Democratic and authoritarian political systems as related to international hotel and restaurant industry
The article explores political factors that may hamper economic growth in any country. In particular, the authors discuss aspects such as government stability, bureaucracy, authoritarian rule, and democracy in the overall growth of an economy (Zeaiter, El-khalil & Nassar, 2014). It is evident that authoritarian political systems negatively impact the growth of multinationals. In any case, multinational corporations can hardly expand their operations in regions affected by civil strife as a result of dictatorial rule. This type of political system has a higher tendency of harboring ethnic tensions and also weakening the stabilities of the affected governments. On the other hand, democratic political systems are in a position to preserve peace and consequently spur economic growth.
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In regards to the international hotel and restaurant industry, authoritarian rule is a negative factor that inhibits the growth and development of the sector. For example, a dictatorial regime has a higher chance of creating ethnic differences and conflicts. Moreover, such regimes can easily resort to instability and gross state of political dilemma. As a result, both local and international tourists might not be ready to visit war-torn nations or politically polarized regions. It is crucial to mention that security and peace are vital ingredients in the growth of the hotel industry.
The impact of different economic systems on hotel and restaurant globalization
There is a rapid pace of development of modern economies. Bogolib (2013) posits that the past economic systems across the globe have transformed themselves into mixed economic systems within a very short time. One of the attributes of a mixed economic market system is that it is very competitive. In other words, institutions such as the hotel industry tend to compete among themselves in order to gain a larger share of the targeted market. In addition, the author highlights the relevance of the pubic sector in the overall growth of globalized firms. The article emphasizes the fact that the performance of globalized firms largely depends on the regular market performance of national economies. Other types of economic market systems have also been described in the article. For example, the author has laid adequate background in the discussion of planned economic systems and mixed economies.
The globalization of hotels and restaurants is affected by the nature of economic systems in place. Each of the economic systems has its own strengths and weakness to hotel and restaurant firms that desire to expand their operations to other geographical locations. This implies that hotels and restaurants that wish to expand in countries with minimal government policies are highly likely to reap a number of benefits. When the government plays a very small role in controlling the business activities of foreign companies, a rapid pace of development can be attained due to minimal trade barriers. On the other hand, this classification of the economic system lacks central planning.
In other words, an economy is commanded from a central point. The government intervenes in all the major processes, such as pricing of goods and services, distribution, and production. Firms in the hospitality industry may not enjoy operating in such regimes owing to several barriers. However, a mixed economic system exhibits a lot of modesty for hotels and restaurants that wish to globalize their operations because some areas are controlled by the government while others are quite liberal.
The advantages and disadvantages of various market entry strategies in the hospitality industry
According to Fernandes, Gouveia, and Pinho (2014), the entry mode into a foreign market is usually one of the most vital decisions during the process of internationalization. The choice of an entry mode usually determines the level of profitability of a firm. From the article, the possibility of choosing equity entry mode is minimized by cultural distance. An empirical study carried out on a number of Spanish firms in the hospitality industry indicated that the culture of a given geographical location affects the entry mode during globalization. In addition, the available internal financial funds and profitability of a firm should equally be put into consideration by firms that wish to expand to other regions. The entry mode and hotel industry characteristics are key aspects that determine the final success level of internationalization.
Equity is one of the entry modes discussed in the article. This mode of entry is often associated with negative growth factors in the Gross Domestic Product of a country where globalization is taking place. In better terms, the overall profitability of a globalized firm is largely determined by the GDP performance. However, an equity entry mode presents myriads of benefits to the globalizing firm. For example, it makes it easy to recognize the market brand. Besides, reservations can be made in advance with limited hitches.
Foreign Direct Investment (FDI) is also a common market entry mode in the hospitality industry. When an FDI entry mode is used, overseas operations can be controlled in a better way due to direct control. Nonetheless, FDI can be a costly entry mode because it requires direct involvement. The risks can also be high. Finally, foreign markets can be assessed by hospitality firms through export trade. Direct exportation may take advantage of improved international market prices. However, export entry mode may be liable to several cross border tariffs, unstable foreign exchange rates, and unfavorable government policies and restrictions.
Bogolib, T. M. (2013). The public sector of mixed economy in the modern world. Equilibrium, 8(1), 125-136. Web.
Fernandes, R., Gouveia, B., & Pinho, C. (2014). Exploring modes of entry into international markets: Direct investment or contractual relations. Journal of Business Economics and Management, 15(1), 56. Web.
Zeaiter, H., El-khalil, R., & Nassar, I. (2014). Politics and economic growth: Regional and income level classification. Journal of American Academy of Business, Cambridge, 19(2), 315-322. Web.