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Strategic planning is a very important step that is required before our company before it gets into a joint venture with the other international tourism according to Ritchie and Crouch (2003, pp. 63-81). Strategic planning can be defined as a step by step process with definite objectives and end products that can be implemented and evaluated. Very simply, it is a process by which we look into a future, paint a picture of that future based on current trends, and influence the forces that will affect us. It involves setting goals and developing an approach to achieving those goals.
Strategic planning is a very important business activity as the aim is to help a company select and organize its business in a way despite unexpected upsets occurring. It is to analyze the current and expected future situation by determining the direction of the firm, and develop means of achieving the mission. In analyzing the company's future joint venture with this other company, we shall make use of a PESTLE analysis (Political, Economic, Social, Technological, Legal and Environment) to get hold of the right information required for this partnership.
Strategic Planning in Tourism
Considering the way the tourism industry is dynamic and unpredictable, the importance of strategic planning will collectively and cooperatively gain control of the future and the destiny of the organization despite changes in the environment. In the recent years, tourism planning has gone through strategic changes with the advances in new technologies, the pursuit of a relationship approach with customers and suppliers, as well as the importance of sustainability issues in marketing. Societal orientation for our company will consider the needs and wants of the tourists but also will not ignore the long-term economic, environmental, social and cultural interests of the local population. There is substantial evidence that promotes the importance of our organization using strategic management concepts in order to perform well.
Strategic planning will help improve our organization's performance according to Vanhove (2005, pp. 63-71). In fact, through strategic planning in place we will exhibit superior long term financial performance both relative to the industry sector and in absolute terms. Over the past two decades, there has been increasing recognition of a potential role for concepts of strategic management and their application in helping organizations in the tourism industries achieve and maintain competitive advantage and we are aiming to become part of this. The strength and value we have in strategic planning using the PESTLE tool of analysis is that it will assist us in understanding the dynamic and complex nature of our environment and in thinking through problems in a strategic manner to arrive at more reasoned decisions. Therefore, strategic planning is a must for us. I intend to use an organization based in Malaysia.
We must analyze the nature of constitution of the mother country (Malaysia) of our partner. The structure and organization of a country (Malaysia) has a lot to say on the decision we are about to make. It is very crucial that we establish the influence the government has on the thriving of the tourism industry in that particular country. It is imperative that we establish whether the government has a strong association with many of their major businesses, either acting as a source of equity or having an active participation in the running of these businesses. This factor may or may not place strain on the company's success in exporting our area of operation because the government could be found often focusing much of its influence towards promoting the success of all organizations found in the tourism industry.
The Government could be one which is widely inflicted with corruption and highly influenced by bribery. This may be due to the fact that the concept of corruption & the values assigned to it are culturally located, where actions seen as corruption and malpractice could be accepted practice in the country, causing conflicts among the interests of relevant stakeholders in the tourism industry and its operation. This could however be in the process of being combated by a newly introduced campaign against corruption and cronyism within government.
The currency used within the country of entry is also a major factor to be considered. For instance in Malaysia, the currency is the Malaysian Ringgits (RM). With 2.83334 RM equal to 1 AUD (. Malaysia currently holds a Gross Domestic Product (GDP) of US$147 billion which converts to approximately RM499.288 billion. It also occupies a GDP per capita of US$5570 of which continues to grow at a rate of 5.5 %. This is a decrease from 2004 of which the growth rate was at 7.1%, however has increased since 2005 by 0.3%. Malaysia is currently the most developed of the world's developing countries. Private consumption makes up almost half of Malaysia's Gross Domestic Product (GDP), with a percentage of 46.3 in 2003.
The price water Coopers (2005, par. 5-8) indicated that Malaysia's unemployment rate has declined over recent years due to improved labor market conditions. 2003 statistics display the low unemployment rate of 3.5 per cent. The Australian and Malaysian governments have a good ongoing relationship, with Australia in the midst of active negotiations with Malaysia in regards to Free Trade Agreements according to Fletcher and Brown ( 2005, pp. 23-67). This link between the two nations is strengthening as time passes due to the regularly held meetings including the Joint Trade Committee, bilateral visits, and also APEC (Asia Pacific Economic Cooperation) gatherings and the ASEAN (Association of South East Asian Nations) regional forum of which Malaysia is an active member of both.
With such strong ties between the two nations (due to the large export market existent in Malaysia for Australia and also Malaysia being the 12th largest trading partner to Australia) this makes trade between the two countries much easier as Australia has become a well trusted supplier of a variety of goods to Malaysia for many years, and has formed a positive relationship with Malaysian consumers as shown in the Austrade, Malaysia Profile (2007, par. 7-12). Malaysia has an aim to attain a developed nation status by the year 2020. It is through a five year plan that the Malaysian government plans to reach this goal. The introduction of products, which help this process, will be readily accepted in the country. Such an example of this includes the sale of mineral water that aids in alleviating the problem of Malaysia's unclean water supply, which is typically existent within developing countries.
Social and Cultural Factors
As society is constantly changing, it is essential that we identify these changes and how they may potentially affect us. The Malaysian population is currently set at 26 million people according to Austrade, Malaysia Profile (2007, par. 5-7), and holds an approximate population growth of 2.4% per annum. With projected outcomes forecasting a population of approximately 31.4 million by 2025 as indicated in Earthtrends (2006, par. 4-9), it is reasonable to say that this growth may also potentially lead to the growth of the market for bottled water.
In Malaysia business is conducted differently from the way it is conducted in Australia: the Malaysians place great weight on building a personal relationship with business partners prior to doing business with them. It is therefore important for Australian businesses to take time to aid in developing these relationships, often through the course of a meal and also by avoiding manners which they may find offensive, such as offering something over to them using your left hand, failing to address them using accurate titles, and dressing inappropriately (especially women who are expected to dress conservatively) as found in the Austrade, Malaysia Profile (2007, par. 6-11).
The main language spoken in Malaysia is Bahasa Malay, however English, Chinese dialects, and Tamil are also spoken amongst several subcultures. This may make communication during business negotiations difficult due to a lack of understandings or misinterpretations as portrayed in Cultural Profiles Project (2002, par.10-23). However, it is most common than not, that English is used when taking part in business discussions according to the facts presented in the Austrade, Malaysia Profile (2007, par. 11-16). There are a vast variety of religious beliefs throughout Malaysia. All of which generally have a high respect for one another due to the religious freedom granted by the constitution for all except those who are born as Malays, in which case they are declared Muslims by law as shown in Cultural Profiles Project (2002, par. 10-23).
Islam, being the most dominant religion within Malaysia, usually reflects not only a set of values and beliefs but also generally also a way of life. The Islam rituals must therefore be taken into strong consideration. During the holy month of Ramadan, followers of Islam undertake a fast, where they are restricted from allowing anything to come into contact with their lips, this including the consumption of any food or drink (including water) from sun rise to sunset for each day of the month. Therefore throughout this month, the industry is likely to experience a low season of tourists. However, as much of the population is also made up of Buddhists, Hindus and Christians, we must be careful as to not neglect these sectors of the economy by continuing to meet their needs throughout this month also.
With the development of new technology so too has come the development of a large potential threat towards the success of the tourism industry as there is more use of the internet than the travel agencies in marketing. Tourists have been found to make bookings for their destinations for holiday online. The tourism holiday destinations bookings through travel agencies have for a long time been in use since time in the past. These services are indefinable since they cannot be touched. The utility enhanced therefore to the customer is feeling the services being offered. The tourism falling under this category of services therefore needs an exerted effort to make sure that they are felt by the customer.
The excellence in the advertisement channel has been realized through the inclusion of such features of services pertinent to the tourism industry. The internet according to Vanhove (2005, pp. 63-71) has therefore been instrumental in making a wider coverage of the potential segments than the travel agencies according to Kehoe (1996, pp. 45 - 67). It is therefore required that any advertisement agency should create a necessity in the potential clients concerning the destination of the proposed holiday. Unlike in traditional tools of marketing, the internet is very flexible in updating the information. The tourism sector is an ever growing filed that experiences changes from time to time. The availability of these services in Malaysia will make our job easier in the entry process into the market.
The Malaysian government has passed legislation to ensure the protection of their wildlife and rainforests, which may in turn have a negative effect on the engagement process in a joint venture with this company in the Malaysian country. The government close monitoring of its resources in the tourism sector could be a great challenge to overcome in the process of establishing ourselves in the country of Malaysia. The sector seems to be more controlled by the laws governing the land which means there could be a substantial amount of challenge for foreigners in getting established in the tourism industry. This will be found to have a major influence on our theme parks.
With Malaysia's ‘humidity (at) about 80% all year round and temperatures (ranging) from 21 to 32oC' it is highly affected by monsoons which usually occur throughout November to March in the Northeast and May to September in the Southeast. Thus with the nation ¬being predominantly flood prone throughout the majority of the year, with heavy rainfall during the remaining periods, it is often faced with many climate crisis as depicted in Cultural Profiles Project, (2002, par. 3-5). The aftermath of these floods often cause sewage to overflow into septic tanks and oxidation ponds, making their way eventually into the tanks and taps of family homes.
This dirty, ‘smelly' tap water is most often unsuitable for drinking and often even bathing and cleaning due to its low hygiene level and excessively high ammonia contents. In these situations consumers are forced to look towards alternative water sources for daily use, other than tap water, thus giving height to consumer's general demand in the entire tourism activities. It has also been evident that many Malaysian residents have used bottled mineral water not only for drinking but also to wash kitchenware and cooking utensils as to avoid risks involved with using the unhygienic tap water, this may prove to be a challenge to our expansion process as much is needed to meet the needs of the tourists.
The polyethylene terephthalate (PET) commonly used for making plastic water bottles is derived from crude oil. This may raise issues within Malaysia (who tend to be an environmentally conscious nation), as Malaysia is home to ‘one of the most complex and rich ecosystems in the world' and used bottles produce toxic by-products, some of which include chlorine gas and ash containing heavy metals.
We are competing in the area of providing tourism services within Malaysia. The trends in tourism activities in Malaysia have changed significantly as living standards have risen over the past several years and the majority of Malaysians are moving towards a more advanced lifestyle. Ritchie and Crouch (2003, pp. 63-81) say that, with this increased health conscious attitude and move towards urbanization, a larger market is expected to be realized in the tourism industry which offers all sorts of recreational facilities.
Our main aim is to set a suitable package for tourists that come to visit Malaysia. Since our target market is divided into regions there are seven to choose from which are Asia, Europe, Middle East, Africa, North America, South America and Australia, with our main targets based on Middle Eastern and European regions because they are the big spenders due to their strong currency rate. Europeans often leave their country during their winter time to avoid the cold weather and have an enjoyable time on our beaches therefore we aim to take this opportunity to grab them and suggest similar wonderful places that they could visit in our country.
Middle Eastern tourists are known to visit Malaysia during the middle of the year as they tend to prefer tropical weather and also to shop. Furthermore they feel comfortable visiting here because Malaysia is an Islamic country. Other region such as Asia, Africa and America are part of our target as well but our focus would not be as much as the other two regions that have been mentioned. We take our sources from the Malaysian Tourism Statistics website, which states that the English people from the European region are the most number of people who visit Malaysia. From the Middle East most travelers to Malaysia are from Saudi Arabia. Based on the same statistics, we would like to focus more on that.
Our main objective is to offer a package custom suited to their interests. For example, a tourist from China usually would like to gamble before visiting the beaches. Therefore, we set up a package to Genting Highland and possibly somewhere along the east coast of Peninsular Malaysia. Our main competitors would be companies that have been well established in the industry, such as Mayflower, etc. To compete, we need to offer packages that could convince our customers and convince them to select our tour packages rather than our competitors'.
Tourism is a lucrative sector in Malaysia that would boost the country's economic.
That is very true, as mentioned by Malaysian government when they mooted the idea few years back to abolish the registration to build Casino. Malaysia is therefore expected to continuously reinvent itself to sustain its economic growth. More centers such as Integrated Resorts (IR) have been approved to the slump construction industry, as well as create more resort centers for tourists. The market forces in this instance have pushed a government to re-position to gain economic growth. Malaysia continues to be an economic leader in Southeast Asia and an important market for the U.S., providing much to both the exporter and investor in a similar manner.
The Joint Venture
Having considered the above factors that could affect our entry into Malaysia; the following are some of the reasons why a Joint venture would be a more efficacious way of entry.
Reasons for forming a joint venture
- It will help in building on the strengths of our company.
- A joint venture will help spread costs as well as risks which are involved in global strategy and expansion.
- This will improving access by our organization to financial resources
- A joint venture will help us enjoy the economies of scale and also the advantages of size
- It will be also of benefit in accessing new technologies as well as customers
- Moreover, there will be an access to innovative managerial practices
In order to achieve our competitive goals, a joint venture in entering Malaysian market will help in the following ways.
- Influencing the structural evolution of our company and the entire industry
- A joint venture will make us stay ahead of completion as it Pre-empties competition
- Moreover, a joint venture offers a defensive response to blurring industry sections and boundaries
- We know that we will experience the creation of stronger units of competition.
- A joint venture will increase the required speed to market and also improved agility
Advantages of the Joint Venture
Gain access to intellectual property, technology, skills, and enterprise as well as material resources including financing, which it would otherwise be unable to obtain. The joint venture in this case will be in a position to provide us with the opportunity to gain new capacity and expertise. It is also expected that we enter in this related businesses or this new geographic markets or gain new technological knowledge. A joint venture of this form will give us an access to greater resources, including specialized staff and technology and also the sharing of risks with a venture partner
Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what we do, thus limiting both our commitment and the business' exposure. In the era of divestiture and consolidation, this joint venture will offer us a creative way for companies to exit from non-core businesses. Companies can gradually separate a business from the rest of the organization, and eventually, sell it to the other parent company.
The ability to initiate and drive change is a key element of entrepreneurship and is crucial to sustaining the longevity and competitive advantage of our company. However, it could be argued that the pace of change within the current environment can make it difficult for our company to survive let alone initiate an agenda for change in the global expansion process. There are two key factors determining the nature of the competitive environment we are entering into: the quantity and quality of entrepreneurs forming new tourism businesses and sustaining and developing existing ones; and the existence and development of competitive forces shaping the competitiveness of entire regions and industries.
This competitiveness is driven by the volume and contribution the tourism services make to, the Malaysian and global economy following the contributions of Ritchie and Crouch (2003, pp. 63-81). We should therefore be receptive to factors that occur within the external environment. Therefore, our organization and its employees need to be flexible to change. This will generate a sense of innovation in the joint venture and emphasize the ability to be creative in the approach to developing new products and services and also reacting to the exchange of information received by the organization's stakeholders.
However, there are a number of factors that can lead to this process of change failing. The cultural orientation of the firm can be one of the biggest hurdles to inculcating the process of change and can result in a lack of flexibility to change. Our partners can become entrenched in their own business practices, with deeply embedded business routines and processes, leading to reluctance to innovate. This latter point reflects what is known as the ‘endowment effect' in business engagement, defined as the ‘fear of loss being stronger than the attraction of gain' thus leading to a culture of resistance to change.
It has been acknowledged that change is an ever-present feature of organizational life which all organizations in all industries are affected by. This includes the efforts made by our company to enter into the Malaysian tourism industry, which is increasingly faced with change. There is therefore needed an understanding of change management is crucial, irrespective of the size or purpose of the business. It is not surprising that tourism will take a predominately reactive and ad hoc approach to change management the managers might possibly be constrained by limited ‘know-how' in change management dynamics and processes. It could be argued that more conscious decisions being made regarding the management approach to change would enable us to seek out ways in which a competitive advantage can be gained.
The approach through PESTLE analysis is a very important strategic planning tool in managing organizational change in tourism global entry and expansion; although arguably not by conscious choice, can be characterized as being bumpy incremental, bumpy continuous and planned. Furthermore, it can be argued that an approach focusing on facilitating change rather than providing plans for how to deal with individual change initiatives should be advocated in the joint venture strategy. The management apparently should not emerge through chance and coincidence but rather through choice and decision as realized in the PESTLE analysis. Concerning change that is characterized by how it comes about, the approach adopted by a majority of managers is mainly planned. Our expansion process requires individuals who are adaptable, flexible and non-complacent, who strive for continuous learning and improvement, who are pragmatic and willing not only to undergo change, but also to identify, initiate, plan, implement and manage it at all levels of the organization. In order to retain these individuals, the organization must value and acknowledge from the outset their contribution through continuous motivation, challenges, rewards and the opportunity for personal development.
Austrade, Malaysia Profile 2007, www.austrade.gov.au - accessed March 2010
Cultural Profiles Project 2002, www.cp-pc.ca - accessed March 2010
Earthtrends: The Environmental Information Portal (2006), www.earthtrends.wri.org; World resource Institute- accessed March 2010
Fletcher, R. & Brown, L 2005, International marketing: an Asia-Pacific perspective, Prentice Hall, Sydney, pp. 23-67
Kehoe, B.P 1996, Zen and the Art of the Internet (4th edn). Upper Saddle River, NJ: Prentice Hall, pp. 45-67
PricewaterhouseCoopers 2005, ‘Malaysia', www.pwc.com - accessed March 2010
Ritchie JRB, Crouch GI 2003, The Competitive Destination: a sustainable tourism perspective. CABI Publishing: Wallingford. Pp. 63-81
Vanhove N 2005, The economics of tourism destinations. Elsevier: London. Pp. 63-71