1.1 Background of the Zanzibar Commission for Tourism
Under that Act ZCT is responsible with many functions including licensing (operation) of all the tourist establishment in Zanzibar, Monitoring and supervision of the Zanzibar tourist, Assisting potential investors, etc (ZCT, 1992 )
Zanzibar Commission of Tourism (ZCT) on regarding the development tourism in Zanzibar has the mission to be the most interesting, miscellaneous island targeted in the Indian Ocean constituency that will be more interesting in the world.
According to that mission ZCT combines various types of tourism such as: Culture & Tradition, Performing Arts, History & Archaeology, Beaches, Culinary (spices), Medical (herbs) ,etc (ZTPS, n/d)
1.3 Introduction and background of the problem
In order to survive in today’s business environment,in small companies, particulaly Small and Medium Enterprises (SMEs) in tourism industry utilize innovative techniques as a basis of competitive advantage. At the moment globalized world, SMEs have turn out to be more imperative for developed and developing countries since they produced high percentages of overall production, employment and revenue collection to the government.
The most important and the greatest growing sectors of the overall economy, tourism in Zanzibar contains many SMEs that make an effort to be doing well in aggressive and quickly changing business situation. SMEs play a critical role not only in national trade but also in international trade. The previous information from different sources such as the Organization for Economic Cooperation and Development (OECD) shows SMEs in many countries account for a very substantial proportion on local and export market (Knight, 2001). Porter (1991) argues that in order for any industry to compete within the business environment, it has to adopt competitive advantage strategy, so the owners and stake holders should be able to identify their competitors.
The competitive advantages for any organization are superior skills and resources. Therefore any source of advantage is like a drivers of cost or differentiation advantages. (Porter, 1985). Like any SMEs, in order for tourism SMEs to survive in competitive business environment, SMEs should be more entrepreneur and innovative,it means that should perform well in dynamic locations and not in regulated markets.
SMEs could have low performance and unstable environments due to delay of product innovations, the working operation was not aggressives even throw the enterprenuership could be benefited in various ways but does not provide a sustainable competitive advantages. (Hult and Ketchen, 2001). Above all, the innovation, promotion, lowering of the price, differentiation, creativity, all these cannot be performed well without the adoption of ICT(Kotler and Armstrong ,2008). Indeed, the nature of any industry cannot compete with its competitor to bring the superior value to their customers without the appropriate adoption of ICT. ICT is regarded as the main force of sustainable competitive advantage and a strategic weapon especially in the tourism and hospitality industries (Poon, 1993). Generally, most of the tourism industry should be well equipped with ICT, which include radio, television, as well as newer digital technologies such as computers and the Internet, have been touted as potentially powerful enabling tools for tourism change and reform. These changes and reforms include services such as e-commerce, e-booking, e-reservation and not only that ICT facilitate the information processing system.
In order to survive strong competition and current economic crisis in the region, SMEs involved in hotel industry have to improve the quality of its services. What is the role of tourism SMEs in the process in order to gain customer’s satisfaction through service quality and business improvement? It is generally accepted that ICT is a modern instrumental tool that enables the SMEs entrepreneurs to modify their tourism methods. It is used in order to increase the tourist interest. The extended use of ICTs drove the society into a new knowledge based form where information plays an important role for the SMEs as well as tourist satisfaction.
In Zanzibar there is a significant research gap on small tourism business and failure to identify critical weakness of small and medium sized tourism enterprises. A number of studies on tourism have been conducted, however very little has been studied about tourism SMEs and particularly how these SMEs engaged in adopting ICTs for more productivity and overall total economic growth of the Zanzibar .The need to undertake a thorough tourism analysis in Zanzibar has been realized recently. For example, It is important to have a database on tourism development if, students, policy analysts, planners, decision makers and entrepreneurs to be up to date with drive of tourism industry .As a large number of tourism SME’s are involved in the delivery of tourism products and that they are also potential for future development of tourism is a need to carry out studies that might show how small and medium tourism business develop, function, conduct business and how they contribute to local and national economic development. Zanzibar has many tourist attractions and contributes high percentage of economy of the country and that the tourism sector is dominated by SME’s. However there is a continued absence of studies on small tourism firms, therefore it is important to do research on tourism SMEs.
1.4 Statement of the problem
There are different kinds of ICTs used in tourism activities such as e-reservation, tele- and video-conferencing and e-booking tools. The extent into how these products services are used by the SMEs involved in Zanzibar and their potential to improve the sector has not been explore enough. Challenges facing these SMEs in application of ICT are not known and areas for improvement have not been investigated. Given the mounting global demand on usage of ICTs in tourism, there is therefore a need to look at the impact of ICTs application on SMEs engaged in tourism sector in Zanzibar. This study is learning to address the issued.
1.5 Aim of the research
To examine /explore the role and use of Information Communication Technology (ICT) in enhancing the competitiveness advantages of Small and Medium Enterprises (SME’s) in Zanzibar Tourism operation.
1.6 Research objectives
The main objective of this study is significantly examined how ICT help to create competitive advantage in tourism sector in Zanzibar. Not only that but also to identify constraints facing SMEs using ICT.
To examine the awareness and the extent of ICT utilization in Zanzibar tourism SMEs sector
To identify constraints and opportunities of ICT usage in tourism sector in Zanzibar
To find out solution options to overcome the shortcoming of the ICT utilization in tourism SMEs in Zanzibar
1.7 Research questions
For the purpose of meeting the above objectives, the study comes up with the following questions:
How do Zanzibar tourism SMEs aware and utilize the ICT in their business?
How do Zanzibar SMEs perceive profitability and performance of their business in relation to use of ICT in their business?
What measures have been taken to solve the problems of lack of use of ICT?
1.8 Scope of the study
This study was conducted to investigate how usage of ICT and its application in sectors, involved in tourism industry could help the way business is run and hence contribute increased efficiency and effectiveness. Due to the time constraint this study covered the part of Zanzibar Islands which is Stone town and the portion of North East Coast zones which includes Kiwengwa village, Matemwe village and Nungwi village because this area is more active in tourism activities in Zanzibar.
1.9 Significance of the study
This study intends to disclose the influence of the ICT as a competitive advantage strategy that can be applied in SMEs in the tourism industry. The study is expected to be of much value to a number of peoples and organization as follows:-
The results obtained from this study will provide some recommendation to the Governing Authority, which is expected to bring insights into Zanzibar’s SMEs on how ICTs usage can bring competitive advantages against their competitors so as to accelerate economic growth of Zanzibar. It will help the policy makers of the country to appreciate the implications on ICT in SMEs in tourism to increase the quality of services in hospitality industry.
The research will provide sufficient information to be used as a reference on this area of the study and to fulfill the requirement for the Degree of Master of Business Administration in Information Technology Management in Coventry University.
1.10 Limitations of the study
Some data are confidential so it was difficult to get the current data.
Financial constraints, so it could be difficult for a researcher to cover all the Zanzibar regions due to financial constraints.
1.11 Summary of the chapter
This chapter was introduced the introduction of the study, the introduction of Zanzibar Commission for Tourism (ZCT) was done under this chapter where all services offered were summarized and the mission statement of ZCT were also started.
Also in this chapter the researcher discussed something about the aim of the research, research objectives, research question and statement of the problems. Not only that but also the researcher briefly discussed the significance of the study, scope of the study and limitation of the study.
2.0 LITERATURE REVIEW
This part provides definition of the important terms and concepts which are used in this study including ICT in tourism sectors, the conceptual frame work of this study, the performance of tourism in SME’s, and the opportunity and challenges of tourism in Zanzibar.
2.2 Definitions of the terms and concepts
2.2.1 Small and Medium sized Enterprises (SMEs)
Morrison (1996) argues that it is difficult to define the term SMEs because there are no universal criteria that can be used to determine the size of the business, as a result, Olomi (2009) noted that although the SMEs all over the world contribute a major role in social development, its definition varies from one country to another and even from one institution to another in the same country. An enterprise may be perceived as small in terms of physical facilities, production/service capacity, market share, and number of employee. Olomi (2009) cited that ,the United States Agency for International Development-USAID (1993) ,suggested that SMEs can be defined by considering combination of both qualitative and quantitative criteria and should include one among the aspects such as number of employee, capital investment, share capital, number of share holders, number of stakeholders, total asset, turnover, market share, geographical market coverage, organizational complexity, composition of management and degree of formalization.
In Tanzania, the SMEs Development Policy (2002) classifies SMEs under the consideration of employment size and capital investment of the organization. A micro-enterprise is one with fewer than five employees, a small enterprise with 5-49 employees, a medium enterprise with 50-99 employees and a large enterprise with more than 100 employees. In contrast with the Capital investments the definition was based at the range from less than Tshs 5 million to over Tshs 800 million. For the purpose of this research, the Tanzania SMEs Development Policy of (2002) definition will be adopted because it is based on the local environment of Tanzania, where SMEs are characterized by family ownership and local area of operation, which is not the case to other countries. This illustrated in the table below:-
Table: 1 Category of SMEs in Tanzania
Capital investment in machinery Tshs
Up to 5mil
Above 5mil to 200mil
Above 200 to 800mil
Source: SMEs development policy (2002)
Accordind to Zanzibar Youth Employment Action Plan.(2007), Zanzibar has a large informal sector operation where more than 80 percent of the workforce is believed to be engaged in. Majority of the establishments in the informal sector are micro, own account or employing less than 5 people. This situation is linked to low skills base as a result of limited opportunities for skills training, working capital and inadequate support for off-farm activities in rural areas. From a gender perspective,women have low participation rates and fewer skills than men. Women account for only 19 percent of total employees compared to 81 percent for men in this sector. This sector is dominated by private individuals through 1,541 registered businesses in 2002. Out of this number, only 6% employs more than 10 people while 79% of the industry employs less than 20 people and only 3% of registered industry employs more than 100 people (SME Policy, 2006). The potential is still there for more employment opportunities especially to out of school youths and those from different vocational training centers. The Zanzibar SME policy (2006) is aiming at developing and creating conducive environment through participation of public and private sector for the purpose of increasing employment provision, income generation and poverty reduction. The policy and the MKUZA aim at increasing job opportunities through SMEs. SMEs are important to the national economic, but they are facing a number of problems, both administrative and financial and thus fail to contribute fully in employment creation.
Apart from the SMEs sector, Zanzibar has a small manufacturing sector. Manufacturing sector in general is at infant stage and has not been fully exploited to its maximum potential to increase its contribution to the economy and welfare of the people. There is a wide potential for investors to come in, invest in big industries and thereby generates employment on the youth. The importance of manufacturing sector in terms of employment creation and development of linkages with the rest of economy is well understood. Employment opportunities that exist in manufacturing take into consideration its linkages with agriculture, tourism, and trade. Other opportunities that could be generated include those from agro-processing, production of souvenirs, transportation, and other new activities that will meet demands of tourism and trade.
2.2.2. Importance of Small and Medium Enterprises (SME’s)
There are many benefits that obtained from SME’s in day to day operation forexample there will be about 1.7 millions business engaging, in micro enterprises operation which is about 3million persons that will be about 20% of Tanzanian labour force (URT,2003)
The SME’s was be the labour intensive by creating the employment opportunity at different level of investment.The estimation will be shown as about 700,000 new entrants in every year as a labour force, not only that about 500,000 of it are school leavers with few skills, while the employment trend in public sector will show about 40,000 are the new entrants and about 660,000 remained to be unemployed (URT,2003) as cited in Temba(n/d)
According to that the trend will be shown in Tanzania will be characterised by low rate of capital formation and normally the SME’s will tend to be more effective in the utilisation of employment situation in the country (URT,2003) as cited in Temba(n/d)
The development of SME’s will promote the distribution of economic activities within the country and boster the technology in easierst way,this is because due to lower overheads and fixed costs in their normally operation, therefore the owners of SME’s must be tend to show the greater resilience in the face of recession by holding their business (URT,2003)
2.2.3 Information Communication Technology (ICT)
The literature shows that there is no universally accepted definition of ICT, because the concepts, methods and applications involved in ICT are constantly evolving on an almost daily basis.
Blurton (2002) as cited in Badnjevic and Padukova (2006) defines ICT as a diverse set of technological tools and resources used to communicate, and to create, disseminate, store, and manage information. Kumar (2001) claimed that ICT is the study, design, development, implementation, support, or management of computer-based information systems, particularly software applications and computer hardware. ICT deals with the use of electronic computers and computer software to convert, store, protect, process, transmit, and securely retrieve information.
2.2.4 The adoption of ICT by SMEs:
Obviously, ICTs are more than computer or internet even though they focuse on business technology.Therefore ICTs include the software and hardware telecommunicaton and information management techniques, also the ICT can be used to creates,receive, retrives and distribute/ transform information in a wide range. (Porter and Millar, 1985, Brady et al,2002)
SME’s in tourism operation are important tools on contribution of the economy in the country in particulaly ICT has more effective use and better position of working performance and rapidly change the new technologies and creates the tourism organization in more competitive.(Hartigan, 2005)
In recent years, SMEs have acquired direct access to digital technologies for individual task development.In previous this opportunity only for large companies to use computing and communication capabilities to coordinate their work. On the other hand, ICT reduced the expenditure on cost consumption and improve the performance in organization due to certain kinds of communications and coordination can occur. (Summut-Bonnii and McGee, 2002).
(Ragaswamy and Lilien, 1997).On the business today their was certain changes that global interdependencies are becoming more critical thus, companies/organization realized they need to take advantage of ICT capabilities for improving their competitiveness and productivity.
2.2.5 ICT and SME competitiveness
The presence of ICT and use it could lead to increase the competitiveness of SME’s due the faster and more conscientious communication channel, it means the use of ICT has increase the competitiveness of SME’s also enables the establishment of litheness associated with different trading partners due to more consistency of channel of communication. In addition the increases of the biggest enterprises it comes through introduced of ICT in many organizations and adapt quicker to changing operational conditions. For that reason the aggressive compensation of SME’s possibly will turn down.
Normally well-built enterprises not relay comfortable information as SME’s; therefore the realistic decision is not costless if needed appropriate information. However SME’s contain the improvement of slighter interior harmonization expenditure as each and every one resolution is completed by a small number of assessment makers. (Raymond 1993, Müller-Falcke 2001)
The economies of extent can be condensed due to lowering the operational expenditure with the presences of ICT, particularly internet monitor the enterprises situation for appropriate information to obtain the exacting information concerning sellers, buyers and clients that was absent of accomplish. In addition delivery of goods, funds transmission and banking system facilities are reliable, this will enables SME’s to be expanded regionally and internationally.
Finally most of the SME’s are located in outside the town areas due to competition of larger enterprises,transportation and communication costs that, ICT might increases the competition for enterprises and becomes more effectivelly and productivity or the enterprises to be close down. (Annual Forum at Misty Hills, Muldersdrift (2001))
2.2.6 ICT as a business tools
The use of Information, Communication and Technology is very important in current business operations. Entrepreneurs need to understand the market situation before doing any business and the preferred types of products at particular time. This knowledge can be sought through ICT system. The use of media is important in advertising and promoting business inside and outside the country. The available public and private media institutions can be utilized to publicize the available potential of products and services undertaken by youth and others.(Zanzibar youth Employment Action Plan, 2007).
ICT is technology’s version of economic growth, to satisfy the needs and wants of the community over time. Organizations are forced to adjust and take advantage of the opportunities provided by ICT in order to stay competitive. Businesses that do not take advantage of the ICT will run the risk of losing customers and their competitive advantage (Sharma, 2002). Some of the functions that technology has impacted are information search, advertising, consumer buying patterns and behaviors (Hanson, 2000). On a global scale, all industries have been affected by the emergence and implementation of technological advances. All above, ICT can be employed to give users quick access to ideas and experiences from a wide range of people, communities and cultures. The positive impacts of ICT can be seen in the following aspects:
Economic impacts: ICT, in combination with globalization and the information uprising have reshaped the employees. By raising the momentum of international communication, ICT has enabled corporations to subcontract jobs, both in the industrialized as well as professional sector (Lippis, 2007).
Social impacts: ICT has influenced societies on numerous levels. They have comprehensive the contact of public administration, leading to a centralization of district administration into city centre. They have lead to new forms of employment in innovation and production of ICT and a stipulate for highly accomplished specialists. On the other hand, ICT has enabled professionals in certain industries to be replaced by unqualified human resources, or even completed exclusively redundant.
Lifting productivity: Investing in ICT can have a powerful effect on productivity in almost every industry, driving innovation, cutting costs, and opening up new opportunities. ICT can boost profits, help small firms overcome limitations of size, and enable even small enterprises to establish a global presence. Nevertheless, to take full advantage of the opportunities of ICT, we need to develop the skills of our workforce at every level, from front-line staff to senior management.
In summing up, ICT has the potential to change the tourism SMEs in improving the productivity at a lower cost and to raise the quality of information. It contributes to make the tourism penetration around the globe. In today’s world, people want to find the appropriate tourist destination, booking and buying airline ticket, check in and getting boarding pass when they are sited at their home or working place. All these can be done with the support of ICT.
Holloway (2004) defines Tourism as the business of providing for different types of visitors; overnight or longer stay and day visitors and includes accommodation, car parking, entertainment and attractions, food and drinks. According to Beech and Chadwick (2006), the widely accepted modern definition of tourism is that given by the World Tourism organization (WTO) which describes as the activities of persons traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business or other purposes.
In tourism sector, various travel operators, hotels, restaurants and travel agencies have been active in development of Internet and e-commerce. The Internet allows travellers to access and recommend the tourism information directly as well as , reviews the local tourism information, this was done previously through the physical offices of large travel agencies. Therefore most of Information Communication Technology (ICT) capture the compensation of direct discounted sales of airline tickets and travel packages, due to both online/offline agencies have shifted on selling leisure products involve high operating expenses. Given that Internet and others travel agencies allow the customer to make comparisons in a price of air tickets and other services of the online travellers (OECD, 2004)
2.2.8 The competitive advantage
Porter (1985) views that a competitive advantage is an advantages over competitor gained by offering consumer greater value than competitors offer. His view on competitive advantages is at the heart of a firm’s performance in competitive market. He argued that a firm’s ability to outperform its competitors lay in its ability to translate its competitive strategy into competitive advantages.
Kotler and Armstrong (2008) suggested an advantage that firms has over its competitors, the way of building relationship with targeted customer, understanding their needs better than competitors do and deliver more customers value. That is it is the extent a company can differentiate and position itself as providing superior customer value.
The competitive advantage is a way of giving a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more difficult for competitors to neutralize the advantage (Walker et al, 2006)
2.3 Performance of Tourism SME’s
2.3.1 Trade, industry and tourism
Zanzibar Povery Reduction Policy Report (2003) has the broad objective of this sector in order to create a competitive manufacturing and trading sector, which is geared towards for economic diversification in order to ultimately alleviate poverty. The sector is aimed to provide opportunity for further participation of the private sector. The fundamental goal is to equip and facilitate this sector in building its capacity, create better working environment and institute legal and institutional framework for the enhancement and expansion of its activities. The tools to be used are the National Trade policy, Promotion of Small and Medium Enterprises (SMEs) and Private Sector Involvement and Development. Zanzibar has a strong determination to develop tourism as an economic sector to provide foreign exchange earnings, creating employment opportunities, stimulate local economy and diversify the economy.
On the other side most of the tourist guides and/or RoGZ believes that on development of tourism factors, tourism is a vital socio economic that participate effectively and successfully in order to manage their life and to be more development. This can be implemented through the Zanzibar National Tourism Policy and the Indicative Tourism Master Plan.
Since the inception of the ZIPA in 1991, the investment process has been very positive and progressive. Statistics shows that by the end of 2002, ZIPA had approved about 242 projects with a total proposed investment value of USD 403 million. Tourism sector takes the lion share with 70% of total projects with proposed capital of USD 313.8 million. In 1985, the number of tourists who visited Zanzibar was 19,368; while the number of tourists has reached in the range between 85,000 and 100,000 annually. In 2001 Zanzibar earned approximately US$ 46 million in forex from international tourism, this accounts for approximately 15% of the GDP. This contribution is projected to increase to around $ 116 million and 21% of the GDP by 2012. (Zanzibar Povery Reduction Policy Report, 2003)
2.3.2 Contribution to GDP
Tourism already makes a significant contribution to the economy of Zanzibar. It is provisionally estimated that the sector accounted for about 14% of GDP in 2001, with 12% for Tanzania as a whole. This contribution is projected to increase to around 21% by 2012.(Indicative tourism master plan ,2003)
2.3.3 Foreign exchange earnings
According to the preliminary results of the International Visitor Exit Survey Zanzibar earned some $46 million from the spending of International tourists in 2001. To this must be added an allowance for the spending of tourists traveling to Zanzibar on internal flights (who are not presently covered by the official statistics). This raises total visitor expenditure to $55 million in 2001. Allowing for the imports from foreign countries that are utilized by the tourism sector, net foreign exchange earnings from tourism are estimated at $46 million in 2001. This figure is projected to increase to some $116 million by 2012. Even allowing for leakages on imports, it is clear that tourism is a most important sources of foreign exchange, and helps considerably to offset the trade deficit which widened from $51 million in 1997 to $86 million in 2000, reducing to an estimated $50 million in 2001.( Indicative tourism master plan final report,2003)
2.3.4 Contribution to employment
According to (Indicative tourism master plan final report,2003), there exists no official data on the employment generated by the tourism sector, it is estimated that currently some 5,800 persons are directly employed by the tourism industry in Zanzibar, of whom approximately 4,400 persons (76%) are employed in the hotel/guest houses sub-sector. The remainder is employed in tourist restaurants, tourist shops, ground tour operators, airlines (state-owned and private), the Commission for Tourism and other tourism-related government departments or as tour guides. In addition to those directly employed in the tourism sector, there are many more-perhaps, as many again, who derive part or all of their employment from supplying goods or services to hotels, restaurants, etc, or who otherwise benefit from the spending of persons who are directly or indirectly employed in tourism. Thus, total tourism-generated employment in Zanzibar could presently be in the order of 37,000 jobs or full-time job equivalents. This number should further increase to around 48,000 jobs by 2021, if, as is hoped, the tourism sector returns to a path of sustained growth. Indeed, Zanzibar Vision 2020 envisages that as much as 50% of all jobs in the modern sector could be provided in tourism and the free zones by 2020.
Zanzibar Growth Strategy (2007) has accorded tourism as one among the three lead sectors of the economy. In recent years the economic growth in Zanzibar has been driven by the increasing contribution and growth of the service sector, (including tourism) which represents up to 43 percent of GDP (2006).According to Zanzibar Youth Employment Action Plan(2007),arque the employment in tourism sector they believed to employ 56,000 people most of them in hotel operations of which 60% are Zanzibari youth. They are mostly engaged in building of the hotel and other infrastructure as well as in services such as tour guiding, transportation and hotel services. The potential is still there, and the government hopes more people especially youth with further be employed in this sector.
2.3.5 Contribution to government revenues
The tourism sector makes a substantial contribution to government revenues through the wide range of fees, licenses and taxes levied on the sector. While precise figures are not yet a
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