Introduction
The internationalization process is the process through which firms gradually get involved in international business opportunities. This is influenced by the international environment. Daniels and Radebaugh (2007) defined the International business environment “as the environments in different countries with factors that are exogenous to the domestic environment and influence business operations and decision of a firm” (76). These factors, depending on whether they are positive or negative influence the internationalization process. The purpose of this paper is to find out how business environment factors impact hospitality organizations and influence their level of internationalization.
Discussion
Hospitality organizations deal in the business of providing accommodations, food, and beverages within different establishments and events (Travis 2007). According to Theobald, (1998) “the business environments of these organizations are similar in their generic aspects to that faced by any other industry, while containing a few specific components relating to the nature of the industry” (89). These aspects influence the factors provided by the environment and make them relevant to the hospitality industry (Kotler 2006). These factors include:
- Political factors
- Policies and legal factors on forego investment
- Economic conditions
- Technological environments
Political factors
The political situation of a country is a determining factor in the kind of relationship the country will have with the rest of the world (Farmer, Richman & Irwin 1966). This directly implies that its status affects the internationalization process of a firm and the environment it is to operate in (Minyard 1996). These impacts could be positive or negative.
Stable political situations in a country provide positive environments and this, in turn, affects business operations positively (Jones 1961). When a country’s political environment is stable, its relations with the rest of the world are increased and therefore foreigners are motivated to invest in that country, and also tourists are interested to visit it (McKenzie 1994). Increased inflow of people into a country means more need for accommodation and food, therefore, increased business for hospitality firms (Samuelson 2001). Furthermore, increased business for hospitality firms leads to their expansion. Expanding means that there is an opportunity to make international visits. Those firms that have resources can invest in other countries if the countries are politically stable and therefore stable international political environments provide a positive influence to hospitality firms. For example, Dubai, due to its political stability has attracted investment from many hospitality firms whether foreign or local (Guiltinan et al 2006). This enabled the country to attract people from many countries hence; its stability has favored internationalization.
On the other hand, an unstable political situation harms the internationalization process and the environments the hospitality firms have to operate in. This is so because if a country is politically unstable, it is separated from the rest of the world. In addition, its citizens do not move freely and this is not an environment that a hospitality firm can operate in. When a country is separated from the world, it means if it isn’t economically sufficient and stable, its hospitality industry will collapse. This is because it is little or no movement of people internationally or locally and therefore low demands for accommodation and food. This will put firms out of business and in the long run reduce the internationalization process significantly in this industry. For example, Iraq’s political instability has lead to the collapsing of their hospitality industry (McKenzie 1994).
Legal factors and policies on foreign investment
These are crucial factors as they determine the level of the internationalization process of firms. According to Gray (1999) “It’s greatly influenced by the political environment as this influences legislation, government rules and regulations on foreign investing and how foreign firms operate” (34). A foreign company operates by the systems set by that particular country and depending on its attractiveness, different business environments are established
In a country where its systems are favorable, foreign investors are attracted and this leads to increased internationalization. This also affects hospitality firms. Firms with recourses and are interested in investing internationally will look for countries whose policies are favorable. For example, a country like Kenya has got favorable policies and this has attracted many hospitality firms to her (Guiltinan et al 2006). The reverse of this is true implying that, poor policies are not attractors. For example, Zimbabwe has got policies and very few firms are ready to invest there.
Economic conditions
The economic status of a country is a key determinant of whether foreign investors will be attracted or whether the local firms will have the ability to invest internationally or attract international business. A strong economy means that a country has got the good infrastructure, its citizens are economically empowered, has good medical facilities, and good standards of educations. These are key attractions to investors including hospitality firms. A good economy means that the citizens of a country can afford to travel whether on business or for leisure providing a market for hospitality firms and favoring them to expand. It also means that foreigners are attracted to these countries either for business or as tourists. This provides a positive environment for the internationalization of hospitality firms. Additionally, it leads to them being able to attract international clients (Fiore & Shawn 2001).
A poor economy means poor infrastructure, poor medical facilities, and poor education standards which isn’t a motivator for investment (Murphy 1999). This means that the citizens of that country are struggling and therefore it’s not appropriate to invest in such a country. This affects internationalization since the good economies having been exhausted, their abilities are little room for upcoming firms to invest internationally.
Technological environments
In the world of today, technological advancements occur every day. This has led to the need for the business world to continuously improve their technology to manage the competition. Advanced countries have advanced technological advantages over developing countries (Guiltinan et al 2006). This has made it difficult for firms from developing countries to compete with them internationally and thereby influencing their ability to internationalize. This is also true for hospitality firms. In places like Las Vegas, technology is an important attraction in the hospitality industry. Most firms from developing countries cannot afford to set up the technological attraction required and so if they are interested in investing in that city, it’s impossible.
Conclusion
The internationalization process is greatly influenced by the international environment as mentioned in the essay. A positive environment which means a stable political situation, good economic environment, and motivating legal factors and policies leads to more internationalization. On the contrary, political instability, poor economy, and poor legal factors and policies affect internationalization negatively. This also applies to hospitality firms. It, therefore, implies that if a firm is to grow internationally, it has to concede all the above factors and evaluate its ability to overcome them to avoid investing in countries that would not benefit them.
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