Introduction
In the current days, a number of factors continue to serve as impediments and opportunities for entrepreneurs when setting up businesses. More particularly, the upheavals that the entrepreneurs face when they attempt to establish businesses in the hospitality industry are increasing exponentially.
In this report, there is going to be exploring of various factors that may act as either opportunities or risks for entrepreneurs seeking to start businesses in the hospitality industry.
There is going to be examining of both external and internal factors that may affect an entrepreneur who wishes to set up a business in the hospitality industry. In the conclusion, some recommendations are going to be given that may serve to help overcome challenges that may be faced when setting up a business in the hospitality industry and capitalising on opportunities.
The business environment
The business environment impacts in a significant way on the growth of the SMES that are just coming up (Delmar and Wiklund, 2008). A larger number of the business organisations in the hospitality sector are SMEs. The definition for the business environment is given as the entire variables or factors, internal as well as external to the firm, which may have a continued victorious existence of the firm (Smit et al, 2007).
These factors, both internal and external, may either offer opportunities or challenges and risks to a business organisation (Shane & Cable, 2002; World Bank, 2006). An argument was presented in which it is pointed out that in order for an SME that is just coming up to expand, it is imperative for it to not just make the inside environment to be stronger but to as well make the outside environment to be strong as well (Beck & Demirguc-Kunt, 2006).
Internal environment
These refers to those factors in an organisation’s environment that are, to a large extent, under the control of the organisation (Phillips & Wade, 2008). One of these factors is access to finance. The firms in the hospitality industry, just like in any other industry, require financial resources so that they can be able to start trading and to finance business growth. As Cassar (2004) points out, lack of availability or access to finance can serve as a big constraint to business growth.
New SMEs can receive finances from the owner’s wealth, or from the external sources which may include friends and family members and this are informal sources. Finances can also be obtained from the lending institutions such as banks or from private equity organisations as well as venture capitalists which are formal sources of funding (Olawale & Garwe, 2010, p.731).
Another internal factor is management skills. It is pointed out that decision-making competencies involves having attitudes, skills as well as knowledge which make a contribution towards developing personal efficiency (Hellriegel et al, 2008, p.31).It was found out by Martin and Satines (2008, p.1) that not having management understanding as well as skills are major causes of the new firms failing.
Location is another factor that can be largely under the control of a firm. It is pointed out that where the business is located has an impact on market prospect and expansion opportunities of the business organisations that are just coming up (Olawale. & Garwe, 2010, p.731).
The geographical closeness to the critical suppliers or buyers creates a kind of better environmental scanning which makes it possible for the new businesses to identify opportunities in the market in a more easy way and be able to capitalise on them (Mahadea, 2008). According to Dahl and Sorenson (2007), this has an impact on the market potential of the new businesses.
Another factor that a firm should consider is “investment in technology and cost of production” (Olawale. & Garwe, 2010, p.731). Investing money in technology and ensuring that there is keeping up with IT is, on an increasing level, imperative for any firm.
The role that is played by technology is critical for the development of an SMEs that is just starting up (Wong, Ho & Autio, 2005). Technology does not just assist in developing of a “multi-pronged strategy”, it as well assists in the maximisation of the business opportunities”( Olawale. & Garwe, 2010, p.731).
The external environment
The political, legal and technical factors and Government Policy
The theories give a demonstration of the impossibility of separating the outside or external environment from the process of entrepreneurship (Zapalska & Brozik, 2007, p.143). External environment concept is meant to encompass the influencing factors as well as elements that are external to the boundaries of the organisation which have an effect on the actions of the organisation.
It as well encompasses wide-ranging technological, economic, political-legal, and socio-cultural factors which offer wider context for the entrepreneurial development as well as growth (Zapalska & Brozik, 2007, p.143).
For instance, evidence was found the outcome of the “government regulations, policies, and procedures as well as political and legal forces, attitudes, and public support for entrepreneurship” (Fogel, 2001, p.105). The external forces may have an effect on entrepreneurship through loan availability, physical facilities, technical assistance and information on the achievement of firms that are just starting up (Zapalska & Brozik, 2007, p.143).
There has been advancing of a number of models which make an attempt to label and offer explanation of the several development stages of the entrepreneurial firms. The organisational lifecycle models as well as development stages give out information in regard to the kinds of problems that are faced by business organisations in the course time and give out a suggestion that every development stage is linked to particular problems (Zapalska & Brozik, 2007).
The researchers in the field of entrepreneurship have committed much effort to have the understanding of the relationship that exists between business environment, the strategy for the fresh venture, as well as performance (Zapalska & Brozik, 2007).
As on one hand there has been a discussion about these relationships in a theoretical as well as empirical way in the market economies, on the other hand, it is imperative to have consideration of the relationship that exists between business achievement and the business environment within transitional economies (Porter, 1989, p.51).
Several features of the business environment have been shown to have an influence of the performance of the new business enterprise (Zapalska & Brozik, 2007, p.144). Among the environmental influences which have been identified are the existence the factors like the accessibility to capital, other entrepreneurs, technically skilled labor, suppliers, clients, government motivation for setting up business, equipment, plant, supportive home culture, support services as well as desirable living conditions (Zapalska & Brozik, 2007, p.144).
Other studies undertaken in various nations show that entrepreneurs indicate that the nations can bring up the level of the chances of new business enterprise start-ups business expansion in several ways (Zapalska & Brozik, 2007, p.144). These encompass maintaining rules or regulations at a lower level, giving out tax breaks among other possible incentives, and availing financial resources to the start-up entrepreneurial ventures offering training as well as counseling services to them (Zapalska & Brozik, 2007, p.144).
There are also studies which show that entrepreneurs encounter a number of obstacles like not having adequate information about a number of business aspects, large taxes, inflation rates which are high, and not having financial support (Zapalska & Brozik, 2007, p.144). Such findings give a suggestion of a number of policy decisions for setting up businesses that are small in size.
The policy decisions may encompass offering business enterprise capital funds, offering incentives that are tax-based and government procurement programs, protecting propriety ideas as well as innovations, encouraging entrepreneurship through educating organisations, and bringing down the level of barriers to entry (Zapalska & Brozik, 2007, p.144).
Cultural Factors
Jordan (1997, p. 529) points out that, at the outset, various factors may act as challenges, when attempting to venture in hospitality industry. Cultural and gender considerations have been in the forefront in running business. While it is recognizable that the world has made strides in enhancing equal opportunities for both men and women, the latter are still challenged in the hospitality industry (Birley,1989, p. 35).
Women experience clash of roles in the workplace and at home which render them unable to manage such firms effectively. According to Kirby (2003, p. 121), it is difficult for women to strike a balance between work and home responsibilities.
Research has shown that European women who have ventured in the business sector devote a huge amount of time to the fulfillment of domestic roles. This represents three folds of men’s time that goes to performing domestic roles (Morrison & Thomas, 2004, pp. 23: Purcell1997, p. 123; Schein 1973, pp. 95-100).
It is pointed out that when women combine both domestic and work roles, it is an uphill task for them to begin entrepreneurial endeavors (Jackson, 2001, pp. 31-40). As such, it denies women entrepreneurs the opportunity to gain insightful experience of establishing a business in hospitality industry. This is not only a challenge in the short run, but it limits women from exploring other opportunities within the hospitality industry that may require such experience (Liff & Ward 2001, p. 31; Vianen & Fischer 2002, p. 327).
Demand Seasonality
The firms in the hospitality sector are normally affected by the cyclic demand fluctuations (Baum & Lundtorp, 2001, p.20). It is pointed out that the seasonality in tourism demand leads to having fluctuations in the tourism volumes in the course of the calendar year “and must be differentiated from longer-term business cycles and short-term changes related to weekly and daily travel patterns” (Zapalska & Brozik, 2007, p.143).
Demand seasonality is normally brought about by natural or institutional forces with the pattern typically staying to be stable in the course of a large number of years (Carter & Rosa 1998, p.225). This seasonality predictability enables businesses as well as investors and lenders to engage in anticipating a large number of seasonal impacts (Zapalska & Brozik, 2007, p.144).
Small Businesses in the Central and Eastern Europe
It is pointed out that the small business organisations in such places as in the Central and Eastern Europe (CEE) face a number of uncertainties because of the ongoing lack of stability of the basic regulations of the market economy model, the environment profile continue to be of great importance (Johnson & Loveman, 1995, p.215).
It is also pointed out that there is increasing interest in carrying out the measurement of the failures as well as successes of the transition processes in the CEE countries. There have been a small number of studies that examine the family entrepreneurial business enterprises, especially the ones that operate in hospitality and tourism sector of an economy that is reforming (Butler, 2001, p.10).
There is need to have an all-inclusive investigation of entrepreneurship in the family enterprises in hospitality and tourism business which are operated in CEE. There is holding of a belief that the detailed and incorporated scrutiny of entrepreneurs as well as their business enterprise will offer more insights which can be helpful in the formulation of the public policy on the development of entrepreneurship.
Conclusion
Various factors have presented hospitality industry with challenges and opportunities. There are both external and internal factors. It is imperative for the new businesses in the hospitality industry to understand both the internal and external environment in order for them to be able to capitalize on the opportunities and to avoid risks. There is need for the government to come up with the appropriate policies and allow these businesses to operate efficiently and effectively.
Such other factors as the cultural one are supposed to be overcome. There is need to ensure that the managers have adequate experience and skills to run the business. There is also need to have a suitable location for the business to operate effectively and profitably. There is also need to understand demand seasonality in order to come up with the appropriate decisions to ensure successful operation of the businesses.
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