Chapter - Iii: Strategic Management Framework in Tourism
Chapter - Iii: Strategic Management Framework in Tourism
Chapter - Iii: Strategic Management Framework in Tourism
IN TOURISM
ST R A T E G IC M A N A G E M E N T F R A M E W O R K IN TO U R ISM
current m anagem ent practices. In the present day business environm ent, strategic
m anagem ent is very com m only practised to system atise the m ost im portant business
decisions. Every decision at corporate, SBU (Strategic B usiness U nits) and functional
Before w e proceed further w hat is all about strategic m anagem ent, let’s
take a look at the strategy itself. The w ord strategy is derived from the Greek w ord
‘Stratego’, w hich m eans the art or science o f being a General w ho gives the actual
direction to m ilitary force. T he concept o f strategy first gained currency in the area o f
military activity and it w as associated with th e planning o f wars, cam paigns and battles.
The concept as applied to business and m anagem ent is o f relatively recent origin. It was,
only after the publication o f C handler’s book on Strategy and Structure in 1962, that it
came to be w idely used in business and m anagem ent. Today, the concept o f strategy has
long-term goals and objectives o f an enterprise and the adoption o f the courses o f action
and the allocation o f resources necessary for carrying out these goals” . 1
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Here, he refers to three aspects in the strategy such as (a) determ ining long
term objectives and goals (b) adopting the courses o f action to achieve these goals, and
(c) allocating the resources necessary for accom plishing the courses o f action.
strategy as the com m on thread am ong the organisations activities and product-m arkets as
above that defines the essential nature o f business that the organisation was or planned to
activities and the product - m arket orientation w hich will bring the company from the
objectives, purposes, goals and the major policies and plans for achieving these goals
stated in such a way so as to define w hat business the company is in o r is to be and the
kind o f com pany it is o r is to be”3 In this definition he refers to the understanding o f the
present and desired future conditions and the action plans required in taking the
comprehensive and integrated plan that relates the strategic advantages o f the firm to the
challenges o f the environm ent and that is designed to ensure that the basic objectives o f
the enterprise are achieved through proper execution by the organisation”.4 Here, the
emphasis is given to the interdependence and inter linkages o f all parts and major aspects
valuable position, involving a different set o f activities. The essence o f strategy is in the
rivals. O therw ise, a strategy is nothing m ore than a m arketing slogan that will not
Sinha and R eddy (1991) also state that “ Strategy is the pattern or plan that
integrates an organisation’s m ajor goals, policies and action sequences into a cohesive
whole” 6
patterns m ay appear.
organisation members.
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To sum up, a strategy is a means to achieve ends. It links all parts and
covers all the major aspects o f an organisation. Strategy is a long-term plan and ensures
that all parts of the plan are compatible. It also identifies basic issues such as
questions regarding the firm’s existence such as (a) What has to be done in order to
safeguard the firm’s long term survival? and (b) How has this to be achieved? In order to
give a sound and consistent answer to these questions, systematic approach to setting
functioning o f the business enterprise depends highly on the quality o f strategic planning
i.e., the vision, insight, perception, sense o f realism , clarity o f thought and ideas and the
the task o f form ulating a strategic plan and the jo b o f im plem enting and executing it will
been the content o f effective organisational strategies and the process o f formulating and
have to be taken on four aspects such as “ steering elements, environm ent, the resources
and resource allocation pattern and the corporate values, norms and ethics”8. In doing so,
a desirable future is defined and steering elem ents provides what the m anagement wants
to achieve. It also concerns an analysis o f the firm ’s environm ent, w hich leads to defining
what the firm should achieve in the given environm ent. The third decision is on the
resources and their allocation pattern that determ ine w hat the firm can achieve.
The fourth decision is in regard to firm ’s norms, values and ethics through
which m anagement decides w hat is allowed to be achieved by the firm and its associates.
Fig ( 3 .1 ) shows the sum m ary o f the com ponents o f the field o f strategy making.
and actions which leads to the development o f an effective strategy or strategies to help
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A desirable future
/ WANT
N. Resource allocation
Managing the f iim -
environment fit
y^OULD
<
CAN N.
\ ALLOWED /
/ A competitive business ethics
Source : Aime Heene (1997) ,“The Nature of Strategic Management” Long Range Planning, Vol 30, No-6,'
Dec,. P-934
Further, they describe that “strategic decisions are m eans to achieve ends.
These decisions encom pass th e definition o f the business, product and markets to be
served, functions to be perform ed and m ajor policies needed for the organisation to
process o f m aking present entrepreneurial (risk - taking) decisions system atically and
with the greatest know ledge o f th eir futurity; organising systematically the efforts needed
to carry out these decisions; and measuring the results o f these decisions against the
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expectations through organised, system atic feedback.” 11 Here, he covers the strategy
formulation, im plem entation and evaluation processes in the term strategic planning.
Business School, puts fo rw ard that “Every firm com peting in an industry has a
competitive strategy, w hether explicit or im plicit. This strategy may have been developed
through planning process o r it m ay have evolved im plicitly through the activities o f the
various functional departm ents o f the firm ".12 Further, Porter (1985) states that
series o f steps in w hich organisational m em bers analyse the current situation, decide on
strategies, put those strategies into action, and evolved/m odify/change strategies as
needed. It entails all the basic m anagerial functions: Planning, organising, leading and
controlling".14 She further asserts that "the process o f strategic m anagem ent involves
characterised by its em phasis on the interactions o f the organisation with its external
environment i.e. it has external focus. The second, it highlights the im portant interactions
of the organisation’s various functional areas and activities, i.e. it has an internal focus.
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I bird, it concerns the choice o f future direction o f the organisation i.e. it focuses on the
future.
evaluation. They present a model on strategic management process comprising the above
stages in five phases such as developing a strategic vision and business mission, setting
objectives, crafting and strategy to achieve the objectives, implementing and executing
the strategy and evaluating performance, m onitoring new developments and initiating
corrective adjustment.
Thompson & Strickland come out a comprehensive model on the strategic management
Source : Adapted from Calingo, L.R. (1997), “Strategic Management in the Asian Context, ” New York, John Wiley and
Sons, p.8.
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Thus, various authors have com e out with different models o f strategic
management, however, a typical model o f strategic m anagem ent process is shown in fig
3.2.
strategies that allow an organisation to develop and maintain com petitive advantage. So
winning com petitive strategy o f a firm. W hen a firm has com petitive advantage, it has
some thing that other com petitors don’t or it does something better than other firms or
does something that others cannot. Hence, com petitive advantage is becom ing an
essential elem ent for long term success and survival o f a firm. H owever, the question is
what else will give com petitive advantage to a firm and how long the firm can sustain it
in the fast changing environm ent. Thus, system atic decision m aking in the light o f
strategic m anagement process becom es necessary for a firm to build its sustainable
competitive advantage so as to enable the firm to survive for long. A further look over
the competitive strategy will give an insight into the formulation o f w inning strategy. Fig
Source: Adapted from Day, G.S. (1984) “Strategic Market Planning : The Pursuit o f Competitive Advantage ” New York, St. Paul, West
Publishing Co. p.49
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Porter (1980) describes that the essence o f form ulating com petitive
strategy is relating a com pany to its environm ent. A lthough the relevant environm ent is
broad, encom passing social as w ell as econom ic forces, the key aspects o f the firm ’s
strong influence in determ ining th e com petitive rules o f the game as well as the strategies
relative sense since outside forces usually affect all firm s in the industry, the key is found
in the differing abilities o f firm s to deal with them. Further, he writes that the state o f
competition in an industry depends on five basic com petitive forces. They are threat o f
bargaining pow er o f buyers, and rivalry am ong existing firm s in the industry.
Identification o f the forces w ill facilitate to determ ine the intensity o f industry
competition and profitability: Fig. 3.4 shows the P o rter’s model o f competition. This
model is regarded as one o f th e most com prehensive tools for building com petitive
strategies.
Source: Michael Porter (1980) “Competitive Strategy : Techniques for Analysing Industries and competitors”. New York, The Free
Press. P.4
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A ccording to M ichael Porter (1980), there are three generic com petitive
strategies that have been successful in outperform ing other firms in the industry. H e has
persuasively explained the th ree generic strategies: overall cost leadership, differentiation
C ost Leadership strategy aim s to m ake the firm an industry wide low est
cost position relation to com petitors. Thus, the firm attem pts to control cost o f
production, and cost o f sales so as to enable them to get substantial returns when the
prices are at low level. Som e im portant variables for cost leadership strategy are as
below:
are perceived industry w ide as unique. These distinctive abilities may be along various
dimensions such as product quality, distribution, after sales service etc. that are widely
through.
a) a s s e s s i n g s e r v i c e in n o v a tio n
b) e c o n o m y o f sc a le
broadly. As a re s u lt, th e firm a c h i e v e s either d iffe re n tia tio n for better m e e tin g the n e e d s
necessary.
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differentiation strategy leads to perceived benefits advantage through innovation and cost
The im portant aspect o f P o rte r’s generic com petitive strategies that are
used to exam ine is the concept o f being ‘stuck in the m iddle’. It occurs when a firm is not
successfully pursuing either a low cost or a differentiation com petitive strategy. M ost
unsuccessful firm s are in this situation as its costs are too high to com pete with the low
cost leader o r its products and services are not differentiated well to cope with the
resources, capabilities and distinctive com petencies and make consistent strategic
Porter in his w ork on com petitive strategies and com petitive advantage
maintained that a firm could not simultaneously pursue a low cost and a differentiation
strategy. I f it does so there is risk being stuck in the middle and not successfully
strategies fram ework is still widely practised. H ow ever, some new er perspectives on
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competitive strategies could b e discussed w hich probably can provide an expanded and
looking for w ays to set th em selv es different from th e rivals. C om petitive strategy is all
about how an organisation ch o o ses to have a sustainable com petitive advantage over the
rivalry.
competes in an industry w here it operates. M iles and Snow ’s approach is based on the
to survey dynam ic environm ent frequently and continually and develops new products
and services. Com petitors are uncertain about prospector’s future strategic decisions and
actions. D efender organisation searches for m arket stability, produces only a lim ited
product line for a narrow segm ent o f total product market. It seeks to protect its will
established business and does w hatever is necessary to aggressively prevent com petitors
from entering their turf. D efender can crave out and maintain niches within their
ideas such as products, services, m arkets before deciding to jum p in. It watches for and
coherent strategic plan. It m akes strategic adjustm ents only when finally forced to do so.
Generally, such organisation are not able to respond quickly to environm ental changes
because they lack resources and capabilities and do not develop or exploit them properly.
strategies on the basis o f his business definition fram ework. A business according to
in industry and its products or services. In the light o f the three dim ensions, we have
competitive m arket scope and the level o f com petitive market segment differentiation for
strategies that he believed better reflected in increasing complexity o f the com petitive
environment
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Fig. 3.5 show s the possible com petitive strategies proposed by M intzberg.
He asserted that having th e low est costs d o esn ’t provide a com petitive advantage by
itself, but the advantage can com e w hen the organisation is allow ed to charge below
average m arket prices. T hus, organisation follow ing this strategy according to M intzberg
is differentiating on the basis o f price. The undifferentiated strategy is that strategy w hen
firm has not basis for differentiation or w hen it deliberately follow s a copycat strategy.
them the major thing to rem em ber in crafting a winning strategy o f an organisation is that
its competitive strategy should exploit the com petitive advantage(s) the organisation has
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its competitive strategy should exploit the competitive advantage(s) the organisation has
from the organisation ability to use its resources optimally and create special capabilities,
which in turn are transformed into distinctive competences. These things take place
through the strategies being used in the various functional work units o f the organisation.
strategy.
is not implemented. When a strategy is not translated into action, then it remains a mere
strategic plan or idea only. Strategy implementation is very important for any strategic
existing structure, systems, staff, skills, style and shared values and making changes
made in each of these is inevitable.18 It gives a new strategic direction to the firm.
like structures and systems and ‘soft’ issues like skills, staff, style and shared values. For
tourism service organisation, to successfully implement its service concept and achieve
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the desired positioning in the m ind o f tourists it needs to pay special treatm ent to both
developed on the quality and com m itm ent o f em ployees and it is the reason w hy top
management in successful service organisations give utm ost priority in human resource
management.
Ranjan D as (1997) deals w ith certain key im plem entation issues such as
organisation structure, system s (including use o f IT); People; C ulture and leadership as
task a wide array o f know ledge, skills, attitudes and abilities to allocate resources, design
structures, form ulate functional policies, take into account the leadership styles required
and maintain internal consistency besides handling various other issues confronting the
organisation.
economies, there has been greater desire for a better standard o f life and to explore m ore
of the world. People are w illing to spend m ore on leisure and holidays resulting in greater
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demand for recreation and entertainment facilities, adventure sports, tourist resorts and
business has complex phenomenon. A typical tourism organisation offers a wide gamut
tourism service is intangible. Tourism services are highly perishable and cannot be
stored. They are to be produced and consumed simultaneously. Thus, a different set o f
strategies is required for the tourism organisations to face the competition and remain in
on the charms o f tourist revenue. The heat o f the contest is undoubtedly inevitable. To
develop competitive edge over others, like the consumer products tourist destinations
must persuade their customers that they have some combination o f benefits, which no
Tourist travel for business and leisure in both domestic and international is
this sector too becomes indispensable. In such a dynamic and competitive environment,
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References : (C h a p te r - III)
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9 Op. Cit, Glueck W. F. & Jauch L.R.(1984), p-5.
10 ibid, Glueck W. F. & Jauch L.R.(1984),
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Row
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New York, Free Press, p . .
14 Coulter, M.K (1998) “Strategic Management in A ction ” New Jersey, Prentice Hall Inc., p. 6
15 Ibid Coulter, Mary K(1998), p-6
16 ibid PP. 209.
17 Darek Abell (1980), “Defining the Business (he Starting Point o f Strategic Planning” New
Jersey, Prentice Hall Inc. P.30.
18 Peters, Thomas J. & Waterman Jr. Robert, H (1984) “In Search o f Excellence” New York,
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19 Das, Ranjan (1997) "Strategic Management o f Services; Framework and C ases” New Delhi,
Oxford University, Press p.82