is to keep
their surrounding communities strong.

Stakeholders are very important to Marriott, and they work together closely to
develop community and organisation involvement.

Within the context of Hilton International as an organisation, there are many influencing
political factors, however findings within the report have shown that accessible documents

produced by the company such as Code of Conduct shows their values as a leading
organisation.
With the hospitality industry being the fifth biggest industry inside the UK, providing eight
percent of total employment, this outlines how widely it is expanding around the globe. In
addition to this, figures show that hospitality contributes to just under 10% of the worlds
gross domestic product (Boella, 2000).
The environment, and being a sustainable organisation is a constantly growing issue within
the hospitality industry. Using Marriott hotels as an example, the findings of their attitude
and values towards maintaining a sustainable working business environment are:

One of their main objectives is reducing operating costs within all of their global
establishments.

They are constantly working towards making all of their hotels as green as possible.

Conclusions that were made from the above findings were categorised into advantages and
disadvantages that have an impact on the hospitality industry, as a result of globalisation:
Larger Market
Exposure to new/different cultures
Increased Job Opportunities
Economy boost
Global Disasters
Exposure to new/different cultures
Seasonal Job Opportunities
Loss of cultural values
Overall the report addresses five aspects that affect the hospitality industry, with regards to
globalisation under the headings: culture, society, politics, global economy, and
environment. One of the main conclusions made is that hotel companies need to consider
different cultures and traditions when they enter a new country or market to bring culture
diversity into the industry.

3.0 MAIN BODY

3.1 Globalisation within Hospitality

As an industry, the hospitality industry is complex. Sufi (2008, NP) believes that these
complexities arise because of the fragmented nature of this industry and the subsequent
strategy of the hospitality establishments for bigger market share, growth, and entering
foreign markets. Globalisation has become a key concept within business, economic
and political markets since the early 1990s (Hall, 1997), and with the hospitality
industry being considered one of biggest global service markets today, this puts into
question why an increased amount of people are travelling the world (Litteljohn, 1997 ).
It is believed that the hospitality industry is a sub-sector of the tourism industry, and is
one of the most quickly growing industries in the service sector (Go and Pine, 1995 ),
The European Commission (2009, pg. 2) agrees with this by stating a large part of the
sector is closely linked to the dynamics of the tourism economy; in terms of turnover the
hotels and restaurants sector counts for more than 70% of the EU tourism sector . Key
sectors within the hospitality industry are becoming more concentrated, with Morrison
and Thomas (1999) stating they found evidence of growth within hotels over recent
decades, and called it incontrovertible. From this evidence they discussed domination
of market shares, and found that it was at the cost of small firms within this market,
questioning the basis of unavailability of accurate statistics of the industry structure
(Sufi, 2008 NP).
The hospitality and tourism industry is vastly increasing, with global businesses all
around world, in particular hotels. International companies such as Hilton and Marriot,
are located all around the globe in several different continents, and in numerous
different countries. Zhao and Merna (1996) consider the acceleration of globalisation
within the hospitality industry, due to the advances in communication and
transportation, technology, elimination of political barriers, sociocultural changes,
global economic development, and growing competition within the global environment.

Location is essential to any hotel business. Companies are forced to find the best
locations all over the world to expand their ever-growing business, this applies to all
businesses no matter what their target market may be. Johnson et al. (2005) argue that
the size and nature of a hotels location, whether it is a small or large chain, is seen as
the most important factor, this therefore shows the more locations an organisation has,
the more familiarity and loyalty it can build among current and future customers.
In order to analyse the business environment, it requires a very detailed study of the
political, economic, social and cultural aspects of the desired country (Morrison, 2011).
From this organisations have three business choices: expand existing markets, create
new products to fill market gaps, or develop new markets abroad, however t he most
successful and progressive hotel organisations will have developed all three strategies
at some point. An example of this within a current organisation is the Marriot Hotel
Chain.
In 2010, Marriott had more than 3500 lodging properties located in the U.S. and in 69 other
countries around the world, employing 137,000 people (Marriott International Company
Profile, 2010). Throughout their years as an operating hotel business, Marriott have
applied all three business choices:

Expanded their existing markets shown through the number of hotels

developed in the home country the U.S.

Created new products Created new brands to fill market gaps, to attract a
broader range of customers. List of brands shown in figure 3.1.1 below.

Developed new markets abroad shown through the expansion of their

organisation into 69 other countries than the U.S.
List of Brands Managed under Marriott International

Marriott

Residence Inn

Springhill Suites

Renaissance

Courtyard

Ramada International

JW Marriott

Towne Place Suites

Marriott Vacation Club

Ritz-Carlton

Fairfield Inn

Ritz-Carlton Club

Figure 3.1.1 Brands developed under the Marriott International Organisation, Adapted
from www.marriott.com, 2014.

Marriot Groups of Hotels are strategically located in important worldwide locations,

allowing the maximum potential of customers to access their sites on an annual basis.
From this their target consumers are targeted and the required services are positioned
according to the features and characteristics of each segment. For example, the tourists and
travellers, the services of Marriott hotel must be positioned according to the demands of
the location and sites. Therefore the location of Marriott Hotels must be near tourists sites.

3.2 Culture
Culture as described by Morrison (2011 pg. 28), are usually grouped as national
cultures, which are held together by language, a historical sense of belonging and a
loyalty to the national homeland. Within most businesses, their company way is a
result of the organisations culture (Shrivastava, 2012). Wheelen and Hunger (1998)
believe that corporate culture can be described as a collection of beliefs, expectations,
and values learned and shared by an organisations members, and transmitted from one
generation of employees to another. To maintain a higher competitive position,
companies must obtain a strong culture (Ritzer, 2009). Therefore when a hotel business
decides to invest outside its home country, this means they have to adjust a higher or
lower company culture. This is due to the business needing to adapt to the cultural
diversity within the new hotel working environment, which also results in a multiple
culture working environment. In addition to this, the hotel business is therefore at a
competitive advantage, as they are able to meet the needs of a diverse range of
customers and workforce employees. An example of this within the current hospitality
industry is Hilton International.
Hilton International operates 380 hotels worldwide and is represented in 66 countries, and
its 80,000 strong workforce looks after an average of 8 million guests every year. (Hilton
International, 2014). As a result of this Hilton International as an organisation is
decentralised, as it has hotels in numerous countries, cities, and even individual hotel
brands. From this Hilton International have adapted a high company culture, through new
diverse cultural workforces and environments, all working under one brand name.

However such cultural diversity can also convey some negative effects, which can
generally be attributed to individuals, and how they relate to difficulties arising from
departmental concentration of minority ethnic groups, particularly from language and
cultural differences. An adjustment like this, can prove to be a difficult task for an
organisation. Even for a small local hotel, when business customers are all from the
same culture and speak the same language, the actual construction of the facility can
be difficult, if the organisation is not familiar in the local culture.

3.3 Society
As described by Morrison (2011, pg. 400) social responsibility refers to the role of the
firm in society, which entails obligations to stakeholders in local communities and to the
environment. The corporate social responsibility of Marriott International covers two main
points:

Business Values - Marriott hotels must establish its business to increase the business
values for customers. Marriott hotel management and its franchise operations
create the basic essential business values for the basic framework of ethical
behaviour and integrity within an organisation.

Society - Marriott hotels is committed to the social blending of corporate financial

contributions with the volunteer opportunities around the globe. They also offer:
career opportunities, childrens health, and provision of food and shelter for the
workplace and support of education within the hospitality industry (Kotler et al.
2009).

We are committed to investing in the communities where we do business through our

Spirit to SERVE Our Communities social responsibility and community engagement
initiatives. Our properties worldwide are focused on five areas of giving: Shelter and Food,
Environment, Ready for Jobs, Vitality of Children and Empowering Diversity (Marriott
International, 2014 N.P)
Stakeholders can be anything from international, to national or even regional, they can also
be established within society at any level. This can also include people who can have an

effect, or are affected by actions and decisions made within an organisation. Marriott
International work closely with stakeholders in the local community where their hotels are
located, to establish constant communication to aid the development of communityorganisation involvement, with the aim of serving them positively (Marriott International,
2014).
One of Marriotts main aims within society, and all of their worldwide hotels, is to keep the

community strong through providing careers opportunities, As a global industry leader, we

are committed to training and educating the next generation. We create opportunities
through programs that provide work experience and life stills to youth, and provide on-thejob training in our hotels. Through our global World of Opportunity initiative, our hotels help
young people from disadvantaged backgrounds by providing employment skills training and
vocational opportunities (Marriott International, 2014 N.P)

3.4 Politics
Hospitality businesses are widely affected by political issues, however global hotel
organisations need to implement specific management procedures to address the
issues affecting them as a business.
No location is inaccessible, except for those parts of the world temporarily off limits because
of war, natural disaster or some other exceptional circumstance (Hirst et al, 2009).
Temporarily, because many countries ravaged by war in the previous century, hotel
organisations are now transforming their economies to include tourism. The fact that such
countries are developing their tourist industries so rapidly suggests that they provide a
viable mechanism for transforming formerly war-torn areas into attractive tourism
destinations.
As a result of this business such as, Hilton International are legally required to implement
procedures such as, code of conduct which outlines their business ethics as an
organisation. Hilton International (Code of Conduct, 2014 pg. 12) state to their guests and
staff that Hilton is committed to complying with all applicable antitrust laws and
regulations, including federal and state antitrust laws in the U.S. as well as competition laws
in other countries where we do business. These laws are designed to promote competition

and protect consumers. By stating such business procedures in an accessible document

such as a code of conduct Hilton are showing to their customers and stakeholders, their
values as a leading hospitality organisation.

3.5 Global Economy

The hospitality industry is the UKs fifth biggest industry, providing eight percent of
total employment, ahead of industries such as: financial services, transport and
communications, and construction sectors (British Hospitality Association, 2014). The
hospitality industry is expanding around the globe, and is promoting its growth into
many multicultural environments. As a result of this the hospitality industry contributes
to just under 10% of the worlds gross domestic product (Boella, 2000).
Hotels are globally important, providing facilities to customers and contributing
towards the output of goods and related services which aid in building toward the
welfare of their local communities. Medlik and Ingram (2002) argue that hotels are
hotels are the social centre of their local communities. From this visitors to the hotels
contribute towards the local economies both directly and indirectly, in addition to this
it also brings a source of employment to the community.
Hilton International stated that between 2008 and 2011, they created 52,000 job
opportunities through opening new worldwide properties (Hilton Corporate
Responsibility Report, 2011). In addition to this, they also contributed $25 million USD
to charitable causes in 2011, through in-kind contributions and Hilton team members
volunteerism (Hilton Corporate Responsibility Report, 2011). Hilton International (2014)
believe that when local communities thrive, so does their business and vice versa. They
therefore take pride as an organisation in being committed towards cultivating the
economic vitality of our communities, through creating and providing jobs, enhancing
local tourism and travel opportunities and, when possible sourcing our products locally
(Hilton Corporate Responsibility Report, 2011, NP.).

3.6 Environment
In the new sustainable era, more organisations have realised the importance of
environmental policies and practices towards sustainability, expecting to reduce their
footprints on environment. An example of an organisation implementing this is, Marriott
Hotels, try to involve its activities in the security and sustainability of the environment of the
countries it is located in (Jayawardena et al, 2013). The responsible management of natural
resources in Marriotts internal hotel operations, has played a major role in their
organisation since they opened their first hotel in 1957 (Marriott Sustainability Report,
2014). One of Marriotts main objectives, in addition to compliance with environmental
regulations is the reduction of operating costs (energy consumption, water), as well as, the
ability to stand out from the competition and capture new customers (Hutt & Speh 2012).
Our commitment to serve our customers, associates, environment and communities makes
our culture vibrant, our business robust and our communities strong (Marriott Sustainability
Report, 2014 pg. 3).
Challenges posed by the current environment are increasingly impacting on any current
hospitality business, as well as becoming a critical focus for them (Morrison, 2011).
Environmental issues were once seen as mainly local, however it has come to light in recent
years, that they increasingly not only affecting local environments, but also in the wider
context of regional and global implications. As a result of this Marriott created
environmental goals as part of their Sustainability Report 2014 (see figure 3.6.1):
Our Environmental Goals

Further reduce energy and water consumption by 20% in 2020

Empower our hotel development partners to build green hotels

Green our multibillion dollar supply chain

Educate and inspire associates and guests to conserve and preserve

Address environmental changes through innovative conservation initiatives,

including rainforest protection and water conservation

Figure 3.6.1 Our Environmental Goals, adapted from Marriott Sustainability Report 2014
pg. 26

As a result of these goals, Marriott have put more effort into creating more green and
sustainable hotels, to attract their associates and guests to live and work more sustainably.
Although projects that involve developing green technology and renewable energy can be
costly, it is important in current hospitality organisations to implement this, as it is not only
a highly valued way of life for global customers, it is expressing their corporate social
responsibility towards the environment as a growing business.

4.0 CONCLUSIONS
In conclusion, Globalisation has become a current issue for the hospitality industry. It is the
process of hotel organisations expanding their business or operations into foreign markets,
and taking their business to new levels. As with any industry, globalisation affects them
positively and negatively, below is a summary of these factors within the hospitality
industry.

4.1 Advantages of Globalisation

Larger Market as a result of globalisation, customers have increased vastly. This is

due to people not only travelling for pleasure, but for business and other purposes.
This therefore has a positive effect on the hospitality industry, by increasing their
markets from the income they gain from international travellers (Dervis, 2005).

Exposure to new/different cultures hotel organisations and managerial staff within

those establishments are exposed to new cultures. Due to this customers and staff
are open to adapting to different cultures, and as a result of this positively increasing
their knowledge of new communities and environments (Holton, 2005).

Job Opportunities due to globalisation, hotel organisations have a major increase

in customers staying within their establishments. As a result of this, businesses have
expanded and opened new hotels, therefore there are a lot more job opportunities
available to the local communities in which they are situated. (Gopinath, 2008).

Economy Boost as a result of globalisation, more hotel businesses have

international travellers and customers staying with them. From this increase, new
tourism is brought to new countries and boosting their economy, by customers
visiting and spending money within that country. (Lechner & Boli, 2008).

4.2 Disadvantages of Globalisation

Global Disasters any disaster/event that affects one country, can also affect
another. This could include terrorism, which can put off customers travelling to
certain places in the world where they could be affected by this, as a result of that
hotel businesses can see a decrease in customers. This can put pressure on them to
survive as a company, as profits can majorly decrease (Hartungi, 2006).

Exposure to new/different cultures as a result of globalisation, the hospitality

industry is faced with new cultures, in which customers and workers can be foreign.
As a result of this language barriers could become a problem, if customers or staff
are not fluent in the language of the country they are in. In addition to this cultural
barriers could also be an issue, this arises when different cultures are mixed. What is
deemed acceptable in one culture, may not be accepted in another, which can be
seen as offensive. (Wittmann, 2014).

Job Opportunities Although job opportunities within the hospitality industry have
increased from globalisation, a negative of this could be that the opportunities are
seasonal. Due to certain countries having peak seasons, this could result in hotel
businesses having to reduce staffing during off-peak months (Lechner & Boli, 2008).

Loss of Cultural Values To suit customer needs hotels may need to change or
modify various services and product, for example: certain dishes are changed in taste
and names become more westernized to make them more attractive to visitors. This,
in a way, leads to the loss of culture from that country or community as the business
is changing to become and behave like most of the tourists (Wittmann, 2014).

4.3 Summary

This report has addressed five impacts of globalisation on the hospitality industry
including: culture, society, politics, global economy and environment. As a result of
globalisation hotel organisations are able to choose locations all over th e world to

expand their business. When they do choose to expand, the industry of hospitality
expands with it. Globalisation helps hotel companies to enter into new market shares and
as a result gain more profit and reduce purchasing cost through quantity buying or
centralised purchasing. In addition to this globalisation also causes hotel companies to
consider different cultures and traditions when they enter a new country and bring culture
diversity into the industry which is always a positive thing.
When hotel organisations enter into globalisation, they should use standardisation and
localisation strategies, meaning they should keep the same standard in terms of service and
quality while altering their service and product to adapt to the different customers, culture
and traditions. The concept glocal (Thinking global and acting local) is essential for hotel
businesses development (Jayawardena et al, 2013). Furthermore, using differentiation
strategies is also a good way to become competitive within the current market.
Differentiation strategy is about providing guests with distinct products or services. These
unique and distinctive attributes make them attractive in the eyes of their customers.

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