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Identify factors a hospitality/tourism related company should consider before entering a foreign market and discuss what leadership skills are necessary to successfully manage global hospitality/tourism firms.

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Chapter 9
ï‚® Entrepreneurship is the creation of new business
ï‚­ Opportunity recognition or creation (entrepreneurial
discovery is the intersection of a need and a solution)
ï‚­ Assembling resources to pursue the opportunity,
including capital (typically associated with a business
ï‚­ Managing activities that bring a new venture into
ï‚® Some ventures are complete start-ups
ï‚® Other ventures occur within existing firms
 Organizational entrepreneurship or “intrapraneurship”
ï‚® Opportunists
ï‚­ Recognize and take advantage of
ï‚® Resourceful
ï‚® Creative
ï‚® Visionary
ï‚® Hardworking
ï‚® Optimistic
ï‚® Independent Thinkers
ï‚® Excellent Leaders
ï‚® Dreamers
ï‚® Executive Summary
ï‚® Business Description
ï‚® Environmental Analysis (see next slide for
ï‚® Resource Analysis (with a focus on the
ï‚® Functional Plans
ï‚® Financial Projections
ï‚® Implementation Schedule
ï‚® End-game Strategy
ï‚® Risk Analysis
ï‚® Environmental Analysis
ï‚­ Market analysis
ï‚­ Existing competitor analysis
ï‚­ Supplier analysis
ï‚­ Evaluation of potential substitutes
ï‚­ Discussion of entry and exit barriers
ï‚­ Relevant government regulations and regulators
ï‚­ Financial condition of the industry
ï‚­ Availability of funding
ï‚­ Overall economic factors for the host country
ï‚­ Availability of technology
ï‚® Commercial Banks
ï‚® Personal Contacts
ï‚® Venture Capitalists
ï‚® Corporate Partnerships
ï‚® Business Angels
ï‚® Initial Public Offerings
Select Underwriter
Draft Letter of Intent
Develop Business Plan
Assemble the
Offering Price
Draft Prospectus
Revise & Print the Prospectus
Due Diligence
Present to Potential Investors
Offering Size
ï‚® Financial Management
ï‚­ Obtain initial capital
ï‚­ Establish systems to track revenues and expenses and
control costs.
ï‚­ A record-keeping system must be established that will
satisfy the demands of investors, creditors and the
internal revenue service.
ï‚® Marketing
ï‚­ Selection of initial product/service offering.
ï‚­ Selection of initial market.
ï‚­ Targeted advertising.
ï‚® Product / service Development
ï‚­ Establishment of a system for collecting feedback from
early customers. Continuous improvement is essential.
ï‚® Resource Acquisition
ï‚­ Site selection and construction.
ï‚­ Acquisition of machinery, furnishings, information
systems, utilities and supplies.
ï‚­ Contracts with suppliers.
ï‚® Process Development
ï‚­ Focus is on production and operations management to
ensure efficiency, quality and continuous
ï‚® Management and Staffing
ï‚­ Recruitment of motivated, well-trained employees
ï‚­ Selection of managers.
ï‚­ Assignment of responsibilities
ï‚­ Establishment of personnel policies
ï‚­ Training
ï‚­ Compensation system, which may include benefits.
ï‚­ Supportive culture.
ï‚® Legal Requirements
ï‚­ Legal form (sole proprietorship, partnership,
ï‚­ Other legal requirements and filing of forms.
ï‚­ Patents and trademarks if necessary.
ï‚® Sole proprietorship
ï‚­ The entrepreneur is the owner and legally liable for the
venture in its entirety
ï‚® Partnership
ï‚­ Each of the partners contribute resources such as
money, physical goods, services, knowledge and
ï‚­ Limited partnership means that management responsibility
and legal liability of partners are limited, except that one
partner must be a general partner with unlimited liability
ï‚® Corporation
ï‚­ Risk of a shareholder is limited to investment in stock
ï‚­ However, the tax advantages of a partnership are lost
ï‚­ S Corporations allow some partnership-type tax
advantages, but they must meet restrictions and have
few shareholders
ï‚® External Problems
ï‚® Internal Problems
ï‚­ Customer Contact (27.3%)
ï‚­ Market Knowledge (19.3%)
ï‚­ Market Planning (14.4%)
ï‚­ Location (11.1%)
ï‚­ Pricing (8.4%)
ï‚­ Product Issues (7.6%)
ï‚­ Competitors (6.3%)
ï‚­ Expansion (5.5%)
ï‚­ Adequate Capital (15.9%)
ï‚­ Cash Flow (14.9%)
ï‚­ Facilities / Equipment (12.6%)
ï‚­ Inventory Control (12.3%)
ï‚­ Human Resources (12.0%)
ï‚­ Leadership (11.1%)
ï‚­ Organizational Structure
ï‚­ Accounting Systems (10.4%)
ï‚® Poor Management Skills
ï‚® Lack of Adequate Capitalization
ï‚® Product/Service Problems
ï‚® External Market Conditions
ï‚® Factors Encouraging Innovation
ï‚­ Vision and culture that support innovation, personal
growth and risk taking
ï‚­ Top management support and organizational
ï‚­ Teamwork and collaboration; a flat management
ï‚­ Decentralized approval process
ï‚­ The ideas of every employee are considered valuable
ï‚­ Excellent communications
ï‚­ Innovation grants and time off to pursue projects
ï‚­ Large rewards for successful entrepreneurs
ï‚­ Focus on learning
ï‚® Factors Discouraging Innovation
ï‚­ Rigid bureaucracy and conservatism in decision making
ï‚­ Absence of management support or champions
ï‚­ Authoritarian leadership and traditional hierarchy
ï‚­ Difficult approval process
ï‚­ Only the ideas of certain people (researchers or managers) are
given attention
ï‚­ Closed-door offices
ï‚­ Inadequate resources devoted to entrepreneurial activities
ï‚­ Harsh penalties for failure
ï‚­ Exclusive emphasis on measurable outcomes
ï‚® Entrepreneurships involves the creation of new business
ï‚® Entrepreneurship can involve a new start-up or
organizational entrepreneurship, the creation of new
business within an existing firm
ï‚® Entrepreneurial tasks include opportunity recognition or
creation, assembling resources, and managing the
activities that bring the venture into existence
ï‚® Entrepreneurial discovery is the intersection of a need
and a solution
ï‚® A business plan is at the center of an entrepreneurial
venture. It forces the entrepreneur to think through the
details of the venture and determine its feasibility
ï‚® A business plan includes an executive summary, a
description of the proposed venture, an analysis of the
environment, a resource analysis (with special emphasis
on the entrepreneur), functional plans such as marketing
and operations, financial projections, a schedule for
major events, an endgame strategy and an analysis of
ï‚® Obtaining start-up capital is one of the most
difficult problems facing an entrepreneur
ï‚® Lack of management skills is a primary source of
failure of entrepreneurial ventures
ï‚® Firms that foster organizational
entrepreneurship tend to have a vision, culture
and top management that support innovation,
organizational champions, teamwork and
collaboration, a flat management hierarchy, a
decentralized approval process, respect for
ideas, excellent communications, resources for
entrepreneurial activities, rewards that
encourage innovation and a focus on learning
ï‚® The optimal design for an internal venture
depends on the strategic importance of the
venture and how closely related it is to current
ï‚® Organizations can pursue internal growth
strategies, external growth strategies or a
combination. Internal growth strategies provide
more control but they tend to be slower
Chapter 10
ï‚® New Markets
ï‚® Better Resources
ï‚® Efficiency
ï‚® Risk Reduction
ï‚® Competitive Countermove
 A multidomestic strategy –
ï‚­ Focuses on extensive customization on a country-by-country basis
by tailoring the services provided around individual market needs.
 A global strategy –
ï‚­ Standardizes what it offers so that it is essentially the same in all
ï‚­ A global strategy can result in cost efficiency, global flexibility, and
an ability to apply the firm’s resources and skills across multiple
ï‚® A transnational strategy –
ï‚­ Entails standardized and yet flexible services, seeking both the
benefits of global efficiency and local responsiveness.
ï‚­ Through cooperation and integration among corporate offices,
local operations, and international subsidiaries, a company using
this approach seeks to integrate global operations.
1. There is a global market segment for a product or
2. There are economic efficiencies associated with a global
3. There are no external constraints, such as government
regulations, that will prevent a global strategy from
being implemented.
4. There are no absolute internal constraints.
Expanding markets leading to economies of scale.
ï‚­ Some companies could not grow large enough to enjoy the lowest
possible costs on the basis of domestic demand alone, but expansion into
foreign markets can lead to significant increases in demand.
Transfer of technological know-how through joint ventures
(learning from competitors).
ï‚­ Joint ventures may provide opportunities to learn new technologies that
can lead to significant cost reductions.
Superior quality through joint ventures.
ï‚­ Companies can learn how to better differentiate their products through
higher quality or some other unique feature.
Licensing of brands or technologies from abroad.
ï‚® Forcing an open, learning mind-set.
ï‚­ Companies that attempt to differentiate themselves in the international
marketplace must be willing to learn from and adapt to a variety of
conflicting circumstances.
ï‚­ They can then bring what they learn back to the home country and apply
it to local businesses.
ï‚® Exporting
ï‚® Contractual Arrangements
ï‚­ Licensing
ï‚­ Franchising
ï‚­ Long-term Management Contracts
ï‚® Foreign Direct Investment
ï‚­ Joint Venture
ï‚­ Wholly Owned Subsidiary
ï‚­ Acquisition
ï‚® In general, moving down the list (above) is
associated with greater cost, financial risk, profit
potential and control
ï‚­ Selling the right to use a brand name in a foreign market. This right typically
comes with restrictions that allow the licensing firm to protect its brand image.
ï‚­ Similar to licensing, but franchising typically requires more standardization on
the part of the franchisee.
ï‚­ A foreign firm buys the legal right to use the name, but it may also be required to apply
operating methods or use supplies from the franchisor company.
ï‚­ Marketing arrangements vary, but a lodging franchisee is typically a part of the
companywide reservation system. Also, the franchisee typically contributes to a
companywide advertising pool. Both hotels and restaurants use this tactic extensively.
Long-term management contract.
ï‚­ A contract between an owner and a management company. The owner agrees
to make a payment from the operation’s gross revenues to the management
company in exchange for running the business with full management
responsibility. This is a common hotel tactic for expansion.
ï‚® Joint venture.
ï‚­ Cooperative agreement among two or more companies to
pursue common business objectives.
ï‚® Wholly owned subsidiary.
ï‚­ Venture is started from scratch, thus creating a wholly owned
foreign subsidiary. These ventures are sometimes called a
“greenfield investment.”
ï‚® Acquisition.
ï‚­ Purchase of a foreign firm or the foreign subsidiary of a foreign or
domestic firm.
ï‚® Unstable government
ï‚® Inadequately trained workers
ï‚® Low levels of supporting technology
ï‚® Shortages of supplies
ï‚® Weak transportation systems
ï‚® Unstable currency
Group- Family-centered Bank-centered
France, Italy
U.S., U.K.
economic and
Source: R.E. Hoskisson, R.A. Johnson, D. Yiu and W.P. Wan, “Restructuring Strategies of
Diversified Business Groups: Difference Associated with Country Institutional Environments,” in
M.A. Hitt, R.E. Freeman and J.S. Harrison, The Blackwell Handbook of Strategic Management
(Oxford: Blackwell Publishers LTD, 2001), p. 444, used with permission.
Firm Strategy,
Structure and
Related and
Source: Adapted with the permission of the Free Press, an imprint of Simon & Schuster Adult Publishing
Group (see text for complete reference)
Factor conditions.
ï‚­ Some nations enjoy special endowments, such as uncommon raw materials or laborers
with specific skills or training. Often countries with excellent schools or universities that
excel in particular areas produce laborers with superior skills.
Demand conditions.
 If a nation’s buyers of a particular product or service are the most discriminating and
demanding in the world, then firms must achieve product and service excellence just to
survive. These companies can easily outperform foreign companies that compete in the
same industry, even in the home countries of those foreign competitors.
Related and supporting industries.
ï‚­ If suppliers in a particular country are the very best in the world, then the companies that
buy from them are at a relative advantage. Firms in related industries that are also
global leaders can also help create a nationally based competitive advantage.
Firm strategy, structure, and rivalry.
 If the management techniques that are customary in the nation’s businesses are
conducive to success in a particular industry, then the firms in that nation are at a
competitive advantage relative to firms from other countries.
ï‚­ Another advantage can come from having an industry that attracts the most talented
managers in the nation.
ï‚­ Finally, if industry rivalry is strong in a particular industry, then firms are forced to excel.
This is similar to the argument with regard to discriminating buyers.
ï‚® Developing a strategic plan for the designated
geographic area.
ï‚® Establishing a network of productive contacts,
such as real estate developers, individual and
institutional investors, hotel owners, hotel
management companies, municipalities, and
governmental development organizations.
ï‚® Selling the value proposition of the brand,
particularly to potential franchisees.
ï‚® Assisting franchisees with applications and fee
payments, and developing relationships with
existing local franchisees and owners.
ï‚® Increasing Levels of Global Trade and Global
ï‚® Global and Domestic Social Turbulence
ï‚® Increased Terrorism and a World-Wide Effort to
Eliminate It
ï‚® Increased Sensitivity to Ethical Issues and
Environmental Concerns
ï‚® Rapidly Advancing Technology, Especially in
ï‚® Continued Erosion of Buying Power in the U.S.
and Other Economies
ï‚® Continued Development of Third World
ï‚® Increases in U.S. and Global Strategic Alliances
ï‚® Revolution in the U.S. Healthcare Industry
ï‚® Greater Emphasis on Security and Crisis
Pay global attention by looking after the global traveler at home and the
local traveler abroad and by extending the global reach of your
Uncover the unexpected experiences that excite and delight your
Invest in your guest by developing a comprehensive framework for
guest interactions.
Become agile by integrating your businesses across business units,
brands, and locations into a common business infrastructure for backof-house and key front-of-house functions, and consider strategic
outsourcing opportunities.
Rethink revenues to focus on “return on investment management.”
Polish your “guest experience managers.” to transform front-line staff
into GEMs.
Extend the experience before the trip begins and after it ends.
ï‚® Firms make foreign investments for a variety of
reasons, including seeking new markets, better
resources, efficiency, risk reduction or as a
competitive countermove
ï‚® Global strategic management provides
challenges and opportunities not found in
domestic markets and strategies
ï‚® International expansion involves building an
expanding operational presence, while global
integration is the process through which a
multinational organization integrates its
worldwide activities into a single global strategy
ï‚® Organizations seem to evolve through four
stages of international development, which
are domestic, international, multinational and
ï‚® The role of foreign subsidiaries is changing from
being simply branch locations to a full role in the
development of new competencies, capabilities,
resources and products
ï‚® A multidomestic product/market strategy entails
custom tailoring products and services by country,
whereas a global product/market strategy offers
one approach throughout the world. A
transnational product/market strategy is a
compromise between the two approaches
ï‚® Common international expansion tactics include
exporting, licensing, franchising, joint ventures,
wholly-owned subsidiaries and acquisitions
ï‚® A global merger and acquisition wave has created
enormous, diversified global companies; however,
refocusing is also evident as firms pursue related
acquisitions and discard unrelated businesses
ï‚® Foreign markets should be carefully evaluated
before investments are made. Factors that should
be evaluated include the social environment,
economy, political/legal environment, the state of
technology and other factors specific to each

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