Globalization refers to the increments in the relationships of the people, industries, culture and various activities of economy. The term Globalization refers to the economics and all the global distribution of the production of goods and service which ultimately reduces the barriers of international trade like export fees, import quotas and various other tariffs, Cowen (2003). The Globalization has contributed to the growth of economy in a considerable manner. The globalization have accompanied to economic growth in developed and developing countries through increased specialization and the principle of comparative advantage. Globalization means the transnational change between the ideas, languages, and popular culture of different nations and countries so as to increase the diversity in the economy and enhance the growth of economy. It is argued that the decrease in the inter-cultural contact will increase the possibility of international and intra-national conflict. According to Shoa (2002), the globalization impacts the hospitality industry in prospect to the national as well as international hotel and tourism industry as a new occurrence. Actually, there are many hotels which are dealing with the international players even in the eighties.
However, these days, the phenomenon has become so common that some company’s claim fifty percent of their profits will emanate from foreign companies, Pimentel (2008). The major factor behind the higher impact of globalization is that the hospitality sector has attracted international hotels into foreign countries and they are exploring the efficient and cost effective methods of doing business. The economies of scale are not just a theoretical phenomenon. it equally works in the hospitality sector and has considerable impact of globalization on the same. The hotels have realized that the larger they become the lower their production costs and the higher their profit margins. Besides that, the business within the industry will take their business to overseas and they can tap the unexplored markets that would never have been reached in local markets. Another reason that has increased the impact of globalization and has also increased the propensity for globalization within hospitality industry is increasing competition within local markets.
Consequently, in order to expand their respective businesses, the hotels and tourism industries have started exploring the untapped markets and therefore, the globalization have started impacting the growth and profitability of the overall hospitality sector. However, it is necessary to look for the new markets as the increasing numbers of players in this industry are increasing the internationalism and competition within the hospitality industry. According to McAlister (2005), it is also likely that there are so many competitors which are now entering into new markets because they will allure the global brands.
In contract to local brands, international markets would have to tailor their brands to suite specific conditions in the local market. However, with increasing talk about global brands, now international hotels can market their services to a wide array of consumers who happen to be agents of globalization themselves. Most of the consumers are multicultural in this scenario and always looking for ways to move themselves and their resources easily across various parts of the world, Dreher (2008). In this case, the main concern of study is to get the understanding of the impact of globalization on hospitality and tourism sector industries.
For this case, there has to be geographical location on which the whole study can be done and further geographical analysis will be based on the same. The location which is chosen for the case is India which is a country in South Asia, Roger (2004). The economy of India is the ninth-largest economy by nominal GDP in the world and fourth-largest economy by purchasing power parity. According to Smith (2009), the reason for choosing India for this case is that it has very fast growth rate of economy and is considered a newly industrialized country. However, it also has so many challenges such as poverty, illiteracy, corruption, and inadequate public health.
The concern of the study relates to the impact of Globalization on the hospitality and tourism industry and for the same concern, it is necessary to do the PEST analysis which stands for “Political, Economic, Social, and Technological analysis” and describes the conceptual framework which is used for the macro environmental factors and the environmental factors can be analyzed for the strategic management, Cowen (2003). The external analysis can be easily done by the PEST analysis and the overview of the different macro environmental factors that the company has to take into consideration has to be done for the betterment of the organization. It is considered to be as a very good strategic tool for understanding market growth or decline, business position, potential and direction for operations.
PEST analysis of hospitality sector
The hospitality industry is very important to analyze as the hospitality sector includes a broad category of restaurants, hotels, event planning, transportation, cruise line, and so many additional fields. This particular industry is a very growing sector and has a considerable contribution to the economy, Jeffrey (2005).The unit of hospitality such as a restaurant, hotel, or even an amusement park consists of multiple groups such as facility maintenance, direct operations, management, marketing, and human resources which need to be maintained for the betterment of services. The productivity of the people as well as the location has to be improved for the overall growth of the organization, McGrew(2001).
Political Environment . The Political environment refers to the various government policies related to the particular sector which can affect the service and hospitality sector such as the degree of intervention in the economy. The hotel industry as well as tourism industry has a basic backbone of the government support, Ross (2006). The huge amount of taxes has been charged by the government for the different category of hotels and therefore it has a huge impact with the political changes that occur. Any small step taken by the government by changing some law it would seriously affect hotel as well as the tourism industry.
the economic factors relates to the interest rates, taxation changes, economic growth, inflation and exchange rates. In the recent past, the people are willing to pay large amount of money for the services they get and the more the guests pay the more would the hotel and the industry would prosper ,John (2009) as the paying power of the people or customers will increase, the need for the good and luxurious hotels become massive. The economy of India has faced one of the most minimal drops in the whole world and it has helped the hotel to get concentrated on the foreign travellers which had reduced and the local market being stable was much of a relief to the Indian Hotel Industry. .
The social factor refers to the changes in social trends as it impacts the demand for the products of the company as well as the availability and willingness of individuals to work with the particular organization, Suryadinata (2000) As the social factor influences the people up to the certain extent which includes the culture and various other social factors within the society. .
There are so many software’s which are used for the management of hotel within the hospitality industry and the standards of the hotel has to match with the technology standards of the industry, Jeffrey (2010). The Hotel management software and technologies used have to match the subsequent level of market and industry. As the technology also reduces the manpower and decreases the cost to the company. So, the technology up gradation has always been proved as a boon to the people and the increased productivity of the organization, For example: If a hotel used the printed KOT and BOT and the stewards had to give it themselves to each of the departments. It could be substituted with the direct computerized sending of KOT and BOT to the kitchen or the Bar. In India, tourism is considered to be as one of the fastest growing sectors of the global economy and there are so many countries which are investing in the tourism sector for the expansion of industry, Pimentel (2008).
On the other hand, while conceding that the uncontrolled growth of this industry can result in serious environmental and social problems. In recent years, there is an argument about the sustainability of the tourism industry and the sustainable development to bring together national and local governments, the tourism industry, trade unions and activist groups to realize this goal, Chapman (2009). It has been also considered that the global tourism industry can be propelled towards sustainability which underpins the drive towards globalization. There are so many countries which are facing burdens and worsening trade because of the tourism industry and the various agencies working on the international basis such as World Bank, World Travel & Tourism Council (WTTC) are also involved in the matter of concern for the growth and development of tourism industry and enhance the global presence of the tourism industry, Bruce (1992).
However, tourism is often viewed by critics as an extension of former colonial conditions as it has supported and benefitted the international relations of economics whereas it favours the advanced capitalist countries in the North, Turner (2009). Therefore, it has been believed that there are unequal trading relationships and a trend of dependency on the foreign interests, and the division of labour which ultimately relates to the poor countries in the South to becoming tourism recipients and affluent countries in the North to the position of tourism generators. According to the WTTC, there are some certain reasons for the presence of the travel and tourism which includes the following key areas: * The government should accept the travel and tourism industry as a strategic economic development and employment priority
* There has to be a move towards the open and competitive markets which supports the technological advancements and activities and at the same time, the liberalization of air transport and deregulate telecommunications in international markets * The barriers for the growth of tourism has to be eliminated and at the same time, the expansion and improvement of infrastructure has to be done for the growth of the tourism industry in a better manner such as development in the increase of airport capacity, construction and modernization of airports, roads and various other tourist facilities Friedman (2008) In many developed and developing countries, more than two-thirds of the revenue comes from international tourism and now a days, the policies of free trade and investment have been launched for the better liquidity in the market , Smith (2006).
The globalization and liberalization of tourism will also bring wealth, progress, social achievements and improved environmental standards. It is also significant that the global guidelines could also have the devastating consequences for local and indigenous communities which are based on the social, cultural and ecological manner. The propensity of the tourism industry towards the unrestricted growth and its commoditization of indigenous cultures must be recognized as clearly unsustainable to the industry.
The principles of the tourism are made not only because it is heavily overshadowed by politics of global players but also, the main concern is that the guidelines are to be adopted by the advocates of sustainable tourism at the level of internationalism and the topic remains vague. The tourism industry is overly euphemistic, Tainter (1996). On the other hand, where the companies related to tourism have scrapped or postponed potentially harmful projects, people should know and acknowledge that the projects are scrapped because of the financial crunch, public and private investments in the cut of environmental protection. Moreover, the overall crisis has also resulted in an upsurge of crime and so many social vices related to tourism industry.
Overall effects of Globalization
Globalization has so many aspects which have their considerable impact on the industry in so many different ways such as: Industrial – The emergence of worldwide production markets and a wide access to the international products for the companies as well as consumers. These are particularly related to the movement of material and goods for the national boundaries , Vierich (2008). Financial – The emergence of the financial markets and the wide access to the financial markets and the overall access to the external financing for borrowers is important and at the same time, the structures have been grown at a very fast pace than any transnational regulatory regime. Competition – The emergence of the global market have enhanced the productivity of the people and increased competition in the market, Graham (2011) Therefore, the market is becoming worldwide and there are so many companies in the hospitality industry which needs to upgrade their products and utilize the technology skilfully in order to face increased competition.
Ecological – The challenges of the global environmental challenges which can be solved by the international cooperation, such as climate change, cross-boundary water and air pollution etc. As there are so many companies which are developed in the countries which have very less environmental regulation, globalism and free trade may increase pollution, Barber (2003). Cultural – The overall growth of cross-cultural diversity in the global world can enhance the advent of new categories of consciousness and identities which embodies cultural diffusion, in the different categories of people.
There is a desire which has been developed to raise the standard of living of people within the country and the new technologies have been adopted and the people are participating in a “world culture” for the proper transformation of the culture, Dreher (2008). The multiculturalism has to be speeded so as to access the cultural diversity, Gordon (2004). There are some people who may consider the cultural diversity as a danger, since it may supplant the local culture. But there are also some people who consider the multiculturalism to promote peace and understanding between peoples.
The globalization has their own benefits and effects on the hospitality industry and the other industries as well. The economies of scale are also equally affected as on the larger market base. And this particular reason cannot be ignored as there are lots of further problems which come after the same problem. The further problems can be intercultural difference, organizational structure and looking for investors. The above mentioned problems can be addressed through intercultural understanding, mixing vertical and horizontal organizational structures and marketing homogenous products to investors within the hospitality industry.