TOURISM ENTERPRISES. Alternative Business Objectives 1. Profit maximization 2. Sales revenue maximization 3. Output maximization 4. ‘ Satisficing ’ 5. Quiet Life. Alternative Business Objectives. Alternative Business Objectives. 1. Profit Maximization.
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1. Profit maximization
2. Sales revenue maximization
3. Output maximization
5. Quiet Life
- which further requires the ability to identify marginalrevenuesand costs.
1. A business with relatively fixed capacity, as above, concentrates on revenue far more than on costs.
2. Innew and growingenterprises, managers perceive the need to establish a market base for future growth and long-term profits. This need leads to a series of short-rungrowth decisions. Example: some ‘new’ destinations and travel insurance businesses.
3.Marketing-oriented managers frequently measure success by sales revenue and market share; heavy promotion costs are likely.
- the level of profit required to maintain the viability of the enterprise.
- the level will be the opportunity profit level obtainable within the market for stock in that type of business, below which stockholderswould sell outandinvest elsewhere.
- it is product-orientedrather than market-oriented, and
- it may reduce price to clear supply, perhaps even by giving the product away.
1. multinational, or so large and diverse
3. non-commercial operations such as National Parks Authorities or heritage conservation foundations
> Running a small hotel, motel restaurant almost as a hobby, and because they ‘like to meet people’
> a person sets up as a travel agent, primarily to enjoy the benefits
> Owners of boats, stables or attractive rural properties
3. Attractions and Support Services
> private vehicles- mostly cars- for short distance (mostly domestic) travel, and
> air transportfor international or longdistance travel.
> The product is made up almost entirely of scheduled services
> Airlines concentrate on business tourists
> An oligopoly exists, with eight major carriers supplying 95% of the US market
>Price competition is obscured by product differences (schedule convenience, routes offered).
(1)commercially provided accommodation must compete with hosting by VFR and even BTs
(2)the range of product types varies from unserviced rough bush campsites through to luxury hotels and cruise vessels.
(3)the supplying enterprises range from state-owned National Parksthrough individuals orfamiliesto MNCs.
> Property: land/space, building/vehicle, location
> Lodging services: housekeeping, food & beverage, personal service
> Style and other services: theme/decor, activities, ‘quality’/image
> Domestic markets; limited competition, prices reflect local conditions.
> International markets; competition with other countries-different cost structures, with other large and efficient suppliers, and for consumers with widely varying demand patterns. This structure is especially true for:
> its products tend to be dedicated specifically to particular tourist markets,
> suppliers admit to being within the tourism industry.
> public goods -------- full-profit commercial
> publicly-owned ---------- privately-owned
> 'lifestyle'----- events----- fixed attractions
> the service of selling to the principals who are the buyers of the service.
> the service ofselecting a principal to intending tourists.
* Their incomeis derived from commissions paid by principals as the price of the service of selling.
(1)Principals offer a system of overriding commissions to preferred agents or for special services
(2)Agents use part of their commission to give discounts on principals' prices to tourists. Though this could be regarded as a marketing cost to travel agentsbut competition often makes discounting a normal activity
(3)Distributionof tourism services may omit the travel agent as middlemen. Ex: Direct selling
> Generating-area based enterprises supplyingITs by air -either charter or scheduled
> Suppliers of extended bus toursor other land or sea-basedITs
> Those who act only as a wholesale outlet for groups of accommodations, vehicle renters and so on
>Destination based excursion operators who act as local ground handling agents for offshore enterprises.
> the opportunity for economies of scalein large-scale operations
> the ability to control and develop inputs and markets
> the chance to use existing differential advantagesto operate profitably in related fields.
- horizontal integration
- complementary integration
- backward vertical and forward vertical integration
> straight takeovers or buyouts, through
> corporate mergers, to
> minority and majority cross-stockholdingsor
> merely joint management or consortiumagreements.
These last forms of looser, more flexible 'integration' have tended to predominate intourism industry.
> to obtain externaleconomies of scale in production,
> to obtain power in purchasing or distribution,
> to remove or countermandcompetition.
* Because the capital requirement is relatively small, integration amongst travel agents and tour operators frequently means full mergersandbuyouts.
> to secure demand in competitive markets rather than to obtain production economies.
Equivalent reasoning applies to integration between suppliers of complementary products, referred to as complementary integration.
1. few enterprises in tourism are large, highly cashed-up and have a large asset base
2. enterprises within tourism industry
(a) that are struggling are not in a financial position to diversify and
(b) those that do well ascribe success to the above-average growth obtainable in tourism compared with many other industries; they would therefore to expand within the sector.
> the generally limited barriers to entry (including in many areas of tourism industry a low capital requirement),
> perceptions of industry growth,
> a counterbalance of activity and seasonality to other sectors,
> perceptions (often misinformed) of the pleasures and ease of operating within this industry and opportunities for investment in alternative-use resources
> firstly, the constant demand which encourages the development and survival of more and diverse enterprises and therefore leads to the reduction of concentration;
> secondly, technology promotes integration and large-scale enterprise, especially in air travel and non-personal services (marketing and information communication, travel insurance, tourism payment methods). In these areas, concentration will undoubtedly increase.