The Local Economic Impact From Mega Events Tourism Essay

In this section, the researcher will present the reason for the selection of this topic. An introduction about mega sporting events, the research questions, its aims and objectives, the literature review, theoretical rationale, methodology, its limitations and followed by a short summary will be written in this proposal. As the researcher in writing is much more familiar with the Singapore economy, the research would be based on the local market, which would be the Singapore Formula One Grand Prix.

Roche (2000) describes mega-sporting events as “large-scale cultural (including commercial and sporting) events which have a dramatic character, mass popular appeal and international significance. They are typically organised by variable combination of national governmental and international non-governmental organisations.” This describes that such events should attract viewers and media representatives from all over the world and that the host city or nation should experience alterations to the regular cycle of events.

The hosting of sport events in particular has showed a number of potential benefits. Potential benefits such as investments, advertising, tax generation, revenue generation, enhanced community image, job creation, positive spiritual earnings, health and fitness, promotion of sport, creating local amusement, creation of new infrastructure, improvement community pride, urban redevelopment, increased tourist flow, according to Daniels and Norman (2003), and Kim et al. (1998).

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!
Find out more about our Essay Writing Service

Research Question

This research explains how mega-events like Singapore Formula One Grand Prix affects the local economic impact and the strategies adopted. The research is classified under the following question where in this report; the researcher’s effort will be concentrated on giving insights on this research question.

How do managers use strategic analysis tools on a mega-event such as F1?

Aims and Objectives

The aim of this research is to discuss the impact of strategic analysis tools used on mega-events, on how events such as Formula One is marketed to the beneficial of Singapore’s local economy. Thus, the researcher will be aiming to attain the following objectives:

To identify the different strategic analysis tools used for economic impacts.

To develop an understanding on how these strategic analysis tools are placed on to mega-events.

To discover the influences from strategic analysis tools on mega-events such as Formula One.

To examine the effectiveness of the strategic analysis tools’ impact on Formula One.

Literature Review

Mega-events such as Formula One have the ability to attract large numbers of visitors and their expenditure, which is often sought after by local tourism agencies because of their actual potential to contributing to tourism marketing and development. An important fundamental that government bodies put forward to hosting a mega-sports event is the perceived economic benefits that the event creates (Porter, 1999). It is usually claim that mega-events, such as the Formula One Grand Prix, give an incentive to business resulting in economic benefits generated which are greater than the costs, including public funding, from hosting the event.

Sports entrepreneurs or government bodies typically engage consulting agencies to outline an economic impact report (Johnson and Sack, 1996). Regardless of the mega-sports event, such reports from consulting agencies normally claim a huge positive economical impact.

However, there are a lot of criticisms in the academic literature on the effectiveness of these economic impact analyses. Matheson (2002; 2006) points out that many (event-sponsored) studies overstate the economic impact on local communities and Porter (1999) states that the envisioned benefits of public spending never occur. This explains that the future prospects of hosting such mega-events are worse off for developing countries and the opportunity cost of providing up-to-date facilities are greater and the need of modern infrastructure required poses a major further investment.

4.1 Impact of Events

Mega events can help “re-prioritise urban agendas, create post event usage debates, often stimulate urban redevelopment, and are instruments of boosterish ideologies promoting economic growth” (Hiller, 2003, p. 449). Thus, these offer an extensive range of potential positive and negative impacts for host destinations and are both short- and long-term. Even though now there is significant competition between destinations, there is still significant gaps between the experience of mega-events in developing and advanced societies, between economic and non-economic outcomes.

Mega-events should be part of a long-term developing and marketing plan. The hosting of mega-event can play a critical role in marketing or branding a host destination and be part of a long-term development or positioning strategy. It is important for the marketing opportunity sought from hosting a mega-event to be seen as part of a longer term strategic marketing plan for the destination as opposed to a one-off marketing event (Jago, Dwyer, Lipman, Vorster, 2010, p.231). If a host destination has a development plan in place, the hosting of a mega-event can perform as a catalyst to bringing forward future development opportunities. In this case, this often brings in merit in creating an on-going suite of events that utilises the infrastructure built for the mega-event and enhance the reputation and profile of the host destination over time.

In order to formulate a plan for both short- and long-term event outcomes, the organizing committee must consider various event leveraging strategies to be adopted. (O’Brien and Chalip, 2007). The leveraging perception is implicated with planning ahead of the event so that a host city can improve and maximize positive impacts such as increased business, tourism and social aspects and benefits Chalip (2004, p. 245) explains that a strategic management process must be formed and implemented in order to properly leverage the opportunities from hosting an event. Strategic analysis tools such as SWOT analysis, PEST analysis, Porter’s Five Forces analysis and Value Chain analysis are appropriate for the evaluation of event leveraging or marketing strategies. The following section will examine what the natures of the said four analysis tools entails and how it is applied to a strategic management process for the organization to host mega-events.

4.2 SWOT Analysis

SWOT analysis is whereby an approach to analyze the aspects of the external environment, in order to identify and establish the most attractive or suitable course of action in terms of strategic decisions to be used. In the sport context, Shank (2009) found that the strengths and weaknesses are manageable elements within the establishment (in this case a host city) that may influence the objectives of the strategic management process. In this case, conducting a SWOT analysis is deemed helpful for host destinations as it can provide event organizers to recognize how the strengths of their country or city can be matched with opportunities that exist in the environment, and useful insights to leverage the benefits of the event. A brief example of a SWOT analysis on Singapore Formula One Grand Prix can be seen in Figure 1.

C:UsersNoWaKiDesktopSWOT table.png

Figure1

4.3 PEST Analysis

PEST analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations (Roumboutsos, Chiara, 2010). It understands the political, economic, socio-cultural and technological of the business environment and event managers can use PEST to scan the environment and adjust their plans to minimize threats and capitalize on opportunities. In the context of Singapore’s Formula One, brief examples of PEST analysis can be seen as:

Political – Seen as a Public Private Partnership (PPP) between the public and private sectors.

Economic – A stable and growing economy, translating to high consumer confidence and increase in spending

Social – Lack of racing events in Singapore, thus the idea of Formula One will be well received by the society.

Technology – Singapore ranked 2nd place of World Class IT Infrastructure by the World Economic Forum in 2011.

4.4 Porter’s Five Forces Analysis

Porter’s (1980) five forces framework models the five most significant competitive rivalry forces in an industry in order to determine that industry’s profitability. This serves as a proxy for the magnetism of the industry for potential entrants and determines the industries profitability. The five forces are: rivalry between competitors in the industry, bargaining power of suppliers, bargaining power of consumers, barriers to entry and threat of substitutes. Thus, in the case of Singapore Formula One, examples can be seen in Figure 2.

C:UsersNoWaKiDesktopUntitled.png

Figure 2

4.5 Value Chain Analysis

Value Chain analysis defines each activity that takes place in a business organization and relates them to an analysis of the competitiveness in the environment. It is based on the principal that firms (or events) exist to create value for their customers and helps to identify new business opportunities. The value chain analysis includes a couple of significant theoretical distinctions, one being between primary and support activities (Porter, 1985). Primary activities create value for the customer, whereas support activities support primary activities and indirectly affect customer value.

Competitive advantage involves signification and interpretation on the activity cost behavior drivers and differentiation generated by those activities. Product differentiation in turn effects what customers are willing to pay for the firm’s products, thus depending on the activity cost drivers leading to the end product. A simplified table used on Formula One can be seen in Figure 3.

C:UsersBenjamin PhoonDesktopUntitled.png

Figure 3

Theoretical Rationale

Leveraging mega-events such as the Formula One can offer incentives and benefits to a host destination, relating to cultural insights, development of collaborations and improved organizational networks (Kellet et al., 2008). In order to successfully leverage the event, strategic analysis tools such as SWOT, PEST, Porter’s Five Forces and Value Chain Analysis associated with hosting the event can provide valuable knowledge to host destinations.

Analysis of weaknesses in the operating environment, such as economic stability and political support (Shank, 2009) can also offer valuable insights for event managers and tourism providers to plan on how the host destination can reap the benefits from the sport event (O’Brien and Chalip, 2007). However, mega-events can lead to an entryway to under-utilized infrastructure and debts. Jones (2001) argues that the justifications in the use of public funds are based on the economic benefits that are often overstated. The case of Montreal 1976, where they experienced a tremendous debt after hosting an event, which cost the country and its residents over CAD$2 billion in capital and interest cost (Whitson and Horne, 2006).

Therefore, the selection of Strategic Choice Theory and Stakeholder Theory would be appropriate for this rationale. Stakeholder theory (Freeman, 1984) focuses the organization’s efforts on developing a firm that has to deal with a multitude constituent groups other than customers and shareholders. Stakeholders groups represented are both legitimate and powerful, thus this approach seeks to widen the vision of a marketing manager, of his/her duties, rather than just being profit and customer oriented (Mitchell et al., 1997). Stakeholders are distinguished into two categories – primary and secondary. Managing both primary and secondary stakeholder relationships is critical and essential for the marketing organization in achieving marketing objectives.

Strategic analysis theory contends that marketing managers’ plays an exceptional role in a marketing firm’s success or failure in the market, with other factors such as product development and market repositioning efforts (Child, 1972). Strategic decisions made by managers’ are often made with careful considerations for the marketing firm as the primary driver, where they are able to adopt a specific type of strategy that fits their main marketing competencies. Strategic choices geared to the accomplishment of achievable strategic objectives are more likely to be effective through an open managerial decision- making process (Harrison and Pelletier, 1998).

With the inter-relationship between stakeholder and strategic choice theory, stakeholders (e.g., customers, media, and shareholders) will have an influence and affect on marketing managers’ strategic decision making on the nature of the situation (Jawahar and Mclaughlin, 2001). A clear role of stakeholders is that they can provide necessary and vital information and if well captured by marketing firms’, would lead to better organizational performance in decision making (Mori, 2010). A simple model of the process of decision making can be seen in Figure 4.

C:UsersBenjamin PhoonDesktopUntitled.png

Figure 4

Managers would use strategic analysis tools to measure the strengths and opportunities from stakeholders to hosting a mega-event, in this case, Formula One in Singapore and make strategic choices within constraints.

Therefore, this study aims to investigate the impact of what can be classed as a major sporting event of international recognition and its implications from the perspectives of government officials, private businesses and local residents. Furthermore, sports events research has lacked exploratory findings to qualitatively examine how it impacts on the local economy.

Hence, the following research will utilize a qualitative approach to begin developing an understanding of how mega-events such as Formula One would impact on the local economy using strategic analysis tools. This research will offer a basis for future qualitative research and provide relevant information to future researchers studying strategic analysis tools to evaluate and identify data relevant to strategy formulation mainly on mega-events.

Research Methods

The researcher will undertake a case-study and secondary data approach. This study will only be analyzed by a qualitative approach and thus, the researcher will conduct a case study based on qualitative findings. Qualitative research focuses on the gathering of more richer and in-depth data from other smaller samples (Kent, 1999).

Case Study

According to Yin (1984), case study research method is defined “as an empirical inquiry that explores a contemporary phenomenon and the real-life context in which it occurred; when the boundaries between phenomenon and context are not clearly palpable; and in which several sources of evidence are used.” The approach of a qualitative case study is to research and assists examination of an occurrence within its context and to compare using a wide range of data sources for research validity (M. Dooley, 2002). This will ensure that the focus is not explored through a single view, but a variety of views which allows for various facets of the event to be exposed and understood (Baxter & Jack, 2008).

Secondary Data

Secondary sources will be mainly used to collect and utilized to gather qualitative data related with this research. This is especially helpful as the researcher lives in Singapore and could not acquire data of market situations from other countries holding mega-events such as Formula One. In this case, different research reports, books, electronic journals and web portals will be accessed to gather information from these sources to conduct the study of the available secondary data.

Data Analysis

Firstly, after collating data from secondary sources and case studies, the researcher will read and transcribed all collected data to get a general sense as a whole and ideas presented. It is crucial to take into consideration the value of the data before analysing as it may not be significant to the research.

Next, the researcher will identify areas to be covered and what is to be achieved based on the aims and objectives of the research by focusing on the analysis. In this case, the researcher can focus on the analysis by comparing the data collected from various case studies and secondary sources in a qualitative perspective, in which theoretical statements and causal relationships are clearly developed from and grounded in the phenomena studied (Cumberbatch, 2004). Thus, this leads to the use of Grounded Theory where it provides a mix of flexibility and structure with unambiguous guidelines, where the researcher will adopt the usage of coding.

Coding is a method of constant comparison which led to the founding of Grounded Theory on the conceptualisation of data (Jones, Keifilik and Zanko, 2005). There are three steps of coding in analysing data collected. Opening coding is about understanding and to have a constant comparison of data collected that would be fractured into conceptual codes.

In this case regarding to case study methodology, the researcher may categorise factors of economic impacts from mega-events into codes such as “social, environmental, strengths, benefits, etc”. The next step after data has been fractured, axial coding would be used. It is the process of exploring new relationships among the data and to discover any connections between them (Warburton, 2012). The final step would be selective coding, whereby it involves picking of certain codes to construct and integrate them with the listed categories in the axial coding model as part of the approach to developing a grounded theory (Strauss and Cobin, 1998).

Limitations

One of the main limitations is that an independent empirical process research is not being employed due to restrictions of organizations being reluctant to provide accurate data as some sports that host mega-events are naturally secretive. F1 is heavily technologically driven; therefore the release of information is seen as a pejorative to the sport. Reliance can only be placed upon the accuracy of data provided from external sources such as case studies and mainly secondary data. However, this issue will be minimized through the approach of identifying as many different reports as possible and cross-referencing them.

Timeline

The Gantt chart in the appendix section will be showing the estimated time needed for each process up till the submission of the dissertation itself.

Conclusion

In conclusion, the researcher will use a qualitative research methodology to have a better understanding and insight of the local economic impact of mega-events, using Formula One as the key event to the research. With the study on strategic analysis tools, the researcher will be able to find out how marketing managers analyse the economic situation and make strategic decisions on for the success of leveraging mega-events. It is also vital that the researcher have an open mind without any biasness in order to obtain accurate data for the development of grounded theory while conducting this qualitative research.

Nevertheless, information acquired for the research will hopefully formalize a grounded theory and to be used as guidance for future researchers and academics studying economic impact from mega-events using analytic tools, to have a better insight and build on in the future for improvement.

Appendices

C:UsersNoWaKiDesktopUntitled.png

Planned Timeline/Gantt Chart of Dissertation