Gaining positions of competitive strength has become more important in an environment that has become increasingly global and competitive (Fahy 24). For last decade the process of hospitality industry companies’ involvement in international transactions accelerated its pace (Contractor & Kundu 326). Scholars point out that there exists something of a conflict between developing niche markets and globalization: customization versus standardization.
The solution to the problem seems to lie with ‘protecting’ the customer from core, administrative elements that are best served through global policies. For a hotel chain this might be the standardized ‘back of house’ policies related to centralized inventory procedures, staff orientation policy and safety standards. Local management is then free to respond to the type of guest it receives (Burns 128). Thus, while the company operates on a global basis, insofar as the guest is concerned, they receive ‘customized customer care’ at a specific location.
The motivation for globalization is compelling, especially for hospitality industry enterprises whose service relies, in many cases, on an ever expanding geographic diversity (Burns 129). Technological advances in both transport and information systems have enabled these global service traders to think beyond traditional political-national boundaries. International competition has driven such corporations into thinking globally.
By integrating corporate activities on a world-wide basis through referral systems, computerized reservation systems and vertical integration with other sectors, competitive advantage is gained by controlling the flow of tourists through the international distribution channels. As experts in hospitality industry ascertain, one of the continuing paradoxes for international hotel chains within the globalization debate is that of standardization (Michman & Greco 196).
But the problem for hospitality industry enterprises, unlike for a manufacturing venture, is that part of the attraction is the unique character of the destination attractions (Burns 129). Thus, Taylor, Smith and Lyon point out that recent advances in the international hospitality industry, especially in its hotel sector, are beginning to move beyond the standardization phase to incorporate some real progress towards increased consumer choice (113). In such circumstances the brand name is gaining its especial importance for being attractive for the consumers who associate their favorite brand with the certain characteristics.
In particular it is true for well-known brands – big international hotel chains which recently increase importance as an organizational form in hotel industry (Ingram & Baum 74). Moreover, the trend over the last century suggests that chains will eventually come to dominate every service industry that is characterized by some direct contact between customer and organization, as in hospitality industry (Ingram & Baum 70). When a firm enters a foreign market various business functions can be undertaken. Some may entail higher risks of local partner opportunism; some can be easier to transfer to local partners.
Within a particular function (e. g. , marketing), the entrant should undertake some activities (such as branding), whereas the local partner can more easily perform others (such as pricing). Chain-owned, unaffiliated hotels are owned and operated under a common brand name as part of a corporate chain, but are independent of either a third-party management company or franchise system. Thus this mode offers the entrant the highest level of control over the hotel’s marketing and operations (Brown, Dev & Zhou 476).
For high involvement products, consumers consider a wide range of features, with brand name being one of many attributes evaluated. For low involvement products where fewer features are likely to be evaluated, a brand name might serve “as a ‘halo’ through which consumers can make a quick assessment of the brand” (Cobb-Walgren, Ruble & Donthu 36). Several studies proved that brand name has greater feature importance for services than for products, given the intangible, abstract nature of services and the fact that the name of a brand might serve as reassurance in the evaluation process (Crimmins 17).