Youth travel and cultural exchange company’s establishment

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My dissertation is about the youth cultural exchange company's establishment opportunities in current Latvia's market. Latvia is among those former Soviet countries that regained independence at the beginning of the 1990s. After a rapid and still ongoing socio-economic transformation towards western standards of society and economy, they became part of the European Union in 2004. As Latvia joined European Union on 2004, young people are more interested to have a work or cultural experience in other country. This research is about customer demand and current supply in Latvia's market in terms of student exchange companies. The author has been participating in one of the programs in United States. After analysing the provided information about the product author found out that in Latvia there is not much useful information about the exchange programs. The high status of education in a country like Latvia is re¬‚ected in many ways. First, compulsory education was extended to 11 years, now including two years of preschool education. This may be a remedy for inequalities in society and low levels of achievement; yet the policy intention behind this reform is somewhat unclear. Second, the increasing participation in upper secondary education is indicative of the general striving for advanced educational merits as well as, clearly, re¬‚ective of the bad reputation and quality of vocational and professional tracks. This development causes great concern among Latvian authorities and systematic attempts to anticipate processes of labour market matching are still at an early stage. Third, involvement in higher education, especially at the Bachelor and Masters level, has become a popular way of postponing career decisions among young people and of escaping the unfavourable labour market that characterised youth transitions in Latvia until recently. The popularity of PhD training, however, is very low and institutions are starting to have problems with ensuring an academic succession.

This dissertation will help to understand the current demand for the company and the real establishment opportunities. Is it worth it or not?

Aim: Analyse the current demand for that type of business.

Objectives: reviewing available literature on the chosen subject



This literature review aims to give concise overview of literature already available about the supply and demand and also customer demand tendency. Also it aims to examine the condition of the youth cultural exchange company's market in Latvia. As Latvia joined European Union in 2004, students are more interested to go abroad for experience and language knowledge. As the consumer trends change continued the economic recession in the world the literature research is enlarging. In order summarize author has researched relevant literature to this topic. The main focus areas of this topic are customer behaviour analysis and current Latvia's market research. For customer behaviour and market research, demand theory and market development factors are vital. Going to another country for studying abroad does not only mean to learn new subjects it is more than that. The biggest advantage for the students was learning about other cultures. Learning about cultures means also to learn about the people of a country and what they were thinking, doing and how they were working. They get to know different ways of living and they learn many things about the cultural heritage and traditions of the people. European culture, traditions and history are seen as something special. Europe has the skill of communicate the culture through many different tools what it is (cultural events, architectural legislation, museums, etc.). When you are in Europe you can feel the culture and the past everywhere.

The students experienced their exchange time as something they would never want to miss. They could gain various experiences and discovered a lot of personal changes. To get to know other cultures, to meet new people with different backgrounds, to learn a new language and to experience new ways of learning and studying were perceived most advantageous. Apart from these advantages the students discovered changes, for example in the development of their own personality, a development towards more tolerance and a new perception of Europe in general and the European Union in particular. During their stay in the host countries the students got aware of the reality there and compared these impressions with their experiences gained in their own countries. Although the students realised some differences between countries, cultures and people in Europe, they got the impression that living and working together in peace is possible. They noted that the EU offers their people various opportunities for living and saw the enlargement of the European Union towards Eastern and South-Eastern Europe as important enrichment


Market can be defined as follows:

The market mechanism is a form of economic organization in which individual consumers and business interact trough markets to determine the central problems of economic organization'' According to Samuelson and Nordhaus, there central problems are"1. What goods shall be produced? 2. How shall these goods be produced? and 3. For whom shall the goods be produced?" For those purposes, "The market is a process by which the buyers and sellers of a good interact to determine its price and quantity." (Lane, 1991) Understanding of markets and related economic principles is vital to being able to establish new business. The main market segment and target for this business will be students and youth aged 18 - 30 particularly.

The students will notice differences as well as common aspects in the cultures and habits of various people with different citizenships they met during their internships. Getting to know people with different backgrounds and make new friends is seen as very valuable. The students will also notice some differences but also that they "share a lot of common ground in many aspects like globalisation, work and study abroad". Although there are different visions of life in some aspects, there is the opportunity to learn form each other, to share important common ideas and work together into one direction.

Nowadays, the number of Latvian Students migrating abroad for purpose of getting better education has been in increasing mode. Most of them are pursuing their higher education at universities mostly in Europe particularly Great Britain and German. The study abroad is described as an exercise based on mutual understanding, cooperation and share of experiences and values. Consequently when young people from different European countries meet and exchange experiences and opinions, this should not only be considered as one step towards better understanding among individuals but also towards raising tolerance and understanding among different EU-nations.

Some students state that they realized, as a result of meeting so many people from the whole of Europe, "that Europe does not mean only business relations but also friendship based not on economic interest but on interest of the personality of a person". Getting in touch with a new culture and with different people also means to learn a new language. Next to English, regarded as lingua franca for the communication between exchange students, the students could also improve or learn the language of their host country. For many students talking in a foreign language is seen as challenge but also as one of the biggest aims regarding their student exchange program. Therefore this proposed business could possibly linked with English Language Operator or Language Centre from all over Europe. In addition to learn the language, the ways of learning and studying in general are a big issue for the exchange students. It is seen as opportunity for young people from the new EU-countries to spend some time in the so called "older EU countries". There they get in touch with modern ways of learning and teaching which are based on flexibility and reasoning. In addition, the students could also improve their know-how concerning their specific field of study. Furthermore the student exchange program helped to get a clearer understanding regarding the own professional future. The students did not only benefit from their study exchange but could also discover a lot of changes during the time abroad.

It is the role of universities to prepare students to work in the new international context, thus meeting the needs of business and society (Fantini, AriasGalicia, & Guay, 2001; Higher Education Council, 1990).

1.2.1 Market research

Market research is one of the most important things when it comes to any business activities. It is very much a commercial activity, focused on gathering information to help the organization address a business problem. (Adams & Brace, 2006). Understanding how brands works, segmenting the market, communicating with customers and gauging how satisfied customers are- are most important issues related to market research. One of the goals of market research was to help the company build the "perfect" product. Reaching that level meant studying consumers lifestyles in meticulous details to decipher what they might want even if they could not articulate that desire in terms of a specific product request. (Cullen, 1999) . During their stay in the host country the students got an impression of the reality of everyday life and compared their new impressions with their experiences from their own countries and their previous life. The students got aware of some differences between countries, cultures and people in Europe. For example there are distinctions in the field of the welfare systems, like in the pension system. Even though Europe is home to different religions, different nations and cultures, living and working together is possible. In the minds of the young people the Eastern European expansion is connected with a change of attitudes.

As a member of the Council of Europe and the European Union, Latvia is included in all the usual European mobility activities, like the Lifelong Learning Programme incorporating Erasmus, or the Youth in Action programme incorporating the European Voluntary Service. Over the past few years, the number of participants has constantly increased and about 18 000 young people were involved in the former EU Youth Programme (2000-06) alone.

In addition to these three most frequently mentioned issues - differences, various opportunities and the EU-enlargement - there are also some other topics, which come to the students' minds when thinking of Europe respectively the European Union:

- Europe is seen as a very big "country", which is getting bigger and bigger

- Europe is seen as the most peaceful "country" in the world and "in the history of


- The EU helps to improve the living standards of its members

- The health insurance guarantees medical support to any member of the European Union

- The common currency

- The EU is also based on economic principle

The development of exchange programs is seen as positive factor for pupils, students and young scientists for getting in contact with another culture and for increasing tolerance towards the "different". But to implement such programs and to offer more scholarships a higher promotion of the idea of exchange is needed. What Europe could do is to financially support the program of student exchange and make it available for greater number of students, especially having in mind South-Eastern Europe. Europe should invest more in young people by making them able to travel and study abroad, making them able to become men and women with good human values who will lead the Europe into bright future. Opportunity of grant and financial aid from government etc could be very promising and potential for business opportunity for this sector to flourish.

Less than one percent of American higher education students are studying abroad each year, and only eight percent of students study a foreign language at the tertiary level (Cushner & Karim, in progress; Fantini et al., 2001). Likewise, less than one percent of Canadian university students study abroad as part of their degree (Knight, 2000 cited in Fantini et al., 2001). While in Europe, five percent of undergraduate students are participating in exchange programs annually (Hamilton, 1998 cited in Clyne & Rizvi, 1998).

1.2.2. Market analysis

A market analysis could be made considering range of factors relevant to each situation, but would usually include following areas:

Actual and potential market size

Estimating the total sales in the market allows the organization to evaluate the realism of particular market share objectives. Identifying the key sub-markets of this market, and potential areas of growth, is crucial to developing a marketing strategy, as establishing whether any areas are in decline. Many of the students want to continue their experiences in a foreign European country. They think that Europe offers a global environment where people are used to work with different points of view. Although there are so many differences there is the claim to work towards a common objective and to respect every single person. A second important issue is the contact to people from all over the world and the chance to meet colleagues who work in the same field and on the same problems but with a different background. The practice of a foreign language is seen as useful. Although all students participated already in an exchange programme, some of them want to intensify their experiences and apply for another scholarship or decided to do a PhD-Study abroad. Working in a foreign country within the EU is an attractive prospect for many of the participating students. The students mention career aspirations in different fields, the chance to practice foreign languages and to learn more about another culture. The desire to work for European institutions like the European Commission or for international programmes like Erasmus or CEEPUS is a repeating issue in the essays of the students. One of the most effective means for graduates to develop international skills and communication competencies is through international academic mobility programs such as study abroad and student exchange (Clyne & Rizvi, 1998; Fantini et al., 2001; Gochenour, 1993; Lawson, 1969; Wallace, 1993). Thus, international experience is proposed to be fundamental to education.

Latvia is a small country. With a population of 2.3 million people and a territory of 64 600 sq. km, Latvia is about the size of the Republic of Ireland but with only half of its population. With an average of 36 inhabitants per square kilometre, the population density of Latvia is rather low but still higher than that of Estonia, Sweden, Norway, Finland or Russia, for example. The concentration of residents in cities is considerable: about two out of three people live in urban areas. More than 700 000 people, about one third of the total population, live in the capital of Riga; another 400 000 people live in one of the other six major cities of the country (Central Statistical Bureau of Latvia, 2006). However, Latvia has more than 400 rural municipalities distributed over 26 districts. In 2005, the Latvian youth population, between the ages of 15 and 29, amounted to some 520 000 young people. According to statistical projections, the Latvian population will decrease by about 8% between 2005 and 2020; the youth population between the ages of 15 and 29 years is estimated to decrease by 34% in the same period. Changes in fertility, migration and the gradual extension of life expectancy are among the main reasons for this development (Central Statistical Bureau of Latvia, 2006)

Population growth and increased affluence together have helped create a 'global youth culture' - teenagers now account for 30 per cent of the population globally. In many countries, more than half the population is pre-adult, creating one of the world's biggest single markets, the youth market.

Trends Analysing general trends in the market identifies the changes that have actually taken place. This can help to uncover the reasons for these changes and expose the critical drivers underlying a market. The educational systems of Europe differ widely and particularly in the new EU-countries such as Latvia the education systems have to be reformed. New plans and modules should be developed and new equipment should be implemented. Since it will take a long time to change the old ways of learning into modern ones, the help and cooperation of schools and universities in Western countries will be needed. In the case of standardisation and adoption of curricula the student exchange plays an immensely important role and the experiences of the young people could be helpful for their countries. Clyne and Rizvi (1998) identified reasons that positively influenced Victorian studentsí decision to study overseas. In addition to issues surrounding a desire to travel, meet new people and experience other cultures, respondents also identified that they wished to develop international skills such as language skills, intercultural competencies and global awareness. Kim (1998) purports that cultural distance affects the decision to study overseas. Specifically, the more different the host country is from the home culture, the less likely it will be chosen. International co-operation on youth work training has produced a few reports which help to deepen our understanding of non-formal education (Bowyer, 2005; García López, 2005; Chisholm, 2006).

The youth market has a higher lifetime value than other travel sectors today's backpackers and students are tomorrow's honeymoon, family, business and leisure travellers, as well as foreign employees in local industries. Plus, not only do they return to destinations they like, they also continue to travel to more destinations, further enriching and unifying the industry. At a value of approximately US $136 billion per year, the youth travel industry commands great power, and is set for growth.

Youth travelers are continually hailed as pioneers and trend-setters, forging new tourism frontiers and opening up new markets through their adventurous spirit and desire for new experiences. Furthermore, with youth's addiction to social media and sharing quick updates or moments, businesses not only need to create new moments for them but also facilitate the subsequent sharing of those experiences. Travel opportunities that reflect the desire for education, learning and personal experience are becoming increasingly popular. youth are leading the trends towards self-improvement, eco-awareness, social responsibility, community involvement and volunteering.

Customers The analysis needs to identify who the customer is and what criteria they use to judge a product offering. Information on where, when and how customers purchase the product, or service, allows an organization to begin to understand the needs of the customer. Identifying changing trends in customer behaviour may begin to signal potential market developments and opportunities. Camps are part of a popular strategy of providing young people with outdoor leisure activities over the summer. The State Youth Initiative Centre, as well as NGOs like the Latvian Scouts and Guides, takes a leading role in this respect. The Youth Guard (Jaunsardze), established in 1992 by the National Guard and administered by the Ministry of Defence, has become the largest youth organisation in Latvia. It has about 7 000 male and female members, between the ages of 12 and 18 and operates throughout the country via a network of some 70 schools in partnership with the Youth Guard Centre. Sport seems to play a signi¬cant role in young people's lives in Latvia. However, the role and tasks of the consultative body - the Youth Sports Council, subordinate to the ministry's Sports Department - were not clearly de¬ned in relation to other bodies and NGOs active in the ¬eld of sport. An open question is how the new trends in practising sport are taken into account in Latvia. The growing tendency to practise sport individually, rather than collectively in sports clubs or organisations, poses a challenge to the authorities.

Customer segments Identifying current market segments and establishing the benefits each group requires allows an organization to detect whether it has the capability to serve particular customers' needs. Several studies report the relative importance of student exchange programs through comparing sojourning groups with those students who remain in the homeland. For example, Yachimowicz (1987) found that American college students, who studied abroad for one year, demonstrated an increase in cultural and political knowledge while those who did not participate in the program did not demonstrate such learning. Similarly, qualitative analysis of Zhaiís (2000) study revealed that studentsí global perspective, intercultural sensitivity and openness to cultural diversity were enhanced after participating in an exchange program. Moreover, as Clyne and Rizvi (1998) found that one of the reasons that students were choosing to study abroad as part of their degree was to make them more employable and give themselves an advantage over their peers.

As per the statistics in Clyne and Rizviís (1998) study, 37% of exchange students were enrolled in business degrees. Very few students from the faculties of Law, Science, Education and Health participate in international exchange. Thus, the course in which the student is enrolled appears to influence participation in exchange programs. However, it is unclear as to whether these disciplines such as Humanities and Business, are more suited to international education opportunities in regards to flexibility of subjects studied, or if it is the students who enroll in these disciplines who are more flexible in their approach to learning. Moreover, considering that some disciplines such as Science and Health would benefit from international exchange initiatives through providing opportunities for sharing of ideas and development of collaborative research partnerships, it is worthwhile examining how the course in which students are enrolled influences participation in exchange programs. This study examined international exchange programs from the position of the institutions. Although data concerning the demographics of students participating was gathered, the factors affecting students' willingness to participate in exchange programs, was merely speculated. In the study conducted by Clyne and Rizvi (1998), factors such as social and psychological adjustment, communication, personal safety and achieving educational goals, were identified.

The enhancement of human capital is certainly one of the most important ways for a small country like Latvia to remain competitive in an internationalised economic context and, at the same time, to provide its young citizens with the potential for quality of life.

In order to succeed in the competitive Latvian labour market and to get a quality job and the payment that matches the needs and ambitions of today's young people, they have to acquire skills, knowledge and educational credentials. At least this is the underlying attitude. Going abroad, studying and/or staying there are relevant alternatives - mass emigration and the "brain drain" are among the major challenges facing societies like Latvia (UNDEP, 2006).

Distribution channels Identifying the changes of importance between channels of distribution, based on growth, cost of effectiveness, permits a company to evaluate its current arrangements. Establishing the key decision-makers in a channel of distribution also helps to inform strategic decisions. (Drummond & Ensor, 2005)

After analysing the market business has to choose the market entering strategy. see figure (nr)









Product/Market growth matrix (Stevens et al., 2006)

Market entering strategies

The elastically of demand in any market depend on how we draw the boundaries of the market. Narrowly defined markets tend to have more elastic demand than broadly defined markets, because it is easier to find close substitutes for narrowly defined goods. For example, food, a broad category, has a fairly inelastic demand, because there are no good substitutes for food. Ice cream, a narrower category, has more elastic demand because it is easy to substitute other desserts for ice cream. Vanilla ice cream, a very narrow category, has a very elastic demand, because other flavours of ice cream are almost perfect substitutes for vanilla. (Mankiw, 2008)

Some of the means to diversify products of travel youth and cultural exchange services include:

Learning program that combines international travel, inter-cultural exchange, adventure, volunteer community service work, and homestays.

Opportunity to volunteer in another country

A wide variety of placements can be found in the social, cultural, environmental and sports sector.

Exchange programme which gives young people from different countries an opportunity to volunteer together and make a practical contribution where it is needed in local communities

Supply and demand laws:

Law 1. When, at the price ruling, demand exceeds supply, the price tends to rise. Conversely when supply exceeds demand the price tends to fall.

Law 2. A rise in price tends, sooner or later, to decrease demand and to increase supply. Conversely a fall in price tends, sooner or later, to increase demand and decrease supply.

Law 3. Price tends to the level at which demand is equal to supply. (Henderson, 2004) These three laws are the most important in economic theory. They are the framework into which all analysis of special, detailed problems must be fitted. Travel products and services need to be unique and of high-quality. The new establishment company must create new, enriching experiences for youth and students