ISSUES OF BUSINESS AND LAW VOLUME 1 (2009)

ISSN 2029-1094

DOI: 10.2478/v10088-009-0006-9

54

STRATEGIC DECISIONS OF TOURISM COMPANIES IN THE CONTEXT

OF SUSTAINABLE DEVELOPMENT

Virgilija ZINKEVIČIŪTĖ Associate Professor, Dr. Head of the Tourism Management Department Vilnius Law and Business College, Laisvės Ave. 58, LT-05120 Vilnius, Lithuania E-mail: virgilija.zinkeviciute@gmail.com Abstract. Theoreticians and practitioners unanimously acknowledge the specific role of strategic decisions in a successful activity of a tourism company. Strategic decisions as the decisive factor in creating competitive advantage are gaining a considerable importance under the conditions of sustainable development. The article reviews the process of strategic decisions formation by a tourism organisation in the context of sustainable development. The scenarios method is proposed as offering good prospects under certain conditions. A universal scenarios formation technology has been presented, which is oriented towards facilitation of scenarios creation using a graphic tool of the “Scenarios Roads’ Analysis”. Keywords: tourism business, strategic decisions, sustainable development.

Introduction Fast changes in the tourism business environment are a topical issue of the present day, and variability of the environment is seen as an inevitability under the conditions of which a company needs to survive and seek to win in the competitive activity. The changes in the business environment are a challenge for an enterprise aiming at competitive advantage, though also an opportunity to take advantage of tendencies of the changes in the environment through developing those business capacities and adopting those strategic decisions which will allow to acquire competitive advantage in the context of new tendencies. This is underlined in the works of Hao, 2000, Kotler, 2003, Verdu, Gomez-Gras, 2005.

Under the present-day conditions, a matter of particular relevance for changes in the tourism business environment is the concept of sustainable development whose basis is a compromise between environmental, economic and socio-cultural goals of society (European Commission, 2005; Ruževičius, 2007). The concept of sustainable development is topical and is promoted not only at the national or the European Union (EU) level, but is also popular worldwide as a unique approach providing a possibility for the current and coming generations to achieve a general welfare without exceeding the permitted limits of impact on the environment. This implies that sustainable development preserves for future generations a sufficient amount of resources for quality existence (European Commission, 2005; Čiegis et al., 2005; Ruževičius, 2007; Klaipėdos universitetas, 2009).

Promotion of the concept of sustainable development is determined by changes in the macro environment mainly relating to climate change, decline of biodiversity, the threat posed to our health by pollution, ways of using natural resources and excessive accumulation of waste. The EU is dealing with these tasks by setting high standards for environment protection and promoting new methods of work and cleaner technologies (European Commission, 2005). Moreover, promotion of the concept is enhanced by the feeling of consumer responsibility (the number of consumers

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refusing to purchase the products or services causing harm to the environment is growing (Klaipėdos universitetas, 2009). The tourism business not only needs to respond to these changes, but also must base its activity on the concept of sustainable development thus contributing totargeted development of these changes at the global level. A voluntary activity in the field of environmental protection is becoming an important factor enhancing an enterprise’s image and value (Ruževičius, 2007). Under such circumstances, of especial relevance are strategic decisions of tourism companies as a decisive factor in aiming to create competitive advantages in the age of forthcoming changes. It is the strategic decisions that determine the course of operation of a tourism business entity and the eventual outcome of this course of operation. The impact of the strategic decisions on the future of the tourism business entity is decisive, hence formation and selection of strategic decisions is particularly important.

The tourism business is characterised by a large variety of the services and products provided by it, however the key principles of formation of strategic decisions of the tourism business are universal, and the proposed methodology may be applied to any tourism company irrespective of the type of its services or products.

Aim of the article – to present the methodology of formation of tourism companies’ strategic decisions in the context of sustainable development.

Research methods – the method of logical abstraction, systemic analysis of scientific literature, scenarios method.

1. Application of the Scenarios Method in Tourism Companies in the Context of Sustainable Development Sustainable development is the principal requirement of a long-term development in seeking to ensure that the present-day needs of social welfare are not satisfied at the expense of impoverishment of future generations, so that we could leave for future generations non-depleted natural resources and undamaged environment. The general definition indicates the principal system of values which should serve as the basis for companies, organisations, states, and state alliances. Taking into consideration the fact that promotion of sustainable development is determined by the macro environment, preparation of strategic decisions of the tourism business must be based on the analysis of factors of the entire macro environment. The analysis of research works (Kotler, 2003; Smith, 2003; Walsh, 2005) shows that in the majority of cases, the qualitative analysis of the business environment (both of the macro environment and the micro environment as well as of the sector) is applied. When conducting the analysis of the macro environment, the following qualitative methods are applied: PEST analysis, PESTEL analysis, analysis of the environment dynamics, scenarios analysis. This is an important integral part of research for each company, as it is pointed out by Hunt, Morgan, 1995, Porter, 1998, Moffett et al., 2002, Fleisher, 2003, Žvirblis, 2005.

The success of implementation of tourism companies’ strategic decisions and their actual effectiveness is determined by environment factors, their dynamics, and a combination of them formed at a certain period. In light of the suitability of strategic decisions, this circumstance requires to attach a particular attention to envisaging changes in the macro environment. To this end, the scenarios method seems to offer good prospects. Its joining with the formation of strategic decisions could significantly enhance the validity of suitability of tourism companies’ decisions.

The analysis of the macro environment using PESTEL usually identifies (on the basis of expert evaluation) the factors having the anticipated favourable effect and the anticipated unfavourable effect. The impact of the main factors of the macro environment on the strategy of a tourism company is also provided for. Moreover, this analysis, when conducted in conjunction with the scenarios analysis, allows to forecast the comparative strength of the impact of the identified factors

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(for example, highly favourable, favourable, unfavourable, highly unfavourable, etc.) and tendencies (and directions) of their changes. This is revealed in the works of Ratcliffe, 2000, Hair et al., 2003, Verdu, Gomez-Gras, 2006.

Determination of the environment situation in the context of strategic decisions is a complicated task, because it is necessary to describe the prospective environment situation rather than the present-day situation. At this point, considerable problems are caused by the vagueness and shortage of reliable information. All this is not unfamiliar to the scenarios method, hence its application would allow to increase the probability of adoption of tourism companies’ strategic decisions that would best correspond to the future environment situation.

According to Hamilton, 1981, Millett, 2003, Fahey, 2003, the scenarios method describes sets of sequences of conditions and circumstances characterising an environment in which an organisation will operate in the future. Schoemaker, 1997 defines the scenarios method as a methodical tool for picturing the future of an organisation. Goodwin and Wright, 2001 present the scenarios method as a means for evaluation of strategies and claim that the scenarios method allows to verify the envisaged strategy within the range of probable future situations. As it is not possible to determine in advance which of the possible scenarios will actually occur, consequences of each scenario are analysed.

According to the manner of presentation, the scenarios method is a descriptive one. A description of future situations provides the probable combinations of various factors and their influence on the business. A peculiarity of the scenarios method distinguishing it from other methods lies in the fact that this method allows to model versions of a variety of impact factors and their possible effect. Scenarios are built through subjective interpretation of an objective analysis. When considering a set of possible events, likely changes are revealed thus obtaining relevant information about the impact of external factors, which allows to prepare in advance and to appropriately respond to their impact. In turn, possibilities of events are generalised and presented in a descriptive form, which facilitates their understanding and promotes within an organisation the process of thinking and learning.

Creation of scenarios enables a clearer definition of the competitive situation of a company, and highlighting of its individual competitive capacities (Schoemaker, 1997; Millett, 2003). This allows to focus the attention of top management on the main competitive capacities which it is expedient to develop in order to win in the competitive activity.

Scenarios and their creation are linked with a company’s individuality, hence alternatives of external situations which are inseparable from a specific company are considered. Although external impact factors are common for all the companies in pursuit of tourism activities, however the approach of each company towards impact factors and their effect is individual. Experience of specialists and top management, their knowledge, also personal psychological traits are manifested in the form of an individual response to environment situations.

Application of the scenarios method for the formation of strategic decisions is based on the assumption that the future is not straightforwardly predictable, and the present-day decisions influence a future situation. Schoemaker, 1997 stresses that even though the formation of strategic decisions, which is based on provision for a long-term perspective, does not guarantee that all possible events have been provided for, it is useful when adopting the present-day decisions, because it takes account of a broad and flexible image of the future. Such a formation of decisions enables to consider future events and their development and helps to prepare for them.

Taking into consideration scenarios’ building recommendations and upon examining the scenarios’ building processes discussed in scientific literature and applied in practice (Hamilton, 1981; Schoemaker, 1997; Ratcliffe, 2000; Goodwin, Wright, 2001; Millett, 2003; Fahey, 2003), a scenarios’ building technology focused on facilitation of the scenarios’ creation process is presented.

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The initial step of the technology is to define the task of scenarios’ creation by formulating the goal of creation of scenarios, defining directions and limits of the scenarios’ analysis as well as providing for the prospective period. At the stage, it is expedient to look back at the tourism business environment during the same retrospective period as the established prospective period. Looking back helps to ascertain of the variability of the environment and to determine initial guidelines for the creation of scenarios.

Another stage of scenarios’ creation is related to the identification of impact factors and analysis of their effect on the achievement of an enterprise’s goals. When examining the external environment of a tourism company, factors of the PESTEL analysis are used. Considerable attention of those creating scenarios should be devoted to the identification of special driving factors, whose impact on the activities of a tourism company may be decisive and may alter the enterprise’s strategic direction. The particular impact factors topical for tourism companies may be climate change, change of the biological environment, the restrictions set forth by environmental protection legislation, etc.

Upon identification of impact factors, their possible combinations are analysed and preliminary scenarios are developed. It is at this point of development of the scenarios that a special space is left for the expression of experts’ opinion and intuition. Moreover, experts of a scenario-building team need at this stage to consider a large amount of information and to systematise it by searching for possible combinations of impact factors, to verify them in light of the principles of logics. The graphical tool of “Scenarios Roads’ Analysis” has been developed on the basis of principles of the morphological analysis by Godet, 2000 and presented in Figure 1 in order to facilitate the work of the experts creating scenarios.

The presented scheme (Figure 1) depicts components of the PESTEL external environment analysis. The impact factors identified in a company are shown by entering them into empty boxes, their effect on achievement of goals by the company is indicated, and the identified particular factors are depicted at the top of the scheme.

In the Scenarios’ Roads Analysis, all parameters are controllable and modifiable. Both the factors being considered and particular impact factors are individual and are selected for each tourism company taking account of its goals. The principal advantage of this graphical tool lies in the fact that scenario-building experts are able to focus their attention on the process of scenario creation by searching for possible combinations of impact factors. In such a manner, creativity and innovation in thinking are promoted, which is of particular importance also for the improvement of the quality of scenarios.

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Figure 1. Scenarios’ Roads Analysis (developed by the author according to Godet, 2000) The developed original scenarios are evaluated according to the criteria of consistency,

probability as well as differentiation. The evaluated scenarios are analysed and improved thus constructing final scenarios. The number of the latter ranges from two to four.

The scientific theory and practice distinguish the following characteristics of final scenarios: the developed scenarios must be concise, easily remembered and not overloaded with unnecessary information. The scenarios must be provided with appropriate, distinct and unique names. This step is required with a view to using the scenarios for the purposes of organisational learning. Organisational learning is linked with the development of systemic and strategic thinking and prospective insights, which may determine an expedient use of competitive opportunities in the future.

2. Process of Development of a Tourism Company’s Strategic Decisions An expert team commences the formation of strategic decisions from identification of the strategic goals of a tourism company (Figure 2). This is necessary for a targeted formation of strategic decisions and performance of assessment. The goals establish and specify the desired result of implementation of strategic decisions, which is used as the reference basis for assessment of strategic decisions. The identified goals are a foundation for the basis of comparison and assessment of strategic decisions during the entire period of formation of strategic decisions. A rigorous structuring of the goals facilitates selection of assessment criteria and considerably reduces the likelihood of occurrence of errors at this stage.

Environment driving factors and their influence

on reaching aims of the organization

Political factors

Economical factors

Social factors

Technological factors

Primary scenarios

a b c d

...

...

...

...

Special driving factor

Ecological factors

Legal factors

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Figure 2. Process of planning of tourism company’s strategic decisions (developed by the author) At the next stage, a tourism company’s environment scenarios are built. The conditions of

implementation of the company’s strategic decisions are unknown, hence the scenarios method is applied allowing to determine possible tendencies of changes in the external environment and to model possible future scenarios on their basis. This permits to increase the probability of adopting the strategic decisions which best correspond to the future environment situation.

Further stages are attributed to the strategic decisions’ formation bloc (Figure 2). In the course of their implementation, a mention is made of all strength and weakness factors of a tourism company which are subsequently analysed in each scenario. As it is unknown which of the scenarios will occur, it is necessary to analyse the company’s factors in the context of all scenarios. This is done in order to establish which factors of an organisation would, in the event of one or another scenario, allow to acquire competitive advantage, and which factors would hinder the successful activity of a company. The analysis allows to obtain information determining competitive advantages or reducing them, which a tourism company may use as a basis for development of strategic decisions and thus direct its activity so that it would win in the competitive activity by making advantage of its strengths and seeking to minimise the impact of weakness factors by effectively and promptly eliminating the obstacles hindering its activity. A created model (Table 1) is used for the formation of strategic decisions.

Stra

tegi

c de

cisi

ons’

form

atio

n bl

oc

Identification of a tourism company‘s strategic goals

Building of the tourism company‘s environment scenarios

Assessment of the strategic decisions in the contexts of all scenarios

Identification of the tourism company‘s strength and weakness factors

Analysis of the tourism company‘s strength and weakness factors in the context of the created scenarios

Creation of strategic decisions

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Table 1. Model of use of the internal factor analysis for strategic decisions’ formation (developed by the author)

Scenarios Strength/ weakness factors

“A” ↓ action line

“B” ↓ action line

“C” ↓ action line

1st factor + + + 2nd factor + + + + + + + ... St

reng

th

fact

ors

nth factor + + + + +

1st factor ‼ ‼ ‼‼ 2nd factor ‼‼‼ ‼‼‼‼ ‼ ... W

eakn

ess f

acto

rs

nth factor ‼‼ ‼‼ ‼‼

↓↓↓ possible decisions

↓↓↓ possible decisions

↓↓↓ possible decisions

Values of symbols: + a factor has a strategic value for the

company’s activity in the context of a scenario under analysis;

+ + + a factor has a particular strategic value for the company’s activity in the context of a scenario under analysis;

‼(‼‼‼) a factor weakens the company’s positions and a particular attention must be given to it in the context of a scenario under analysis.

Formed strategic decisions 1st strategic decision 2nd strategic decision 3rd strategic decision .... nth strategic decision

The main stages of formation of strategic decisions are as follows: 1. An expert team identifies a company’s strength and weakness factors. The company’s

internal factors identified by the experts are entered into the model presented in Table 1. 2. The expert team analyses the value of the identified strength and weakness factors for the

company’s successful strategic activity in creating competitive advantages in the context of created scenarios. Actions by experts at this stage are the following:

- Names of the created scenarios, which in the provided example are listed as “A”, “B” and “C”, are entered into the model presented in Table 1;

- The value of each internal factor for the development of a tourism company’s competitive advantages in each scenario is analysed separately. A symbol of the factor’s value is entered into the model presented in Table 1. The value of the factor is marked with the help of the following symbols: the value of strength factors is marked with the symbol “+”. If the value of a strength factor is very high and could determine meaningful competitive advantages in one or another scenario, the value of the factor is then marked with several symbols, namely, “+ +” or “+ + +”. The impact of weakness factors on the strategic activities of a tourism company is marked with the symbol “‼”, which means that a specific factor weakens positions of the tourism company and that this factor needs to be give a particular attention in order to reduce its impact to the greatest degree possible. In order to point out and draw attention to a strong hindering effect of a specific factor on the successful activities of a tourism company, a combination of symbols “‼‼”, “‼‼‼” or “‼‼‼‼” is employed. The larger is the number of symbols at a specific factor, the greater is the unfavourable

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effect of the factor indicating possible problems or warning of weaknesses in the activities of a tourism company hindering the use of competitive advantages.

3. The expert team prepares and finally forms strategic decisions, which are entered into the model presented in Table 1. The analysis of strengths and weaknesses covers the key guidelines for the creation of a tourism company’s strategic decisions on the basis of which experts finally form strategic decisions. At this stage, the expert team may employ the methods of group idea generation and decision-making, for instance, “brainstorming” or the Delphi method.

Prior to selecting a specific decision, the prepared strategic decisions must be assessed. In addition to general assessment criteria (Zinkevičiūtė, 2007), it is advised to use as an evaluation criterion also the principal values of the concept of sustainable development: economic growth, environmental friendliness, socio-cultural compatibility. It is in this manner that tourism companies can ascertain whether the strategic decisions adopted do not contradict the concept of sustainable development. The adoption and successful implementation of strategic decisions will increase the competitiveness of a tourism company, improve the tourism company’s image among customers and enhance confidence of the public.

Conclusions Theoreticians and practitioners unanimously acknowledge the particular role of strategic decisions in a successful activity of tourism companies. Unfortunately, insufficient methodical support of the formation of strategic decisions is a weak point in the broader implementation of strategic management of the tourism business.

The article presents a methodology of formation of strategic decisions for tourism companies based on the concept of sustainable development and an analysis of the prospective environment by means of the scenarios method. With a view to facilitating the application of the scenarios method, the scenario formation technology has been refined, and a graphic tool of the “Scenarios Roads’ Analysis” has been created.

The presented methodology of formation of strategic decisions enables to adopt the decisions taking into consideration changes in the business environment of tourism companies and, upon conducting of an exhaustive analysis of strength and weakness factors, prospect scenarios. This allows to form such strategic decisions that take account of the variable nature of the environment of a business entity and a general suitability of strategic decisions and provides a basis for the adoption of strategic decisions. Formation of strategic decisions is becoming comprehensible, transparent and evident to members of a business entity.

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Short biographical note

Virgilija Zinkevičiūtė is the doctor of Social sciences, the Head of Tourism Management Department at Vilnius Law and Business College, Vilnius, Lithuania.